On Tuesday, December 16, 1997, the President signed into law H.R. 2265, the "No Electronic Theft (NET)" Act. The Act was passed unanimously by both houses of Congress (143 Cong. Rec. S12689 and 143 Cong. Rec. H9883-01). The NET Act strengthens the copyright and trademark laws, providing enhanced protection in the digital age in a careful and balanced manner.

The criminal copyright and trademark provisions in titles 17 and 18 of the U.S. Code are amended to:

• Permit the Department to prosecute individuals under misdemeanor or felony provisions⁽¹⁾ in cases involving large-scale illegal reproduction or distribution of copyrighted works where the infringers act willfully but without a discernible profit motive, bridging the gap in statutory protection discussed in U.S. v. LaMacchia, 871 F. Supp. 535 (D. Mass. 1994);

• Exempt from criminal prosecution reproduction or distribution that is not done "willfully" or that constitutes small-scale non-commercial copying (copyrighted works with a total retail value of less than $1,000);

• Clarify that "willful" infringement must consist of evidence of more than the mere intentional reproduction or distribution of copyrighted works;

• Define "financial gain" in the Copyright Act (17 U.S.C. 101 et seq.) to include the "receipt, or expectation of receipt, of anything of value, including the receipt of other copyrighted works," to ensure that persons who illegally traffic in copyrighted works by using barter rather than cash are covered by the statute;

• Clarify that "reproduction or distribution" includes by electronic as well as tangible means;

• Extend the statute of limitations from three to five years, making the criminal copyright statute consistent with most other criminal statutes;

• Establish a recidivist provision which raises penalties for second or subsequent felony copyright offenses;

• Recognize victims' rights by allowing parties who own rights in the pirated copyrighted works or in trademarks on counterfeit goods to provide a victim impact statement to the sentencing court; and

• Enhance the deterrent power of the copyright criminal laws by directing the Sentencing Commission to amend the Sentencing Guideline for copyright and trademark infringement to allow courts to consider the quantity of infringing goods and the retail value of the good infringed upon, rather than the often lower value of the infringing good, when sentencing defendants.

Copies of the trademark and copyright provisions as amended by the NET Act are attached. These are 17 U.S.C. §§ 101, 506, and 507 and 18 U.S.C. §§ 2319, 2319A, and 2320. New language appears in bold typeface.

The Computer Crime and Intellectual Property Section (CCIPS), Criminal Division, is preparing a supplement to the manual "Federal Prosecution of Violations of Intellectual Property Rights - Copyrights, Trademarks and Trade Secrets" which will explain and incorporate the changes effected by the NET Act. The supplement will be reproduced and distributed to recipients of the manual and will be posted on our website (www.usdoj.gov/criminal/cybercrime).

1. The reproduction or distribution of 10 or more copies of 1 or more copyrighted works which have a total retail value of $2,500 or more constitutes a felony, with a maximum sentence of three years imprisonment and a fine of $250,000. The reproduction or distribution of 1 or more copies of 1 or more copyrighted works which have a total retail value of more than $1,000 constitutes a misdemeanor, with a one-year maximum sentence and a fine of up to $100,000.

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