U.S. v. Drum
| Decision Date | 08 June 1984 |
| Docket Number | Nos. 81-5450,81-5986,s. 81-5450 |
| Citation | 733 F.2d 1503 |
| Parties | 1984 Copr.L.Dec. P 25,671 UNITED STATES of America, Plaintiff-Appellee, v. Larry DRUM, John C. McCulloch, Ferrol "Bud" McKinney, Curtis R. Snipes, George Washington Cooper, III, Jerry Herbert Jones, Defendants-Appellants. UNITED STATES of America, Plaintiff-Appellee, v. Frances LOCKAMY, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Jack C. Harris, Jacksonville, Fla., for Drum.
Ralph Humphries, Jacksonville, Fla., for McKinney and Snipes.
David R. Fletcher, Jacksonville, Fla., for McKinney.
Hugh A. Carithers, Jr., Jacksonville, Fla., for McCulloch.
Eugene Loftin, Jacksonville, Fla., for Jones and Cooper.
Curtis Fallgatter, Asst. U.S. Atty., for U.S.
Bruce J. Greenspan, Jacksonville, Fla., Court-appointed, for Lockamy.
Appeals from the United States District Court for the Middle District of Florida.
Before RONEY and HENDERSON, Circuit Judges, and DYER, Senior Circuit Judge.
After a jury trial in the United States District Court for the Middle District of Florida, the appellants were convicted of various crimes enumerated in a 78-count indictment charging a Racketeering Influenced Corrupt Organizations (RICO) conspiracy, 18 U.S.C. Sec. 1962(d); a RICO substantive offense, 18 U.S.C. Sec. 1962(c); Interstate Transportation of Stolen Property (ITSP), 18 U.S.C. Sec. 2314; Wire Fraud, 18 U.S.C. Sec. 1343; copyright conspiracy, 18 U.S.C. Sec. 371; and copyright substantive violations, 17 U.S.C. Sec. 106(3) and 506(a). 1
The indictment arose from the operation of an enterprise involved in the manufacture and distribution of "pirated" 2 eight-track and cassette tapes. The copyright violations allege criminal infringement of the copyright in certain sound recordings. The wire fraud counts charge a scheme to defraud copyright owners, sound recording companies, recording artists and musicians, the public and other individuals and businesses dealing in and purchasing recordings. The ITSP counts involve the interstate transportation of pirated tapes of a value in excess of $5,000.00. The RICO conspiracy and substantive counts assert that the defendants were employed by and affiliated with an enterprise, that is, a group of individuals associated in fact to operate an eight-track and cassette tape copyright infringement business. The defendants were alleged to have participated in the conduct of the enterprise's affairs through a pattern of racketeering activity which consisted of the predicate acts of ITSP and wire fraud. 3
In this consolidated appeal, all the defendants-appellants claim that the ITSP counts must fail because the pirated tapes in issue were copied from legitimately acquired phonorecords, and thus they were not "stolen" property within the meaning of 18 U.S.C. Sec. 2314.
Extending this argument further, the appellants contend that the invalidity of their ITSP convictions nullifies sufficient predicate acts to sustain the RICO convictions. They further argue that the Wire Fraud convictions must be set aside because the wiretaps utilized to gather certain evidence for their convictions were authorized for the investigation into the ITSP charges.
Ferrol "Bud" McKinney urges that his individual participation was excused because the Federal Bureau of Investigation ("FBI"), which launched the investigation at the instance of and with the authority of the recording industry, purchased tapes from him. McKinney also claims that the government failed to overcome his "first sale" defense at trial.
Larry Drum asserts that his trial was improperly joined with that of the other appellants, and that the prosecutor made improper remarks during his closing argument.
After reviewing the record and applicable case law, we find no error in the conduct of the trial and affirm the convictions.
The principal issue in this appeal is whether the National Stolen Property Act, 18 U.S.C. Sec. 2314, proscribes the conduct of the defendants in this case. Under section 2314, it is a federal felony to transport "in interstate or foreign commerce any goods, wares (or) merchandise ... of the value of $5,000.00 or more, knowing the same to have been stolen, converted, or taken by fraud ...." The appellants maintain that the transportation of unauthorized copies of tapes is not a violation of section 2314 because copyrights are not "goods, wares or merchandise", and cannot be characterized as "stolen, converted or taken by fraud" within the meaning of the statute.
This contention was recently rejected in United States v. Gottesman, 724 F.2d 1517 (11th Cir.1984), in which it was held that the intangible idea protected by a copyright is effectively made material by its embodiment upon tape and therefore constitutes "goods, wares, or merchandise" that may be "stolen, converted or taken by fraud." Id. at 1520.
The appellants attempt to distinguish Gottesman by pointing out that Gottesman involved the reproduction of stolen copyrighted works whereas here the recordings reproduced here were acquired from legitimate sources. They cite the Fifth Circuit Court of Appeals decision in United States v. Smith, 686 F.2d 234 (5th Cir.1982), to support this view. The court there held that the reproduction and interstate transportation of legitimately acquired copyrighted works does not constitute an offense under section 2314. 4
This distinction is not meaningful when considered in light of the purposes of the statute. The evil which Congress addressed in the National Stolen Property Act was the interstate traffic in stolen property. Where, as here, copyrighted material has been reproduced and distributed without the authority of the copyright owners, the property rights of owners are certainly affected adversely.
We have previously noted that copyrights, once given tangible form, may be "stolen, converted or taken by fraud" and fall within the reach of section 2314. The term "conversion," as defined by the Supreme Court, directly applies here:
Conversion ... may be consumated without any intent to keep and without any wrongful taking, where the initial possession by the converter was entirely lawful. Conversion may include misuse or abuse of property. It may reach use in an unauthorized manner or to an unauthorized extent of property placed in one's custody for a limited use. (Emphasis added).
Morissette v. United States, 342 U.S. 246, 271-72, 72 S.Ct. 240, 254, 96 L.Ed. 288, 305 (1951). See United States v. Sam Goody, Inc., 506 F.Supp. 380, 386, 390 (E.D.N.Y.1981). The defendants were entitled to enjoy the copyrighted works as recorded on generally available phonorecords and tapes. They were not authorized to reproduce and distribute multiple copies of the copyrighted works. It is thus clear that the defendants' activities constituted use of copyrighted property in an unauthorized manner.
The rights of copyright owners in their property are just as deserving of protection as those of the owners of other types of property. See States v. Belmont, 715 F.2d 459, 461 (9th Cir.1983), cert. denied, --- U.S. ----, 104 S.Ct. 1275, 79 L.Ed.2d 679 (1984). We disagree with the distinction made in Smith and urged by the appellants, finding the genesis of their unauthorized appropriations irrelevant to the charges against them. Simply stated, legitimate acquisition of copyrighted material does not ameliorate the effect of subsequent illegal duplication and distribution of that material. The prohibitions contained in section 2314 applied to the activities of the defendants.
Our conclusion that the unauthorized duplication and interstate distribution of the tape recordings constituted a violation of section 2314 immediately settles three other issues raised by the appellants. First, it validates all convictions under the ITSP statute. Second, it affirms the utilization of the ITSP counts as predicate RICO acts, thereby sustaining the RICO convictions. Finally, it validates both the use of the wiretap and the Wire Fraud convictions stemming therefrom because the ITSP violations furnished sufficient probable cause for the wiretap order. 5
The copyright owners who were the victims of the piracy scheme cooperated with the undercover investigation by permitting the FBI to deal with the defendants for the sale and distribution of the pirated tapes. McKinney somehow perceives that permission as authority for him to engage in tape piracy because the FBI purchased some of the tapes from him.
There is no evidence whatsoever that the victim recording companies authorized the tape pirates themselves to continue their unlawful duplication and distribution. Moreover, there is evidence that McKinney engaged in the duplication and sale of copyrighted tapes prior to the initiation of the FBI investigation. Even at the time of his transactions with the FBI, he sold pirated tapes to other customers, none of whom were investigating him at the instance of or with the approval of the recording industry. 6
McKinney attacks the sufficiency of the evidence to negate the "first sale" defense which he raised at trial. The "first sale" doctrine provides that:
[W]here a copyright owner parts with title to a particular copy of his copyrighted work, he divests himself of his exclusive right to vend that particular copy. (Citations omitted.) Although the owner's other copyright rights remain intact, (e.g., publishing or copying), the copyright owner has no right under the copyright statute to restrict subsequent sales or transfers of that copy. (Emphasis added).
United States v. Moore, 604 F.2d 1228, 1232 (9th Cir.1979). Accord, United States v. Drebin, 557 F.2d 1316, 1329-31 (9th Cir.1977), cert. denied, 436 U.S. 904, 98 S.Ct. 2232, 56 L.Ed.2d 401 (1978); United States v. Atherton, 561 F.2d 747, 750 (9th Cir.1977).
The doctrine only applies to copies lawfully made, American Intern. Pictures, Inc. v. Forman, 576 F.2d 661, 663 (5th Cir.1978), and...
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