United States v. Liu

• Decision Date: 01 October 2013
• Docket Number: No. 10–10613.,10–10613.
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Julius Chow Lieh LIU, Defendant–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

731 F.3d 982

UNITED STATES of America, Plaintiff–Appellee,

v.Julius Chow Lieh LIU, Defendant–Appellant.

No. 10–10613.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted March 11, 2013.

Filed Oct. 1, 2013.

David J. Cohen (argued) and Jason T. Campbell, Bay Area Criminal Lawyers, PC, San Francisco, CA, for Defendant–Appellant.

Jenny Ellickson (argued), Trial Attorney, Melinda Haag, United States Attorney, and Barbara J. Valliere, Chief, Appellate Division, United States Department of

Justice, San Francisco, CA, for Plaintiff–Appellee.

Appeal from the United States District Court for the Northern District of California, James Ware, District Judge, Presiding. D.C. No. 5:06–cr–00772–JW–1.

Before: JOHN T. NOONAN, RAYMOND C. FISHER, and JACQUELINE H. NGUYEN, Circuit Judges.

OPINION

NGUYEN, Circuit Judge:

Julius Liu appeals his convictions and sentence for criminal copyright infringement and trafficking in counterfeit labels. Liu's company, Super DVD, commercially replicated CDs and DVDs for various clients on a scale that subjects him to substantial criminal liability if a client—and, by extension, Liu—lacked permission from the copyright holder to make the copies.

Under the relevant criminal statutes, Liu's guilt turns on whether he acted “willfully” and “knowingly.” We hold that the term “willfully” requires the government to prove that a defendant knew he was acting illegally rather than simply that he knew he was making copies. Similarly, to “knowingly” traffic in counterfeit labels requires knowledge that the labels were counterfeit. Because the district court improperly instructed the jury otherwise, we vacate Liu's convictions and remand. We also conclude that the district court should dismiss the second count against Liu on remand because his counsel was ineffective, failing to raise an obvious statute-of-limitations defense.

BACKGROUND

I. The Replication of CDs and DVDs

Commercial CD and DVD replication differs from the process of recording content onto CDs and DVDs in that prerecorded discs have their content stamped onto them—requiring a molding machine and a stamper—rather than burned. To create a CD stamper, a process known as “mastering,” some source material containing digital content is necessary, such as a tape, recordable CD, or music file. Counterfeiters making a “straight counterfeit,” i.e., an exact copy of an existing CD, can start with either a legitimate or counterfeit version of the CD. Counterfeiters making a previously nonexistent compilation of tracks take multiple legitimate disks and burn the relevant tracks onto a recordable CD, which then serves as the source material for the stamper.

Replication plants process orders for customers, who are typically the publishers (or persons purporting to be the publishers) who own the reproduction rights to the works in question. While a few plants specialize in mastering, most deal exclusively with replicating. Plants offering both types of services are rare because of the higher cost associated with mastering, which requires more expensive equipment, larger premises, a clean room environment, and greater expertise to operate. A replication plant that does not create stampers in-house will outsource the work to a mastering plant.

II. The Investigation of Liu and Super DVD

Liu has worked in the replication industry since the early 1990s. In 2000, he founded, and became the CEO of, a DVD-manufacturing company called Super DVD. By 2001, Super DVD employed about 65 people and operated four replication machines at its Hayward, California warehouse.

In mid–2001, Super DVD fell on hard financial times. The manufacturer of one of its replication machines went bankrupt and the machine was taken back to Irvine, California. Two of the other machines were repossessed because Super DVD fell behind on its lease payments. Use of the final replication machine was frozen due to a dispute over royalties between the machine manufacturer and another company. Super DVD's engineers left for other employment, and in 2003 the company did not renew its business license with the city. In an effort to lease the factory space, Liu showed the property to approximately 10–15 persons per week.

Meanwhile, the government had become suspicious of Super DVD's operations. In May 2003, Immigration and Customs Enforcement agents raided the warehouse of Vertex International Trading, a computer software reseller based in Coral Springs, Florida, where agents recovered counterfeit copies of the Symantec software “Norton Anti–Virus 2003” and related documentation. The documentation included purchase orders, handwritten notes, and FedEx shipping labels from more than 50 vendors, including Super DVD.¹

Later that month, private investigator Cynthia Navarro, working on behalf of Symantec, posed as a potential lessee to investigate Super DVD's warehouse. While there, Navarro observed a man using one of two machines that she believed were used for CD or DVD replication. Through a window, she could see into a locked room that was filled wall to wall with spindles of CDs.

At the end of July 2003, agents executed a search warrant on the Super DVD warehouse and recovered thousands of DVDs and CDs. One room stored CDs and DVDs, and another held stampers, artwork, and masters. The CDs included a compilation of rap tracks, Rap Masters Vol. 2; three compilations of Latin music tracks, Los Tucanes de Tijuana: Romanticas, Lo Mejor de la Mafia, and 3 Reyars [sic] del Tex Mex: Romanticas; and a greatest hits album, Beatles 1. The agents also recovered DVD copies of the film Crouching Tiger, Hidden Dragon. Liu did not have authorization from the copyright holders to replicate any of these works.

During an interview and at trial, Liu admitted that Super DVD manufactured the Crouching Tiger DVDs in 2001 for a company called R & E Trading. R & E gave Super DVD a stamper with the name “Tiger” on it but not the full title of the film. The DVDs were still in Super DVD's warehouse at the time the search warrant was executed because R & E had rejected them, claiming that the movies would freeze. Liu stated that when R & E refused to pay for the order, he became personally involved and realized that R & E did not have the rights to duplicate such a famous movie. Super DVD filed a lawsuit against R & E alleging that R & E deceived it about the copyrights. The lawsuit sought payment from R & E on about 40 invoices totaling approximately $85,000, including work done on the Crouching Tiger movie. Super DVD obtained a jury verdict for approximately $600.

Liu generally denied any knowledge of or involvement in replicating the other works. Liu explained that he became involved with the Latin music compilations when one of the former Super DVD engineers introduced Liu to his uncle, Juan Valdez, a famous mariachi singer. Liu and Valdez got together and played music—Liu on the guitar, Valdez singing. Valdez expressed interest in publishing CDs, and Liu told him that he didn't have the facility to do it but suggested companies that could take care of the mastering, printing, and even the sleeve. Liu volunteered to do the overwrapping for Valdez because it only cost him “pennies.” Valdez told Liu that he created the tracks by mixing his voice with music from a Karaoke machine and that he had paid for the license. Liu listened to some of the tracks and, believing that it was Valdez's voice, thought that the music “belong[ed] to him.”

III. Liu's Convictions and Sentence

The government charged Liu with three counts of criminal copyright infringement under 17 U.S.C. § 506(a)(1)(A) and 18 U.S.C. § 2319(b)(1) based on the music CDs, the Crouching Tiger DVD, and the Norton Anti-Virus software. A fourth count alleged that Liu trafficked in the counterfeit labels on the software, 18 U.S.C. § 2318(a). Following a three-day jury trial, Liu was convicted on all counts. The district court sentenced Liu to four years in prison followed by three years of supervised release.

JURISDICTION

The district court had jurisdiction under 18 U.S.C. § 3231. We have jurisdiction under 18 U.S.C. § 3742 and 28 U.S.C. § 1291.

ANALYSIS

I. The District Court Erred in Instructing the Jury on the “Willfulness” and “Knowledge” Elements

A. Standard of Review

“When a party properly objects to a jury instruction, we review de novo whether the instructions given ‘accurately describe the elements of the charged crime.’ ” United States v. Munguia, 704 F.3d 596, 598 (9th Cir.2012) (quoting United States v. Heredia, 483 F.3d 913, 921 (9th Cir.2007) (en banc)). A district court's omission or misstatement of an element of an offense in the jury instructions is subject to harmless error review. United States v. Wilkes, 662 F.3d 524, 544 (9th Cir.2011) (quoting United States v. Kilbride, 584 F.3d 1240, 1247 (9th Cir.2009)). We review unpreserved errors in the jury instructions for plain error. United States v. Phillips, 704 F.3d 754, 762 (9th Cir.2012) (citing United States v. Moreland, 622 F.3d 1147, 1166–67 (9th Cir.2010)).

The parties disagree as to whether Liu properly preserved an objection to the jury instructions so as to be entitled to de novo review. Liu argues that the district court failed to provide him an opportunity to object to the jury instructions as required under Federal Rule of Criminal Procedure 30(d). We agree.

Liu requested an instruction parroting 17 U.S.C. § 506(a)(2)—that “[e]vidence of reproduction or distribution of a copyrighted work, by itself, shall not be sufficient to establish willful infringement of a copyright.” The government did not include this language in its proposed instruction on the elements of copyright infringement, and Liu objected on that basis. The government informed the court that it had no problem with Liu's requested instruction.

The night before closing arguments, the district court emailed counsel a tentative set of jury instructions and indicated that it would give them a revised draft in the...