Retail Value among Thieves

You have been nabbed by the FBI for selling 300 counterfeit DVDs. You are facing prison time and fines, but how for long and how much money? The answer depends on the retail value of the DVDs, in particular whether they are worth more than $2,500. How do you get to below $2,500 for selling 300 counterfeit DVDs? By explaining to the judge that you sold them for $1,500. But is the relevant retail value the value for legitimate copies or the retail value that those who buy from counterfeiters pay? Who in other words are the willing buyers we look at? The term "retail value" is undefined, but the issue was just decided by the Fourth Circuit in United States v. Armstead, 2008 WL 1947869 (4th Cir. May 6, 2008)(05-5157). The court's approach seems unduly complicated, although it waqs of no moment to defendant since the court upheld the jury's verdict.

Here is the court's explication of defendant Armstead's argument:

He asserts that retail value, as used in the statute, means "the price a willing buyer would pay a willing seller at the time and in the market in which it is sold-the thieves' market." With this definition of "retail value," he argues that what a willing buyer would pay a willing seller at the time was evidenced by what the undercover agent paid him and therefore that the retail value amount was insufficient to satisfy the felony threshold amount of $2,500.

Here is the court's explication of the government's position:

The government contends that "retail value" refers to the higher value of what a willing buyer would pay a willing seller for a legitimate copy of the infringed item, such as an authentic, authorized DVD of the same movie. The government states that retail value as used in the statute is not the " 'bootleg value' the defendant received on the black market." It argues, "[i]f the Congress had meant to use the 'bootleg value' or 'wholesale value' of counterfeit product[s], it certainly would have used that or similar language; instead, the Congress used the phrase 'total retail value' of the copyright works."

The government's view makes sense and is easy to apply. Alas, that is not the approach taken by the court of appeals:

The government provides no authority to support the position that prices paid in a "thieves' market" cannot be a market value. Indeed, its only definition - the price of a movie "if it were sold to a member of the public" - would seem to include any market, except for the fact that the government argues for a value determined only by a market of "legitimate" copies. The government's assertion that the market for illicit goods is not determinative of "retail value" may be correct, but only if there is other evidence of a higher "value." ... Otherwise, a black market for illegitimate goods undoubtedly may provide evidence of a "market value." .... It remains undisputed by the parties that whatever value is used, it must be a value applicable at the time the violations occurred and the transactions in question took place-in this case, June 2003 and January 2004. Accordingly, retail value, as used in § 2319(b)(1), refers to prices assigned to commodities and goods for sale at the retail level at the time of sales at issue, representing face value or par value, or prices of commodities and goods determined by actual transactions between willing buyers and willing sellers at the retail level- whichever is the greatest. In this case, Armstead sold the illicit DVDs to an undercover agent when the movies recorded on them had only been distributed for theatrical release (and perhaps for hotel and airline release) but certainly before they had been released on DVDs to the public. Thus, at the time of the illicit transactions, there was no legitimate retail market for the sale of DVDs except as evidenced by the occasional and sporadic illicit transactions of the kind represented in this case. As noted, prices paid in those illicit transactions might be evidence of a market value. But in this case, the "thieves' market" prices were not the only evidence. The government presented evidence of other kinds of value that related to retail value during the theatrical release stage of the movies when the illegal transactions occurred.

...

Based on our reading of the statute, the government's evidence of the prerelease values of copies of movies, the actual selling prices of legitimate copies of movies in the postrelease period, as well as the suggested retail prices (which were erroneously excluded by the trial court), were all appropriate evidence for a jury to consider in determining total retail value of the illicit transactions. Likewise, the evidence relied on by Armstead of the actual transaction prices in the wholesale "thieves' market" was appropriate evidence for a jury to consider.

...
The fact that Armstead actually sold his DVDs in bulk for $5 per copy was also evidence that the jury could have considered. But this evidence would not be evidence of the greatest value; rather, it provided evidence of the lowest value that could be assigned to the DVDs. Indeed, the $5-per-copy price was a wholesale price, suggesting a "retail" value somewhat greater than $5 per copy.

BTW, Armstead was ultimately sentenced to six months' home detention, and paid $1,500 in fines.