Amendments to the Sentencing Guidelines for United States Courts

SUMMARY: Pursuant to its authority under section 994(p) of title 28,

United States Code, the United States Sentencing Commission, on May 1,

1998, submitted to the Congress amendments to the sentencing

guidelines, policy statements, and official commentary together with

reasons for the amendments. The amendments submitted to Congress are

set forth in Part I of this notice.

In addition, pursuant to its authority under section 994(a), (o),

and (p) of such title and section 2(g) of the No Electronic Theft Act

of 1997, Pub. L. 105-147, the Commission is considering promulgating an

amendment to the guidelines and commentary in order to implement

directives to the Commission contained in the No Electronic Theft Act.

The proposed amendment and a synopsis of the issues addressed are set

forth in Part II of this notice. The Commission seeks comment on the

proposed amendment, as well as alternative proposed amendments.

Bracketed text within a proposal indicates alternative proposals and

that the Commission invites comment and suggestions for appropriate

policy choices.

DATES: Pursuant to 28 U.S.C. 994(p), the Commission has specified an

effective date of November 1, 1998, for the amendments submitted to

Congress, subject to their acceptability to Congress.

Written public comment on the amendments proposed to implement the

directives in the No Electronic Theft Act of 1997 should be submitted

not later than August 31, 1998.

ADDRESSES: Public comment on the amendment proposed to implement the

directives in the No Electronic Theft Act of 1997 should be sent to:

United States Sentencing Commission, One Columbus Circle, N.E., Suite

2-500, Washington, D.C. 20002-8002, Attention: Public Information.

FOR FURTHER INFORMATION CONTACT: Mike Courlander, Public Affairs

Officer, telephone: (202) 273-4590.

SUPPLEMENTARY INFORMATION: The United States Sentencing Commission, an

independent agency in the judicial branch of the U.S. Government, is

empowered by 28 U.S.C. 994(a) to promulgate sentencing guidelines and

policy statements for federal sentencing courts. The statute further

directs the Commission to review periodically and revise guidelines

previously promulgated and authorizes it to submit guideline amendments

to the Congress not later than the first day of May each year. See 28

U.S.C. 994(o), (p). Additionally, a number of the amendments included

in Part I of this report are authorized and directed by, or otherwise

respond to, a variety of enactments of the 105th Congress. Absent

action of Congress to the contrary, the amendments become effective on

the date specified by the Commission (i.e., November 1, 1998) by

operation of law.

Notice of the amendments submitted to the Congress on May 1, 1998,

was first published in the Federal Register of January 6, 1998 (63 FR

602). Public hearings on the proposed amendments were held in San

Francisco, CA, on March 5, 1998, and in Washington, DC, on March 12,

1998. After review of the hearing testimony and additional public

comment, the Commission promulgated the amendments set forth in Part I

below, each having been approved by at least four voting Commissioners.

In the Federal Register of January 6, 1998, the Commission also

published a proposal from the Department of Justice on the

implementation of the directives contained in the No Electronic Theft

Act, as well as a general issue for comment on how these directives

might best be carried out. The Commission heard testimony on these

directives at the public hearing in Washington, DC, on March 12, 1998,

and reviewed additional written public comment received on this issue

in response to the Federal Register notice. The Commission also

informally solicited and received the input of parties interested in

copyright and trademark infringement sentencing issues, such as

representatives of the Department of Justice, the defense bar, and

other key groups, in an effort to determine how best to implement the

directives. As a result of this input and after reviewing the hearing

testimony and additional written public comment, the Commission voted,

on April 23, 1998, to publish for comment the three proposals contained

in Part II, below.

In connection with its ongoing process of guideline review, the

Commission welcomes comment on any aspect of the sentencing guidelines,

policy statements, and official commentary.

Authority: 28 U.S.C. 994(a), (o), (p).

Richard P. Conaboy

Chairman.

Part I--Amendments Submitted to Congress on May 1, 1998

1. Amendment: Section 2B1.1(b) is amended by adding at the end the

following new subdivision:

``(8) If the offense involved theft of property from a national

cemetery, increase by 2 levels.''.

The Commentary to Sec. 2B1.1 captioned ``Application Notes'' is

amended in Note 1 by adding at the end the following new paragraph:

``National cemetery means a cemetery (A) established under section

2400 of title 38, United States Code, or (B) under the jurisdiction of

the Secretary of the Army, the Secretary of the Navy, the Secretary of

the Air Force, or the Secretary of the Interior.''.

The Commentary to Sec. 2B1.1 captioned ``Background'' is amended by

adding at the end the following new paragraph:

``Subsection (b)(8) implements the instruction to the Commission in

Section 2 of Public Law 105-101.''.

Section 2B1.3(b) is amended by adding at the end the following new

subdivision:

``(4) If property of a national cemetery was damaged or destroyed,

increase by 2 levels.''.

The Commentary to Sec. 2B1.3 captioned ``Application Notes'' is

amended in Note 1 by adding at the end the following new paragraph:

``National cemetery means a cemetery (A) established under section

2400 of title 38, United States Code, or (B) under the jurisdiction of

the Secretary of the Army, the Secretary of the Navy, the Secretary of

the Air Force, or the Secretary of the Interior.''.

The Commentary to Sec. 2B1.3 captioned ``Background'' is amended by

inserting before the first paragraph the following:

``Subsection (b)(4) implements the instruction to the Commission in

Section 2 of Public Law 105-101.''.

Section 2K1.4(b) is amended by striking ``Characteristic'' and

inserting ``Characteristics''; and by adding at the end the following

new subdivision:

``(2) If the base offense level is not determined under (a)(4), and

the offense occurred on a national cemetery, increase by 2 levels.''.

The Commentary to Sec. 2K1.4 is amended by adding at the end the

following new application note and background commentary:

``4. National cemetery means a cemetery (A) established under

section

[[Page 28203]]

2400 of title 38, United States Code, or (B) under the jurisdiction of

the Secretary of the Army, the Secretary of the Navy, the Secretary of

the Air Force, or the Secretary of the Interior.

Background: Subsection (b)(2) implements the directive to the

Commission in Section 2 of Public Law 105-101.''.

Reason for Amendment: The purpose of this amendment is to provide

an increase for property offenses committed against national

cemeteries. This amendment implements the directive to the Commission

in the Veterans' Cemetery Protection Act of 1997, Pub. L. 105-101,

Sec. 2, 111 Stat. 2202, 2202 (1997). This Act directs the Commission to

provide a sentence enhancement of not less than two levels for any

offense against the property of a national cemetery. In response to the

legislation, this amendment adds a two-level enhancement to Secs. 2B1.1

(Theft), 2B1.3 (Property Destruction), and 2K1.4 (Arson). National

cemetery is defined in the same way as that term is defined in the

statute.

2. Amendment: Section 2F1.1(b) is amended by striking subdivision

(5) in its entirety and inserting the following:

``(5) (A) If the defendant relocated, or participated in

relocating, a fraudulent scheme to another jurisdiction to evade law

enforcement or regulatory officials; (B) if a substantial part of a

fraudulent scheme was committed from outside the United States; or (C)

if the offense otherwise involved sophisticated concealment, increase

by 2 levels. If the resulting offense level is less than level 12,

increase to level 12.''.

Section 2F1.1(b) is amended by adding at the end the following new

subdivision:

``(7) If the offense was committed through mass-marketing, increase

by 2 levels.''.

The Commentary to Sec. 2F1.1 captioned ``Application Notes'' is

amended by redesignating Notes 14 through 18, as Notes 15 through 19,

respectively; and by inserting after Note 13 the following new Note 14:

``14. For purposes of subsection (b)(5)(B), United States means

each of the 50 states, the District of Columbia, the Commonwealth of

Puerto Rico, the United States Virgin Islands, Guam, the Northern

Mariana Islands, and American Samoa.

For purposes of subsection (b)(5)(C), sophisticated concealment

means especially complex or especially intricate offense conduct in

which deliberate steps are taken to make the offense, or its extent,

difficult to detect. Conduct such as hiding assets or transactions, or

both, through the use of fictitious entities, corporate shells, or

offshore bank accounts ordinarily indicates sophisticated

concealment.''.

The Commentary to Sec. 2F1.1 captioned ``Application Notes'' is

amended by adding at the end the following new note:

``20. Mass-marketing, as used in subsection (b)(7), means a plan,

program, promotion, or campaign that is conducted through solicitation

by telephone, mail, the Internet, or other means to induce a large

number of persons to (A) purchase goods or services; (B) participate in

a contest or sweepstakes; or (C) invest for financial profit. The

enhancement would apply, for example, if the defendant conducted or

participated in a telemarketing campaign that solicited a large number

of individuals to purchase fraudulent life insurance policies.''.

Section 2T1.1(b) is amended by striking subdivision (2) in its

entirety and inserting the following:

``(2) If the offense involved sophisticated concealment, increase

by 2 levels.''.

The Commentary to Sec. 2T1.1 captioned ``Application Notes'' is

amended by striking Note 4 in its entirety and inserting the following:

``4. For purposes of subsection (b)(2), sophisticated concealment

means especially complex or especially intricate offense conduct in

which deliberate steps are taken to make the offense, or its extent,

difficult to detect. Conduct such as hiding assets or transactions, or

both, through the use of fictitious entities, corporate shells, or

offshore bank accounts ordinarily indicates sophisticated

concealment.''.

Section 2T1.4(b) is amended by striking subdivision (2) in its

entirety and inserting the following:

``(2) If the offense involved sophisticated concealment, increase

by 2 levels.''.

The Commentary to Sec. 2T1.4 captioned ``Application Notes'' is

amended by striking Note 3 in its entirety and inserting the following:

``3. For purposes of subsection (b)(1), sophisticated concealment

means especially complex or especially intricate offense conduct in

which deliberate steps are taken to make the offense, or its extent,

difficult to detect. Conduct such as hiding assets or transactions, or

both, through the use of fictitious entities, corporate shells, or

offshore bank accounts ordinarily indicates sophisticated

concealment.''.

Section 2T3.1(b) is amended by striking subdivision (1) in its

entirety and inserting the following:

``(1) If the offense involved sophisticated concealment, increase

by 2 levels.''.

The Commentary to Sec. 2T3.1 captioned ``Application Notes'' is

amended by adding at the end the following new note:

``3. For purposes of subsection (b)(1), sophisticated concealment

means especially complex or especially intricate offense conduct in

which deliberate steps are taken to make the offense, or its extent,

difficult to detect. Conduct such as hiding assets or transactions, or

both, through the use of fictitious entities, corporate shells, or

offshore bank accounts ordinarily indicates sophisticated

concealment.''.

Reason for Amendment: This amendment has three purposes: (1) to

provide an increase for fraud offenses that use mass-marketing to carry

out the fraud; (2) to provide an increase for fraud offenses that

involve conduct, such as sophisticated concealment, that makes it

difficult for law enforcement authorities to discover the offense or

apprehend the offender; and (3) to clarify and conform an existing

enhancement that provides an increase for tax offenses that similarly

involve sophisticated concealment.

First, this amendment adds a two-level enhancement in the fraud

guideline for offenses that are committed through mass-marketing. The

Commission identified mass-marketing as a central component of

telemarketing fraud and also determined that there were other

fraudulent schemes that relied on mass-marketing to perpetrate the

offense (for example, Internet fraud). Accordingly, rather than provide

a limited enhancement for telemarketing fraud only, the Commission

determined that a generally applicable specific offense characteristic

in the fraud guideline would better provide consistent and

proportionate sentencing increases for similar types of fraud, while

also ensuring increased sentences for persons who engage in mass-

marketed telemarketing fraud.

Second, this amendment provides an increase for fraud offenses that

involve conduct, such as sophisticated concealment, that makes it

difficult for law enforcement authorities to discover the offense or

apprehend the offenders. The new enhancement provides a two-level

increase and a ``floor'' offense level of level 12 in the fraud

guideline and replaces the current enhancement for ``the use of foreign

bank accounts or transactions to conceal the true nature or extent of

fraudulent conduct.'' There are three alternative provisions to the

enhancement. The first two prongs address conduct that the Commission

[[Page 28204]]

has been informed often relates to telemarketing fraud, although the

conduct also may occur in connection with fraudulent schemes

perpetrated by other means. Specifically, the Commission has been

informed that fraudulent telemarketers increasingly are conducting

their operations from Canada and other locations outside the United

States. Additionally, testimony offered at a Commission hearing on

telemarketing fraud indicated that telemarketers often relocate their

schemes to other jurisdictions once they know or suspect that

enforcement authorities have discovered the scheme. Both types of

conduct are specifically covered by the new enhancement. The third

prong provides an increase if any offense covered by the fraud

guideline otherwise involves sophisticated concealment. This prong

addresses cases in which deliberate steps are taken to make the

offense, or its extent, difficult to detect.

Third, this amendment provides a two-level enhancement for conduct

related to sophisticated concealment of a tax offense. The primary

purpose of this amendment is to conform the language of the current

enhancement for ``sophisticated means'' in the tax guidelines to the

essentially equivalent language of the new sophisticated concealment

enhancement provided in the fraud guideline. Additionally, the

amendment resolves a circuit conflict regarding whether the enhancement

applies based on the personal conduct of the defendant or the overall

offense conduct for which the defendant is accountable. Consistent with

the usual relevant conduct rules, application of this new enhancement

for sophisticated concealment accordingly is based on the overall

offense conduct for which the defendant is accountable.

3. Amendment: Section 2K2.1(a) is amended in subdivision (4) by

striking ``the defendant'' after ``20, if''; in subdivision (4)(A) by

inserting ``the defendant'' before ``had one''; in subdivision (4)(B)

by striking ``is a prohibited person, and''; and in subdivision (4)(B)

by inserting ``; and the defendant (i) is a prohibited person; or (ii)

is convicted under 18 U.S.C. 922(d)'' after ``' 921(a)(30)''.

Section 2K2.1(a)(6) is amended by inserting ``(A)'' after

``defendant''; and by inserting ``; or (B) is convicted under 18 U.S.C.

922(d)'' after ``person''.

The Commentary to Sec. 2K2.1 captioned ``Application Notes'' is

amended in Note 6 by striking ``or'' before ``(vi)''; and by inserting

``; or (vii) has been convicted in any court of a misdemeanor crime of

domestic violence as defined in 18 U.S.C. 921(a)(33)'' after

``922(d)(8)''.

The Commentary to Sec. 2K2.1 captioned ``Application Notes'' is

amended in Note 12 in the first paragraph by striking ``924(j) or (k),

or 26 U.S.C. 5861(g) or (h)'' and inserting ``924 (l) or (m)''; and in

the second paragraph by striking ``only'' after ``if the''; and by

inserting ``or 26 U.S.C. 5861(g) or (h)'' after ``922(k)''.

Reason for Amendment: This amendment has three purposes: (1) to

change the definition of ``prohibited person'' in the firearms

guideline so that it includes a person convicted of a misdemeanor crime

of domestic violence; (2) to provide the same base offense levels for

both a prohibited person and a person who is convicted under 18 U.S.C.

922(d) of transferring a firearm to a prohibited person; and (3) to

make several technical and conforming changes to the firearms

guideline.

The first part of the amendment amends Application Note 6 of

Sec. 2K2.1 (Unlawful Receipt, Possession, or Transportation of Firearms

or Ammunition; Prohibited Transactions Involving Firearms or

Ammunition) to include a person convicted of a misdemeanor crime of

domestic violence within the scope of ``prohibited person'' for

purposes of that guideline. It also defines ``misdemeanor crime of

domestic violence'' by reference to the new statutory definition of

that term in 18 U.S.C. 921(a).

This part of the amendment addresses section 658 of the Treasury,

Postal Service, and General Government Appropriations Act, Pub. L. 104-

208, 110 Stat. 3009 (1996) (contained in the Omnibus Consolidated

Appropriations Act for Fiscal Year 1997). Section 658 amended 18 U.S.C.

922(d) to prohibit the sale of a firearm or ammunition to a person who

has been convicted in any court of a misdemeanor crime of domestic

violence. It also amended 18 U.S.C. 922(g) to prohibit a person who has

been convicted in any court of a misdemeanor crime of domestic violence

from transporting or receiving a firearm or ammunition. Section

922(s)(3)(B)(i), which lists the information a person not licensed

under 18 U.S.C. 923 must include in a statement to the handgun

importer, manufacturer, or dealer, was amended to require certification

that the person to whom the gun is transferred was not convicted in any

court of a misdemeanor crime of domestic violence. Section 658 also

amended 18 U.S.C. 921(a) to define ``misdemeanor crime of domestic

violence''.

Violations of 18 U.S.C. 922(d) and (g) are covered by Sec. 2K2.1.

The new provisions at Sec. 922(d) (sale of a firearm to a ``prohibited

person'') and Sec. 922(g) (transporting, possession, and receipt of a

firearm by a ``prohibited person'') affect Application Note 6 of

Sec. 2K2.1, which defines ``prohibited person''. This part of the

amendment conforms Application Note 6 of Sec. 2K2.1 to the new

statutory provisions.

The second part of this amendment increases the base offense level

for a defendant who is convicted under 18 U.S.C. 922(d), which

prohibits the transfer of a firearm to a prohibited person.

Specifically, this part amends the two alternative base offense levels

that pertain to prohibited persons in the firearms guideline in order

to make those offense levels applicable to the person who transfers the

firearm to the prohibited person. A person who is convicted under 18

U.S.C. 922(d) has been shown beyond a reasonable doubt either to have

known, or to have had reasonable cause to believe, that the transferee

was a prohibited person.

This part of the amendment derives from a recommendation by the

United States Department of Justice and is generally consistent with a

proposed directive contained in juvenile justice legislation approved

by the Senate Judiciary Committee in 1997.

The third part of this amendment makes two technical and conforming

changes in Application Note 12 of Sec. 2K2.1. First, the amendment

corrects statutory references to 18 U.S.C. 924(j) and (k), which were

added as a result of the Violent Crime Control and Law Enforcement Act

of 1994, Pub. L. 103-322, 108 Stat. 1796 (1994). In the Economic

Espionage Act of 1996, Pub. L. 104-294, 110 Stat. 3488 (1996), Congress

again amended 18 U.S.C. 924 and redesignated the provisions as

subsections (l) and (m). The amendment conforms Application Note 12 to

that redesignation. Second, the amendment corrects the misplacement of

the reference to 26 U.S.C. 5861(g) and (h).

4. Amendment: The Commentary to Sec. 2J1.6 captioned ``Application

Notes'' is amended in Note 3 in the first paragraph by striking

``3D1.2'' and inserting ``3D1.1''; and by striking the second paragraph

in its entirety and inserting the following as the new second

paragraph:

``In the case of a conviction on both the underlying offense and

the failure to appear, the failure to appear is treated under

Sec. 3C1.1 (Obstructing or Impeding the Administration of Justice) as

an obstruction of the underlying offense, and the failure to appear

count and the count or counts for the underlying

[[Page 28205]]

offense are grouped together under Sec. 3D1.2(c). (Note that 18 U.S.C.

3146(b)(2) does not require a sentence of imprisonment on a failure to

appear count, although if a sentence of imprisonment on the failure to

appear count is imposed, the statute requires that the sentence be

imposed to run consecutively to any other sentence of imprisonment.

Therefore, unlike a count in which the statute mandates both a minimum

and a consecutive sentence of imprisonment, the grouping rules of

Secs. 3D1.1-3D1.5 apply. See Sec. 3D1.1(b), comment. (n.1), and

Sec. 3D1.2, comment. (n.1).) The combined sentence will then be

constructed to provide a `total punishment' that satisfies the

requirements both of Sec. 5G1.2 (Sentencing on Multiple Counts of

Conviction) and 18 U.S.C. 3146(b)(2). For example, if the combined

applicable guideline range for both counts is 30-37 months and the

court determines that a `total punishment' of 36 months is appropriate,

a sentence of 30 months for the underlying offense plus a consecutive

six months' sentence for the failure to appear count would satisfy

these requirements. (Note that the combination of this instruction and

increasing the offense level for the obstructive, failure to appear

conduct has the effect of ensuring an incremental, consecutive

punishment for the failure to appear count, as required by 18 U.S.C.

3146(b)(2).)''.

The Commentary to Sec. 2J1.6 captioned ``Application Notes'' is

amended by redesignating Note 4 as Note 5; and by inserting the

following as new Note 4:

``4. If a defendant is convicted of both the underlying offense and

the failure to appear count, and the defendant committed additional

acts of obstructive behavior (e.g., perjury) during the investigation,

prosecution, or sentencing of the instant offense, an upward departure

may be warranted. The upward departure will ensure an enhanced sentence

for obstructive conduct for which no adjustment under Sec. 3C1.1

(Obstruction of Justice) is made because of the operation of the rules

set out in Application Note 3.''.

The Commentary to Sec. 2P1.2 captioned ``Application Notes'' is

amended in Note 2 by striking ``as amended,'' after ``18 U.S.C.

1791(c),''; and by inserting ``by the inmate'' after ``served''.

The Commentary to Sec. 2P1.2 captioned ``Application Notes'' is

amended in Note 2 by inserting before the first paragraph the

following:

``In a case in which the defendant is convicted of the underlying

offense and an offense involving providing or possessing a controlled

substance in prison, group the offenses together under Sec. 3D1.2(c).

(Note that 18 U.S.C. 1791(b) does not require a sentence of

imprisonment, although if a sentence of imprisonment is imposed on a

count involving providing or possessing a controlled substance in

prison, section 1791(c) requires that the sentence be imposed to run

consecutively to any other sentence of imprisonment for the controlled

substance. Therefore, unlike a count in which the statute mandates both

a minimum and a consecutive sentence of imprisonment, the grouping

rules of Secs. 3D1.1-3D1.5 apply. See Sec. 3D1.1(b), comment. (n.1),

and Sec. 3D1.2, comment. (n.1).) The combined sentence will then be

constructed to provide a `total punishment' that satisfies the

requirements both of Sec. 5G1.2 (Sentencing on Multiple Counts of

Conviction) and 18 U.S.C. 1791(c). For example, if the combined

applicable guideline range for both counts is 30-37 months and the

court determines a `total punishment' of 36 months is appropriate, a

sentence of 30 months for the underlying offense plus a consecutive six

months' sentence for the providing or possessing a controlled substance

in prison count would satisfy these requirements.''.

The Commentary to Sec. 3C1.1 captioned ``Application Notes'' is

amended in Note 6 by striking ``Where'' and inserting ``If''; and by

striking ``where'' both places it appears and inserting ``if''.

The Commentary to Sec. 3C1.1 captioned ``Application Notes'' is

amended in Note 7 in the first sentence by striking ``Where'' and

inserting ``If''; by striking ``both of the'' and inserting ``both of

an''; by inserting ``(e.g., 18 U.S.C. Sec. 3146 (Penalty for failure to

appear); 18 U.S.C. Sec. 1621 (Perjury generally))'' after ``obstruction

offense'' the first place it appears; and by striking ``the

underlying'' the first place it appears and inserting ``an

underlying''.

Section 3D1.1(b) is amended by striking the first sentence in its

entirety and inserting the following:

``Exclude from the application of Secs. 3D1.2-3D1.5 any count for

which the statute (1) specifies a term of imprisonment to be imposed;

and (2) requires that such term of imprisonment be imposed to run

consecutively to any other term of imprisonment.''.

The Commentary to Sec. 3D1.1 captioned ``Application Notes'' is

amended by striking Note 1 in its entirety and inserting the following:

``1. Subsection (b) applies if a statute (A) specifies a term of

imprisonment to be imposed; and (B) requires that such term of

imprisonment be imposed to run consecutively to any other term of

imprisonment. See, e.g., 18 U.S.C. 924(c) (requiring mandatory term of

five years to run consecutively). The multiple count rules set out

under this Part do not apply to a count of conviction covered by

subsection (b). However, a count covered by subsection (b) may affect

the offense level determination for other counts. For example, a

defendant is convicted of one count of bank robbery (18 U.S.C. 2113),

and one count of use of a firearm in the commission of a crime of

violence (18 U.S.C. 924(c)). The two counts are not grouped together

pursuant to this guideline, and, to avoid unwarranted double counting,

the offense level for the bank robbery count under Sec. 2B3.1 (Robbery)

is computed without application of the enhancement for weapon

possession or use as otherwise required by subsection (b)(2) of that

guideline. Pursuant to 18 U.S.C. 924(c), the mandatory five-year

sentence on the weapon-use count runs consecutively to the guideline

sentence imposed on the bank robbery count. See Sec. 5G1.2(a).

Unless specifically instructed, subsection (b) does not apply when

imposing a sentence under a statute that requires the imposition of a

consecutive term of imprisonment only if a term of imprisonment is

imposed (i.e., the statute does not otherwise require a term of

imprisonment to be imposed). See, e.g., 18 U.S.C. 3146 (Penalty for

failure to appear); 18 U.S.C. 924(a)(4) (regarding penalty for 18

U.S.C. 922(q) (possession or discharge of a firearm in a school zone));

18 U.S.C. 1791(c) (penalty for providing or possessing a controlled

substance in prison). Accordingly, the multiple count rules set out

under this Part do apply to a count of conviction under this type of

statute.''.

The Commentary to Sec. 3D1.2 captioned ``Application Notes'' is

amended in Note 1 in the third sentence by striking ``mandates

imposition of a consecutive sentence'' and inserting ``(A) specifies a

term of imprisonment to be imposed; and (B) requires that such term of

imprisonment be imposed to run consecutively to any other term of

imprisonment''; and by inserting ``; id., comment. (n.1)'' after

``Sec. 3D1.1(b)''.

Section 5G1.2(a) is amended by striking ``mandates a consecutive

sentence'' and inserting ``(1) specifies a term of imprisonment to be

imposed; and (2) requires that such term of imprisonment be imposed to

run consecutively to any other term of imprisonment''; and by inserting

``by that statute'' after ``determined''.

The Commentary to Sec. 5G1.2 is amended in the last paragraph by

striking the first three sentences and inserting:

[[Page 28206]]

``Subsection (a) applies if a statute (1) specifies a term of

imprisonment to be imposed; and (2) requires that such term of

imprisonment be imposed to run consecutively to any other term of

imprisonment. See, e.g., 18 U.S.C. Sec. 924(c) (requiring mandatory

term of five years to run consecutively to any other term of

imprisonment). The term of years to be imposed consecutively is

determined by the statute of conviction, and is independent of a

guideline sentence on any other count.''.

The Commentary to Sec. 5G1.2 is amended in the last paragraph in

the fourth sentence by inserting ``, e.g.,'' after ``See''; and by

adding at the end the following new sentence:

``Subsection (a) also applies in certain other instances in which

an independently determined and consecutive sentence is required. See,

e.g., Application Note 3 of the Commentary to Sec. 2J1.6 (Failure to

Appear by Defendant), relating to failure to appear for service of

sentence.''.

Reason for Amendment: The purpose of this amendment is to clarify

how several guideline provisions, including those on grouping multiple

counts of conviction, work together to ensure an incremental,

consecutive penalty for a failure to appear count. This amendment

addresses a circuit conflict regarding whether the guideline procedure

of grouping the failure to appear count of conviction with the count of

conviction for the underlying offense violates the statutory mandate of

imposing a consecutive sentence. Compare United States v. Agoro, 996

F.2d 1288 (1st Cir. 1993) (grouping rules apply), and United States v.

Flores, No. 93-3771, 1994 WL 163766 (6th Cir. May 2, 1994)

(unpublished) (same), with United States v. Packer, 70 F.3d 357 (5th

Cir. 1995) (grouping rules defeat statutory purposes of 18 U.S.C.

Sec. 3146), cert. denied, 117 S. Ct. 75 (1996). The amendment maintains

the current grouping rules for failure to appear and obstruction of

justice, but addresses internal inconsistencies among different

guidelines and explains how the guideline provisions work together to

ensure an incremental, consecutive penalty for the failure to appear

count. Specifically, the amendment (1) more clearly distinguishes

between statutes that require imposition of a consecutive term of

imprisonment only if imprisonment is imposed (e.g., 18 U.S.C. Sec. 3146

(Penalty for failure to appear); 18 U.S.C. Sec. 1791(b), (c) (Penalty

for providing or possessing contraband in prison)), and statutes that

require both a minimum term of imprisonment and a consecutive sentence

(e.g., 18 U.S.C. Sec. 924(c) (Use of a firearm in relation to crime of

violence or drug trafficking offense)); (2) states that the method

outlined for determining a sentence for failure to appear and similar

statutes ensures an incremental, consecutive punishment; (3) adds an

upward departure provision if offense conduct involves multiple

obstructive acts; (4) makes conforming changes in Sec. 2P1.2 (Providing

or Possessing Contraband in Prison) because the relevant statute, 18

U.S.C. 1791, is similar to 18 U.S.C. 3146; and (5) makes conforming

changes in Secs. 3C1.1, 3D1.1, 3D1.2, and 5G1.2.

5. Amendment: The Commentary to Sec. 3B1.3 captioned ``Application

Notes'' is amended in the first paragraph of Note 1 in the third

sentence by inserting ``public or private'' after ``position of''; in

the fourth sentence by striking ``would apply'' and inserting

``applies''; and in the last sentence by striking ``would'' and

inserting ``does.''.

The Commentary to Sec. 3B1.3 captioned ``Application Notes'' is

amended by redesignating Note 2 as Note 3; and by inserting the

following as new Note 2:

``2. This enhancement also applies in a case in which the defendant

provides sufficient indicia to the victim that the defendant

legitimately holds a position of private or public trust when, in fact,

the defendant does not. For example, the enhancement applies in the

case of a defendant who (A) perpetrates a financial fraud by leading an

investor to believe the defendant is a legitimate investment broker; or

(B) perpetrates a fraud by representing falsely to a patient or

employer that the defendant is a licensed physician. In making the

misrepresentation, the defendant assumes a position of trust, relative

to the victim, that provides the defendant with the same opportunity to

commit a difficult-to-detect crime that the defendant would have had if

the position were held legitimately.''.

The Commentary to Sec. 3B1.3 captioned ``Background'' is amended by

inserting after the first sentence the following:

``The adjustment also applies to persons who provide sufficient

indicia to the victim that they legitimately hold a position of public

or private trust when, in fact, they do not.''.

Reason for Amendment: The purpose of this amendment is to establish

that the two-level increase for abuse of a position of trust applies to

a defendant who is an imposter, as well as to a person who legitimately

holds and abuses a position of trust. This amendment resolves a circuit

conflict on that issue. Compare United States v. Gill, 99 F.3d 484 (1st

Cir. 1996) (adjustment applied to defendant who posed as licensed

psychologist), and United States v. Queen, 4 F.3d 925 (10th Cir. 1993)

(adjustment applied to defendant who posed as financial broker), cert.

denied, 510 U.S. 1182 (1994), with United States v. Echevarria, 33 F.3d

175 (2d Cir. 1994) (defendant who poses as physician does not occupy a

position of trust). The amendment adopts the majority appellate view

and provides that the abuse of position of trust adjustment applies to

an imposter who pretends to hold a position of trust when in fact he

does not. The Commission has determined that, particularly from the

perspective of the crime victim, an imposter who falsely assumes and

takes advantage of a position of trust is as culpable and deserving of

increased punishment as is a defendant who abuses an actual position of

trust.

6. Amendment: Section 3C1.1 is amended by inserting ``(A)'' after

``If''; by inserting ``the course of'' after ``during''; and by

inserting ``of conviction, and (B) the obstructive conduct related to

(i) the defendant's offense of conviction and any relevant conduct; or

(ii) a closely related offense'' after ``instant offense''.

The Commentary to Sec. 3C1.1 captioned ``Application Notes'' is

amended in Note 2 in the second sentence by striking ``Note 3'' and

inserting ``Note 4''; in the third sentence by striking ``Note 4'' and

inserting ``Note 5''; and in the fourth sentence by striking ``Notes 3

and 4'' and inserting ``Notes 4 and 5''.

The Commentary to Sec. 3C1.1 captioned ``Application Notes'' is

amended in Note 4 in the first paragraph by striking ``Note 7'' and

inserting ``Note 8''.

The Commentary to Sec. 3C1.1 captioned ``Application Notes'' is

amended by redesignating Notes 1 through 8, as Notes 2 through 9,

respectively; and by inserting the following as new Note 1:

``1. This adjustment applies if the defendant's obstructive conduct

(A) occurred during the course of the investigation, prosecution, or

sentencing of the defendant's instant offense of conviction, and (B)

related to (i) the defendant's offense of conviction and any relevant

conduct; or (ii) an otherwise closely related case, such as that of a

co-defendant.''.

Reason for Amendment: The purpose of this amendment is to clarify

what the term instant offense means in the obstruction of justice

guideline, Sec. 3C1.1. This amendment resolves a circuit conflict on

the issue of whether the adjustment applies to obstructions that occur

in cases closely related to the defendant's case or only those

specifically related to the offense of which the defendant convicted.

Compare United States v. Powell, 113

[[Page 28207]]

F.3d 464 (3d Cir.) (adjustment applies if defendant attempts to impede

the prosecution of a co-defendant who is charged with the same offense

for which defendant was convicted), cert. denied, 118 S. Ct. 454

(1997), United States v. Walker, 119 F.3d 403 (6th Cir.) (same), cert.

denied, 118 S. Ct. 643 (1997), United States v. Acuna, 9 F.3d 1442 (9th

Cir. 1993) (adjustment applies if defendant attempts to obstruct

justice in a case closely related to his own), and United States v.

Bernaugh, 969 F.2d 858 (10th Cir. 1992) (adjustment applies when

defendant testifies falsely at his own hearing about co-defendants'

roles in the offense), with United States v. Perdomo, 927 F.2d 111 (2d

Cir. 1991) (cannot apply adjustment based on obstructive conduct

outside the scope of charged offense), and United States v. Partee, 31

F.3d 529 (7th Cir. 1994) (same). The amendment, which adopts the

majority view, instructs that the obstruction must relate either to the

defendant's offense of conviction (including any relevant conduct) or

to a closely related case. The amendment also clarifies the temporal

element of the obstruction guideline (i.e., that the obstructive

conduct must occur during the investigation, prosecution, or sentencing

of the defendant's offense of conviction).

7. Amendment: The Commentary to Sec. 3C1.1 captioned ``Application

Notes'' is amended in Note 4 in the first sentence of the first

paragraph by striking ``enhancement'' and inserting ``adjustment''; and

by inserting ``or affect the determination of whether other guideline

adjustments apply (e.g., Sec. 3E1.1 (Acceptance of Responsibility))''

after ``guideline range''; in the second sentence by striking

``enhancement'' and inserting ``adjustment''; in subdivision (d) by

striking the period at the end and inserting a semicolon; and by adding

at the end the following new subdivision:

``(e) lying to a probation or pretrial services officer about

defendant's drug use while on pre-trial release, although such conduct

may be a factor in determining whether to reduce the defendant's

sentence under Sec. 3E1.1 (Acceptance of Responsibility).''.

Reason for Amendment: The purpose of this amendment is to establish

that lying to a probation officer about drug use while released on bail

does not warrant an obstruction of justice adjustment under Sec. 3C1.1.

This amendment resolves a circuit conflict on that issue. Compare

United States v. Belletiere, 971 F.2d 961 (3d Cir. 1992) (lying about

drug use is not obstructive conduct that impedes government's

investigation of instant offense), and United States v. Thompson, 944

F.2d 1331 (7th Cir. 1991) (same), cert. denied, 502 U.S. 1097 (1992),

with United States v. Garcia, 20 F.3d 670 (6th Cir. 1994) (falsely

denying drug use, while not outcome-determinative, is relevant), cert.

denied, 513 U.S. 1159 (1995). The amendment, which adopts the majority

view, excludes from application of Sec. 3C1.1 a defendant's denial of

drug use while on pre-trial release, although the amendment provides

that such conduct may be relevant in determining the application of

other guidelines, such as Sec. 3E1.1 (Acceptance of Responsibility).

8. Amendment: Section 5K2.13 is amended by striking the text in its

entirety and inserting:

``A sentence below the applicable guideline range may be warranted

if the defendant committed the offense while suffering from a

significantly reduced mental capacity. However, the court may not

depart below the applicable guideline range if (1) the significantly

reduced mental capacity was caused by the voluntary use of drugs or

other intoxicants; (2) the facts and circumstances of the defendant's

offense indicate a need to protect the public because the offense

involved actual violence or a serious threat of violence; or (3) the

defendant's criminal history indicates a need to incarcerate the

defendant to protect the public. If a departure is warranted, the

extent of the departure should reflect the extent to which the reduced

mental capacity contributed to the commission of the offense.

Commentary

Application Note:

1. For purposes of this policy statement--

Significantly reduced mental capacity means the defendant, although

convicted, has a significantly impaired ability to (A) understand the

wrongfulness of the behavior comprising the offense or to exercise the

power of reason; or (B) control behavior that the defendant knows is

wrongful.''.

Reason for Amendment: The purpose of this amendment is to allow

(except under certain circumstances) a diminished capacity departure if

there is sufficient evidence that the defendant committed the offense

while suffering from a significantly reduced mental capacity. This

amendment addresses a circuit conflict regarding whether the diminished

capacity departure is precluded if the defendant committed a ``crime of

violence'' as that term is defined in the career offender guideline.

Compare United States v. Poff, 926 F.2d 588 (7th Cir.) (en banc)

(definition of ``non-violent offense'' necessarily excludes a crime of

violence), cert. denied, 502 U.S. 827 (1991), United States v.

Maddalena, 893 F.2d 815 (6th Cir. 1989) (same), United States v.

Mayotte, 76 F.3d 887 (8th Cir. 1996) (same), United States v. Borrayo,

898 F.2d 91 (9th Cir. 1989) (same), and United States v. Dailey, 24

F.3d 1323 (11th Cir. 1994) (same), with United States v. Chatman, 986

F.2d 1446 (D.C. Cir. 1993) (court must consider all the facts and

circumstances to determine whether offense was non-violent; terms are

not mutually exclusive), United States v. Weddle, 30 F.3d 532 (4th Cir.

1994) (same), and United States v. Askari, F.3d, 1998 WL 164561 (3d

Cir. 1998) (en banc) (``non-violent offenses'' are those that do not

involve a reasonable perception that force against persons may be used

in committing the offense), abrogating United States v. Rosen, 896 F.2d

789 (3d Cir. 1990) (non-violent offense means the opposite of crime of

violence). The amendment replaces the current policy statement with a

new provision that essentially represents a compromise approach to the

circuit conflict. The new policy statement allows a diminished capacity

departure if there is sufficient evidence that the defendant committed

the offense while suffering from a significantly reduced mental

capacity, except under the following three circumstances: (1) the

significantly reduced mental capacity was caused by the voluntary use

of drugs or other intoxicants; (2) the facts and circumstances of the

defendant's offense indicate a need to protect the public because the

offense involved actual violence or a serious threat of violence; or

(3) the defendant's criminal history indicates a need to incarcerate

the defendant to protect the public. The amendment also adds an

application note that defines ``significantly reduced mental capacity''

in accord with the decision in United States v. McBroom, 124 F.3d 533

(3d Cir. 1997). The McBroom court concluded that ``significantly

reduced mental capacity'' included both cognitive impairments (i.e., an

inability to understand the wrongfulness of the conduct or to exercise

the power of reason) and volitional impairments (i.e., an inability to

control behavior that the person knows is wrongful). The application

note specifically includes both types of impairments in the definition

of ``significantly reduced mental capacity''.

9. Amendment: Section 5B1.3(d) is amended by adding at the end the

following new subdivision:

``(6) Deportation

If (A) the defendant and the United States entered into a

stipulation of

[[Page 28208]]

deportation pursuant to section 238(c)(5) of the Immigration and

Nationality Act (8 U.S.C. Sec. 1228(c)(5)); or (B) in the absence of a

stipulation of deportation, if, after notice and hearing pursuant to

such section, the Attorney General demonstrates by clear and convincing

evidence that the alien is deportable--a condition ordering deportation

by a United States district court or a United States magistrate

judge.''.

Section 5D1.3(d) is amended by adding at the end the following new

subdivision:

``(6) Deportation

If (A) the defendant and the United States entered into a

stipulation of deportation pursuant to section 238(c)(5) of the

Immigration and Nationality Act (8 U.S.C. Sec. 1228(c)(5)); or (B) in

the absence of a stipulation of deportation, if, after notice and

hearing pursuant to such section, the Attorney General demonstrates by

clear and convincing evidence that the alien is deportable--a condition

ordering deportation by a United States district court or a United

States magistrate judge.''.

Section 5D1.3(e)(5) is amended by striking ``to provide just

punishment for the offense,''.

Section 5B1.3(c) is amended by inserting ``(Policy Statement)''

before ``The following''.

Section 5B1.3(d) is amended by inserting ``(Policy Statement)''

before ``The following''.

Section 5B1.3(e) is amended in the title by adding ``(Policy

Statement)'' at the end.

Section 5D1.3(c) is amended by inserting ``(Policy Statement)''

before ``The following''.

Section 5D1.3(d) is amended by inserting ``(Policy Statement)''

before ``The following''.

Section 5D1.3(e) is amended in the title by adding ``(Policy

Statement)'' at the end.

Reason for Amendment: The purpose of this amendment is to make

several technical and conforming changes to the guidelines relating to

conditions of probation and supervised release. The amendment has three

parts. First, the amendment adds to Sec. 5B1.3 a condition of probation

regarding deportation, in response to section 374 of the Illegal

Immigration Reform and Immigrant Responsibility Act of 1996, Pub. L

104-208, 110 Stat. 3009 (1996). That section amended 18 U.S.C.

Sec. 3563(b) to add a new discretionary condition of probation with

respect to deportation. Second, this amendment deletes the reference in

the supervised release guideline to ``just punishment'' as a reason for

the imposition of curfew as a condition of supervised release. The need

to provide ``just punishment'' is not included in 18 U.S.C.

Sec. 3583(c) as a permissible factor to be considered in imposing a

term of supervised release. Third, this amendment amends the guidelines

pertaining to conditions of probation and supervised release to

indicate that discretionary (as opposed to mandatory) conditions are

advisory policy statements of the Commission, not binding guidelines.

10. Amendment: Section 5K2.0 is amended in the first paragraph in

the first sentence by inserting a comma after ``3553(b)''; by striking

``guideline'' and inserting ``guidelines''; in the second sentence by

striking ``guidelines'' and inserting ``guideline range''; in the third

sentence by striking ``controlling'' after ``The''; by striking ``can

only be made by the courts'' and inserting ``rests with the sentencing

court on a case-specific basis''; in the last sentence by inserting

``determining'' after ``consideration in''; by striking ``guidelines''

and inserting ``guideline range''; by striking ``guideline level'' and

inserting ``weight''; by inserting ``under the guidelines'' after

``factor''; and by inserting before the period at the end ``or

excessive''.

Section 5K2.0 is amended in the last paragraph by striking ``An''

and inserting ``Finally, an''; by striking ``not ordinarily relevant''

and inserting ``, in the Commission's view, `not ordinarily relevant'

''; and by striking ``in a way that is important to the statutory

purposes of sentencing''.

The Commentary to Sec. 5K2.0 is amended by inserting before the

first paragraph the following:

``The United States Supreme Court has determined that, in reviewing

a district court's decision to depart from the guidelines, appellate

courts are to apply an abuse of discretion standard, because the

decision to depart embodies the traditional exercise of discretion by

the sentencing court. Koon v. United States, 116 S. Ct. 2035 (1996).

Furthermore, `[b]efore a departure is permitted, certain aspects of the

case must be found unusual enough for it to fall outside the heartland

of cases in the Guideline. To resolve this question, the district court

must make a refined assessment of the many facts bearing on the

outcome, informed by its vantage point and day-to-day experience in

criminal sentencing. Whether a given factor is present to a degree not

adequately considered by the Commission, or whether a discouraged

factor nonetheless justifies departure because it is present in some

unusual or exceptional way, are matters determined in large part by

comparison with the facts of other Guidelines cases. District Courts

have an institutional advantage over appellate courts in making these

sorts of determinations, especially as they see so many more Guidelines

cases than appellate courts do.' Id. at 2046-47.''.

Reason for Amendment: The purpose of this amendment is to reference

specifically in the general departure policy statement the United

States Supreme Court's decision in United States v. Koon, 116 S. Ct.

2035 (1996). This amendment (1) incorporates the principal holding and

key analytical points from the Koon decision into the general departure

policy statement, Sec. 5K2.0; (2) deletes language inconsistent with

the holding of Koon; and (3) makes minor, non-substantive changes that

improve the precision of the language of Sec. 5K2.0.

11. Amendment: Section 2B3.2(b) is amended in subdivision (2) by

striking ``(b)(6)'' and inserting ``(b)(7)''.

The Commentary to Sec. 2K2.1 captioned ``Application Notes'' is

amended in Note 5 in the first sentence by striking ``subsections (1)

and (2)'' and inserting ``subsections (a)(1), (a)(2), and (b)''.

The Commentary to Sec. 6A1.3 is amended in the third paragraph by

striking ``117 U.S.'' after ``Watts,'' both places it appears and

inserting ``117 S. Ct.''.

Reason for Amendment: This amendment corrects technical errors in

Secs. 2B3.1, 2K2.1, and 6A1.3.

Part II--Proposed Amendment in Response to the No Electronic Theft

Act of 1997

Synopsis of Proposed Amendment: In section 2(g) of the No

Electronic Theft Act of 1997, Pub. L. 105B147, Congress directed the

Commission to (1) ``ensure that the applicable guideline range for a

defendant convicted of a crime against intellectual property (including

offenses set forth at section 506(a) of title 17, United States Code,

and sections 2319, 2319A, and 2329 of title 18, United States Code) is

sufficiently stringent to deter such a crime and to adequately reflect

the additional considerations set forth in paragraph (2)''; and (2)

``ensure that the guidelines provide for consideration of the retail

value and quantity of the items with respect to which the crime against

intellectual property was committed.''

Three possible approaches for implementing these directives are set

forth below. Option One is the result of the Commission's review and

consideration of the directives, after taking into account pertinent

hearing testimony, written public comment, and

[[Page 28209]]

other input of interested parties. Upon the Commission's request for

input from the Department of Justice, the Department proposed Options

Two and Three as possible approaches for carrying out the statutory

directives. The Commission invites comment on each of these three

proposals, as well as any other comment on how the congressional

directives might best be implemented. Additionally, the Commission

invites comment on whether the Commission can and should promulgate any

of these proposed amendments (or any other amendments to the

guidelines, policy statements, and official commentary to carry out

these directives) pursuant to the emergency amendment authority of

section 21 of the Sentencing Act of 1987.

Note: Persons commenting on this issue may wish to consider

whether the authority of the Commission to adopt emergency

amendments to the guidelines in order to implement the directives is

sufficiently clear inasmuch as the authority to act on an emergency

basis under section 21 of the Sentencing Act of 1987, which was

cited in section 2(g) of the No Electronic Theft Act of 1997, has

expired and may not have been revived adequately by that section.

Proposed Amendment:

Option One [Commission Proposal]:

Strike Sec. 2B5.3 and insert the following:

Sec. 2B5.3. Criminal Infringement of Copyright or Trademark

(a) Base Offense Level: 6

(b) Specific Offense Characteristics

(1) If (A) the offense involved (i) the infringement of a copyright

other than a copyright violation under 18 U.S.C. 2319A, (ii) the

infringement of both a copyright and a trademark, or (iii) palmed-off

counterfeit goods; and (B) the infringed value exceeded $2,000,

increase by the number of levels from the monetary table in Sec. 2F1.1

(Fraud and Deceit) corresponding to that value.

(2) If (A) subsection (b)(1) does not apply; and (B) the infringing

value exceeded $2,000, increase by the number of levels from the

monetary table in Sec. 2F1.1 corresponding to that value.

[(3) If the offense involved online electronic infringement,

increase by 2 levels.]

[(4) If the offense was not committed for commercial advantage or

private financial gain, decrease by [2] levels, but not below level 6.]

[(5) If the offense involved the conscious or reckless risk of

serious bodily injury or death, increase by [2] levels. If the

resulting offense level is less than level [13][14], increase to level

[13][14]].

Commentary

Application Notes:

1. For purposes of this guideline--

Infringed value means the average retail value of the infringed-

upon item multiplied by the number of infringing items. Infringed-upon

item means the legitimate item with respect to which or against which

the crime against intellectual property was committed. Average retail

value of the infringed-upon item generally means the average price that

a well-informed consumer typically would pay for the legitimate item

(which may be less than the Manufacturer's Suggested Retail Price). In

cases involving the interception of a communication in violation of 18

U.S.C. Sec. 2511, the average retail value of the infringed-upon item

means the price the user would have paid if that communication had been

obtained lawfully.

Infringing value means the average retail value of the infringing

item multiplied by the number of infringing items.

Infringing item means the item that violates the copyright or

trademark laws.

Palmed-off counterfeit goods means counterfeit goods that a

consumer reasonably would believe are the legitimate items, because of

price comparability and apparent substitutability.

Online electronic infringement includes the unlawful producing,

reproducing, distributing, selling, performing, or trafficking in

copyrighted or trademarked articles or services via an electronic

bulletin board, a worldwide web site, or any online facility.

Commercial advantage or private financial gain includes receipt, or

expectation of receipt, of anything of value, including the receipt of

other protected works.

2. The enhancement in subsection (b)(2) applies to any infringement

case not covered by subsection (b)(1) and in which the infringing value

exceeded $2,000. The types of cases to which subsection (b)(2) is

intended to apply include, for example, most cases involving trademark

infringement, as well as cases involving the unlawful recording of a

musical performance in violation of 18 U.S.C. Sec. 2319A.

3. There may be cases in which the offense level substantially

understates or overstates the seriousness of the offense or the

culpability of the defendant. In such cases, an upward or downward

departure, as appropriate, may be warranted.

Background: This guideline treats copyright and trademark

violations much like fraud. The enhancements in subsections (b)(1) and

(2) are intended as an approximate determination of the aggregate

pecuniary harm resulting from trafficking in goods or services that

violate the copyright or trademark laws.

The Electronic Communications Privacy Act of 1986 prohibits the

interception of satellite transmission for purposes of direct or

indirect commercial advantage or private financial gain. Such

violations are similar to copyright offenses and are therefore covered

by this guideline.''.

Option Two [Department of Justice Proposal]:

Strike Sec. 2B5.3 and insert the following:

``Sec. 2B5.3. Criminal Infringement of Copyright or Trademark

(a) Base Offense Level: 6

(b) Specific Offense Characteristics

(1) If the economic harm exceeded $2,000, increase by the

corresponding number of levels from the table in Sec. 2F 1.1 (Fraud and

Deceit).

(2) If the offense involved online electronic infringement,

increase by 2 levels.

(3) If the offense posed a threat to public health and safety,

increase by 2 levels.

Commentary

Statutory Provisions: 17 U.S.C. Sec. 506(a); 18 U.S.C. 2318, 2319,

2319A, 2320, 2511. For additional statutory provision(s), see Appendix

A (Statutory Index).

Application Notes:

1. For purposes of this guideline--

Infringed upon items means the items (including phonorecords and

computer programs) with respect to which or against which the crime

against intellectual property was committed.

Infringing items means the items that violate the copyright or

trademark laws; often, infringing trademarks, and the items bearing

them, are referred to as counterfeit and items that infringe copyrights

are referred to as pirated.

Retail value means the Manufacturer's Suggested Retail Price

(MSRP).

Copies means both copies and phonorecords.

Trafficked in includes transported, transferred, distributed, sold

or otherwise disposed of.

2. Economic harm in 2318, 2319 (506(a)), and 2320 cases is the

retail value of the infringed upon items, multiplied by the number of

copies produced and trafficked in. This recognizes that infringement

causes losses not only for the trademark and copyright owners, but for

others in the distribution chains of legitimate articles, and for

members of the public who are

[[Page 28210]]

deceived into buying what they may believe are legitimate articles.

A single copy that is produced and then sold by a single defendant

counts as one copy.

3. Economic harm in 2319A cases is the retail value of the

infringing items, multiplied by the number of copies produced

(including the number of primary unlawful fixations, i.e., `masters,'

from which those copies are made) and/or transmissions and/or the

number of copies sold, offered for sale, distributed, offered for

distribution, rented, offered for rent, and trafficked in. The value of

infringing items is the standard in these cases because merchandise

that violates Sec. 2319A has no legitimate counterpart. A single copy

that is produced and then sold by a single defendant counts as one

copy.

4. Online electronic infringement includes the producing,

reproducing, distributing, selling, performing, or trafficking in

copyrighted or trademarked articles or services via an electronic

bulletin board, a worldwide web site, or any online facility. The ease

with which infringers can operate in the online environment and the

access they have to limitless numbers of customers gives them the

capability of causing substantial harm. For example, a defendant may

post copyrighted material to an electronic bulletin board, making it

accessible for others to illegally obtain, copy, and further

distribute. In such an instance, it may not be possible to determine

precisely the number of items (copies) downloaded by persons who access

the facility, but it is reasonable to assure, based on the worldwide

possibility for distribution and the number of items offered at the

facility, that the harm is substantial.

5. In many instances, items that violate the trademark and

copyright laws also present public health and safety hazards. These

hazards can appear in many contexts. For example, counterfeit products,

such as automotive parts, airplane parts, foodstuffs, pharmaceuticals,

and electrical devices, place members of the public in danger. The

enhancement shall apply in cases in which the products, if used in

their intended manner, would threaten public health and safety.

6. An upward departure may be warranted in cases in which the

economic harm underrepresents the actual harm or would lead to an

unfair result. This Application Note applies in infringement

situations, other than those referred to in Application Note 4, in

which the number of copies produced and trafficked in is impossible to

calculate and the harm to the copyright or trademark owner, others in

the legitimate distribution chains, and the public is substantial. For

example, rather than operate as an individual, a defendant may be part

of a distribution or manufacturing network in which he or she supplies

other distributors with unlawful products or parts of products, such as

counterfeit handbags or watches or their parts or pirated sound

recordings or motion pictures. In such an instance, it may not be

possible to determine precisely the number of items (copies) provided

to other persons for distribution, but it is reasonable, based on the

available facts (including the number of persons in the distribution

network), that the number is large enough to create substantial harm.

The upward departure provided for in this Application Note is available

regardless of whether the conduct was for financial gain.

7. A downward departure may be warranted in cases in which the

retail price of the infringing items is less than 30% of the retail

value of the infringed upon item. In such cases, it may not be

reasonable to conclude that each sale of an infringing item represents

a lost sale for the copyright or trademark owner or others in the

distribution chain. For example, a counterfeit watch may retail for

$15, while the infringed upon watch may retail for $5,000. A sentencing

calculation based on the retail value of the infringed items may lead

to an unfair result.

Background: This guideline treats copyright and trademark

violations much like fraud.

The Electronic Communications Privacy Act of 1986 prohibits the

interception of satellite transmission for purposes of direct or

indirect commercial advantage or private financial gain. Such

violations are similar to copyright offenses and are, therefore,

covered by this guideline.''.

Option Three [Department of Justice Proposal]:

Strike Sec. 2B5.3 and insert the following:

Sec. 2B5.3. Criminal Infringement of Copyright or Trademark

(a) Base Offense Level: 6

(b) Specific Offense Characteristics

(1) If the economic harm exceeded $2,000, increase by the

corresponding number of levels from the table in Sec. 2F1.1 (Fraud and

Deceit).

(2) If the offense involved online electronic infringement,

increase by 2 levels.

(3) If the retail price of the infringing items is less than 50% of

the manufacturer's suggested retail price of the infringed upon items,

decrease by 2 levels; if the retail price of the infringing items is

less than 30% of the manufacturer's suggested retail price of the

infringed upon items, decrease by 4 levels.

Commentary

Statutory Provisions: 17 U.S.C. Sec. 506(a), 18 U. S. C. 2318,

2319, 2319A, 2320, 2511. For additional statutory provision(s), see

Appendix A (Statutory Index).

Application Notes:

1. For purposes of this guideline

Infringed upon items means the legitimate items (including

phonorecords and computer programs) with respect to which or against

which the crime against intellectual property was committed.

Infringing items means the items that violate the copyright or

trademark laws; often, infringing trademarks, and the items bearing

them, are referred to as counterfeit and items that infringe copyrights

are referred to as pirated.

Copies means both copies and phonorecords.

2. Economic harm in section 2318, 2319 (506(a)), and 2320 cases is

the manufacturer's suggested retail price (msrp) of the infringed upon

items, multiplied by the number of copies involved in the offense. This

recognizes that the economic harm caused by infringement affects not

only the trademark and copyright owners, but also others in the

distribution chains of legitimate articles, and members of the public

who are deceived into buying what they may believe are legitimate

articles.

Because there is no infringed upon item in section 2319A cases,

`economic harm' in those cases is the retail price of the infringing

items, multiplied by the number of copies involved in the offense

(including the number of primary unlawful recordings, i.e., `masters,'

from which those copies are made).

Economic harm in section 2511 caves is the price the user or users

would have paid if the service had been obtained lawfully.

3. Online electronic infringement includes the producing,

reproducing, distributing, selling, performing, or trafficking in

copyrighted or trademarked articles or services via an electronic

bulletin board, a worldwide web site, or any online facility. The ease

with which infringers can operate in the online environment and the

access they have to limitless numbers of customers gives them the

capability of causing substantial harm.

4. An upward departure may he warranted in cases in which the

unlawful conduct presents a reasonably

[[Page 28211]]

foreseeable risk to public health or safety. These hazards appear in

many contexts. For example, counterfeit products, such as automotive

parts, airplane parts, foodstuffs, pharmaceuticals, and electrical

devices, place members of the public in danger.

5. An upward departure may be warranted in cases in which the

standard calculation of economic harm under-represents the actual harm

or would lead to an unfair result. This Application Note applies in

infringement situations, other than those referred to in Application

Note 3, in which the number of copies involved in the offense is

impossible to calculate and the harm to the copyright or trademark

owner, others in the legitimate distribution chain, and the public is

substantial. For example, rather that operate as an individual, a

defendant may be part of a distribution or manufacturing network in

which he or she supplies other distributors with unlawful products or

parts of products, such as counterfeit handbags or watches or their

parts or pirated sound recordings or motion pictures or their

packaging, In such cases, it may not be possible to determine precisely

the number of items (copies) provided to other persons for

distribution, but it is reasonable, based on the available facts

(including the number of persons in the distribution network), that the

number is large enough to create substantial harm. The upward departure

provided for in this Application Note is available regardless of

whether the conduct was for commercial advantage or financial gain.

Background: This guideline treats copyright and trademark

violations much like fraud.

The Electronic Communications Privacy Act of 1986 prohibits the

interception of satellite transmission for purposes of direct or

indirect commercial advantage or private financial gain. Such

violations are similar to copyright offenses and are, therefore,

covered by this guideline.''.

[FR Doc. 98-13584 Filed 5-20-98; 8:45 am]

BILLING CODE 2210-40-P