U.S. v. LaMacchia

Citation: United States v. LaMacchia, 871 F. Supp. 535 (D. Mass. 1994)(full-text)

Factual Background
Defendant, a computer hacker, used a university’s computer network to gain access to the Internet. Through the use of pseudonyms and an encrypted address, defendant set up an electronic bulletin board which he named Cynosure. Defendant encouraged correspondents to upload popular software applications and computer games, which he then transferred to a computer at a second encrypted address &mdash; Cynosure II &mdash; where they could be downloaded by other users with access to the Cynosure password. The worldwide traffic generated by the offer of free software attracted the attention of the university and federal authorities.

Trial Court Proceedings
Defendant was charged with conspiring with “persons unknown” to violate the wire fraud statute, by using the computer bulletin board to facilitate copying of copyrighted computer software. The defendant brought a motion to dismiss, arguing that the government had improperly resorted to the wire fraud statute.

In Dowling v. U.S., Justice Blackmun emphasized that cases prosecuted under the National Stolen Property Act traditionally involved physical goods, wares or merchandise. Copyright is unlike an ordinary chattel because the holder does not acquire exclusive dominion over the thing owned; the limited nature of the property interest conferred by copyright stems from an overriding First Amendment concern for free dissemination of ideas.

The wire fraud statute reads as follows:


 * Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined not more than $1,000 or imprisoned not more than five years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

The court held that purpose of the statute is to cure a jurisdictional defect relating to gaps in state and federal law and is not applicable to copyright law]. The defendant had no duty to the [[copyright holders that gave rise to liability for nondisclosure, and copyright was unique and distinguishable from other rights protected by the wire fraud statute.

The wire fraud statute was intended to complement the mail fraud statute by giving federal prosecutors jurisdiction over frauds involving the use of interstate wire transmission. Thus, what can be prosecuted as a scheme to defraud under the mail fraud statute is equally susceptible to punishment under the wire fraud statute so long as the jurisdictional element is met. Unlike the criminal copyright statute, mail and wire fraud statutes do not require that the defendant be shown to have sought to personally profit from the scheme to defraud.

The court concluded that the defendant’s use of a computer bulletin board to facilitate copying of copyrighted computer software was not a violation of the wire fraud statute. Defendant’s advertising of access to computer software which infringed copyrights, via computer transmission, did not violate the wire fraud statute on the grounds that defendant’s nondisclosure or concealment to copyright holders could not served as a basis for a fraudulent scheme; no fiduciary duty existed between the defendant and the copyright holders and there was no independent statutory duty of disclosure that existed and defendant’s conduct was not criminal under the Copyright Act.