U.S. v. Hux

Citation: United States v. Hux, 940 F.2d 314 (8th Cir. 1991)(full-text).

Factual Background
Defendant Hux sells and services satellite systems, two-way radios, and other electronic devices. In March 1989, an undercover agent working with the FBI asked Hux to modify a General Instruments VideoCipher II Satellite Descrambler Module so that it would receive premium pay channels without the user paying the provider of the programming. Hux made the modification for $400. Again in May 1989, the undercover agent gave Hux a Videocipher II for modification. Hux modified the second unit and was paid $400. The FBI analyzed the descrambler and found that a computer chip had been modified to allow the receipt of all encrypted channels. On the basis of this evidence, a search warrant was issued for Hux's business, Fireball Electronics. Items seized during the search included modified computer chips, programs to modify computer chips, and the tools necessary to perform the modifications.

Trial Court Proceedings
Hux was indicted on two counts of manufacturing an electronic device for the purpose of surreptitiously intercepting electronic communications, two counts of copyright infringement, and one count that was dismissed prior to trial. Hux was convicted on the four counts presented to the jury. He was sentenced to three years of probation, six months of which was to be served in an in-home detention program. Additionally, he was fined $40,000.

Appellate Court Proceedings
18 U.S.C. Section 2510 are commonly referred to as the Wiretap Law. Hux argues that as such Section 2512(1)(b) is not applicable to the alleged conduct of modifying satellite descramblers. His contention presents a difficult question of statutory interpretation that has caused a split of opinion within the Circuit Courts.

The legislative history of 18 U.S.C. Section 2512 as it was originally disseminated states that its statutory language is intended to establish a relatively narrow category of devices whose principal use is likely to be for wiretapping or eavesdropping. . . . The crucial test is whether the design of the device renders it primarily useful for surreptitious listening. In 1986, the existing law was amended through the Electronic Communications Privacy Act of 1986. The stated purpose of the amendments was to "update and clarify Federal privacy protections and standards in light of dramatic changes in new computer and telecommunications technology. While the original law covered only interception of oral and wire communications, the amendments added electronic communications as well.

The difference of opinion in the Circuits demonstrates that the interpretation of Section 2512(1)(b) is a difficult matter. Under the Tenth Circuit's interpretation, Hux's conduct was prohibited by Section 2512(1)(b). However, that interpretation discounts the legislative history and ignores the existence of 47 U.S.C. Section 605. The appellate court believed that the Eleventh Circuit has the better reasoned approach in considering the past and present legislative history, prior case law, principles of statutory construction, and the provisions of 47 U.S.C. Section 605. Therefore, the appellate court reversed Hux's conviction under 18 U.S.C. Section 2512(1)(b).

Hux also complained that the trial court erred in admitting General Instruments' copyright certificates because they did not appear on the Government's evidence list and were not produced by the Government until the first day of trial. Hux notes that Federal Rule of Criminal Procedure 12(d) requires the Government to provide notice of its intention to use in its case-in-chief any evidence that the defendant is entitled to discover under Federal Rule of Criminal Procedure 16. Hux submits that this untimely production of evidence prejudiced his ability to prepare for trial.

At trial, the defense objected to the admission of the certificates. Upon the objection, the trial court held a bench conference. The Government attorney stated that he had just received the certificates on the morning of the trial. The Government noted that the certificates were merely business documents showing registration of the copyrights, not the copyrighted programs themselves. The trial judge extended the lunch recess so that defense counsel would have an adequate opportunity to examine the documents and then ruled that the certificates were admissible.

The appellate court may reverse the trial court's evidentiary rulings only upon a showing of an abuse of discretion. The appellate court concluded that there has been no such abuse in this case. As the Government noted, the certificates were merely business documents that substantiated the existence of the copyrights. Hux presented an expert witness who testified about the actual copyrighted material and concluded that there had been no infringement. Thus the tardy production of the certificates did not preclude Hux from preparing his defense with regard to the copyrighted material. Additionally the judge allowed the defense counsel adequate time to examine the documents during the long lunch break. Defense counsel did not indicate that he needed more time. Therefore, the trial court did not abuse its discretion in admitting the certificates.

Lastly, Hux was indicted under 17 U.S.C. Section 506(a) which applies to any person who infringes a copyright willfully and for purposes of commercial advantage or private financial gain. The trial court instructed the jury that the Government must prove the following elements beyond a reasonable doubt: 1) that the computer program in the satellite descrambler modules had a valid copyright; 2) that Hux infringed the copyright by preparing one or more derivative works or computer programs, or by reproducing or selling unauthorized copies of the computer program; 3) that Hux willfully infringed the copyright; and 4) that the act of infringement was for commercial advantage or private financial gain.

Hux argues that the evidence was insufficient to sustain his convictions under Section 506(a). Hux notes that only 205 bytes on the computer chip he developed were similar to the total of 16,384 bytes on General Instruments' chip. He contends that this similarity is insignificant and that he merely replaced the original chip with another that was the product of his own labor. As such, he argues that there has been no copyright infringement. Hux also disputes that the Government proved the second element of infringement. Hux's expert witness testified that Hux's chip was not a derivative work or other infringement of the General Instruments' chip.

In addition to the copyright certificates, two witnesses testified that General Instruments held valid copyrights for the computer program in the descramblers Hux modified. A Government witness testified that the computer chips Hux substituted were derivative and essentially the same as General Instruments' copyrighted chip. An FBI agent assigned to the investigation testified that Hux admitted knowing that what he was doing was illegal. The purchaser of the modified units testified that he paid Hux $400 for each modification. Thus, evidence was presented on each of the four elements. Viewing this evidence in the light most favorable to the Government, the appellate court found that it was sufficient for the jury to reasonably find Hux guilty beyond a reasonable doubt of copyright infringement. Therefore, the conviction was affirmed.