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A San Jose, Calif., jury Tuesday rejected arguments that a Russian company committed a crime by issuing code-busting computer software, serving up a high-profile defeat for prosecutors who hope to use a new federal law to charge such actions as a crime. The eight-man, four-woman jury found Moscow’s ElcomSoft Co. Ltd. not guilty of five counts of violating the criminal provisions of the federal Digital Millennium Copyright Act for issuing a program that could be used to circumvent security protections on Adobe Systems Inc.’s eBook reader. ElcomSoft was the first defendant to face a criminal trial under the law, passed by Congress in 1998. Minutes after their verdict was read in U.S. district court, jurors said they didn’t buy the government’s contention that ElcomSoft knowingly flouted the law — which is necessary to prove criminal intent under the DMCA. During the trial, lawyers revealed ElcomSoft had pulled its software from the market a mere five days after it was notified that the product could violate U.S. law. The software had sold just 25 copies and the company had made a few thousand dollars. The verdict seemed to point to a big question for prosecutors who pursue such cases: Should they wait for damages to mount against a victim before pursuing a criminal copyright case or should they risk alienating juries by pursuing cases where damages may appear minimal? While supporters and opponents of the DMCA agreed that the ElcomSoft verdict won’t be the death of criminal copyright prosecutions, they said prosecutors and victim companies face a real conundrum. “It’s a Catch-22,” said Evan Cox, a partner with Washington, D.C.-based Covington & Burling. “Do you act quickly before you run up losses, or do you let them run up so the case is strong? If you are a copyright owner you usually want the authorities to take quick action to minimize the losses. You stopped the losses in this case, but you don’t wind up with a conviction that deters people in future cases.” Nonetheless, the U.S. Attorney’s Office and DMCA supporters attempted to put a positive spin on Tuesday’s verdict. “When you are bringing good cases under new statutes, sometimes you are going to lose, and that’s what happened here,” said Northern District U.S. Attorney Kevin Ryan. “We accept the jury’s verdict. While disappointed, we are also pleased that the judge upheld the constitutionality of the Digital Millennium Copyright Act and the jurisdiction of the United States to bring these cases.” Ryan’s office pursued a high-profile strategy against ElcomSoft. Silicon Valley seemed a natural venue for the first case under the tech-oriented law, and federal prosecutors touted their use of the newly minted act. At a Las Vegas software convention, federal agents arrested the Russian programmer — Dmitry Sklyarov — who developed the ElcomSoft program. But Sklyarov became something of a cause celebre, sparking national press coverage and outrage from the technology industry’s vocal advocates of electronic freedom. Charges against Sklyarov were to be dropped in exchange for his cooperation in the case against the company. “When prosecutions are brought, there appears to be the need for more compelling evidence of intent. They also have to watch the David and Goliath effect in these cases,” said Q. Todd Dickinson, the former head of the Patent and Trademark Office and a partner with Washington, D.C.’s Howrey Simon Arnold & White. “Mr. Sklyarov seems to have become somewhat of a folk hero, or a Robin Hood type character — that makes conviction more difficult. That doesn’t mean the law is any less appropriate or necessary.” Attorneys critical of the DMCA said the acquittal is a boost for fair use and shows that products like ElcomSoft have legal uses, not just criminal ones. “It was really difficult to figure out what the crime was because no one was hurt. There was not intent. At most [Adobe] was embarrassed because it was revealed the product was not very good,” said Cindy Cohn of the San Francisco-based Electronic Frontier Foundation. “It’s difficult to figure out how embarrassing a public company was a criminal offense. It was very clear, from the pieces I watched, this product could be used for good purposes and bad purposes.” But copyright and anti-piracy attorneys who support DMCA protections said the jury may have underestimated the sophistication of the defendants. In the future prosecutors will need to present a more airtight theory of criminal intent, they said. “Going into this, it looked like a strong case. You have someone who created a circumvention device and marketed it commercially. That probably seemed to prosecutors like exactly the kind of case the DMCA was aimed at,” said Covington & Burling’s Cox. But Laurence Pulgram, a partner with Palo Alto, Calif.-based Fenwick & West who represented Napster Inc. in its celebrated copyright infringement trial, said he believes the verdict shows juries are well-equipped to discern between a threat to a copyright and a criminal act. “It’s not as simple as saying a technology can be used to make unlawful copies,” Pulgram said. “Juries care about the defendant’s state of mind.” Joseph Burton, the Duane Morris partner who represented ElcomSoft, said the case hinged on the question of whether ElcomSoft acted with willful disregard of U.S. copyright law. “The evidence in my view,” Burton said, “was not sufficient enough to establish intent.” The case is U.S. v. ElcomSoft, 20138.

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