## Facts

- Jason Slater and Christian Morley participated in “Pirates With Attitudes” (PWA), an organized Internet group distributing copyrighted software without authorization.
- PWA operated through a role-based system: suppliers obtained software; “crackers” removed protection (including Slater); “packagers” tested and described releases (including Morley); couriers uploaded files to PWA-controlled sites for member downloading.
- Members did not pay money, but participation required providing valuable services in a barter-like exchange.
- A key server (“Sentinel”) was operated without a university’s authorization and concealed on campus.
- In January 2000, the FBI seized the Sentinel hardware; it contained about 5,000 downloadable programs and logs documenting member uploading/downloading activity dating back to 1996.
- A grand jury charged Slater, Morley, and others with one count of conspiracy to commit copyright infringement under 17 U.S.C. § 506(a)(2), 18 U.S.C. § 2319(c)(1), and 18 U.S.C. § 371.
- Slater pleaded guilty; Morley went to trial and was convicted by a jury.
- Both defendants appealed issues related to Morley’s requested fair-use instruction and the district court’s Sentencing Guidelines loss calculation.

## Issues

1. Whether Morley was entitled to a jury instruction on fair use in a criminal conspiracy-to-infringe prosecution based on claims of noncommercial, educational, or entertainment purposes.
2. Whether the district court clearly erred in calculating loss under the U.S. Sentencing Guidelines using the software available on the Sentinel server and related evidence.

## Decision

- The court affirmed Morley’s conviction and affirmed both defendants’ sentences.
- The district court properly refused a fair-use instruction because the record lacked evidence from which a reasonable jury could find fair use under the statutory factors.
- The district court’s loss valuation for Guidelines purposes was a factual determination supported by the record and not clearly erroneous.

## Legal Principles

- Fair use may be asserted in a criminal copyright case in principle, but a defendant is entitled to a fair-use jury instruction only if there is an evidentiary foundation that could support a reasonable finding on the statutory fair-use factors.
- Large-scale copying and distribution of entire commercial software products weighs strongly against fair use, especially where the conduct serves as a market substitute for lawful acquisition.
- A “noncommercial” label is not dispositive where the enterprise functions through organized value exchange (including barter of services) to obtain and distribute copyrighted works.
- Sentencing loss in infringement conspiracies may be estimated from the quantity and nature of infringing works made available and from activity records; the district court’s reasonable estimate will be upheld absent clear error.

## Conclusion

The Seventh Circuit held that wholesale Internet distribution of thousands of commercial software programs lacked any evidentiary basis for a fair-use instruction and sustained a Guidelines loss estimate grounded in the scale and commercial character of the works made available, affirming the conviction and sentences.


United States v. Slater, 348 F.3d 666 (7th Cir. 2003)