United States v. Brereton

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES CO URT O F APPEALS
September 19, 2006
TENTH CIRCUIT Elisabeth A. Shumaker
Clerk of Court

U N ITED STA TES O F A M ER ICA,

Plaintiff - Appellee, No. 06-7035
v. (E.D. Oklahoma)
STA N LEY BR ER ETO N , (D.C. No. 05-CR -41-P)

Defendant - Appellant.

OR D ER AND JUDGM ENT *

Before TA CH A, A ND ER SO N, and BROR BY, Circuit Judges.

After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist in the determination

of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is

therefore ordered submitted without oral argument.

Defendant-appellant Stanley Brereton pled guilty to one count of

unauthorized use of a communication service, in violation of 47 U.S.C.

*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
§ 605(e)(4). He was sentenced to twelve months and one day of imprisonment,

followed by twelve months of supervised release. He was also ordered to pay

restitution in the amount of $39,275.52. Brereton appeals his sentence, which w e

affirm.

BACKGROUND

Defendant Stanley Brereton and his brother, Stacy, operated a business

communications company called Brerecom in W ilson, Oklahoma. In February

2004, Deputy Sheriff Gregg Johnson, of the Carter County Sheriff’s Department

in Ardmore, Oklahoma, was assigned to the District Attorney’s Drug and Violent

Crime Task Force. Johnson was conducting a narcotics investigation in the area

of W ilson, Oklahoma. During that investigation, Johnson and another officer

executed a search warrant at the house of A ndy Nipp. W hile searching Nipp’s

residence, Nipp provided Johnson with a DIRECTV access card that Nipp said

had been illegally reprogrammed by Brerecom. This enabled the holder of the

illegally reprogrammed card to view DIRECTV programming without having to

pay the monthly subscriber fee. 1

1
DIRECTV delivers approximately 225 channels of digital entertainment
and information television programming to homes and businesses in the United
States that are equipped with DIRECTV hardware (a mini-satellite dish, an
integrated receiver/decoder (“IRD”) and a DIRECTV Access card, which operates
the IRD). DIRECTV programming includes major cable networks, major movie
studios, special event programming, local channels, and a variety of other sports
(continued...)

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 On February 11, 2004, Johnson contacted Heidi Spangler with DIRECTV’s

Office of Signal Integrity. Spangler informed Johnson that Brerecom w as not an

authorized representative for DIRECTV and was not authorized to program

DIRECTV Access cards. Later that same day, Johnson provided a voice

recording device and $200.00 in cash to Shane Ayers. A yers took a recently

purchased DIRECTV Access card to Brerecom. Ayers went into defendant

Brereton’s house, which was adjacent to the Brerecom office, and, while there,

Ayers paid Brereton $200.00, for which Brereton reprogrammed the DIRECTV

Access card, using his computer. Johnson subsequently confirmed with an

authorized representative of DIRECTV that the cards Nipp and Ayers had given

to Johnson were programmed to receive all DIRECTV channels, including pay-

1
(...continued)
and special interest programs and packages.
DIRECTV currently uses three versions of A ccess cards: the third
generation card (“Period Three” or “P-3” card), the fourth generation card
(“Period Four” or “P-4” card), and the fifth generation card (“D-1” card)). All
cards have been programmed and assigned a unique electronic identification
number. The cards are manufactured outside of the United States and are sold to
consum ers as a component of the IRD.
Consumers w ho subscribe to DIRECTV can subscribe to various monthly
packages of programming, for which the subscriber pays a periodic fee, usually
on a monthly basis. Additionally, subscribers can order individual pay-per-view
events and movies. DIRECTV subscribers access its programming via an
encrypted, or electronically scrambled, signal to prevent unauthorized reception.
A subscriber’s IRD acts like a computer to process the signal using the DIRECTV
Access card. The DIRECTV Access card acts as a reprogrammable
microprocessor and uses smart card technology to authorize decryption of the
programming the subscriber has specially purchased.

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per-view channels. There was no arrangement made to pay DIRECTV for this

programming.

Between February 18 and 19, 2004, ten D IRECTV Access cards were

voluntarily surrendered to law enforcement. Each individual tendering the card

provided a written statement that he or she did not pay DIRECTV for

programming; rather, each stated that he or she paid Stanley or Stacy Brereton to

program their access cards, for fees ranging from $50.00 to $200.00. The

individuals further stated that the Breretons had committed to reprogram their

cards for free if DIRECTV disabled them.

On February 18, 2004, Angie Tibbs, a business neighbor of Brerecom,

contacted W ilson Chief of Police Larry Stearns. She told Stearns that Stanley

Brereton told her that he was leaving tow n and left a box of computer components

at her business. Tibbs provided the box to Stearns w ho then turned it over to

Johnson. The box contained fourteen DIRECTV Access cards, a computer hard

drive, and ten additional computer components. W hen Johnson compared the

computer components in the box with a DIRECTV Field Investigator’s Handbook,

he discovered that they were similar to those used to illegally program DIRECTV

Access cards.

On February 20, 2004, Johnson and other law enforcement officers

executed a search warrant on the Brereton residence. During the search, the

officers seized fifty items ranging from computers, computer components,

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computer disks, DIRECTV IRDs, DIRECTV Access cards, firearms and other

evidence. On M ay 25, 2004, a federal search w arrant was served on the Task

Force for which Johnson was working and Johnson turned over various items

seized from the Brereton residence. These items included thirty-five DIRECTV

Access cards, a W estern Digital hard drive, two laptop computers, two desktop

computers, and Zip electronic media storage disks.

The seized items were sent to the Federal Bureau of Investigation’s

C om puter A nalysis R esponse team in Oklahoma City for further analysis. An

examination of the hard drive revealed more than 5,000 Activation Scripts, which

are softw are scripts utilized to illegally reprogram DIRECTV Access cards.

Additionally, the investigators discovered more than 5,000 bin files, which are

binary files which store access card information, including codes for local

channel programming. They also discovered “Bootloader” software, which allow s

the use of Period 2 Access cards which were previously disabled by DIRECTV, as

well as other software used to assist in illegally reprogramming access cards.

As indicated, Brereton pled guilty to the one count of unauthorized use of a

comm unications service. He then proceeded to sentencing. At the sentencing

hearing, the government presented testimony from Larry Rissler, a retired FBI

agent and a consultant for DIRECTV and its anti-piracy program. Rissler

testified about a DIRECTV study conducted in 2000 to determine the income lost

from an access card that has been modified to receive all programming. The

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study presented three methods for calculating loss. First, on the assumption that

all of D IRECTV’s offered programming, including all re-broadcasted pay-per-

view events, is viewed, the loss was calculated at more than $1.3 million for the

use of one access card for one year. Second, receipt of the same programming but

with each pay-per-view event watched only once, was valued at $150,000 per

year. The third method was based on the assumption “that the viewing habits of

an individual using a hacked device would be at least as robust as the viewing

habits of a legitimate top 10 percent of our paying subscribers.” Tr. of

Sentencing Hr’g at 16, R. Vol. 3. These top ten percent subscribers paid an

average of $204.56 per month, for a total of approximately $2400 for the year.

By contrast, an average DIRECTV subscriber’s bill is approximately $60 per

month.

In preparation for sentencing, the United States Probation Office prepared a

presentence report (“PSR”). The PSR concluded that the base offense level for

Brereton’s crime was eight. Pursuant to United States Sentencing Commission,

Guidelines M anual (“USSG ”) §2B5.3(b)(1)(B) (2004), if the infringement amount

exceeds $5,000, the base offense level is increased in accordance with a table

contained in USSG §2B1.1. The PSR calculated that the infringement amount in

Brereton’s case was $39,275.52, using the third method of calculating loss— i.e.,

assuming that sixteen illegally reprogrammed access cards were used for one year

by viewers whose viewing habits were like those in the top ten percent of

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DIRECTV subscribers. 2 According to USSG §2B1.1(b)(1)(D), if the loss was

more than $30,000, the base offense level is increased by six.

The PSR further recommended a two-level upw ard adjustment to the base

offense level because the offense involved the manufacture, importation or

uploading of infringing items. See U SSG §2B5.3(b)(3). The PSR also

recommended a two-level upward adjustment because Brereton used a special

skill in a manner that significantly facilitated the commission of the offense. See

USSG §3B1.3. After a three-level downward adjustment for acceptance of

responsibility, Brereton’s total offense level was fifteen. W ith no criminal history

points, Brereton’s criminal history category was I. Based on an offense level of

fifteen and a criminal history category of I, the PSR calculated Brereton’s

advisory Guideline sentence as eighteen to twenty-four months.

Brereton made three objections to the PSR. First, he argued that the loss

amount “appears to represent an arbitrary number that . . . cannot be support[ed]

by any competent evidence.” Objections to PSR , R. Vol. 4. Second, he objected

to the two-level increase in his offense level on the ground that he

“manufacture[d], import[ed] or upload[ed]” an item, because he claimed he did

none of those things. Third, Brereton objected to the two-level increase in his

offense level on the ground that he used “special skill” under U SSG §3B1.3.

2
Thus, 12 (months) x $204.56 (payment per month by top ten percent
view ers) x 16 (number of access cards charged) = $39,275.52 (the loss to
DIRECTV from a single illegally reprogrammed access card used for one year).

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Brereton also filed a motion for a downward departure on the ground that he

suffers from “multiple mental and physical ailments.” M ot. for Downward

Departure, R. Vol. 1, tab 17.

A t B rereton’s sentencing hearing, the court overruled Brereton’s first tw o

objections, but agreed that Brereton “did not use a special skill in the commission

of the instant offense.” Tr. of Sentencing Hr’g at 71, R. Vol. 3. This resulted in

an offense level of thirteen, which yielded an advisory Guideline range of twelve

to eighteen months. After denying Brereton’s motion for a downward departure,

the court sentenced him to twelve months and one day, followed by twelve

months of supervised release.

Brereton appeals, arguing: (1) the “infringement amount” calculated for

purposes of determining his offense level for sentencing was incorrectly

calculated; (2) the sentencing Guideline offense characteristic of manufacturing

an infringing item was not justified; and (3) the amount of restitution, which is

the same as the infringement amount in issue (1), was incorrectly calculated.

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 D ISC USSIO N

1. Infringement amount

“W e now review sentences under a reasonableness standard.” United States

v. Sanders, 449 F.3d 1087, 1090 (10th Cir. 2006) (citing United States v. Kristl,

437 F.3d 1050, 1053 (10th Cir. 2006) (per curiam)). A review for reasonableness

“encompasses both the reasonableness of the length of the sentence, as well as the

method by which the sentence was calculated.” Kristl, 437 F.3d at 1055.

“Because the Guidelines must still be considered when imposing a sentence, a

sentence cannot be considered reasonable if it was based on an improper

determination of the applicable Guidelines range.” Sanders, 449 F.3d at 1090

(quotation and alterations omitted). In determining whether the district court

correctly calculated an advisory Guideline sentence, “we review factual findings

for clear error and legal determinations de novo.” Id. (quotation omitted).

USSG §2B5.3(b)(1)(B) provides that, in cases involving “Criminal

Infringement of Copyright or Trademark,” the base offense level is increased in

accordance with the “number of levels from the table in §2B1.1” if the

“infringement amount” exceeds $5,000. As indicated, the district court increased

Brereton’s base offense level by six, after calculating the infringement amount on

the assumption that those purchasing pirated DIRECTV access cards have

viewing habits like those in the top ten percent of all DIRECTV customers. Larry

Rissler, DIRECTV’s consultant who testified at Brereton’s sentencing hearing as

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an expert for the government, explained the rationale behind this method of loss

calculation:

O ur view w as that if an individual were to spend a hundred or two
hundred or three hundred dollars for a signal-theft device to get all of
DirecTV’s programming, that individual would probably be a fairly
robust television watcher.

Tr. of Sentencing Hr’g at 15. Rissler further characterized that calculation as

“very conservative.” Id. at 17. He explained that “[a]necdotal information

DirecTV developed indicates that the viewing habits of a pirate end-user are much

greater than the view ing habits of a legitimate consumer. So that number is

conservative, and I believe the . . . yearly figure that we’ve estimated of slightly

over [$]39,000 is also conservative.” Id.

The application notes to USSG §2B5.3 further describe how the

“infringement amount” is to be calculated:

The infringement amount is the retail value of the infringed item,
multiplied by the number of infringing items, in a case involving . . .
the illegal interception of a satellite cable transmission in violation of
18 U.S.C. § 2511. (In a case involving such an offense, the “retail
value of the infringed item” is the price the user of the transmission
would have paid to lawfully receive that transmission, and the
“infringed item” is the satellite transmission rather than the
intercepting device.)

USSG §2B5.3, comment. (n.2(A)(iv)). “District courts have considerable leeway

in assessing the retail value of the infringing items, and need only make a

reasonable estimate of the loss, given the available information.” United States v.

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Foote, 413 F.3d 1240, 1251 (10th Cir. 2005) (quotation omitted). Further, “[t]he

district court’s methodology is reviewed for clear error.” Id.

Brereton cites no case authority for his argument that the district court’s

methodology was clearly erroneous. The government cites only one case

supporting this method of calculating the infringement amount. See DIRECTV ,

Inc. v. Pahnke, 405 F. Supp. 2d 1182, 1192 (E.D. Cal. 2005). W e have found no

other authority on the issue. Given the lack of any more accurate method to

calculate the value of the loss to D IRECTV from the use of pirated access cards,

the court’s decision to adopt the third method did not constitute clear error. See

Foote, 413 F.3d at 1251. M oreover, we agree with the government’s assertion

that this amount is conservative, given that Brereton was only charged with

making sixteen illegally programmed cards that were used for only one year,

although law enforcement authorities found thirty-five such cards, and there was

information that the scheme had been going on longer than one year.

2. M anufacturing an infringing item

USSG §2B5.3(b)(3) provides for a two-level increase in the base offense

level if the infringement offense “involved the manufacture, importation, or

uploading of infringing items.” In applying this two-level increase, the district

court held:

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 [T]he evidence show s that the defendant had to reprogram the access
cards in order for them to be suitable for obtaining unauthorized
satellite cable transmissions which resulted in the creation of a
different product.

Having reviewed the presentence report and hearing the
testimony regarding the defendant’s actions in this case, the court is
convinced that the defendant manufactured the access cards w ithin
the meaning of . . . [§ ]2B5.3(b)(2).

Tr. of Sentencing Hr’g at 70, R. Vol. 3.

Brereton argues that he did not “manufacture” anything, as “defined by

W ebster’s Third New International Dictionary, Vol. II at p. 1378 (1976), [in

which “manufacture” is defined] as ‘to make (as raw material) into a product

suitable for use.’” Appellant’s Br. at 12. He argues that he only “modified” the

access cards.

Brereton cites no authority for this argument, other than the dictionary.

The government cites only an unpublished Ninth Circuit decision, in which the

court upheld a two-level increase under USSG §2B5.3(b)(2) in a case similar to

this one, stating:

Application Note 1 defines “the infringing item” to mean “the item
that violates the copyright or trademark laws.” By permitting
individuals to illegally gain access to scrambled electronic signals,
the reprogrammed access cards fit the definition of “infringing item.”

United States v. M ason, 38 Fed. Appx. 458, 459, 2002 W L 575840, at **1 (9th

Cir. 2002) (unpublished) (quoting USSG §2B5.3, comment. (n.1)). W e can find

no other authority on this matter.

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 Interpreting the Guidelines with a nod towards common sense, we agree

with the district court that Brereton manufactured an infringing item w hen he

illegally reprogrammed access cards to permit unauthorized interception of

DIRECTV programming. He did, indeed, thereby create a different item, one that

did something the access card could not previously do.

3. Restitution amount

Brereton was ordered to make restitution of the amount of the loss suffered

by DIRECTV. As he concedes, this is the same amount as the infringement

amount he challenged in his first issue. Brereton further concedes that he did not

object to the restitution order before the district court, so our review is for plain

error only. United States v. M itchell, 429 F.3d 952, 961 (10th Cir. 2005). W e

have already concluded that the court committed no error in calculating this

amount, much less plain error.

Having concluded that the district court correctly applied the Guidelines in

fashioning Brereton’s sentence, we accord that advisory Guideline sentence a

presumption of reasonableness. Kristl, 437 F.3d at 1054. Brereton makes no

other argument that the sentence is unreasonable. W e accordingly conclude that

it is reasonable.

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 C ON CLU SIO N

For the foregoing reasons, we AFFIRM Brereton’s sentence.

ENTERED FOR THE COURT

Stephen H. Anderson
Circuit Judge

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