
Microsoft attempts to spin its role in counterfeiting case - sizzle
https://techcrunch.com/2018/04/27/microsoft-attempts-to-spin-its-role-in-counterfeiting-case/
======
uberswe
I hate to take Microsoft's side on this but reading the emails from court
documents seems to show that this guy clearly knew he was counterfeiting and
profiting from it. See Microsoft's post here [https://blogs.microsoft.com/on-
the-issues/2018/04/27/the-fac...](https://blogs.microsoft.com/on-the-
issues/2018/04/27/the-facts-about-a-recent-counterfeiting-case-brought-by-the-
u-s-government/)

If anything I would say that the techcrunch post is overly misleading.
Although they may be right that Microsoft overstated the value of the discs in
court which lead to a harsher sentence.

~~~
devindotcom
Hey, I'm the author. Yeah he's 100% guilty of counterfeiting, pleaded guilty
and acknowledged everything up front, faking the discs and everything.

The issue I and others have been trying to highlight is that as you say that
Microsoft overstated the value, not a little, but a lot, and also contrary to
the basic facts of the matter. Essentially he committed one crime and was
sentenced for another.

He was selling recovery discs with no licenses, which are free for anyone to
create on their own or for refurbishers to burn as many as they'd like of.
They pay Microsoft for bulk licenses then print as many discs as they need.

Lundgren never sold or attempted to sell licenses, which of course create the
value of the product. The discs were worth the convenience cost of however
much a shop would pay to not have to print them themselves. No Microsoft sales
were harmed, if a license was needed Microsoft is the only place to get it,
these discs are for _re_ -installation purposes.

Microsoft in this case convinced a judge that a "copy" of Windows is worth the
same whether it is licensed or not. That's not true, and as if it weren't
enough that this misrepresentation of the facts took the day in court, a guy
is going to prison for 15 months because of it — the sentence was directly
affected by the value determined by Microsoft's $25-per-disc assertion. If the
discs were valued accurately he might have had a fine and probation, or a
month in jail.

I wrote another post talking about this earlier:

[https://techcrunch.com/2018/04/25/how-microsoft-helped-
impri...](https://techcrunch.com/2018/04/25/how-microsoft-helped-imprison-a-
man-for-counterfeiting-software-it-gives-away-for-free/)

and for what it's worth regarding the $80K and $28K payments, Lundgren's
account of it is the first was for all kinds of stuff his Source Captain
company manufactured over there for refurbishing purposes (old hard drive
cases, CD caddies, weird screws) and the second never took place because the
goods were never sent — all confiscated in the raid on Wolff's place.

~~~
zeusk
> Microsoft in this case convinced a judge that a "copy" of Windows is worth
> the same whether it is licensed or not. That's not true, and as if it
> weren't enough that this misrepresentation of the facts took the day in
> court, a guy is going to prison for 15 months because of it — the sentence
> was directly affected by the value determined by Microsoft's $25-per-disc
> assertion. If the discs were valued accurately he might have had a fine and
> probation, or a month in jail.

And how exactly did you arrive at this judgement? Restitution is solely to
make whole on the financial damage.

His jail term is completely appropriate for counterfeiting and piracy with
intent to distribute and profit under federal jurisdiction.

~~~
syshum
>>His jail term is completely appropriate for counterfeiting and piracy with
intent to distribute and profit under federal jurisdiction.

WOW you have a completely screwed set of ethics and morality if you believe
putting a person in a cage for 15 mos for duplicating restore disc is
"completely appropriate"

~~~
zeusk
I'm interpreting law as I was taught. And if you're going to question my
ethics and morality over my interpretation of the law and sentence, I don't
take the work of others and distribute copies of it while claiming them to be
genuinely produced and spend great effort to hide that fact to defraud the
buyers while also trying to downplay law enforcement and coach people on
withholding information from federal agents to _enrich myself_.

Would his sentence have been more lenient had the value of discs estimated to
be $100,000 instead of $700,000? Nope.

Would his sentence have been more lenient had he not spent effort to infringe
on copyright and attempt to make fakes that are harder to discern? Maybe.

Would his sentence have been more lenient had he not actively tried to deceive
and defraud those buying the discs from him believing them to be genuinely
produced by Microsoft/Dell? Surely.

Would he be scot free in this situation had he just shipped a free OS?
Definitely, but recycling or reducing waste wasn't his intent as you can see
for yourself from his email and bank records.

He didn't even spend the minimal effort to inquire with Microsoft if they
would help him in pushing more recycled computers with Windows but instead
decided all by himself to fly to china to create 20,000+ copies of genuinely
sold recovery disks and to sell them as genuine when he clearly knew they
weren't while coaching his codefendants to play dumb, suggesting them on
evading scrutiny from customs and pressing them to sell more product so he can
realize returns on his investment. If that doesn't show criminal intent, I
don't know what does.

~~~
syshum
>>I'm interpreting law as I was taught. And if you're going to question my
ethics and morality over my interpretation of the law and sentence

The fact that you seem to get your ethics and morality from the law says a
lot. I don't, I personally find large segments of the law to be highly immoral
and unethical.

>Would his sentence have been more lenient had the value of discs estimated to
be $100,000 instead of $700,000? Nope. Would his sentence have been more
lenient had he not spent effort to infringe on copyright and attempt to make
fakes that are harder to discern? Maybe.

Ok that may be a factual statement, that has nothing to do with the fact it
should not have been a criminal matter in the first place, but a civil matter
where only monetary damages would be punishment

I believe prison should be reserved for people that are a physical danger to
other, not as punishment for harming a corporations profits

>He didn't even spend the minimal effort to inquire with Microsoft if they
would help him in pushing more recycled computers with Windows

They would for $25 per computer, That is MS double dipping method for
recyclers to force them to purchase a new license for a computer that was
already licensed by the OEM at the time of manufacturer

>If that doesn't show criminal intent, I don't know what does.

Again you are talking about the law, I am talking about ethics, surely you to
not believe all thing that are illegal are unethical and that all thing that
are legal are ethical? If you do believe that I return to my original
statement in that you have a completely screwed set of ethics and morality

~~~
zeusk
> Again you are talking about the law, I am talking about ethics, surely you
> to not believe all thing that are illegal are unethical and that all thing
> that are legal are ethical? If you do believe that I return to my original
> statement in that you have a completely screwed set of ethics and morality

> The fact that you seem to get your ethics and morality from the law says a
> lot. I don't, I personally find large segments of the law to be highly
> immoral and unethical.

As much as you'd like, the judicial system doesn't work on ethics as judged by
you. I hope you understand the functionality of the judicial system before
making such broad statements about it.

> The fact that you seem to get your ethics and morality from the law says a
> lot.

I don't, but I also don't let my own feelings affect my interpretation of law.

> Ok that may be a factual statement, that has nothing to do with the fact it
> should not have been a criminal matter in the first place, but a civil
> matter where only monetary damages would be punishment

Do you know what the difference is between civil and criminal law? It doesn't
appear so.

> I believe prison should be reserved for people that are a physical danger to
> other, not as punishment for harming a corporations profits

So do I to a certain degree, but you must first understand that the
corporations comprise of people like you and me and not some evil mind CEO who
eats all the profits.

> They would for $25 per computer, That is MS double dipping method for
> recyclers to force them to purchase a new license for a computer that was
> already licensed by the OEM at the time of manufacturer

You're making presumptuous statements here (and I know because A - your
statement is false, $25 is only necessary if the device does not have a
recovery disk already; B - your statement is in no way related to my quoted
response of approaching Microsoft if they'd be interested in partnering in a
recycling program). I'm not going to engage with your prejudice against a
corporation of your dislike.

> Again you are talking about the law, I am talking about ethics, surely you
> to not believe all thing that are illegal are unethical and that all thing
> that are legal are ethical? If you do believe that I return to my original
> statement in that you have a completely screwed set of ethics and morality

When all else fails, paint the other person in black?

You believe software should be free to distribute and copy because it is a
never ending source and can be created out of thin air once someone has
developed it?

How about you try counterfeiting US Dollars which are also created out of thin
air?

Software is the currency of the tech companies that develop it and they like
to protect is just like our Govt. likes to protect their own economic
interest. If you don't like a company you have the choice of not using their
products but don't go around saying they're a bunch of evil morons for
protecting their interest.

~~~
syshum
>>So do I to a certain degree, but you must first understand that the
corporations comprise of people like you and me and not some evil mind CEO who
eats all the profits.

While it is true the corporations are "made up of people" the very nature of a
corporation separates liability from those people, thus when you remove said
liability people generally tend to behave worse than they would when they are
personally liable.

Then there are the group dynamics where many many people working together can
justify, rationalize, and excuse all manner of actions that when done as a
individual, they would individually find abhorrent but when done as a group
they do not.

This is why at best a corporation can only be described as amoral (at best)

The fact that corporations are "made of people" has no relevance to my
comments

>As much as you'd like, the judicial system doesn't work on ethics as judged
by you. I hope you understand the functionality of the judicial system before
making such broad statements about it.

The legal system of a society should be judged by the ethics of the members
making up that society, people like you that believe the law is the law and we
just have to accept that are part of the problem in society today

I see this law as being unethical as such I am advocating against this law.

You believe the law is the law and should remain unchanged as if it was the
word of a god.

>You're making presumptuous statements here (and I know because A - your
statement is false, $25 is only necessary if the device does not have a
recovery disk already; B - your statement is in no way related to my quoted
response of approaching Microsoft if they'd be interested in partnering in a
recycling program).

Yes it is as that is their "partnership program" for Recyclers,

I do not believe MS should be allowed to charge $25 simply because the owner
of the device did not keep or make a recovery disc upon purchase. I believe
(and the law supports) that the physical disk is irreverent, it is the LICENSE
that they sell not the Physical media.

Of course MS, and most other tech companies, want to have it both ways,
picking a choosing which sections of law they want to apply based on the
circumstances. Sometimes treating it has a Sold Good where the physical
product matters, but then other times saying it is a licensed product and the
physical media has no value

>How about you try counterfeiting US Dollars which are also created out of
thin air?

I dont think you want to know my thoughts on Fiat Currency. (hint I am not a
fan)

>Software is the currency of the tech companies that develop it and they like
to protect is just like our Govt

I have already stated I find our government (aka the law) to be largely
unethical and immoral. So you defense is to point out how the Tech Companies
are acting like our government... i.e Unethically and Immorally

>If you don't like a company you have the choice of not using their products
but don't go around saying they're a bunch of evil morons for protecting their
interest.

I do not define virtue as " protecting their interest." it is possible to be a
Evil Moron and be " protecting their interest." at the same time.

------
underwater
The TechCrunch article completely ignores huge chunks of the Microsoft post.
The emails
([https://blogs.microsoft.com/uploads/prod/sites/5/2018/04/Ema...](https://blogs.microsoft.com/uploads/prod/sites/5/2018/04/Email3.pdf))
from Eric are pretty damning. He makes it obvious he’s trying to evade
customs, that he’s trying to mislead wholesale buyers into thinking the discs
come from Microsoft, and that he’s not happy about the amount of money he’s
making.

~~~
syshum
At most this should be a civil issue between 2 private parties where monetary
damages are awarded, not a criminal case where a person faces prison times.

------
DanBC
(I don't think he should have got prison time for this crime.)

It's useful to read the emails from the defendant.

He's not just burning re-installation DVDs. He's going out of his way to burn
re-installation DVDs that are identical to MS / Dell supplied discs, even down
to holograms in the disc.

Customers were rejecting the discs because they were "counterfeit". He was
saying things like "tell him the product is guaranteed to be real". "Customs
can't tell the difference and therefore is not legally allowed to hold them
hehe"

[https://blogs.microsoft.com/uploads/prod/sites/5/2018/04/2LU...](https://blogs.microsoft.com/uploads/prod/sites/5/2018/04/2LUNDGREN6.pdf)

But that document also shows people test installing the OSs onto different
computers, and it shows them using the licence sticker on the machine to
activate one of the OSs. I'm not sure that was made clear to the judge: the
machines are licenced, and if the machines aren't licenced the supplied discs
won't activate. So, I wonder how the discs were being sold. "These discs are
licenced, and you won't have problems with activation" would be bad.

EDIT: in general, when you're ending emails to people describing how you're
going to evade customs you're probably doing something wrong, and know that
you're doing something wrong.

~~~
SiempreViernes
The copyright infringement on the packaging is blatant, but valuing recovery
disks as full operating system installers is an equally blatant lie.

~~~
DanBC
MS valued them at $20 each.

He attempted to sell some of them for more than that.

~~~
facetube
MS values replacement disks for Win 7 Pro at twice that.

~~~
DanBC
In this case MS put a value of $20 per disc. The prosecution put a value of
$25 per disc - that's the cost to refurbishers of the MS supplied discs. The
defence tried to claim that the discs are worthless without the licence, and
should be valued at either nothing or $3 each. That defence failed because he
spent $80,000 creating the counterfeit product, and you don't spend that much
money on worthless items.

~~~
jaycroft
People spend money on "worthless" things all the time, and as a person who
wants to reduce e-waste Eric would have plenty reason to spend something like
$80000 to further his goal (whether his belief is justified or not). He made
28,000 disks for $80000. That is $2.85 per disk. $3 is a perfectly reasonable
value.

------
zaroth
Is this spin or not?

“This case involves our program to partner with businesses that refurbish PCs.
These businesses typically purchase used PCs, wipe them clean of all software,
install a fresh version of Windows and sell the refurbished PCs with new
software to new customers. When a refurbisher installs a fresh version of
Windows on a refurbished PC, we charge a discounted rate of $25 for the
software and a new license – it is not free. Thousands of refurbishers
participate in this program legally without confusion, and the program works.”

The wording here is a bit tricky. What is a “fresh” version of Windows, what
makes the software “new” and is a new license actually required or not?

Restoring the _original_ version of Windows would not require a new license. A
so-called “fresh” version however would. These are meaningless terms when it
comes to the bits and bytes of WinXP SP3.

I think - totally guessing - this is the difference between a system restore
which would include any original bloatware and perhaps no SP updates - vs a
clean install with no bloatware and maybe bundling the SP3 with it...

I could see how a “fresh” install which didn’t use the original recovery disk,
being sold to a 3rd party as part of a certified refurb program, might require
some additional license which Microsoft sells for $25.

I know that the original purchaser can absolutely wipe and reinstall a fresh
copy of Windows without recovery media because it’s the first thing I always
do when getting a new machine to eliminate any possible bloatwaes.

Is the original license supposed to carry over to a fresh install being made
by a refurbisher while preparing the unit for resale?

~~~
Hamuko
The original license carries over if the computer-to-be-refurbished has the
Certificate of Authenticity and the original restore media. This is per
Microsoft's refurbishing guidelines.

[http://download.microsoft.com/download/F/5/5/F5549310-DBCE-4...](http://download.microsoft.com/download/F/5/5/F5549310-DBCE-4762-AA1A-A2012A65F2DB/Microsoft_Refurbished_PC_Licensing_Guidelines_FY14Q2.pdf)

If either one of those is missing, the computer needs to be relicensed for
$25, which is the special price that Microsoft makes available for
refurbishers and which Microsoft used to value the damages for Lundgren, as he
was selling the discs for refurbishers.

------
drvortex
There is no spin here. The fellow is remorseless and distributed software that
he did not own, nor was lecensed to distribute, violating the license
agreements of both Dell and Microsoft.

No sympathy here. Also, clickbait headline.

~~~
kahnpro
The fact that this is a _criminal_ offense is what is right and truly fucked
up.

~~~
tzs
He was making discs designed to intentionally deceive customers into thinking
they were genuine discs from Dell and Microsoft, and doing it for profit.
Isn't that classic criminal fraud?

------
kryptiskt
I don't see why they should put up with someone else manufacturing Microsoft-
branded discs and distributing them.

~~~
joecool1029
It was a screwup on his part to duplicate the trademarks. Should have just
been 'repairco's windows 7 reinstallation discs for old dells' or something to
that effect.

If its a major OEM machine like dell/lenovo/hp, there are OEM specific keys in
the BIOS. This is why they use manufacturer cd's and not retail ones (fairly
certain you can't use microsoft downloaded iso for an oem, but correct me if
wrong) You need a certificate component, the bios slic strings, and a OEM key
off the coa: [http://www.squidworks.net/2015/03/how-to-windows-7-oem-
activ...](http://www.squidworks.net/2015/03/how-to-windows-7-oem-activation/)

Point being, if the OEM stopped providing the discs and he only charged to
cover costs of the medium without profiting I fail to see Microsoft's logic
here.

EDIT: I stand corrected, they weren't selling these discs for a quarter as
articles reported.

~~~
DanBC
He didn't just duplicate the trademarks. He went out of his way to make the
discs identical to the real discs. Some of his product was rejected by his
customer because they were not identical.

> he only charged to cover costs of the medium without profiting

This was a profit making venture. You can see his invoices here:
[https://blogs.microsoft.com/uploads/prod/sites/5/2018/04/2LU...](https://blogs.microsoft.com/uploads/prod/sites/5/2018/04/2LUNDGREN6.pdf)

~~~
joecool1029
Thanks for that. Tech jouralism really is dead I guess.

In the articles I read nobody seemed to know you need an OEM cert to activate
an OEM key and nobody bothered to read the exhibit where they talk about
ebay'ing discs for $30-$40 and getting a steady cash stream.

------
youdontknowtho
I didn't expect people to be so reasonable about this. Kudos. The guy was
obviously trying to counterfeit discs. Not every copyright action is a double
plus bad DMCA internet sin.

That being said, it is indicative of how complex OS licensing is that there
are so many questions in this thread about how licenses are granted and
transferred. At some point, MS will need to be making enough money from the
cloud that they can drop this licensing model. It wont be soon, though.
Windows revenue bwas up in the last earnings report.

~~~
AnIdiotOnTheNet
Microsoft's incomprehensible licensing is a huge part of their business model.
They rely on no one (not even their own experts) being able to understand it
as a form of leverage.

~~~
youdontknowtho
It's not just Microsoft doing that, by the way. I've really been taken aback
recently as I learned more about how licensing is done at an enterprise scale.

That being said, it's business to business stuff...so, while they have
leverage, they can't use it all because that would end in litigation. In most
cases they want ongoing revenue so some things are just granted.

It's a strange way of doing things, that's for sure, but so are most things in
big business.

------
AluminiumPoint
Im sad that he got jail time, but this guy was distributing end-of-life
vulnerable operating systems. These are very dangerous and no longer updated.
Forcing old machines to run closed-source outdated operating systems, which
put the user at a real risk of compromise -- maybe we should look at
regulations here. Windows XP is not suitable or safe to use today. This isn't
about recycling, its no longer fit for purpose online.

If he had shipped it with say, a supported Ubuntu, there would be no issue and
the users would be protected.

~~~
zeusk
I'm happy he got jail time after having read those emails.

This guy was intentionally creating "fake" Windows recovery discs with
Microsoft and Dell logos and searching for unscrupulous buyers that would not
notice the small defects and pay him market rate of $25 of a genuine product
for something he copied (presumably for less than $2) in China.

Over that all, he had the guts to ignore US Customs seizure notice about his
illegal activities and to moreover email is codefendant that "they're non-
technical people and have no proof against us".

~~~
9935c101ab17a66
when I first came across this story last week, there was some HEAVY spin that
he was an environmentalist just doing his piece to save old technology. I've
since read all of the emails, and that's definitely not what he was doing.
That may have been his original intention or a very very small part of his
motivation, but this was a money making venture from the get go. There's no
doubt about it.

------
jaclaz
Previous discussion:

[https://news.ycombinator.com/item?id=16921634](https://news.ycombinator.com/item?id=16921634)

As said there, it seems like the Courts treated the case as being counterfeit
_goods_ , not really copyright or software:

[https://news.ycombinator.com/item?id=16922098](https://news.ycombinator.com/item?id=16922098)

------
textmode
The statute requires that the copies _exceed_ $2,500 in value.

[https://www.justice.gov/usam/criminal-resource-
manual-1847-c...](https://www.justice.gov/usam/criminal-resource-
manual-1847-criminal-copyright-infringement-17-usc-506a-and-18-usc-2319)

Hypothetically, if Microsoft had conceded that the value of the CDs was only
the value of the optical media[1], then what if Lundgren had only imported
$2,500 worth of CDs? How many blank CDs can one purchase for $2,500?

If the prosecutor lacks evidence that the value of the goods exceeds $2,500
then will she still pursue the case? Would it be dismissed? What if she loses?
Will that affect her career? Who can she use as an expert to provide evidence
that the goods exceed $2,500 in value? Does she have to ask Microsoft for
evidence? Why or why not?

1\. For example, one argument might be that there was no value to the software
stored on the media because it _would not run_ without purchasing a license,
e.g. by buying a computer with Windows pre-instealled by an OEM

------
wqweto
I'm not sure you can use the serial on the sticker of a refurbished PC. The
sticker is not a license as well as the serial on this sticker is not an OS
license.

The original license holder cannot transfer the OS license (unless a company
is being bought by other company) so using the serial on the sticker of a
refurbished PC by the new owner is generally illegal.

Probably the damages for MS come from refurbishers "assisting" their customers
to install OS from repair CDs using serials from stickers left from previous
PC owners -- clearly not legal.

~~~
taneq
Hang on, I thought OEM Windows licenses were nontransferable between
_computers_ , not between _owners_?

~~~
djsumdog
I think you're right. You can always sell your PC and that includes the
license (and for OEMs, Microsoft ties that license to the hardware; typically
the UEFI serial or the CPU ID). That can technically be enforced at the
hardware level.

But before they did that, you could peel off your case serial number, install
Win XP on another machine and sell your old one blank. Is this violating your
license? I'm honestly not sure, but we did it all the time.

Also if we didn't have an XP key, we'd often go to Staples and write them down
off the store units.

------
tomjuggler
Should have put Ubuntu on those refurbished pc's man!

------
SiempreViernes
I just think it’s comforting that good old asshole microsoft is back in the
game, no need to painstakingly reconsider my opinion of their business
practices now!

~~~
TomMarius
You can't really sum up Microsoft into one "asshole microsoft". For example
their OSS products are made by awesome people that work in good divisions, and
to be honest, making their work open source seems to be an attempt to not let
other MS divisions (e.g. legal) fuck up their good work.

There is no catch in their licenses (unlike Facebook had with React). Please
don't judge products such as TypeScript by this.

~~~
SiempreViernes
Reminding me that typescript is from the same makers as sharepoint and
office356 doesn’t bring my esteem of sharepoint up, if you know what I’m
saying. What comes to mind is more the stories from when oracle bought sun,
but don’t worry: I don’t want to write javascript anyway.

------
chris_wot
Sounds like they haven't learned anything at all from the MikeRoweSoft case.

[https://en.wikipedia.org/wiki/Microsoft_vs._MikeRoweSoft](https://en.wikipedia.org/wiki/Microsoft_vs._MikeRoweSoft)

