
Microsoft helped imprison a man for ‘counterfeiting’ software it gives away free - iamjeff
https://techcrunch.com/2018/04/25/how-microsoft-helped-imprison-a-man-for-counterfeiting-software-it-gives-away-for-free/
======
mchannon
So many in this case are missing the point.

If Microsoft caught him violating their copyright, and it bothered Microsoft,
Microsoft should have sued in civil court. That is the purpose of civil court-
to penalize wrongdoing by companies. Happens all the time.

But Microsoft was never going to recover anything in civil court.

So Microsoft lied to the US government about the value of what was being
"stolen", and got the US government to foot the bill of prosecuting the case.

This is called a civil-criminal hybrid case. It should be civilly prosecuted,
but the US government gets in cahoots with a corporation and the pair conspire
to make it a criminal prosecution, which allows the corporation to de facto
imprison any person it helps to convict.

Microsoft was able to avoid the lion's share of the legal fees, and won't be
responsible for any fees when and if the case is successfully appealed. You
will, as a taxpayer, footing the DOJ's bill.

Any restitution Mr. Lundgren pays will be far higher a return than Microsoft
could have gained in a civil case. As for the investigating body within the
government, it gets enriched through forfeiture. Everybody wins, except the
small guy and the taxpayer.

Mr. Lundgren might have been in a stronger position if he had not pled guilty
to two of the counts. Whether to sign away your integrity for a potentially
lighter sentence is a decision no one should have to make.

~~~
Voloskaya
> So Microsoft lied to the US government about the value of what was being
> "stolen", and got the US government to foot the bill of prosecuting the
> case.

Source for that?

Microsoft is clearly denying this, so who is right?:

> "Microsoft did not bring this case: U.S. Customs referred the case to
> federal prosecutors after intercepting shipments of counterfeit software
> imported from China by Mr. Lundgren."

and

> "Customs authorities referred the case to federal prosecutors. The United
> States Attorney’s Office in Miami pressed charges and Mr. Lundgren pleaded
> guilty. Microsoft was called as an expert witness toward the end of the
> legal proceedings. "

From: [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/)

~~~
mchannon
Source that Microsoft lied? Gov Exhibit 17. There are probably many more.

There are about three or four lies on there, which anybody familiar with the
computer recycling business can confirm.

Microsoft had no potential sales of genuine operating systems through this
conduct because any license these discs would have been useful for was affixed
to the computer and not included with the counterfeit discs. Hence, the loss
and restitution amount were falsely stated.

As to the fanciful notion that Microsoft was somehow called in at the 11th
hour, with zero involvement in the case prior to that moment, one would only
need to talk to any attorney versed in criminal law to disabuse themselves of
it.

Prosecutors don't bring cases they aren't relatively certain they can win-
that's why they have a 93+% win rate. That means contacting the "victim" from
the get-go to make sure they're willing to cooperate and testify.

~~~
WalterGR
_Source that Microsoft lied? Gov Exhibit 17. There are probably many more._

I'm not finding this via Google searches... What incantation should I use?

Which parts of the exhibit are you referring to?

[edit: I did find this, which is from the defense. The defense doesn't claim
that Microsoft stated that the value of each restore disk was $25.

"The Government provided no proof of the price at which the Microsoft software
was sold in any market without a license or product key. Indeed, the Court had
no proof that Windows software was ever sold in any market at any price
without a license or product key. Thus, the Court had no basis to determine
the retail value of the infringed item, i.e., the Microsoft software without a
license or product key. With no proof of the retail value of the infringed
item, the Court was left to assume that the Windows software without a license
and product key had the exact same retail value as an installation disc with
Windows software, a license, and a product key sold to refurbishers. In
concluding that the infringement value of the software was $25 - the price
charged to refurbishers for an installation disc with copy of the Windows
software together with a license and a product key – the Court apparently did
so." [https://resource-recycling.com/e-scrap/wp-
content/uploads/si...](https://resource-recycling.com/e-scrap/wp-
content/uploads/sites/2/2017/07/Lundgren-emergency-motion.pdf) ]

 _There are about three or four lies on there, which anybody familiar with the
computer recycling business can confirm._

For those of us who aren't familiar with the computer recycling business
(myself included) could you confirm them?

The rest of your comment is speculation.

------
tripletao
His punishment seems disproportionate and stupid (like, why are we spending
money to lock him up instead of fining him more?); but he clearly intended to
make disks that buyers would think were factory originals, and knew that he
was breaking the law. From his email:

> I can look in to the missing boxes - Usually in my history - Customs just
> ships them to you 3 weeks later.

> If they call you - play stupid and just tell them that you ordered from an
> asset management overseas.

> Tell him that the product was guaranteed to be real and that you paid a very
> high price for it. Act upset as to why you had not received your product
> yet.

Obviously cherry-picked by the prosecutors; but there's a lot more, and it
makes him look much worse than the press coverage does.

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

ETA: And why do the media keep repeating the $0.25/disk? There's a PO where he
sold some for $3 or $4 each. Less than the stupid $25, but not charity.

~~~
okasaki
Those seem like ideas on how to get past customs more easily, not necessarily
an admission of any wrongdoing.

~~~
notahacker
Lying to customs was the wrongdoing that initially saw him indicted.

The easy way to not have any issues with customs of course, would be to send
disks without decoration as "blank CDs". Ockham's razor suggests this approach
is the one you'd take if you meant to ship people a helpful installation CD at
cost price.

Instead, he pays a lot of attention to whether they can pass for the real
thing to customers, and then notes that for some product lines them looking
like the real thing is forcing him to pay extra to send them airmail because
customs check anything that looks like shipped software CDs with the licence
holder...

------
lolc
The title on the original is "How Microsoft helped imprison a man for
‘counterfeiting’ software it gives away for free". Even that title is
misleading, but the shortened title here is wrong because "Free Software" has
a specific meaning.

Referring to Microsoft Windows as "free software" is just wrong. Microsoft
Windows is not Free Software. Even if you leave out the caps intending to
refer to price only, the title is wrong. Windows is not for free. You can only
get unlicensed copies for free. Which is what the article is about.

~~~
BeetleB
>Microsoft Windows is not Free Software.

Sorry, but allowing the Free Software movement to insist they are the sole
proprietors of the definition of "free" is wrong. About as wrong as the people
who are trying to co-opt the word "racism".

If something can be had for $0, it is free. Even with a capital F. That there
exists other definition of free does not prevent people from legitimately
using this definition.

~~~
lolc
You go use the word "free" however you want. And if you refer to software that
is for free as "free software", expect to be misundertood.

~~~
BeetleB
>And if you refer to software that is for free as "free software", expect to
be misundertood.

1\. For the majority of the population, I will not be misunderstood. Only
confusing for a certain crowd (FSF advocates). But that's a hole they dug
themselves into, so my sympathies are wanting.

2\. Let's be frank: Your statement applies more to people who use it the way
you prefer, as opposed to my usage. If it weren't the case, then I wouldn't
encounter so many people all over the Internet going out of their way to point
out pseudo-clarifications.

Don't get me wrong - I'm an advocate of what you call free software, and am
even a fan of the GPL. That doesn't mean I'll buy everything they push.

~~~
lolc
The original title on Hacker News here ended with something like "distributing
free software". I took issue with that because it was about distributing
copies of Windows which is not by any definition free software.

I wasn't protesting the general case, just this instance. If the title hadn't
been misleading to me, I wouldn't have cared. I don't generally care about
licensing issues around Microsoft Windows. Though this one is an interesting
case.

------
skate22
Title is missleading:

"His actual crime, which he pleaded guilty to, was counterfeiting the
packaging to make the discs pass for Dell-branded ones."

He misled his customers in order to make money.

This isnt really different than selling knock off gucci handbags. Sure they
probably work & look the same, but it does damage to the legitimate brand.

~~~
kelnos
Counterfeit handbags damage the brand either by being made of poor quality
materials, or by just being sold cheaply, which undercuts the brand's ability
to charge a premium. (Not making a value judgment of these practices; just it
is what it is.)

Neither of those things is the case here. The discs are near-identical in
quality to the discs Dell would have furnished, and (as far as I can tell),
Dell essentially gives the discs away for free, only charging more or less for
the effort needed to manufacture and ship them. Either way, Dell is certainly
not profiting in any meaningful way from these discs, and getting a disc from
someone else certainly wouldn't harm Dell's brand. They provide this service
as a convenience to the customer, and likely it's actually a cost center.

Should he have used Dell's labeling and packaging? No, of course not. That was
incredibly stupid. I don't think he did it with any nefarious reason to
deceive; likely he just figured that a technically-unsophisticated customer
would trust the discs more with the brand name matching the computer (even
though a hypothetical disc with his own logo and packaging would be just as
safe). A poor decision legally-speaking, definitely, but I don't see how
throwing him in jail could ever be anything but an extreme overreaction to the
facts at hand.

~~~
tialaramex
Jail for organised offences like this actually has relatively good evidence.

For most crimes we know the penalties don't really act as a deterrent, because
people committing them aren't taking any sort of calculated risk - the
smackhead burgling a house isn't going "Man, given the sentencing guidelines
in this state I should prefer to go for fewer, high end houses" or "Really car
theft has a better risk-reward ratio", so sentences for these crimes basically
just take criminals off the streets, they're a form of revenge for the victim,
and maybe there's a small chance the criminal is reformed if the prison
institution is set up to encourage that.

But for crimes like industrial-scale counterfeiting (at one point Lundgren
promises his Chinese counterfeiting team will do a better job of copying the
next batch of CDs, this isn't one guy with a photocopier and a CD burner, he's
hired a factory to make the copies) the actors are really weighing it up so
there actually is a deterrent factor. Longer sentences for these crimes
actually deter crime.

The court says (and the appeal affirms) if you counterfeit a $1000 handbag,
that's $1000 in terms of the guidelines. It doesn't matter that your
counterfeit was only sold to end consumers for $500, or that the raw materials
cost $80, or that your profits at the back end were only $18 per bag, the
sentencing is focused on the price of the thing you knocked off. Official CDs
for refurbing XP Pro PCs are... drum roll... $25. The court said "$25 per
infringement" and now this counterfeiter has to go to jail for a few months.
Works for me.

Don't worry, I'm sure Lundgren will use his fame to launch a "legitimate"
electronic waste recycling outfit when he's out, he can do some great
interviews about how he's really changed now, and then the tech press can
report with "astonishment" in 2-3 years when the waste he's getting paid to
have "professionally recycled to the highest standards" is found dumped in a
toxic creek in Alabama or whatever.

------
roel_v
Look, I'm not saying that this is right or not, but this article does a
horrible job of arguing its point, and it's completely lacking any
understanding of the law.

"Furthermore: People weren’t buying software, let alone “counterfeit
software.” The discs in question are at best “unauthorized” copies of software
provided for free by Microsoft, not really a term that carries a lot of legal
or even rhetorical weight."

I can even... just... What does that even mean? What does 'buying the
software' mean vs 'buying the licence'? This author clearly has no idea about
copyright law at all, and has constructed a complete alternative narrative in
his head, which he is then using to attack a straw man.

A 'licence' is a contract between two parties, in which one party (usually)
agrees to pay a certain amount of money (the 'licence fee') and where the
other party then lets the one paying the fee make a copy of some work to use
it. A copyright holder, and he/she alone, has the right to make copies or
authorize others to make copies of a work. So 'unauthorized copies' _are the
very definition_ of copyright infringement. What does the author mean 'not
really a term that carries a lot of legal weight'? This whole artificial
'Microsoft makes it available for free online and you're not really buying
that, you're buying the licence' is complete jibber jabber - sure you can
download it, but the terms put very clear restrictions on who can download it,
why and what can be done with it after.

And yes there's all sorts of confounding factors - how much did the guy
charge, and this is a criminal case and not a civil one, and there is the Dell
branding thing, and there is intent, on and on. But my point is: this author
shouldn't write about things he clearly has absolutely no clue about.

~~~
cornholio
>A copyright holder, and he/she alone, has the right to make copies or
authorize others to make copies of a work.

In this case, Microsoft provided that authorisation to its license holders by
making available a web tool where they could create their own installation
media for the software they were licensed to use.

So the software was indeed "free" for licensed users - the very same people
who were receiving the disks - in the sense they were not required to pay for
it. It might be a license violation to download and burn the disks on their
behalf, but that's a civil matter.

The crucial element for proving criminal copyright infringement was a personal
gain figure that was manufactured by the Microsoft expert witness.

------
jmull
This article is quite disingenuous.

The lie is in the first sentence: "...15 months in prison for selling discs
that let people reinstall Windows on _licensed machines_.

(emphasis mine)

The prosecution successfully argued the machines these discs were meant to be
sold with did not have valid Windows licenses (and that these discs were part
of an effort to avoid purchasing them).

You will want to find another article on this case to read about it since this
dances fast to avoid addressing it.

We have a crime, a guilty plea, and sentencing. And a careful review in the
appeal. Hard to see what's wrong here.

~~~
Someone1234
They only don't because Microsoft wanted to double-dip. They want one license
fee when the computer is originally sold, and then a second ($25) every time
it is resold.

The problem with that is that Microsoft cannot have it both ways, either the
license is tied to the physical hardware (in which case recyclers don't need
to pay $25) or it isn't (in which case people should be able to resell them on
eBay).

~~~
jmull
I don’t think software licenses are necessarily restricted to common notions
of ownership, as you suggest.

Whether that’s right and good is another question entirely. Personally, I’d
like to see strong consumer protection laws so that software license couldn’t
violate common notions of ownership in cases where negotiation of terms isn’t
possible, but that’s an idea for a better future, not really relevant to this
case.

~~~
Someone1234
> I don’t think software licenses are necessarily restricted to common notions
> of ownership, as you suggest.

They are in the EU. The US takes a much more pro-business stance.

------
Hamuko
If Lundgren was counterfeiting software that you could "download for free",
then why did he and Bob Wolff go around buying genuine Dell recovery discs in
order to produce their own copies?

~~~
tossaway1
The article addresses this:

 _Of course, if you don’t have a DVD burner (remember, this was a while back —
these days you’d use a USB drive), you’d have to get one from a friend who has
one, a licensed refurbisher, or your manufacturer (for instance, Dell or
Lenovo) for a fee._

~~~
Hamuko
That is not in any way related to this.

Why did Lundgren buy a genuine Dell recovery disc if the software was
available for free online? There would be no need to buy a genuine Dell
recovery disc to serve as the master disc for his cloned discs.

Of course, I do know the answer as I am not naïve: the Dell recovery disc is
not the same as the Microsoft.com ISO download you can procure. The Dell disc
contains an installation of Windows + some Dell extra content that you would
expect to have in a Dell disc. And if he was to download the ISO from
Microsoft and burn it onto a DVD, it would produce a checksum that wouldn't be
identical to the Dell recovery disc, revealing it as a counterfeit.

------
notahacker
15 months sounds excessive, but the fact the software could be downloaded by
customers for free is not a mitigating factor in a guy attempting to make a
profit making it look as much as possible like a paid for product sold by
Dell/Microsoft...

~~~
Karlozkiller
> 15 months sounds excessive, but the fact the software could be downloaded by
> customers for free is not a mitigating factor in a guy attempting to make a
> profit making it look as much as possible like a paid for product sold by
> Dell/Microsoft...

I don't know if I would call it 'trying to make profit' when you make CDs in
China, ship them to US and sell the CDs for 25 cent a piece.

According to himself he made no money off of this both because no one wanted
to buy the CDs and the price didn't really allow for profit.

~~~
notahacker
According to emails he wrote whilst not trying to defend a court case, it was
very, very important to him the disks could not be distinguished from the real
thing even though he knew these were far more risky to import than unprinted
CDs, and very important to get as many sales as possible. Court submissions
seem to indicate he had another line in Canon CDs which he was quite happy
encouraging his partner to continue to sell for $30-40 a pop on eBay...

If you read the original court docs, Microsoft also claim the Dell disks
normally supplied only to Dell customers allow Windows to be used without
activating, and that an active secondary market exists for the real thing
because of that.

~~~
Karlozkiller
Do you have a link to the court documents? This whole thing seems like a mess
regardless of who is right. Although I'm quite sure these recovery discs do
not allow you to install windows without a license.

They never did when I used such discs back in the days, and why would DELL be
allowed to distribute software making such a thing possible? Of course you
could argue that he has manipulated the program on the disc but as far as I
know that has not been proven and he is claiming he did not.

~~~
notahacker
Docs are linked to from Microsoft's blog.

They answer your question on the Dell disks, which basically boils down to the
convenience of customers unable to reactivate properly for whatever reason,
who merely get nag screens. May only have applied to some Dell customer groups
and some Windows versions and I'm not about to dig out my old Dell XP
reinstallation disk to find out! Presumably they trust that [certain groups
of] Dell customers are not buying new computers with bundled Windows versions
with the intention of reusing the software on unlicensed older machines, and
make enough from selling the OEM licence not to care about the low level of
piracy they anticipated as a result.

[https://blogs.microsoft.com/uploads/prod/sites/5/2018/04/FIN...](https://blogs.microsoft.com/uploads/prod/sites/5/2018/04/FINAL-
FILED-BRIEF-11.17.17-004.pdf)

------
scandox
Did he or did he not seek to make a meaningful profit from this activity? I
can't see information on that in the article. Also did he use the downloadable
file or did he actually burn from an existing DELL disc? I think there would
be software differences potentially there right? I got a reinstallation media
sent out from DELL and it definitely seemed customised.

~~~
Karlozkiller
According to what he says himself in an interview he was selling the CDs 25
cent a piece after paying for production in China and shipping to the US. I
don't think you can get much meaningful profit from that.

~~~
criddell
It's been reported that he earned $28,000 from the transaction.

~~~
Karlozkiller
Yes, he claims that was all the money he ever got from his 'accomplice' for
selling a lot of things over several years, including screws and the CDs in
question. The CDs according to him were only a minor part of that sum.

Doesn't mean it's necessarily true, for obvious reasons. And one can only hope
the court looked through all that as thoroughly as possible.

------
notahacker
Just spotted this has been discussed before on HN, complete with comments from
the Techcrunch author

[https://news.ycombinator.com/item?id=16946478&goto=news](https://news.ycombinator.com/item?id=16946478&goto=news)

------
nailer
The other side of the case, which contains a lot of detail not mentioned 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/)

~~~
larntz
That definitely paints a different picture of the situation.

> Evidence submitted to the court shows that one transaction alone generated
> $28,000 in revenue for Mr. Lundgren and his co-defendant from the sale of
> 8,000 counterfeit software discs.

That's quite a bit more than 25 cents per disc.

Should Microsoft charge $25 for a disc and license to run windows on a
refurbished, maybe not. But, I have a hard time believing that anyone could
attempt to build a legitimate business based like the one described in this
case and not expect some kind of legal repercussions.

> Sentencing guidelines for Mr. Lundgren were calculated at 37 to 46 months,
> according to federal sentencing rules, and the judge in this case issued a
> below-guidelines sentence of 15 months

I'm not sure how I feel about the prison sentence. I understand that to many
people this feels like punishing someone that was trying to make the world a
better place, but I can also see how this falls under the piracy / copyright
infringement umbrella.

> Mr. Lundgren was even warned by a customs seizure notice that his conduct
> was illegal and given the opportunity to stop before he was prosecuted.

If this is true I have a hard time feeling bad for the guy. He should have
consulted a lawyer at that point. At the least he was aware of the possible
consequences.

~~~
Karlozkiller
According to 'the defendant' that value is all of the money he got from Bob
Wolff over a couple of Years not only from the discs. The discs returned a lot
less. Though of course that might be a lie, I wouldn't know.

~~~
tripletao
The purchase order says $28k for 8k disks. It would be funny if he's telling
the truth, and the fake PO that he made for an unrelated reason came back to
bite him here...

------
petraeus
Its like this, linux is FREE, but if you start impersonating red hat to push
linux you'll be in trouble

------
petraeus
Its free for YOU to use, its not free to copy them impersonate MS and profit
off them en masse

------
PerilousD
I stopped buying windows and the MS Office suite years ago when Microsoft
clearly stopped caring about its consumer base. As for this case, its unfair
to Lundgren - should have had better lawyers - Microsoft is simply taking
advantage of the best legal system money can buy to keep its shareholders
happy

------
DEFCON28
Microsoft didn’t imprison anyone. The U.S. government did.

