Prison For Making "Counterfeit" Windows Restore Disks

[kenblu24]

 

Polygon https://www.polygon.com/windows/2018/4/25/17280178/eric-lundgren-windows-restore-disks-microsoft-prison

arsTECHNICA (Most Recent) https://arstechnica.com/tech-policy/2018/04/why-the-man-who-tried-to-sell-windows-recovery-discs-will-go-to-prison/

Washington Post https://www.washingtonpost.com/news/true-crime/wp/2018/04/24/recycling-innovator-eric-lundgren-loses-appeal-on-computer-restore-discs-must-serve-15-month-prison-term/?noredirect=on&utm_term=.1b6641afb067

 

Summary:

Eric Lundgren, 33, has been sentenced to 15 months in federal prison and a 50k fine, with the court ruling that his "restore disks" infringed upon Microsoft products costing $700,000.

In 2011, Lundgren ordered $80,000 worth of re-printed Windows recovery disks from China. These were intercepted by US Customs and Border protection.

It is reported that these are restore disks, which do not come with a product key or license and cannot be used to activate Windows. Therefore, these disks should be nearly worthless, as an installation/restore disk can be made free of cost with a utility provided by Microsoft. However, as many forum members have noted, it is against Microsoft's terms of use to redistribute this software.

 

Note that currently being reported is that a US appeals court upheld a district judge's ruling. This is an appeal, not the original conviction or sentencing. 

 

Qyotes:

Quote

A California man has been ordered to prison for 15 months after having been convicted of "counterfeiting" thousands of Windows Reinstallation Discs. Curiously, Microsoft routinely gives away this Windows download at no cost.

 

In short, Eric Lundgren, who runs a 100-employee Los Angeles-area e-waste company known as IT Asset Partners, was sentenced to prison for selling something that is otherwise generally free.

(ars)

Quote

"To put it in a nutshell, we believe in cases like this you just can't break the law, create an illegal black market with a retail price that is lower than the value of the harm Microsoft suffered and try to use that lower value, that harm against Microsoft in the calculation," Lathrop Morris, a West Palm Beach-based federal prosecutor, said during a June 2017 sentencing hearing.

 

Both sides in the case settled on the negotiated price of $25 for a newly issued license—that amount times 28,000 copies that Lundgren hoped to sell resulted in what the judge determined to be $700,000 worth of damages. "What has been infringed here is Microsoft's software, the disc is a second copy of it," Senior US District Court Judge Daniel J.K. Hurley said. "So, what we are looking at is what is the value of that Microsoft software."

(ars)

Quote

Nathan Proctor, director of US PIRG’s Right to Repair campaign, issued a statement over Lundgren’s sentencing:

“Companies have gotten too aggressive in pushing us to throw things away and buy new things. What we should be doing instead is reusing more, repairing more, and recycling the rest — ideas that Eric Lundgren has been pioneering.”

(verge)

Quote

“I am going to prison, and I’ve accepted it,” Lundgren said Monday. “What I’m not okay with is people not understanding why I’m going to prison. Hopefully my story can shine some light on the e-waste epidemic we have in the United States, how wasteful we are. At what point do people stand up and say something? I didn’t say something, I just did it.”

(WP)

My favorite:

Quote

Glenn Weadock, a former expert witness for the government in its antitrust case against Microsoft, was asked, “In your opinion, without a code, either product key or COA [Certificate of Authenticity], what is the value of these reinstallation disks?”

“Zero or near zero,” Weadock said.

Why would anybody pay for one? Lundgren’s lawyer asked.

“There is a convenience factor associated with them,” Weadock said.

Still, Hurley decided Lundgren’s 28,000 restore disks had a value of $700,000, and that dollar amount qualified Lundgren for a 15-month term and a $50,000 fine. The judge said he disregarded Weadock’s testimony. “I don’t think anybody in that courtroom understood what a restore disk was,” Lundgren said.

(WP)

Edited April 27, 2018 by kenblu24

[kenblu24]

I would love to hear John chime in on this in the WAN show, because there's gotta be some legal insanity going on here.

[asus killer]

i'm an actual pirate on occasion, and i'm for sharing is not stealing. But this guy deserves this, trying to make money with other peoples work is not fine.

 

The "what is otherwise free" is complete BS, if he spend so much money ordering so many copies of it, he most certainly expected his money back, come on just on top of being a thief is also being an ass.

[vanished]

This was posted earlier (improperly) so there is already a bit of discussion on the topic here if anyone wants to read the "Backlog"

https://linustechtips.com/main/topic/920530-man-gets-15-months-in-prison-for-selling-worthless-windows-restore-disks/

[Spotty]

This is taken from Microsofts terms of use for software which covers the Windows ISO.

Quote

The Software is made available for download solely for use by end users according to the License Agreement. Any reproduction or redistribution of the Software not in accordance with the License Agreement is expressly prohibited by law, and may result in severe civil and criminal penalties. Violators will be prosecuted to the maximum extent possible.

WITHOUT LIMITING THE FOREGOING, COPYING OR REPRODUCTION OF THE SOFTWARE TO ANY OTHER SERVER OR LOCATION FOR FURTHER REPRODUCTION OR REDISTRIBUTION IS EXPRESSLY PROHIBITED, UNLESS SUCH REPRODUCTION OR REDISTRIBUTION IS EXPRESSLY PERMITTED BY THE LICENSE AGREEMENT ACCOMPANYING SUCH SOFTWARE.
_{https://www.microsoft.com/en-us/legal/intellectualproperty/copyright/default.aspx}

So while it's free for anyone to download off the Microsoft website, you are expressly prohibited from redistributing the software. This would include copying it to a commercial quantity of DVDs for sale, even if that sale is not for profit and at cost value.

[Guest]

On 4/27/2018 at 5:56 PM, kenblu24 said:

In 2011, Lundgren ordered $80,000 worth of re-printed Windows recovery disks from China. These were intercepted by US Customs and Border protection.

Haha this is just too good. We need a 'Darwin Award' for tech stupidity like this. 

[asus killer]

15 minutes ago, huilun02 said:

Thief? What did he steal? Did he try to market those discs as a Windows recovery program that he wrote himself? Heck I can buy DVD in bulk and turn them into recovery discs to sell for a dollar each. But do you really think anyone is going to call it an illegitimate business?

if you're asking money for others work you're stealing from them. I don't understand what is your doubt.

 

Besides this dude was not offering those copies or selling them for a dollar, we went to all the trouble of ordering from China in bulk what we could have copied it himself. He was slapping them with a keygen or most likely with those cheap genuine serials from ebay and making a killing reselling them. 

[Spotty]

1 hour ago, kenblu24 said:

"Hopefully my story can shine some light on the e-waste epidemic we have in the United States, how wasteful we are."

Ironically this guy attempting to cut down on e-waste has now created 28,000 DVDs that need to be sent to landfill.

 

35 minutes ago, huilun02 said:

Mind you this is the free recovery program anyone can download themselves

Even free and open source software is protected against unauthorised redistribution. The download and use of that software is limited to personal use and expressly prohibits redistribution of the software.

 

35 minutes ago, huilun02 said:

... and includes the clause

Let me know when you find in the section in Windows Licensing Agreement that expressly states you are permitted to create a commercial quantity of physical copies of their software for redistribution and sale.
That clause would be a general clause for possibly an authorised 3rd party distributor who has received permission from Microsoft to repackage and/or redistribute their software. This guy clearly did not have such permission from Microsoft.

[asus killer]

4 minutes ago, huilun02 said:

Oh wow jumping to conclusions to make him look bad. He said himself that they were just recovery disks. Not counterfeit copies of Windows meant for new installs.

no, read the links, he said he wanted to sell them for 25 cents. That is in itself making money out of others works, but i call it BS, that was not what we wanted to do, you believe in whatever you want, santa claus, tooth fairy, big foot, it's your choice. I'm with the court on this one.

And i bet those were PRINTED DVD's with MS and windows logo and not blank ones. 

[Spotty]

58 minutes ago, asus killer said:

And i bet those were PRINTED DVD's with MS and windows logo and not blank ones. 

They were. They were printed with Dell and Microsoft logos in an attempt to pass them off as original copies.
 

Quote

As part of the manufacturing process, labels were affixed by the factory to the CD-ROMs that purported to be the labels authorized by Dell and Microsoft and that falsely represented that the disks contained copyrighted software that Dell and Microsoft had authorized to be included on the disk. The labels were substantially indistinguishable from the labels that were affixed to authorized Reinstallation Disks. Lundgren was aware that the labels were misleading and had not been authorized to be used.
_{https://www.documentcloud.org/documents/4447142-S-D-Fla-9-16-Cr-80090-DTKH-86-0.html}

Edit: This is just my opinion, but if he was genuine in his cause to stop e-waste and promote his organisation and cause through these recovery CDs, then it would have made more sense for the labels printed on the CD to include information about his organisation and their message of cutting down e-waste. Instead they were designed to be indistinguishable from original genuine copies, for what I can only consider to be for purpose of counterfeiting.

[Master Disaster]

8 minutes ago, Arokhantos said:

This is complete BS those laptops come with license key and he provided backup copy of windows for it, how is this piracy are they stupid or what, there really need to be some people fired out there, this guy does't belong in jail, and some one that does't have a fucking clue about how things work should't be able to take any actions on stuff he does't understand, heck i suggest they do the same with voting in any parlement or whatever, because i am pretty sure many have no idea what net neutrality even is, and unless they know they should't be able to make decisions on it, since its probably gonna effect many in a bad way.

He was importing and selling unauthorized copies of Windows, how isn't that piracy?

[Sauron]

1 hour ago, Spotty said:

This is taken from Microsofts terms of use for software which covers the Windows ISO.

So while it's free for anyone to download off the Microsoft website, you are expressly prohibited from redistributing the software. This would include copying it to a commercial quantity of DVDs for sale, even if that sale is not for profit and at cost value.

And this caused 700k in damages how...? Not to mention EULAs are not law, by itself it means nothing. It's fair enough to fine him, but a year of jail... that's so stupid.

45 minutes ago, Spotty said:

Edit: This is just my opinion, but if he was genuine in his cause to stop e-waste and promote his organisation and cause through these recovery CDs, then it would have made more sense for the images printed on the CD to include information about his organisation and their message of cutting down e-waste. Instead they were designed to be indistinguishable from original genuine copies, for what I can only consider to be for purpose of counterfeiting.

I couldn't tell you for sure why they'd use those logos (although it may just be to avoid this sort of trouble when shipping) but to what end would they be "counterfeiting" discs that you can burn legally and for free at home? They just provided the disks for convenience to their customers, they definitely weren't making any significant amount of money at 25c per disc...

1 hour ago, Spotty said:

Ironically this guy attempting to cut down on e-waste has now created 28,000 DVDs that need to be sent to landfill.

Better 28000 discs than 28000 computers... regardless, this hardly deserves prison time.

1 hour ago, asus killer said:

He was slapping them with a keygen or most likely with those cheap genuine serials from ebay and making a killing reselling them. 

If that were the case he would have been charged with that too - and even if he had NO COSTS whatsoever in obtaining these discs and the keys, he could only have made 7000$ in total from the lot, hardly "a killing" for a business. He probably deserves a fine, but nothing more.

[mr moose]

10 minutes ago, Arokhantos said:

This is complete BS those laptops come with license key and he provided backup copy of windows for it, how is this piracy are they stupid or what, there really need to be some people fired out there, this guy does't belong in jail, and some one that does't have a fucking clue about how things work should't be able to take any actions on stuff he does't understand, heck i suggest they do the same with voting in any parlement or whatever, because i am pretty sure many have no idea what net neutrality even is, and unless they know they should't be able to make decisions on it, since its probably gonna effect many in a bad way.

As I said in the other thread,  even if we assume the CD's weren't intended to work as a stand alone and only worked if you already had a legitimate windows key. The reality is he was printing CD's that contained unauthorized IP and he was selling those CD's.  That is copyright infringement right there.  He was actually selling a branded CD with a copy of windows on it.

[Sauron]

5 minutes ago, Master Disaster said:

He was importing and selling unauthorized copies of Windows, how isn't that piracy?

Would it be piracy if you went on microsoft's website, downloaded the free windows recovery image legally, burned it and gave it to your friend for the cost of the disc? Apparently, legally yes - but that's stretching the definition a little, isn't it?

[mr moose]

Just now, Sauron said:

Would it be piracy if you went on microsoft's website, downloaded the free windows recovery image legally, burned it and gave it to your friend for the cost of the disc? Apparently, legally yes - but that's stretching the definition a little, isn't it?

If you went and printed the windows logo on it and sold it to him then yes it would be copyright infringement.   Not stretching any definition.

[Sauron]

5 minutes ago, mr moose said:

If you went and printed the windows logo on it and sold it to him then yes it would be copyright infringement.   Not stretching any definition.

The windows logo would definitely be copyright infringement, but not in the way it was presented here. They stated the SOFTWARE is infringing, not the logos.

[mr moose]

4 minutes ago, Sauron said:

The windows logo would definitely be copyright infringement, but not in the way it was presented here. They stated the SOFTWARE is infringing, not the logos.

That's because the software is infringing.  Windows is copyrighted software. 

 

EDIT: If you go to the windows 10 download page at MS, you have to agree to the ToS before you can download anything.  You agree to this clause:

 

Quote

Unless otherwise specified, the Services are for your personal and non-commercial use. You may not modify, copy, distribute, transmit, display, perform, reproduce, publish, license, create derivative works from, transfer, or sell any information, software, products or services obtained from the Services.

 

As soon as you put windows on a CD and try to sell it you are infringing copyright. And that is what the 3 judge court ruled.

[Sauron]

Just now, mr moose said:

That's because the software is infringing.  Windows is copyrighted software. 

But microsoft themselves distribute it for free... I know it's against the law, but they pulled the 700k in damages figure completely out of their butts. When someone says "piracy" they generally mean distributing for free something that is otherwise sold for money. All he was selling here was the service of burning the image to a disc. Illegal as it may be, I have a hard time considering it wrong.

[mr moose]

2 minutes ago, Arokhantos said:

 

Those laptops he refurbished had license keys beneath them, he was sentenced for jail anyway cos the people that sentenced him had no clue about how things work.

No, they sentenced him because he infringed copyright.  Please see the edit to my post in response to Sauron.    

[Spotty]

18 minutes ago, Sauron said:

regardless, this hardly deserves prison time

The charges he was facing do come with penalties including prison time. He also pleaded guilty to the charges.

Quote

18 U.S.C. 2320(a)(1) Conspiracy to Traffic in counterfeit goods 10/02/2012 1
17 U.S.C. 506 (a)(1)(A) Criminal Copyright lnfringement 10/20/2012 3
_{https://www.scribd.com/embeds/377387567/content?start_page=1&view_mode=scroll&access_key=key-ZpHnq1ZiUeg0uYjiONsv&show_recommendations=true}

 

Quote

In 2016, Lundgren and Wolff were charged by indictment with conspiracy to traffic in counterfeit goods, trafficking in counterfeit goods, criminal copyright infringement, trafficking in illicit labels, wire fraud, and mail fraud. Lundgren entered into a plea agreement in which he pled guilty to conspiracy to traffic in counterfeit goods and criminal copyright infringement. The government dropped the remaining charges.
Lundgren admitted he shipped approximately 28,000 counterfeit discs to Wolff, and that on one occasion, Wolff paid Lundgren $3,400 in exchange for discs. A probation officer prepared a Presentence Investigation Report (“PSR”), which calculated Lundgren’s guideline sentencing range to be 37 to 46 months imprisonment. This range was largely based on a calculation that valued the infringed goods at $700,000. To arrive at this amount, the PSR relied on evidence  put forward by the government that “Microsoft had a certified computer refurbisher program that made genuine authorized reinstallation discs available to computer refurbishers for about $25,” and multiplying that amount by the 28,000 discs produced.
_{https://www.scribd.com/embeds/377387686/content?start_page=1&view_mode=scroll&access_key=key-AC3ObIKHx2DI0iNIfwDU&show_recommendations=true}

The discs he was counterfeiting at the time were available for sale by Microsoft for $25. This means that they were not being provided for free from Microsoft. The creation of the 28,000 counterfeit discs would have had the potential to deprive Microsoft of the value of 28,000 legitimate disc sales.

[mr moose]

On 4/27/2018 at 3:53 AM, Sauron said:

But microsoft themselves distribute it for free... I know it's against the law, but they pulled the 700k in damages figure completely out of their butts. When someone says "piracy" they generally mean distributing for free something that is otherwise sold for money. All he was selling here was the service of burning the image to a disc. Illegal as it may be, I have a hard time considering it wrong.

They achieved the 700K from valuing windows at $25 x 28,000 copies.  This guy shot himself in the foot because he paid 80K for the cds thus he couldn't claim they were worthless.   The court looked at his 80K as an investment in a piracy scheme.  Regardless of the actual value of the cd's, they are indisputably copyright infringement and piracy.

 

On 4/27/2018 at 3:56 AM, Arokhantos said:

 

I'm not watching Youtube trash if you can't be bothered typing a response.

[Sauron]

2 minutes ago, Spotty said:

The discs he was counterfeiting at the time were available for sale by Microsoft for $25. This means that they were not being provided for free from Microsoft. The creation of the 28,000 counterfeit discs would have had the potential to deprive Microsoft of the value of 28,000 legitimate disc sales.

I see... that changes things somewhat. I still find it a little ridiculous for MS to charge $25 for what they distribute digitally for free, but in this case I can definitely understand where the jury is coming from.

[bobhays]

10 minutes ago, mr moose said:

I'm not watching Youtube trash if you can't be bothered typing a response.

 

 

I understand not wanting to watch a 15 minute video in response to some online thread, but how do you know the video is trash before you've even seen it?

[mr moose]

2 minutes ago, bobhays said:

I understand not wanting to watch a 15 minute video in response to some online thread, but how do you know the video is trash before you've even seen it?

 

If someone wants me to think it is a constructive response that articulates a well reasoned argument on the topic then they should spare 30 seconds to tell me that.  Otherwise its a fair assumption it's just another rant from a basement dweller who doesn't know shit about copyright or piracy.

[asus killer]

54 minutes ago, Sauron said:

If that were the case he would have been charged with that too - and even if he had NO COSTS whatsoever in obtaining these discs and the keys, he could only have made 7000$ in total from the lot, hardly "a killing" for a business. He probably deserves a fine, but nothing more.

the copies were seized at customs so you can only guess what he was going to do with them. You can believe we went to all this trouble (order from china printed dvds and not just copied some blank dvds at his home) because he wanted to help people that lost their copies or that we was a ass trying to make money out of it. It's up to us to decide what is most likely.