How Microsoft Convinced Clueless Judges To Send A Man To Jail For Copying Software It Gives Out For Free

[Wilhelm]

This story should make you very, very angry. Last month we had the basic story of how Microsoft had helped to get a computer recycler sentenced to 15 months in jail for "counterfeiting" software that it gives away for free, and which is useless unless you have an official paid-for license from Microsoft. Let me repeat that: Microsoft helped put someone in jail for criminal infringement over software that anyone can get for free (here, go get it), and which won't function unless you've paid Microsoft their due.

At issue are Windows recovery discs. Way back when, these were the discs that usually shipped with new computers in case you needed to reinstall Windows. You still needed your license to make them work, of course. Then people realized it was wasteful to ship all that -- combined with enough broadband to make it easy enough to download and burn the files, and Microsoft then just made it easy to do that. But, that's still complex enough, and Eric Lundgren had a solution. Lundgren is not some fly-by-night pirate. He's spent years doing amazing things, recycling computers and helping them last longer. And he had an idea. It might be helpful to manufacture a bunch of these recovery discs and offer them to repair shops to help people who were unable to download the recovery discs themselves. He was being helpful.

But Microsoft insisted that he was not just infringing on their copyrights civilly, but criminally. When we left things last month, we were waiting for the 11th Circuit Appeals Court to consider Lundgren's appeal -- and astoundingly this week the judges, demonstrating near total ignorance of technology and the actual legal issues -- rejected his appeal, which means Lundgren is going to jail for over a year for trying to do some good in the world, helping people get the exact same thing that Microsoft is offering for free, and which no one could use unless they'd already paid Microsoft its tax.

Lundgren was arrested as part of a government sting when the customs officials spotted the thousands of discs he'd manufactured and just assumed they were pirated. Here's where Microsoft should havestepped in and said "this is all a mistake" and noted that Lundgren was actually doing a good thing and exactly what Microsoft should be encouraging. Instead, Microsoft sided with the US government and continues to do so to this day.

But beyond being pissed off at Microsoft, we should be pissed off at clueless judges: 11th Circuit Judges William Pryor, Beverly Martin and Lanier Anderson (average age: 66) rejected Lundgren's appeal in 8 short pages of wrongness. It is depressing that vindictive, idiotic Microsoft combined with technically clueless judges can lead to a result that puts a good man in jail for doing nothing wrong. But that's where we're at.

The key issue in the appeal was over the actual "value" of the discs that Lundgren made. He argued, reasonably, that the value is zero. Again, Microsoft gives these away for free. Prosecutors, idiotically, initially argued they were worth the full price of Windows itself ($300). Eventually, the lower court went with a $25 fee after a government "expert" said each disc was worth that much:

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.

But that's wrong. Microsoft sells discs with a license for $25 to repair shops. Again, the discs that Lundgren was offering had no license. You had to supply your own. But the judges (and the prosecutors) can't seem to grasp this simple fact.

The district court did not err in concluding the “infringement amount” in this case was $700,000. First, the district court did not clearly err in concluding that the discs Lundgren created were, or appeared to a reasonably informed purchaser to be, substantially equivalent to legitimate discs containing Microsoft OS software.... That conclusion was supported by the sentencing hearing testimony, in which the government’s expert witness testified that the software on the disks created by Lundgren performed in a manner largely indistinguishable from the genuine versions created by Microsoft. While experts on both sides may have identified differences in functionality in the discs, the district court did not clearly err in finding them substantially equivalent.

Second, the district court reasonably concluded that the proper value of the infringed item was $25 per disc. The government’s expert testified that the lowest amount Microsoft charges buyers in the relevant market—the small registered computer refurbisher market—was $25 per disc. Although the defense expert testified that discs containing the relevant Microsoft OS software had little or no value when unaccompanied by a product key or license, the district court explicitly stated that it did not find that testimony to be credible. We afford deference to a district court’s credibility determinations, and here, no evidence suggests that the district court erred in concluding that the defense expert’s valuation was not worthy of credence.

Got that? No one seems to care that an expert pointed out that Lundgren's discs, sans license, are effectively worthless. They dismiss that as not credible. Again, here was a situation where Microsoft should have said something. And it didn't. It helped the prosecutors. And this week it issued this completely bullshit statement to the Washington Post:

Microsoft actively supports efforts to address e-waste and has worked with responsible e-recyclers to recycle more than 11 million kilograms of e-waste since 2006. Unlike most e-recyclers, Mr. Lundgren sought out counterfeit software which he disguised as legitimate and sold to other refurbishers. This counterfeit software exposes people who purchase recycled PCs to malware and other forms of cybercrime, which puts their security at risk and ultimately hurts the market for recycled products.

Look, that statement is pure hogwash. The software is not counterfeit. It's legit. It's the same thing that anyone can download from Microsoft for free. It didn't expose anyone to malware or cybercrime, and Microsoft knows that.

So much of this comes down to a fundamental misunderstanding, driven by copyright maximalists of all stripes, including Microsoft. And it's the idea that all of the following are equivalent: a copyright, a piece of software, a license, and "intellectual property." Many people like to use all of those things indistinguishably. But they are different. The issue here is the difference between the software and the license. And Microsoft, prosecutors and the judges either do not understand this or just don't care.

The best explanation of all of this comes from Devin Coldewey over at TechCrunch who dives deep into just how fucked up this situation is. Read Coldewey's whole piece because it breaks down just how insane this ruling is piece by piece, but here's one key part:

The “infringing” item is a disc. The “infringed” item is a license. The ones confusing the two aren’t purchasers but the judges in this case, with Microsoft’s help.

“[Defendants] cannot claim that Microsoft suffered minimal pecuniary injury,” wrote the judges in the ruling affirming the previous court’s sentencing. “Microsoft lost the sale of its software as a direct consequence of the defendants’ actions.”

Microsoft does not sell discs. It sells licenses.

Lundgren did not sell licenses. He sold discs.

These are two different things with different values and different circumstances.

I don’t know how I can make this any more clear. Right now a man is going to prison for 15 months because these judges didn’t understand basic concepts of the modern software ecosystem. Fifteen months! In prison!

Coldewey also hits Microsoft hard over all of this:

Microsoft cannot claim that it was merely a victim or bystander here. It has worked with the FBI and prosecutors the whole time pursuing criminal charges for which the defendant could face years in prison. And as you can see, those charges are wildly overstated and produced a sentence far more serious than Lundgren’s actual crime warranted.

The company could at any point have changed its testimony to reflect the facts of the matter. It could have corrected the judges that the infringing and infringed items are strictly speaking completely different things, a fact it knows and understands, since it sells one for hundreds and gives the other away. It could have cautioned the prosecution that copyright law in this case produces a punishment completely out of proportion with the crime, or pursued a civil case on separate lines.

This case has been ongoing for years and Microsoft has supported it from start to finish

There are lots of reasons to hate on Microsoft, but this one is one of the most sickening examples I've seen. Anyone at Microsoft who had anything to do with this should be ashamed.

But, of course, this is the world that companies like Microsoft (and the various Hollywood entities) have pushed for for years. They blur the lines between "license" and "content" and "copyright" and then use it as far as they can push it. And who cares if someone who is actually doing good in the world has his life destroyed?