Debullshitifying Microsoft's smear campaign against the recycler it helped send to prison

boing
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I DUNNO. Its very weird. Various bits of the reporting indicate various numbers of discs. And various amounts of money involved. The caption from WaPo for the same photo Cory is using reads:

“Eric Lundgren atop a pile of 48,000 “restore CDs” he purchased recently for less than 5 cents apiece. He faces prison for seeking to distribute similar CDs to computer refurbishers.”

Customs appears to have seized 28,000 discs in the kick off to the investigation. (Apparently from a different batch?). And other things I’ve read indicate a 40,000 disc buy for this batch. A $40,000 purchase, and an $80,000 investment.

The only clear per disc cost statement I’ve seen is that caption indicating 5ish cents a disc. The reporting on this case all over seem hopelessly confused.

As I said that’s not a severe sentence. There are people sitting in jail for 10 years for using a cell phone to video tape movies. Lungren got a relatively small fine and a sentence on the low end of the statutory range (one he almost certainly won’t serve in full).

Again its a criminal proceeding where he plead guilty to a crime. And he was going to be sentenced. Likely to some jail time. As he didn’t make a plea bargain. He plead guilty then tried to fight out the sentence in court.

Lungren’s insistence that they were worth zero is implausible on its face. And his appeal was entirely predicated on arguing for the zero valuation.

Since the court did not, and maybe could not accept the zero valuation. The court wasn’t really offered any other valuation on the discs. And Microsoft’s was significantly lower than that in the original indictment and the valuation the prosecutors were pushing. It sounds like all he had to do was present some plausible value for the discs. For the court to either accept, or compromise between the $25. And he refused to do so. The $25 valuation seems to have been offered because its the standard charge for such a disc from an OEM. They don’t really seem to have had much involvement or stake in this. But from the valuations offered. Microsoft’s would likely have lowered his sentence.

More over I’m not even sure that valuation has a direct impact on jail time. He may very well have been sentenced to jail time even if the court accepted his zero valuation. Which it didn’t. And largely couldn’t. Because he paid money for them. And sought to sell them for money.

But again. That’s not an extreme sentence. That’s pretty light. The time to argue there was “no harm no foul” because the discs were worthless would have been at trial. At least one of the charges requires a value to what’s copied to be applied. But he risked significantly more jail time there. Like significantly significantly more. If he hit the max for a first offense. Assuming this is his first offense. On both charges. It would have been 15 years.

Instead he plead guilty and made an argument that didn’t, and largely couldn’t, work. And still ended up with a fairly light sentence. He’s doing a little over 6 months for each charge. That’s near the bottom usually handed out for this shit.

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Wait, you’re saying the checksum on the ISOs he produced didn’t match that which is documented on the MS website? And he was convicted of a criminal trademark offence, not a criminal copyright offence?

I didn’t know that.

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No. Zero dollar valuation is only “implausible on its face” if you ignore or are ignorant of the difference between software installation files and an activation code.

The amount Lundgren intended to sell the disks for is irrelevant, the only relevant factor for sentencing is how much he was stealing from the IP holder by selling them. And a rational examination that takes into account the difference between the value of the computer code and the value of the activation key, has to conclude that the loss to the IP holder (microsoft or dell) for the keyless installation disks was pretty much zero dollars.

Dell bundled the disks with a computer. They also sold replacement disks, but for a nominal fee that was almost 100% postage and handling costs. Selling the replacement disks was part of their warranty service, a loss centre rather than a profit centre. As can be seen by the fact that they stopped shipping disks with their PCs in the mid-oughts and instead had a restore partition on the hard drive because that was cheaper for them (you can’t misplace or accidentally scratch a restore partition).

Microsoft didn’t make or sell the disks that were being counterfeited, Dell did. The $25 value the court used was the price MS charged for a replacement activation key for refurbished PCs. The software on the disk is not what Microsoft charges money for, they charge money for the activation key. You want a new disk, they have no problem with your making a copy. You want a new key, they are definitely going to charge you for it. The value of the disks without a key is at most the few cents it costs Dell to manufacture the disks.

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No, I wasn’t making any statement about the actual content of the discs - because I don’t know. What I was saying was that any other potential buyer could not know. (Well, of course one could run a checksum on the disc, and then verify it against the checksum provided on the website - but a consumer with the savvy to do that is not among his target audience to begin with.)

The point I was making was tangential to the case anyway - just another way in which Lundgren was, as Glaurung put it,

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I think he’s saying the end user wouldn’t know one way or the other.

And lungren may not have really known either.

And near as I can tell he plead guilty. Rather than getting convicted. To a copyright infringement charge for the software. And a counterfeiting charge for making the discs look like official dell disks. He had the disks labeled with the windows and dell logos. In a way that was apparently nearly identical to actual dell recovery disks. And trademarks are part of the determining factors in the counterfeiting statute.

He paid money for them

And sought to charge money for them. And the court would have had evidence for just how much he paid. And exactly how much he thought he could sell them for.

That means these physical objects had a clear non zero value. This wasn’t just a copyright case. The other charge, the more serious charge, was one of counterfeiting. Physical counterfeiting.

More over he appears to have plead guilty to a copyright charge that requires the goods/ip involved to have a value of at least $1000. So by the time it came to arguing precise value for purpose of sentencing. He basically already acknowledged there was a non zero value.

I’ve been poking around dell doesn’t list a price/fee for recovery discs on their support site. But forum posts make reference to 39.99. Presumably for newer versions of windows.

There is some value here. Some cost higher than zero. Thats obvious. The court had a difficult situation in trying to establish what that value was. And Microsoft came in with a fairly low number, resulting in a pretty mild sentence. However they arrived at that. Without clarification on the cost from somewhere the court would be working of a range from whatever he paid for the damn things. And the indictment’s claim of a full retail version of current gen windows at $299.

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And I was just browsing through the evidence file @jimmy_powers posted.

It contains this. Apparently a response from Microsoft’s legal in regards to notification that they had to establish a value/damages.

Screenshot_20180501-002649
Screenshot_20180501-002649.jpg1440×2560 739 KB

Screenshot_20180501-002722
Screenshot_20180501-002722.png1440×2560 483 KB

That’s awful evil man. Recommending the court go with the minimum valuation for the market in question. A valuation below what they ended up settling on. But still.

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Yes. He was clearly guilty of the offences he pleaded guilty to. Sensible decision on his part.

Again, I have to agree.

The relevant consideration was the retail value of the infringed article - not the value of the infringing article.

In this case, what he was purporting to sell was not recovery disks for the home consumer but legitimate recovery disks for commercial refurbishers.

The market for such legitimate recovery disks is the one quoted by Microsoft.

That is the only way a commercial refurbisher can obtain a legitimate new recovery disk.

Whether one agrees with that or not, it is the case in law.

Once that is accepted, then the amount Microsoft charge refurbishers for a legitimate recovery disk is the only value available for the court to use.

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Well presumably they could generate the disks to be packaged with each computer during windows install. Just like anyone else can. And if they need a recovery disk to do that install they can get the files from Microsoft and create a disc or install thumb drive just like anyone else. Even using one disk/drive to do multiple installs on multiple system.

But while Dell and other OEMs seem to sell single discs to end users. There doesn’t seem to be any way to bulk purchase recovery disks without associated licenses from either Microsoft or any of those manufacturers. And the manufacturer’s disks contain a hell of a lot more than just Windows recovery files.

And that seems to be people’s hang up. There isn’t a clear analog for these things on the legit market.

It isn’t the free make it yourself disks. Because those aren’t available for bulk purchase. Why would anyone pay several dollars for one when they can be made for the cost of a blank CD? And lungren failed to argue, with now 4 judges that these were the comparison point.

It’s not the recovery disks from Dell. Despite the labels. Because those contain different software and aren’t available in bulk or to referbishers.

The nearest analog in the market is the identical discs. Plus a license sold by Microsoft. It’s the only roughly comparable bulk purchasable software package offered from a legit source to refurb market.

And while Lungren’s disks may have been worth less. He didn’t really provide a plausible argument for determining how much less.

Microsoft kind of did. Assume the minimum valuation of the legit discs. And requested that approach be taken specifically to minimize the sentence Lungren was subject to.

Which kind of brings up the “what the fuck” of this whole thing. How is there this apparent market for this stuff. Why were his buyers willing to pay a couple bucks, the emails list prices from $1.75 to $4, for something they could make them selves for less than a quarter in like 5 minutes?

Is it just that a used computer is worth more with its original packaging? He was presenting these things to buyers and official dell disks and from the emails it looks like he was planning to do that with other manufacturers.

Was he presenting these as legit discs with license? WTF? Who’s buying these things in volume and why? In those emails the buyer that backs out has clearly run into counterfeits before? Where would non-counterfiet disks come from if not Microsoft and Dell? Are people collecting them up by the thousands from junk drawers action wide to resell?

And we can all stop pretending these things are useless without a legit license purchased from MS. I’ve personally installed windows from a recovery disk without having a legitimately purchased license. Multiple times. Though only as recently as XP. Though my windows 7 install was apparently unlicensed/illigeitmate for a couple months. It was easy to work around until I figured what was up (mobo change apparently had built a new/replacement PC and used the same disc/license from the old one’s corpse).

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He charged 25 cents for the delivery medium, a very moderate cost. If you download it, you are (over) paying your ISP for the delivery medium. Is Microsoft taking ISP’s to court? Who would be put in jail of they did?

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Sending a man to jail for helping multiply the number of insecure Windows XP instazombies on the Internet seems like ridiculous overkill, but clearly he needed to be stopped; he was (perhaps unintentionally) abetting organized crime by populating botnets.

It’s not necessary to consider Microsoft virtuous for helping stop the spread of XP, though. Nothing excuses their lying and creating bad precedents in court; regulatory capture is toxic to society.

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My impression was that there are different terms of the licence to create/download the recovery disk depending on whether you are an individual, a business, or a refurbisher.

Individuals get to download for free, businesses have to pay and refurbishers likewise but get a discount for volume.

Yup, just checked and the download page has a dinky little note stating that:

*Your use of the media creation tools on this site is governed by the Microsoft Terms of Use for this website.

Those are here:

and include:

Personal and Non-Commercial Use Limitation

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.

So, yes, they can create working recovery disks that way but those will not be ‘legitimate’ recovery disks which they can sell or package with a computer they sell in the course of business.

If they want to do that, they have to sign up for the refurbisher package and pay.

A refurbisher can of course simply leave the product key in place and leave it up to the purchaser to download and install the software. That’s fine.

Is it bonkers that a private individual is able to download a piece of software for free that a business has to pay for? Maybe but it’s common practice.

Exactly.

The bottom line here is that end users get to reinstall software using the product key for free. People who want to make money from providing the software to end-users have to pay.

Seems reasonable enough.

He tried to sell stuff without being entitled to. The fact that other people are entitled to the same thing for free is irrelevant.

He wasn’t despite what the article tries to claim.

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Well presumably creating a disc and part of the install process. When you own the computer, And sending it along if you sell that computer. Even if your in that business. Would pass muster. Or could be argued in court to pass muster. Because you arent selling the disk. Your selling the PC and the disk thats created as part of the OS install/reinstall is just going with it.

And provided the Windows license exists, and is valid, it doesn’t practically seem to matter what you do the initial install from.

Even if it’s technically a violation of the license it’s unlikely to attract the ire of law enforcement. Of even much action from Microsoft.

But it’s really clear that it doesn’t allow for anything approaching what Lungren did. You clearly can’t charge specifically for the disk. Charge for the creation of the disk. Specifically produce the disks in isolation. Distribute the disks in bulk. Have the disks mass produced by a third party. Etc.

Again that’s part of the hang up. People are equating this to something so routine that most of us don’t even bother with it until there’s a problem. For free. And something all our IT departments and the local computer repair shop do all the time without consequence. With a much, much, much sketchier situation.

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Welcome to BoingBoing!

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I’m kind of annoyed with all the coverage. I’ve yet to see an article from the tech press. Or even regular new paper article that’s done more than present an AP wire level outline of the case/hearing and then take Lungren’s schtick about helping people, e waste and what have as fact.

Even with some cursory digging there’s a lot more going on there. It’s like none of the people reporting on this were actually at the hearing, looked at any of the court documents, checked into the details of the case. Or any of the other basic reporting work you’d normally do.

A lot of the reporting I’ve seen is unclear as to whether this is civil or criminal. What Microsoft’s involvement was. And that this was an appeal hearing about the sentencing. Not a trial over the charges.

Bit of a mess.

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OK, so he charged $1.75 to $4 for the delivery medium? What is the cut off point for a reasonable service fee? Sounds like the court decided it was less than $4 at least, but how low would he have to go?

Or is the issue that he was producing packaging that infringed copyright / trademarks, which seems a different class of activity than simple “delivery medium” sales?

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Ah, that’s not something the article makes clear.

Its also just plain weird. If its a working restore disc, who cares if its “fake”, as long as the bits are right? I suppose a fake might be infected with malware. Is the market for recycled computers highly sensitive to such things? Just seems an awfully strange way to try and make your ill-gotten gains.

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It doesn’t cost $1.75 to $4.00 per disc to ship these. Even as a single disc. It doesn’t take that much to put a label on them or put them in a paper disc folder. It doesn’t cost that much in labor to have them made.

And it especially doesn’t cost that much when you’re sending out orders/packages of 1000 or more. Or when you pay some one else to make and package them for you in lot sizes of ten’s of thousands.

I still haven’t seen an exact number on what these specific disks cost them to press on a per disc basis. And I don’t much feel like digging through more court documents. The only numbers I’ve seen that seem sourced is the $80k they apparently invested in the full project. And I’ve seen multiple references to similar (but not these exact) disks from a previous buy costing him “less that five cents each”.

That’s not the kind of money you wrap up just to break even. And I don’t see a way that the disks cost him even $1.75 to aquire package and ship out. Poke around you can find cd reproduction with custom labels and paper slip cases for fifty cents or less a piece. Domestically. For sub 5000 unit buys. With shipping included. He was buying from China in much higher volumes.

Has any one pulled a firm number out on this?

Hell yes it is.

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Regardless of what Microsoft wants you to do, any refurbisher could read the sticker on the side of the computer, and easily go online and just download the recovery tool rather than using the “original recovery media or hard-disk based recovery image associated with the PC”.

That’s what every refurb place I know of, does. It’s a bit absurd if the assumption by Microsoft is that all used equipment will come packaged nicely with all the original discs and documentation bundled up with a bow on top and that repair shops will be extra careful to only use each PC’s unique original recovery disc.

Even if that was the case, it’s still just a waste of time to deal with the discs. Why bet on the given disc coming in fully functional when you can just whip out a thumbdrive with the exact same files on it-- but that you downloaded off Microsoft’s own website?

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That’s not really the point. What your saying is true. Doing things that way is likely common and would likely skate through MS’s license on the regular repair images.

But all the chatter about this case has presented using the refurbishment disks as the valuation point is draconian. Since the pricing includes both disk and license. And Lungren’s disks are meant for computers that already have a license. Under the assumption that Microsoft’s disks are mean for computers without license, And the charge is primarily for a license.

But if the Microsoft disks are only meant for sale for computers with a pre-existing license. Then they’re directly analogous to the disks lungren was selling. MS’s disks are the only legally purchasable bulk option on the market for systems *with a pre-existing license". Rather than being meant for systems without a pre-existing license.

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