Five Year Sentence for Relabeling Academic and OEM Software as Full Retail Product
What makes a product counterfeit? Does it violate federal criminal anticounterfeiting laws to sell genuine Microsoft software that was intended for the academic or OEM market, but has been relabeled to appear to be the full retail product ? Yes, under 18 USC 2318 which criminalizes knowingly trafficking in counterfeit or illicit labels and counterfeit documentation and packaging for copyrighted works. A Washington man recently found this out the hard way.
Tacoma, Washington federal judge Franklin D. Burgess recently sentenced Scott Laney to five years in prison, three years of supervised release and $9.4 million in restitution for Conspiracy to Traffic in Counterfeit Labels and Computer Program Documentation, and Conspiracy to Engage in Money Laundering following a guilty plea entered on February 23, 2006. According to the U.S. Attorney's Office, Laney and a co-conspirator obtained Microsoft (and other) software labeled for academic or OEM use, altered the labels and licenses to make the software appear to be a full retail product, and resold it at prices approaching the retail value of the full retail product. They also altered the software licenses for server software products to allow for more users than originally provided for. Some of the software had been diverted by Microsoft employees who took advantage of a glitch in Microsoft's internal ordering system. Laney admitted that he and his co-conspirators sold as much as $20 million worth of counterfeit labeled software or software licenses. Microsoft alone alleged that it lost at least $12.41 million as a result of the conspiracy.
Section 2318 is a separate criminal statute from 18 USC 2320, which criminalizes the use of counterfeit trademarks. Although counterfeit and illicit labels, documentation and packaging often contain counterfeit trademarks, this is not necessarily an element of a Section 2318 offense. For more information about Section 2318 and the Department of Justice's approach to its enforcement, take a look at Prosecuting Intellectual Property Crimes, the enforcement manual of the Computer Crime and Intellectual Property Division of the U.S. Department of Justice.