Software Licensing Infringement: Man Sentenced to 27 Months of Prison For Selling $700,000 Worth Of Illegally Copied Software

One of the earliest types of activities I did with regard to compliance was a desktop computer-by-computer audit of a subsidiary that my employer at the time had just acquired. This was in the first half of the 1990’s. I found one licensed copy each of around 15 different software programs they used for business. I found anywhere from 25 to 150 copies of each of the software packages throughout the organization. At that time it was common for businesses to be unaware of software licensing requirements. However, I did find a few cases of folks who had actually tried to make a profit off the copies by selling them to friends.

Fast forward to today, and we have the latest example of how illegal software pirating is going on. The U.S. Department of Justice reported Courtney Smith from Indiana was sentenced to 27 months in prison, fined $2,000, and required to pay $5,200.45 in restitution for selling $700,000 worth of pirated software on eBay.

“Courtney Smith, 36, of Anderson, Ind., was sentenced today by U.S. District Judge Sarah Barker of the Southern District of Indiana for selling counterfeit computer software over the Internet in violation of criminal copyright infringement laws. At today’s guilty plea and sentencing, Smith admitted that he purchased counterfeit Rockwell Automation computer software through the eBay Internet auction site and then duplicated and resold the copyright protected software to other eBay users. Between March 6 and May 26, 2004, Smith sold counterfeit copies of Rockwell Automation software in 32 or more separate eBay auctions, receiving $4,149.97. The actual retail value of this software was in excess of $700,000.
“Mr. Smith exploited eBay to sell hundreds of thousands of dollars worth of counterfeit software at drastically reduced prices, thereby illegally profiting on the back of the copyright holder,” said Assistant Attorney General Fisher. “The Department of Justice is committed to prosecuting individuals who exploit legitimate online auction sites to sell pirated software and commit other acts of fraud.”
The case arose from a Department of Justice initiative to combat online auction piracy. FBI agents executed a search warrant at Smith’s residence in Anderson on Dec. 15, 2004, seizing numerous computers, CDs and other devices used to manufacture the counterfeit software and sell it on eBay. Smith admitted to the investigators that he knew it was illegal to sell copyrighted software and that he not only manufactured and sold the counterfeit software on eBay, but also made his own Rockwell Automation Software labels to affix to the counterfeit software.
Rockwell Automation, Inc., is a global provider of automation, power, control and information solutions. Rockwell Automation, among other things, produces specialized factory management software. This software allows for the establishment of control and visualization disciplines when dealing with factory production lines and machinery. The majority of the software applications sold on eBay had an individual retail price ranging from approximately $900 to $11,325. Rockwell Automation owns the registered copyrights to all Rockwell/Allen Bradley software and the copyright on the product’s packaging.
Smith has forfeited the computers and other equipment used in the offense and will make restitution to Rockwell Automation in the amount of $5,200.45. Judge Barker also ordered Smith to pay a $2,000 fine and serve two years of supervised release upon completion of his term of incarceration.”

So, quite a price to pay for making $4,149.97, eh?
What is interesting is that he was reselling copies of an illegal copy he himself had purchased off eBay. Wonder if they are going after the fraudster from whom he purchased his illegal copy?
This would make a good example to share with your personnel to raise their awareness of software licensing issues, and to reinforce that copying software packages and giving or selling to others is illegal. The prospect of jailtime and fines should be a good motivation to ensure they do not copy your organization’s software and try to make a little money on the side through an online auction site.
Software licensing issues is something organizations need to revisit periodically to ensure their personnel stay aware of the implications. I’ve posted about this topic to the blog a few times, including here and here.

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