Washington Post:

A California man who built a sizable business out of recycling electronic waste is headed to federal prison for 15 months after a federal appeals court in Miami rejected his claim that the “restore disks” he made to extend the lives of computers had no financial value, instead ruling that he had infringed Microsoft’s products to the tune of $700,000.

I recognize that there are two sides to every story, but this reads to me like this guy is going to jail specifically because judge and jury do not understand the technology.

Before he launched his company, IT Asset Partners, Lundgren lived in China, learning about the stream of e-waste and finding ways to send cheap parts to America to keep electronics running. One of his projects was to manufacture thousands of “restore disks,” usually supplied by computer-makers as a way for users to restore Windows to a hard drive if it crashes or must be wiped. The disks can be used only on a computer that already has a license for the Windows operating system, and the license transfers with the computer for its full life span. But computer owners often lose or throw out the disks, and though the operating system can be downloaded free on a licensed computer, Lundgren realized that many people didn’t feel competent to do that, and were simply throwing out their computers and buying new ones.

Lundgren made 28,000 Windows backup CDs, sold them for 25 cents apiece to computer refurbishers. The disks had no licenses, they could only be used to restore a computer with an existing license.

Key to this is the value of those disks. They determine the level of the crime (if this is even a crime):

Initially, federal prosecutors valued the disks at $299 each, the cost of a brand-new Windows operating system, and Lundgren’s indictment claimed he had cost Microsoft $8.3 million in lost sales. By the time of sentencing, a Microsoft letter to Hurley and a Microsoft expert witness had reduced the value of the disks to $25 apiece, stating that was what Microsoft charged refurbishers for such disks.

BUT:

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.

The $25 value is for disks with a product key or COA. The disks Lundgren sold had neither. So with Weadock’s expert testimony, all is good, right?

[U.S. District Judge] 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.

Two sides to every story, and there is an element of harm to Microsoft, in that they do sell backup disks. But is sending this guy to prison what they were after here? Was this about setting a precedent?

Just one more thing, then I’m gonna’ let you go:

Lundgren, 33, has become a renowned innovator in the field of “e-waste,” using discarded parts to construct things such as an electric car, which far outdistanced a Tesla in a test on one charge. He built the first “electronic hybrid recycling” facility in the United States, which turns discarded cellphones and other electronics into functional devices, slowing the stream of harmful chemicals and metals into landfills and the environment. His California-based company processes more than 41 million pounds of e-waste each year and counts IBM, Motorola and Sprint among its clients.

Something seems wrong about this whole thing.

UPDATE: From this article in a local Washington state paper covering the story:

Lundgren argued that because he never ended up selling any discs, Microsoft did not lose any money. But the federal court found that the discs were worth $25 each and therefore Lundgren infringed on Microsoft’s property by $700,000. In addition, the court found that the discs had labels on them that “falsely said the discs contained authorized copies of copyrighted software,” according to court records.

That last bit did not come up in the Washington Post story.