In a little under three weeks, Eric Lundgren will report to a federal correctional institution in Sheridan, Oregon, and begin a 15-month-long prison sentence. Lundgren, a 33-year-old entrepreneur who has spent much of the last decade working to find ways to recycle electronics and reduce e-waste, has pleaded guilty to conspiracy to traffic in counterfeit goods and criminal copyright infringement, admitting that he worked with a broker, Bob Wolff, to duplicate and distribute 28,000 unauthorized Dell original equipment manufacturer (OEM) restore CDs — software that you can download for free from Dell’s website right now.
Why 15 months in prison? The simple answer is that U.S. copyright is awful — and Lundgren made some dumb choices and is unlucky enough to be caught in its exceptionally sharp teeth. Thanks to lobbying first by the music industry and Hollywood in the later half of the 20th century, penalties are stiff for copyright infringement — of the 82 people found guilty of copyright and trademark infringement in 2016, about half served jail time, an obscene set of affairs in a country that already incarcerates far too many of its citizens. That federal prosecutors decided to make this a criminal rather than civil case is even more enraging.
But first: What the hell is a Dell OEM restore CD? Think of it as a Control-Alt-Delete for the entire Windows operating system. If you own a Dell and find that your machine is slammed with viruses, missing crucial files that Windows needs to run properly, or wheezing along under a burden of bloatware, the restore CD, provided by Dell free of charge either at the point of purchase or on its website, resets everything back to zero.
It’s important to note here that a Dell OEM restore CD won’t give you a free, fully-working copy of Windows on a machine that doesn’t have it already — the software has to be authenticated either with a product key or by checking in with Microsoft to ensure that the software was legit.
Lundgren, the U.S. government, and Microsoft can all agree on the facts. In 2011, Eric Lundgren was living in China, working with various brokers in the U.S., including Wolff, to source cheap generic parts to fix up electronics. Wolff approached with a request: Wolff would send Lundgren a Dell OEM restore CD, Lundgren would use a shop in China to create duplicates, and Wolff would sell these restore CDs to refurbishers. The duplication business in China that Lundgren used duplicated the CD exactly — including, crucially, reprinting the Dell and Microsoft logos on top of the discs. In 2012, the government intercepted a shipment of these duplicated CDs, determined them to be counterfeit, and approached Wolff. Wolff began to cooperate with the authorities, and made a controlled buy from Lundgren at the request of the U.S. government. Lundgren sold Wolff $3,400 worth of CDs. When the shipments arrived, the CDs were seized, Lundgren’s home in Florida was raided, and he and Wolff were indicted by a grand jury.
What Lundgren and the U.S. government and Microsoft very much do not agree on is why Lundgren agreed to make these CDs — and what, exactly, those duplicated Dell restore CDs were worth.
Lundgren says his main motivation was to keep PCs out of landfills. He sees himself as a social entrepreneur, finding ways to start self-sustaining businesses that do good in the world. Lundgren says that while he now regrets that the CDs were duplicated with the Dell and Microsoft logos attached, he spoke with Cary Decuir, a fraud investigator at Dell, who told him “technically, you did us a favor” because Dell wouldn’t have to provide those thousands of restore CDs. And he believes (and had an expert witness testify) that the worth of the Dell restore CD is the same as the price as you’d pay to download the software: zero dollars.
The government and Microsoft feel differently. Prosecutors believe Lundgren and Wolff hoped to pass off their CDs as the real deal, thanks to the CDs being printed with Dell and Microsoft logos, and have emails from Wolff’s computer in which Lundgren writes, “[Y]ou should be able to sell these units to anyone whom [sic] is not trying to sell them back to Bill Gates.” The court eventually set the price of each of the 28,000 CDs seized at $25 per CD, or $700,000 in total of counterfeit goods.
What may have doomed Lundgren is this: The argument Lundgren is making about OEM restore CDs is absolutely true for a consumer. If you own a Dell computer and want to restore it to its factory settings, for whatever reason, Dell will provide that CD for free. Microsoft will, too — you can download the ISO files. There is no dispute here.
But if you’re in the business of buying and selling used PCs in bulk, Microsoft takes a very different stance. It has a program called the Microsoft Registered Refurbisher Program (RRP). In order to resell a PC, Microsoft’s policy is that you need to provide both a certificate of authenticity and a restore CD (or an equivalent). But when, say, a local bank branch IT manager decides it’s time to cycle out an office’s computers and sells the castoffs to a PC refurbisher, the PCs will be wiped and that restore CD is almost never included. In those cases, it’s Microsoft’s policy that refurbishers pay a fee — about $25 at the low end — for a restore CD and a “clean license.” This is despite the computer having a license already built in — Microsoft says the fee covers the administration of the program, and also allows refurbished computers to be upgraded to Windows 10, and thus be worth more on the secondary market. The argument accepted by the court is simple: Wolff and Lundgren were attempting to sell CDs for cheaper than $25 and therefore were denying a sale to Microsoft. (The fact that there is no law requiring refurbishers to use the RRP, as openly admitted by Microsoft’s own expert witness, did not seem to carry weight with the judge.)
Lundgren had already pleaded guilty, meaning the majority of his time in court was simply determining his sentence. Federal sentencing guidelines say that for conspiracy to traffic in counterfeit goods and criminal copyright infringement, you need to determine the retail value of the good. Lundgren’s 28,000 CDs were valued at $25 apiece, with a total value of $700,000. Lundgren could have faced between 37 to 46 months — the judge lowered that number to 15 months.
Before heading to prison, Lundgren is waging a furious war in the press, retaining the services of high-powered firm Anderson Group PR, and landing sympathetic pieces in the Washington Post, TechCrunch, the Verge, Slate, and CNN. He claims the emails entered into evidence about producing CDs that would fool anyone except Bill Gates were doctored. He alleges that Wolff, needing to come up with more evidence to help himself avoid jail time, fabricated and edited incriminating emails. (The government did indeed lose Bob Wolff’s laptop and the mirror image of it, and an expert witness testified that the laptop and emails the government ended up using showed signs of being tampered with, but Lundgren’s motion to dismiss was denied.) He’s tweeted that “things are starting to make sense during my trial,” after his defense lawyer, Bruce Reinhart, replaced the judge who sentenced him to 15 months in prison. He claims that Assistant U.S. District Attorney Lothrop Morris told him, “Microsoft wants your head on a platter, and I’m gonna give it to them.” (Morris’s office declined to comment.)
Microsoft is hitting back itself. Frank X. Shaw, corporate vice-president of communications for Microsoft, took the unusual step of posting a response to stories about Lundgren’s case to Microsoft’s website, writing that Microsoft never brought this case against Lundgren, but that it was U.S. Customs that brought the case to prosecutors, and that while Lundgren may want to portray himself as an ecowarrior, “Mr. Lundgren set up a large counterfeit operation in China and intended to profit from his actions.” Shaw has even popped up in the comments section of TechCrunch, defending Microsoft.
Over the phone, Microsoft’s Shaw sounds frustrated that the dominant narrative emerging around Lundgren is that of an e-waste pioneer being sent to prison by the federal government and a corporate monolith. Lundgren, Shaw repeats several times, pleaded guilty. “Yes, he’s sympathetic, and yes, he did have noble goals,” says Shaw. “It doesn’t obviate the fact that what he was doing was illegal.” Microsoft declined to say whether it believed Lundgren’s sentence was fair, except to note in its blog post that Lundgren’s 15-month sentence was well below federal sentencing guidelines.
Talking to Lundgren on the phone and over email, I alternated between sympathy and exasperation as he told his story. He blames a technically illiterate judge, an indifferent defense team, those emails he claims Bob Wolff doctored, and an overly aggressive prosecutor spurred on by Microsoft. He casts himself as a somewhat naïve idealist, led astray and eventually betrayed by Wolff while attempting to fight the good fight against e-waste. He says he checked with a close family friend who was a lawyer before embarking on his restore-CD duplication efforts — but didn’t retain an actual attorney. Lundgren seems like a good guy who made some truly boneheaded decisions.
There’s no arguing that Lundgren has been an innovator in reducing e-waste. IT Asset Partners, the company he ran until he was forced to step away to pursue his legal battle, is a major player in recycling electronics, recycling 43 million pounds of e-waste in 2017. He built a car made mainly from recycled parts that goes farther on a single charge than a Tesla, and was midway to doing the same with a semi-truck. He spent time in Ghana trying to help local businesses better handle electronic-waste recycling in Agbogbloshie, where children run through toxic chemicals and melt the plastic off of electrical wiring to get at the metal underneath. His case for reducing electronic waste is persuasive and passionate. “We use things and take them and throw them away,” he says. “This buy-and-trash society is so wasteful, and it hurts us from top to bottom. If you treat your things like that, then you treat the people around you like that, you treat the environment like that.” He says he’s working with attorneys to mount an appeal to the Supreme Court, though he acknowledges that the chances of the Court hearing his case are vanishingly slim, and he will serve his prison sentence regardless.
And it seems clear that Lundgren’s restore CDs could have saved a few PCs from the landfill. “The lowest price you can get [through the RRP] is $25,” says Adam Sanderson, owner of Computer Overhauls in New York City, who says he sells many computers for just $125. “That can be enough to determine whether the computer is going to be refurbished or thrown away.”
If Microsoft is sincerely committed to extending the life span of PCs running its software and reducing e-waste, it could lower the fees in the RRP for those who don’t want to upgrade to a newer operating system. Microsoft moved 8 million PCs through its RRP last year, and brought in more than $22 billion in profits. Lowering its licensing from $25 to $5 would cost it $160 million, less than one percent of its earnings.
What makes this particularly frustrating is that Microsoft has made some decisions that have absolutely helped keep PCs in circulation and out of landfills longer. Take, for instance, its decision to make sure that Windows 10 could run on older PCs, an unalloyed good. “I think Windows 10 being able to run on older PCs may be one of the best things Microsoft has ever done for the environment ever,” says Kyle Wiens of repair and recycle group iFixit.
But what’s at play in Lundgren’s case is more than just the extent to which hardware and software manufacturers are adequately supporting recycling efforts. It’s also about who owns your computer, and which parts of it. Our stuff and software used to be pretty separate and distinct things. Now, at least half of the things I carry in my bag every day have software, and I don’t exactly own it — I just have the hardware and the license to use it. The last time copyright laws got any sort of major update was over 20 years ago, when the Digital Millennium Copyright Act passed, and the biggest technological worry was people breaking encryption on DVDs.
No one in 1998 was considering a world where a refrigerator or sous-vide machine has a EULA or proprietary software. Our technology has rapidly advanced, and our copyright laws — originally designed to protect and promote artistic and technological innovation, but now used more often to quash it — has stagnated. Meanwhile, large monopolies have even bigger war chests to guard their turf, and anti-consumer laws are on the rise.
Eric Lundgren’s story is sad, but ultimately an edge case; not many of us will find ourselves in the electronics markets of Shenzhen contemplating whether to duplicate tens of thousands of copies of unauthorized software. But that a guy will soon be sitting in a jail cell for making duplicates of software that you can legally download for free should worry us all because it shows just how little both the courts and consumers understand where the lines are actually drawn.