World's Largest Software Piracy Ring Busted

Microsoft estimates that the software piracy of an international counterfeiting syndicate, over the past six years, cost the company at least $2 billion in lost software revenue. Microsoft said that key information in the investigation came from its Windows Genuine Advantage program, an antipiracy system that can check whether an OS is legit.

American and Chinese authorities said Monday that they have taken down what was reportedly the world's largest software piracy syndicate. The two-year-old operation, code-named Summer Solstice, was a joint effort by the FBI and China's Ministry of Public Security (MPS).

The sting resulted in 25 arrests and seizures by the Chinese authorities of more than $7 million in assets, including over 290,000 counterfeit software CDs and certificates of authenticity. The fraudulent software had an estimated street value of about $500 million. In two-dozen searches and asset seizure raids, FBI agents in Los Angeles seized an additional $2 million in counterfeit software and assets worth over $700,000.

J. Stephen Tidwell, assistant director in charge of the FBI in Los Angeles, said that "the buying and selling of counterfeit goods amounts to stealing the ideas of others and is no different than common theft."

Busting the Counterfeiters

According to the FBI, Summer Solstice involved several investigations in LA and China. One such investigation focused on a Shanghai-based organization headed by Ma Ke Pei, who has been accused of providing counterfeit products to U.S. distributors.

In 2003, Ma Ke Pei was indicted in New York for criminal copyright and trademark violations relating to imitation Microsoft Relevant Products/Services products. But Ma fled to China, where he resumed his operations and expanded to include imitation Symantec software.

With assistance from the FBI, the MPS arrested Ma Ke Pei and 10 of his coconspirators in China. More than $500,000 and five real estate properties were frozen, and equipment for manufacturing pseudo-Symantec products was seized.

Another group composed of 14 major producers and distributors was based in Shenzhen. It made counterfeit software, of which more than 70 percent was shipped to the U.S., according to investigators. In the cooperative effort between the two countries, 14 members of the Shenzhen group were arrested, six manufacturing and retail facilities were dismantled, and raids seized 47,000 counterfeit Microsoft CDs and eight high-quality Microsoft master CD replication discs.

Billions in Lost Revenue

Microsoft's associate general counsel, David Finn, pointed out to PC World that the typical maximum sentence for piracy in China is about seven years. He said that there has never been a case this big, and added that it "will have an appreciable and noticeable impact on the volume of pirated software on the marketplace."

The Redmond, Washington-based company estimates that the piracy of these operations, over the past six years, cost the company at least $2 billion in lost revenue. Microsoft said that key information in the investigation came from its Windows Genuine Advantage program, which is an antipiracy system that can check whether an operating system is genuine.

About 1,000 customers who suspected that their copies of Windows XP were not valid had the discs submitted to the Genuine Advantage program, and they were linked back to the syndicate, according to Microsoft.