A Chinese national pleaded guilty late
yesterday to conspiracy to commit criminal copyright infringement and
wire fraud. The individual operated a website used to distribute more
than $100 million worth of pirated software around the world, making it
one of the most significant cases of copyright infringement ever
uncovered – and dismantled – by U.S. Immigration and Customs
Enforcement’s (ICE) Homeland Security Investigations (HSI).
Xiang Li, 36, of Chengdu, China, will be sentenced May 3, 2013, by
U.S. District Court Judge Leonard P. Stark. Li faces a maximum sentence
of 25 years in prison, a $250,000 fine and three years of supervised
release following his prison sentence. The entry of the guilty plea was
announced at a press conference held this morning in Wilmington by U.S.
Attorney Charles M. Oberly III, District of Delaware and ICE Director
John Morton.
“Li mistakenly thought he was safe from the long arm of HSI, hiding
halfway around the world in cyberspace anonymity,” said Director Morton.
“Fast forward to today, where he is now being held accountable in
Delaware for illegally stealing, distributing and ultimately exploiting
American ingenuity and creativity at a loss of at least $100 million to
U.S. companies. HSI is committed more than ever to protecting American
industry and U.S. jobs from criminals like him.”
According to statements made at the plea hearing and documents filed
in court, HSI identified Li as the operator of a website located at
www.Crack99.com that was advertising thousands of pirated software
titles at a fraction of their retail value. The investigation revealed
that Li used the Crack 99 website to distribute pirated or cracked
software to customers all over the world, including the United States.
Software is “cracked” when its digital license files and access control
features have been disabled or circumvented.
Through emails sent to customers of his website, Li described himself
as being part of “an international organization created to crack”
software. In a November 2008 email exchange with a customer, for
example, Li stated that he would charge $1,000 to obtain a cracked
version of a particular software program. When the customer wrote, “Yes
ok tell me who do this.” Li replied, “Experts crack, Chinese people
Sorry can not reveal more.”
During the course of the charged conspiracy from April 2008 to June
2011, Li engaged in more than 500 transactions, in which he distributed
approximately 550 different copyrighted software titles to at least 325
purchasers located in at least 28 states and more than 60 foreign
countries. These software products were owned by approximately 200
different manufacturers and were worth more than $100 million. The
software is used in a wide range of applications including defense,
engineering, manufacturing, space exploration, aerospace simulation and
design, mathematics, and explosive simulation.
More than one-third of the unlawful purchases were made by
individuals within the United States, including small business owners,
government contractors, students, inventors and engineers. Some of Li’s
biggest American customers held significant engineering positions with
government agencies and government contractors. For instance, Li sold 12
cracked software programs worth more than $1.2 million to Cosburn
Wedderburn, who was then a NASA electronics engineer working at NASA’s
Goddard Space Flight Center, in Greenbelt, Md. Li also sold 10 cracked
software programs worth more than $600,000 to Dr. Wronald Best, who held
the position of chief scientist at a Kentucky-based government
contractor that services the U.S. and foreign militaries and law
enforcement with a variety of applications such as radio transmissions,
radar usage, microwave technology and vacuum tubes used in military
helicopters. Both Wedderburn and Best have pleaded guilty to conspiracy
to commit criminal copyright infringement and are awaiting sentencing in
the District of Delaware.
Between January 2010 and June 2011, undercover HSI special agents
made a series of purchases of pirated software worth hundreds of
thousands of dollars from Li’s Crack 99 website. The investigation
culminated in a face-to-face meeting between Li and undercover HSI
special agents on the Island of Saipan in June 2011. Li agreed to travel
from China to Saipan to deliver pirated software, design packaging and
20 gigabytes of proprietary data from a U.S. software company to
undercover HSI special agents posing as U.S. businessmen. In addition,
Li and the undercover HSI special agents were meeting to discuss a plan
to distribute pirated software to small businesses in the United States.
The undercover HSI special agents arrested Li June 7, 2011, after he
delivered the stolen intellectual property to them at a Saipan hotel. Li
was transported to the District of Delaware, where he has remained in
custody since June 2011.
One of the companies victimized by the software piracy scheme stated,
“Circumventing our commercial aerospace and defense software license
mechanisms not only harms the competitiveness of our company, but also
U.S. national security interests. In addition to the revenue lost, we
spend significant legal resources obtaining patents and trademarks to
protect our intellectual property. We also invest a lot of energy
administering software license agreements and product-based, end-user
licenses, which are key components of our U.S. export control compliance
and customer support programs.”
HSI-led National Intellectual Property Rights Coordination Center (IPR Center)
As the largest investigative arm of the Department of Homeland
Security, HSI plays a leading role in targeting criminal organizations
responsible for producing, smuggling and distributing counterfeit
products. HSI focuses not only on keeping counterfeit products off our
streets, but also on dismantling the criminal organizations behind such
illicit activity.
HSI manages the IPR Center in Washington. The IPR Center is one of
the U.S. government’s key weapons in the fight against criminal
counterfeiting and piracy. As a task force, the IPR Center uses the
expertise of its 21 member agencies to share information, develop
initiatives, coordinate enforcement actions and conduct investigations
related to IP theft. Through this strategic interagency partnership, the
IPR Center protects the public’s health and safety, the U.S. economy
and the war fighters.
To report IP theft or to learn more about the HSI-led IPR Center, visit
www.IPRCenter.gov.
Assistant U.S. Attorneys David L. Hall and Edward J. McAndrew,
District of Delaware, are prosecuting this case on behalf of the U.S.
government.
