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article imageOp-Ed: Recycler faces prison for attempting to extend the life of PCs

By Ken Hanly     Feb 24, 2018 in Business
Eric Lundgren's passion is for recycling. He even built a car out of recycled parts that ran much further on a charge than a Tesla as shown in the appended video. He has launched his own "electronic hybrid recycling" facility in California.
Lundgren's recycling company ITAssetPartners(ITAP)
His recycling facility turns discarded cellphones and other electronic equipment into functional devices. In doing so, he slows the stream of harmful chemicals 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.
Lundgren has a LinkedIn profile in which it is claimed that ITAP was founded on the principle that electronic recycling had to become efficient before it could become effective. It began as a computer recycling facility that was dedicated to a hundred percent no landfill policy. Electronic waste has become the largest growing waste stream globally and the company has grown in parallel to this development.
ITAP began in 2012. It has become one of the fastest growing companies in the US. There is a company website here.
Lundgren runs afoul of Microsoft copyright
Prosecutors claim that Lundgren had manufactured in China 28,000 counterfeit discs with the copyrighted WIndows operating system on them. Lundgren was convicted of both conspiracy and copyright infringement ad was given a 15-month prison sentence plus a $50,000 fine.
A federal appeals court has granted an emergency stay of Lundgren's sentence. This will allow Lundgren to argue again that the whole situation involves a misunderstanding. On Lundgren's view, he was just trying to extend the life of older second-hand computers and keep them out of the landfill. He was not out to make any profit from the discs he had manufactured.
Lundgrens' discs were restore or recovery discs
These discs used to often come with computers or the software on them can be downloaded free from the company's manufacturer which was in this case Dell. However, they will work only on computers that already have licensed Windows software. Often discs are lost when a computer finds itself going to a refurbisher. The Lundgren discs would be used in computers that already had a valid certificate of authenticity sticker, that is are properly licensed.
Lundgren thought that electronic companies tried to make it difficult to reuse computers so that customers would be required to buy new ones. In the Washington post article Lundgren said: “I started learning what planned obsolescence was and I realized companies make laptops that only lasted as long as the insurance would last. It infuriated me. That’s not what a healthy society should have.”
Lundgren's view of the discs
Lundgren thought that selling the restore discs to computer refurbishers would save them the trouble of downloading the software and burning new discs. In turn this would encourage more users to restore their computers rather than throwing them away. Users Lundgren argued were entitled to the software and he was just making it easier for them to get it.
Microsoft's and the prosecution's view
Federal prosecutors and Microsoft obtained a 21 count indictment against both Lundgren and a business partner. Microsoft filed a letter seeking $420,000 in recompense for lost sales. According to Lundgren the assistant US attorney on the case said that Microsoft wanted his head on a platter and he was going to give it to them.
The district judge Daniel T. Hurley noted that none of the discs were actually sold and did not order Lundgren to pay any restitution for lost sales. He also gave Lundgren a 15-month sentence less than half that called for by federal sentencing guidelines which were between 36 to 47 months.
Judge notes good works that Lundgren had performed
Hurley remarked that Lundgren's ITAP had worked to clean up e-waste in Ghana and China. In 2016 ITAP repaired and donated more than 14,000 cellphones and $100,000 to "Cellphone for Soldiers" all to the benefit of US soldiers deployed overseas.
At 20 Lundgren landed a contract to refurbish computers for American Airlines refurbishing and selling about 40,000 computers a year. All of these computers come with a COA with the product key numbers on the sticker. Reinstalling Windows was legal. If a computer had no COA it was parted out. Lundgren added Dell, Asus, Lenovo and Coca-Cola as providers of discarded computers.
Lundgren's argument
Lundgren notes: Microsoft does not sell restore CDs. Microsoft sells licenses that enable their software to work." The licences cost from $300 for new operating systems to just $25 dollars for a refurbisher to sell a computer that does not have a licensed copy of Windows.
Lundgren's restore disks are intercepted.
It was while in China considering the waste problems there that Lundgren came up with the idea of selling restore discs. As long as a person has the COA and keys a user could activate the Windows system. The license transfers with the computer no matter who owns it. He had 28,000 restore disks manufactured to send to the US.
In 2013 federal authorities intercepted shipments of the discs to his sales partner in Florida. The discs were almost identical to those provided by Dell for its computers and also had both Windows and Dell logos. Lundgren claimed that if he had just written "Eric's Restore Discs" everything would have been fine. Nevertheless he should have known that placing those logos on the discs makes them look like authentic products of the two companies.
Lundgren had clearly violated the copyrights of both Windows and Dell and he pleaded guilty to two of the 21 charges against him. However, he thought that because the disks had no retail value and none were sold he would not receive any jail time.
Microsoft's restitution assessment
Microsoft's attorney Bonnie MacNaughton said to the judge that this was a case of software piracy and such piracy cost the computer industry billions annually. Microsoft had calculated that Lundgren could have sold the 28,000 discs to refurbishers for $20 each and fully 75 percent of this was Microsoft's average profit and so it should receive $420,000 in restitution. Of course as the judge notes none of the disks were sold so it made no sense to require restitution.
A Microsoft manager, Jonathan McGloin was called to testify. He noted that Microsoft not only licensed Windows to computer manufacturers but also licensed restore or recovery disks to be included with new computers The company charges computer refurbishers $25 dollars for a new licence and copy of the software. However McGloin failed to point out that Lundgren was not making a new copy of the software but a recovery disc, intended only for computers that already had a COA.
Lundgren said that McGloin claimed that a free restore CD which he had purchased for less than 5 cents each was worth the same as a new Windows operating system with a licence. Lindgren complained that he got in the way of Microsoft profits so they pushed the issue into federal court. This would scare recyclers and refurbishers from reusing computers without paying Microsoft once again for another licence. He concluded: Anyone successfully extending the life cycle of computers or diverting these computers from landfills for reuse in society is essentially standing in the way of Microsoft’s profits.”
Lundgren's witness claims the value of the recovery discs is near zero
Glenn Weadock an author of numerous books on software and also a witness for the government in a case against Microsoft was asked what the value of the recovery discs were apart from product keys or COAs and he replied that it was zero or near zero.
The only reason anyone would pay for one is the convenience factor. However, judge Hurley decided that the discs were worth $700,000. This appears to make little sense. It is not explained how he arrived at this value. However, he thought it sufficient to qualify Lundgren for 15 months in jail plus the $50,000 fine. He also denied Lundgren's request to remain free pending his appeal. However the US Court of Appeals granted his request.
Lundgren's viewpoint
Lundgren claimed: “I thought it was freeware. If it’s free, then I’m just going to duplicate the free repair tool and give it away, and that’ll be fine. The value’s in the license. They didn’t understand that.” Surely he thought that he would sell the disks to refurbishers and others at a price at least sufficient to cover his expenses in producing shipping and handling the discs. However, his point remains valid.
Lundgren's appeal is pending before the 11th Circuit with oral arguments not yet scheduled.
The enter trial illustrates the bias towards defending the interests of a giant corporation such as Microsoft and involves what seems to be a deliberate misunderstanding of the role of recovery disks and a bizarre interpretation of their value when a user often gets them free or can download the software and burn it to a disc without any charge.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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