United States Attorney Jenny A. Durkan
Western District of Washington
CLARK COUNTY MAN SENTENCED FOR COUNTERFEIT SOFTWARE SCHEME
Sold Counterfeit Software Products for Ten Years Despite Warning Letters From Microsoft
WAYNE CHIH-WEI SHU, 44, of Battleground, Washington was sentenced today in U.S. District Court in Tacoma to three years in prison, three years of supervised release, and $687,633 in restitution for charges stemming from his scheme to profit from selling counterfeit Microsoft software, and his failure to file income tax returns. SHU pleaded guilty to Mail Fraud, Trafficking in Counterfeit Goods, Trafficking in Illicit Labels, and two counts of wilful failure to file tax returns on January 13, 2011, right after opening statements in his trial. At sentencing U.S. District Judge Benjamin H. Settle said, “Our economy greatly depends on protection of all property rights including intellectual property rights.”
According to records filed in the case, SHU owned and operated various entities that advertised and sold counterfeit and tampered with software over the internet. The companies operated under the names Micro Sharp, Inc., Micro Sharp Technologies, Inc., Microsharp.com., Inc., and Meet Your Price, Inc. SHU offered Microsoft products for sale over the internet. The products were counterfeit, tampered with, or infringed on copyrights owned and held by others. SHU engaged in a practice known as “kitting”; selling software products that contained a mix of some genuine components with other components that were counterfeit or tampered with. The “kitting” made it more difficult for customers to determine that the software was counterfeit. SHU also used counterfeit licenses and certificates of authenticity to fool consumers who thought they were purchasing licensed Microsoft products. Pursuant to a law passed by Congress in 2004, it is illegal to traffic in stand alone certificates of authenticity absent the software that the certificate was designed to authenticate. SHU continued his sales of counterfeit software and stand alone certificates of authenticity even after Microsoft sent him numerous “cease and desist” letters over several years. As part of his plea agreement, SHU admitted that he sold up to $1 million worth of counterfeit software and illicit certificates of authenticity during the course of the scheme.
When law enforcement executed a court authorized search warrant at SHU’s residence on June 20, 2007, they seized an estimated $2.6 million worth of software that included genuine software, counterfeit software, illicit labels of authenticity, and software that had been tampered with in order to disguise its origin. Analysis revealed that 41 percent of the products were counterfeit or tampered with. The investigation also revealed that SHU and his wife stopped filing personal or corporate income tax returns in 2004, resulting in a combined tax loss of over $650,000 in tax years 2004, 2005, and 2006. SHU’s wife, Maynila Voravongseng, was sentenced on May 24, 2011, to imprisonment for a term of 30 days, based on her conviction of failure to file tax returns for these same years. The couple has agreed to work with the IRS to determine their tax liabilities for 2004-2007.
Under the terms of the plea agreement, the couple is forfeiting to the government a 2000 Mercedes, nearly $70,000 in cash and bank accounts, and equity in their home.
In asking for a significant sentence, prosecutors noted the harm done to Microsoft and consumers. SHU “sought to exploit the reputation that Microsoft has built carefully, over decades, based on the established quality of its products and service. At the same time, for his own personal criminal gain, (SHU) was sabotaging the Microsoft reputation by providing consumers with inferior and counterfeit products that led to hundreds of consumer complaints, as well as the loss of revenue due to those fraudulent sales,” prosecutors wrote in their sentencing memo.
The case was investigated by the FBI and the Internal Revenue Service Criminal Investigation (IRS-CI). The case is being prosecuted by Assistant United States Attorneys Kathryn Warma and Norman Barbosa.