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Intellectual Property Rights
04/18/2012

Chinese nationals charged with software piracy and exporting technology to China

More than $100 million in lost revenue to American companies

WILMINGTON, Del. — Two Chinese nationals have been charged in a 46-count superseding indictment for a variety of charges including software piracy and illegally exporting technology to China. Additionally, a Maryland man, and former NASA employee, has pleaded guilty to charges of criminal copyright infringement. Both investigations are being conducted by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI).

Xiang Li, 35, and Chun Yan Li, 33, of Chengdu, China, have been charged by a federal grand jury. Xiang Li was arrested by HSI special agents June 7, 2011, in Saipan, Northern Mariana Islands. Chun Yan Li remains an at-large fugitive in Chengdu.

"Counterfeiting and intellectual property theft are seriously undermining U.S. business and innovation – more than $100 million in lost revenue in this one case alone," said ICE Director John Morton. "Homeland Security Investigations is committed to protecting American industry and U.S. jobs from people like Xiang Li, the leader of this criminal organization who believed he could commit these crimes without being held accountable for his actions. Li thought he was safe from the long arm of U.S. law enforcement, hiding halfway around the world in cyberspace anonymity. He was sorely mistaken. Whether in China or cyberspace, this arrest is proof that HSI and our partners at the National Intellectual Property Rights Coordination Center are committed to identifying, infiltrating and disrupting these criminal enterprises wherever they exist."

"These cases demonstrate our vulnerability to foreign acquisition of American technology," said U.S. Attorney Charles M. Oberly III, District of Delaware. "I applaud our law enforcement partners for their exceptional dedication in pursuing this major investigation."

The indictment charges that Xiang Li and Chun Yan Li engaged in a course of criminal conduct relating to the unauthorized access to, reproduction and distribution of copyrighted software between April 2008 and June 2011. This copyrighted software stolen by Xiang Li and Chun Yan Li was produced by more than 150 manufacturers, mostly American.

The charges arise out of the defendants' operation of a website called Crack 99 that sold pirated copies of software in which the access control mechanisms had been "cracked" or circumvented. An international investigation was initiated by HSI after discovering the Crack 99 website, which advertised the sale of pirated software.

During the course of the conspiracy, more than 150 manufactures lost retail value of the pirated software in excess of $100 million.

In particular, the indictment charges that Xiang Li, Chun Yan Li and others conspired and engaged in software cracking. This is considered the willful circumvention of digital license files and access control software created to prevent unauthorized access to copyrighted software products.

Xiang Li, Chun Yan Li and others also conspired and engaged in the unauthorized international distribution and reproduction of cracked copyrighted computer software over the Internet.

Commercial software is often designed with security features embedded in the software code for the purpose of preventing the unauthorized access or reproduction of the software. Software in which the access controls have been circumvented – and is sold without authorization of the copyright owner – is considered pirated software. The superseding indictment charges that Xiang Li unlawfully distributed this pirated software over the Internet by selling the copyrighted material on websites; crack99.com, cad100.net and dongle-crack-download.com.

These websites advertised over 2,000 different cracked software products for sale at a fraction of their retail prices. The advertised pirated software, most of which was created and copyrighted by companies based in the United States, is used in numerous applications including: engineering, manufacturing, space exploration, aerospace simulation and design, mathematics, storm water management, explosive simulation and manufacturing plant design. The prices listed for the pirated software on the websites range from $20 to $1,200. The actual retail value of these products ranges from several hundred dollars to over one million dollars.

The indictment charges that between April 2008 and June 2011, Xiang Li distributed over 500 pirated copyrighted works to at least 325 purchasers located in Delaware, at least 27 other states and over 60 foreign countries. More than one-third of these purchases were made by individuals within the United States.

Xiang Li faces up to 20 years in federal prison and an extensive fine – a $500,000 fine or twice the loss from this case – per charge.

Former NASA employee pleads guilty

Cosburn Wedderburn, 38, of Windsor Mill, Md., a former NASA employee, has pleaded guilty to conspiracy to commit criminal copyright infringement. This case was investigated by HSI with the assistance of the NASA Office of Inspector General.

According to court documents, Wedderburn was a customer of Xiang Li. He purchased over $1 million of cracked stolen software.

Wedderburn faces up to five years in federal prison and an extensive fine – a $250,000 fine or twice the loss from this case.

Assistant U.S. Attorneys David L. Hall and Edward J. McAndrew, District of Delaware, are prosecuting these cases on behalf of the U.S. government.

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 20 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.