Recently in Criminal IP Category

October 15, 2015

DOJ Announces New Strategy to Combat Intellectual Property Crimes


Washington, D.C. - The Justice Department has announced a new approach to combat intellectual property crimes. Grants to state and local law enforcement agencies totaling more than $3.2 million were also announced.

Attorney General Loretta E. Lynch stated recently that the Justice Department will launch a new collaborative strategy to partner more closely with businesses in intellectual property enforcement efforts. Additionally, over $3.2 million will be awarded to ten jurisdictions to support state and local task forces in the training, prevention, enforcement and prosecution of intellectual property theft and infringement crimes.

"The digital age has revolutionized how we share information, store data, make purchases and develop products, requiring law enforcement to strengthen our defenses against cybercrime - one of my top priorities as Attorney General," said Attorney General Lynch. "High-profile instances of hacking - even against large companies like Sony and Target - have demonstrated the seriousness of the threat all businesses face and have underscored the potential for sophisticated adversaries to inflict real and lasting harm."

The new FBI collaborative strategy builds upon the work previously done by the department while also working with industry partners to make enforcement efforts more effective. As part of the strategy, the FBI will partner with third-party marketplaces to ensure that they have the right analytical tools and techniques to combat intellectual property concerns on their websites. The bureau also will serve as a bridge between brand owners and third-party marketplaces in an effort to mitigate instances of the manufacture, distribution, advertising and sale of counterfeit products. This new strategy will help law enforcement and companies better identify, prioritize and disrupt the manufacturing, distribution, advertising and sale of counterfeit products. Crimes will then be investigated by the FBI and other partners of the National Intellectual Property Rights Coordination Center and finally prosecuted by the Justice Department.

Further, the Office of Justice Program's Intellectual Property Enforcement Program ("IPEP") will award $3.2 million in grants to aid state and local law enforcement in addressing intellectual property crimes.

Local award recipients announced included the following:

City of Austin Police Department: $400,000

City of Hartford Police Department: $399,545

Cook County State Attorney's Office: $400,000

Baltimore County Police Department: $120,174

North Carolina Department of Secretary of State: $367,076

New Jersey State Police: $269,619

City of Phoenix Police Department: $253,129

City of Portland Police Department: $373,569

Virginia State Police: $253,128

City of San Antonio Police Department: $400,000

Since IPEP's establishment in 2009, the department has invested nearly $14.8 million for 41 task forces across the country. These grants have supported the arrests of 3,522 individuals, the dismantling of 1,882 piracy or counterfeiting organizations and the seizure of $266,164,989 in counterfeit property, other property and currency in conjunction with IP enforcement operations.

The department also launched a new intellectual property website to serve as a both a resource to companies facing intellectual property challenges as well as a mechanism to educate the public on how intellectual property theft is a growing threat to the country's public safety and economic well-being.

Practice Tip: Intellectual property theft refers to the violation of criminal laws that protect copyrights, patents, trademarks and other forms of intellectual property and trade secrets both in the United State and abroad. Faulty and counterfeit products are often sold to unsuspecting consumers and can pose a significant threat to their health and safety. In a few circumstances, these activities are used to fund dangerous or violent criminal enterprises or organized crime networks.

October 14, 2015

Indiana Patent and Trademark Litigation: Global Archery Sues Seattle-Based Company for Infringement


Fort Wayne, Indiana - An Indiana intellectual property attorney for Global Archery Products, Inc. of Ashley, Indiana commenced litigation in the Northern District of Indiana alleging trademark and patent infringement by Jordan Gwyther d/b/a and of Seattle, Washington.

Two patents are at issue in this lawsuit: U.S. Patent No. 8,449,413 (the "`413 Patent") and U.S. Patent No. 8,932,159 (the "`159 Patent"). Both are entitled "Non-Lethal Arrow." Also at issue are U.S. Trademark Registration No. 4,208,867 and 4,208,868 for ARCHERY TAG for use in connection with non-lethal arrows. The patents and trademarks have been registered by the U.S. Patent and Trademark Office.


Global contends that Jordan Gwyther d/b/a ("Larping") is selling and offering for sale several products including a "Crossbow Bolt," a "Flat Tip Larp Arrow," a "Glow in the Dark Larp Arrow" and a "Round Tip Larp Arrow." These arrows are marketed at Global asserts that Larping is violating Global's trademark rights by, inter alia, using the ARCHERY TAG trademark on advertising and as a paid "key word" on one or more search engines in connection with the marketing of these products. Global also claims that Larping's products infringe upon two of Global's patents.

In addition to patent infringement and trademark infringement, Global asserts various additional claims against Larping. The counts listed in this federal lawsuit are as follows:

• Count I: Infringement of the '413 Patent by Larping
• Count II: Infringement of the '159 Patent by Larping
• Count III: Infringement of Federal Trademarks
• Count IV: False Designation of Origin/Unfair Competition
• Count V: False Advertising
• Count VI: Tortious Interference with Contractual Relations
• Count VII: Tortious Interference with Business Relationships
• Count VIII: Criminal Mischief

• Count IX: Deception

Global seeks equitable relief along with damages, including punitive damages, costs and attorney fees.

Continue reading "Indiana Patent and Trademark Litigation: Global Archery Sues Seattle-Based Company for Infringement" »

August 24, 2015

Introduction to Criminal Copyright Infringement - Fourth Element: Commercial Advantage or Private Financial Gain

The fourth element of a criminal prosecution for copyright infringement requires that the 


government prove that the defendant engaged in an act of copyright infringement "for purposes of commercial advantage or private financial gain." It is unnecessary that a profit be made as a result of the infringing activities. This interpretation was intended to exclude from criminal liability those individuals who willfully infringe copyrights solely for their own personal use, although those individuals may still be pursued by the copyright holder in civil court.

It is a common misconception that if infringers do not charge subscribers a monetary fee for infringing copies, they cannot be found guilty of criminal copyright infringement. While evidence of discrete monetary transactions (i.e., the selling of infringing goods for a particular price) provides the clearest evidence of financial gain, such direct evidence is not a prerequisite for the government to prosecute.

Instead, the government gives a broader interpretation to the requirement of a "commercial or financial purpose." The Department of Justice's interpretation of the phrase "for purposes of commercial advantage or private financial gain" does not require the payment in money for infringing works. Instead, payment by trading anything of value for infringing copies could constitute seeking a "commercial advantage or private financial gain." Thus, "bartering" (i.e., the practice of exchanging infringing works for other infringing works) that results in the unauthorized dissemination of infringing product can trigger criminal prosecution.

August 17, 2015

Introduction to Criminal Copyright Infringement - Third Element: Willfulness

The third element of a criminal prosecution for copyright infringement requires that the 


government establish that the defendant possessed criminal intent to infringe the holder's copyrighted work. Courts generally agree that a "willful" act must be "an act intentionally done in violation of the law."

However, in defining willfulness when it comes to copyright infringement, courts differ in their interpretations of which of the two acts - copying or infringing - requires willful intent. The minority view, endorsed by the Second and Ninth Circuits, holds that "willful" means only intent to copy, not intent to infringe. The majority view, however, looks for intent to infringe rather than merely intent to copy, thus, requiring the government to demonstrate a voluntary, intentional violation of a known legal duty.

This construction provides a rare but significant exception to the maxim that "ignorance of the law is no excuse." Indeed, under this construction, were a defendant to satisfy the finder of fact either that he was not aware of laws prohibiting copyright infringement, or that he did not believe his acts to be infringing, such might constitute a defense to the criminal charge. It would not constitute a defense to a civil lawsuit for copyright infringement, however, as civil infringement remains a strict liability wrongdoing.

August 14, 2015

Introduction to Criminal Copyright Infringement - Second Element: Infringement


The second element of a criminal prosecution for copyright infringement requires that the government prove that the defendant infringed upon the holder's rights in its copyrighted intellectual property. Although the term "infringement" itself is not specifically defined in the copyright statute, 17 U.S.C. § 501(a) provides that: "[a]nyone who violates any of the exclusive rights of the copyright owner as provided by [17 U.S.C. §§ 106 to 118] . . . is an infringer of the copyright." Thus, the concept of infringement is defined by reference to the exclusive rights conferred on a copyright owner by 17 U.S.C. § 106. Those exclusive rights include the right to display or perform the work publicly, as set forth in 17 U.S.C. § 106(4)-(5), along with the right to reproduce and distribute copies of the work, as set forth in 17 U.S.C. § 106(1) and (3). The unauthorized exercise of these rights will constitute an act of infringement and will give rise to a civil infringement claim by the copyright holder and perhaps prosecution by the government.

Generally, infringement is established by evidence of copying. However, because copying often cannot be directly attributed to the defendant, copying can be established indirectly through evidence that the defendant had access to the original copyrighted work, and that the defendant's work is substantially similar to it.

With regard to prosecution for alleged infringement of copyrighted computer programs, a court must also decide separately whether or not the copies at issue were lawfully made under 17 U.S.C. § 117, which authorizes such duplication in certain circumstances. Thus, unlike copies of other types of copyrighted works, copies of computer programs are not automatically presumed to be unauthorized.

The concept of infringement includes a host of statutory exceptions to the exclusive rights created by copyright law, many of which involve conduct that is already specifically exempted from criminal liability by the heightened proof requirements of 17 U.S.C. § 506(a) and 18 U.S.C. § 2319. Other limitations, such as the fair use doctrine and the first sale doctrine, may also apply to criminal cases.

August 7, 2015

Introduction to Criminal Copyright Infringement - First Element: Existence of a Valid Copyright


The first element of a criminal prosecution for copyright infringement under 17 U.S.C. § 506(a) requires proof that the copyright at issue is a valid copyright. This may be established by demonstrating that the formal requirements of copyright registration have been satisfied. Although registration of a copyrighted work is not necessary to obtain copyright protection, it is usually required before prosecuting a copyright defendant in criminal court.

Registration of a copyright is typically proven by obtaining a certificate of registration from the Register of Copyrights. Under 17 U.S.C. § 410(c), a certificate of registration "made before or within five years after the first publication of the work shall constitute prima facie evidence of the validity of the copyright. . . ." If the defendant contests the validity of the copyright at issue as a defense in a criminal prosecution, the government would need to make an independent evidentiary showing that the copyright is valid. This would involve showing that the copyright was not obtained by fraud and the registration certificate is genuine.

July 31, 2015

Criminal Copyright Infringement - 17 U.S.C. § 506(a) and 18 U.S.C. § 2319


The principal criminal statute protecting copyrighted works is 17 U.S.C. § 506(a), which provides that "[a]ny person who infringes a copyright willfully and for purposes of commercial advantage or private financial gain" shall be punished as provided in 18 U.S.C. § 2319. Section 2319 provides, in pertinent part, that a 5-year felony shall apply if the offense "consists of the reproduction or distribution, during any 180-day period, of at least 10 copies or phonorecords, of 1 or more copyrighted works, with a retail value of more than $2,500." 18 U.S.C. § 2319(b)(1).

The 1992 amendments to section 2319 have made it possible to pursue felony-level sanctions for violations relating to all types of copyrighted works, including computer software and other works written, stored or transmitted in a digital format, if the other elements of the statute are satisfied. Felony penalties attach only to violations of a victim's rights of reproduction or distribution in the quantity stated. A misdemeanor shall apply if the defendant does not meet the numerical and monetary thresholds, or if the defendant is involved in the infringement of the other rights bestowed upon the copyright holder, including the right to prepare derivative works, or the right to publicly perform a copyrighted work.

There are four essential elements to a charge of criminal copyright infringement: (1) that a valid copyright; (2) was infringed by the defendant; (3) willfully; and (4) for purposes of commercial advantage or private financial gain. Attempts to infringe are prohibited to the same extent as the completed act. Conspiracies to violate the Copyright Act can be prosecuted under 18 U.S.C. § 371. A minority of courts also require that the government prove the absence of a first sale, and refer to this as a fifth element of a section 506(a) offense. However, the majority position is that the absence of a first sale is an affirmative defense.

The elements of criminal copyright infringement will be discussed in upcoming blog posts.

July 29, 2015

Criminal Copyright Law: An Introduction

The law of copyright is codified at Title 17 of the United States Code. The principal prohibitions relating to criminal copyright infringement are set forth at 17 U.S.C. § 506(a) and 18 U.S.C. § 2319. Titles 17 and 18 also contain a number of other provisions that make illegal certain practices which are inconsistent with Congress' copyright protection scheme.

In the past several years, these criminal sanctions have been revised significantly, and the penalties for criminal infringement of copyrights have been increased. Under the Copyright Felony Act of 1992, infringement of a copyrighted work may now constitute a felony under federal law, depending on the number of infringing copies reproduced or distributed in a 180-day period, and their retail value.

June 19, 2015

Indiana Trademark Litigation: ArcelorMittal Sues Arillotta et al. for Tarnishment, Deception and Forgery

Hammond, Indiana - Trademark attorneys for ArcelorMittal USA LLC of Chicago, Illinois sued alleging violations of intellectual property rights and other rights. The lawsuit, filed in the Northern District of Indiana, alleges that Albert Arillotta, Global Demolition and Recycling, LLC, NMC Metals Corporation, and Arillotta Enterprises, LLC, all of Swampscott, Massachusetts, engaged in false designation of origin and false endorsement; dilution by blurring and tarnishment; deception; forgery; and deceptive trade practices.


ArcelorMittal is a producer and supplier of steel products. It owns and operates a steelmaking facility in Burns Harbor, Indiana. ArcelorMittal claims rights in federal trademark registrations to "ArcelorMittal" (Reg. Nos. 3908649 and 3643643) and "Mittal" (Reg. No. 4686413).

In 2012, Plaintiff ArcelorMittal solicited proposals for the installation of a pig iron casting machine at its Burns Harbor steelmaking facility. Plaintiff indicates that Arillotta, through his company Arillotta Enterprises, Inc., submitted a proposal for the project but that it was rejected. Nonetheless, contends ArcelorMittal, Arillotta subsequently represented to various third parties that "Arcelor Mittal Burns Harbor" and Defendant(s) had, in fact, entered into a contract for such an installation. Plaintiff further claims in its federal lawsuit that Arillotta forged the signature of two individuals, Michael Rippey and Louis Schorsch, listed as officers of ArcelorMittal, on documents related to this false claim.

Plaintiff also indicates in this lawsuit that Arillotta, when later unable to make payments owing on another contract, falsely claimed that ArcelorMittal would wire transfer $338,200.00 to cover an initial payment. When no such payment was forthcoming, because Plaintiff indicates that no such agreement existed, the payee on that contract then began to demand the money directly from ArcelorMittal.

ArcelorMittal contends that, in sum, "Arillotta has forged contracts and purchase orders purporting to represent in excess of ten million dollars ($10,000,00.00) worth of commercial activities between the defendant companies and ArcelorMittal when, in fact, ArcelorMittal has not hired Arillotta or his companies to perform any of the work shown in the forged contracts and purchase orders."

In its complaint against Arillotta and the other Defendants, trademark lawyers for ArcelorMittal list the following counts:

• Count I: False Designation of Origin and False Endorsement
• Count II: Dilution by Blurring and Tarnishment
• Count III: Deception
• Count IV: Forgery
• Count V: Deceptive Trade Practices

Plaintiff ArcelorMittal asks the court for injunctive relief, money damages, costs and attorneys' fees.

Continue reading "Indiana Trademark Litigation: ArcelorMittal Sues Arillotta et al. for Tarnishment, Deception and Forgery" »

May 28, 2015

New EFF "404" Report Shows How Restrictive Copyright Policies Stifle Online Speech Worldwide

San Francisco, California - Overly-broad intellectual property ("IP") laws in Russia, Colombia, and Pakistan - which U.S. trade regulators say aren't tough enough - stifle access to innovation and threaten artists, students, and creators around the globe with prison, censorship, and state prosecution, the Electronic Frontier Foundation ("EFF") said in a new report released recently.

EFF's "Special 404 Report" is a response to the "Special 301 Report." The latter report, which EFF called biased and "a deeply flawed annual assessment of international intellectual property rights policies," was released in April by the Office of the U.S. Trade Representative ("USTR"). The Special 301 Report is used to pressure countries to adopt IP laws supported by some powerful business interests.

In a first-of-its-kind analysis countering what EFF called the USTR's "name and shame" tactics, EFF argues that the Special 301 Report paints a one-sided picture of IP rights and fails to disclose the damaging results of draconian IP policies. Examples include a human rights activist in Russia who was targeted by prosecutors using criminal copyright law, a biologist in Colombia who faces prison for sharing research, and students in Pakistan who struggle to exercise their rights under local law to study academic papers.

"The Special 301 Report is built on an opaque process that echoes the desires of certain members of private industry, like Hollywood rights holders," said Jeremy Malcolm, EFF senior global policy analyst. "It's meant to push countries to adopt stiffer IP laws, even if such laws aren't in the best interests of the citizens of that country. Our report shows how, in countries targeted by the USTR report, stringent intellectual property laws have had shameful and frightening consequences."

EFF's 404 report - named after the error code that appears on the web to show browsers that something is missing - features case studies from Canada, Chile, Pakistan, Romania, Colombia, and Russia. In addition to showing the chilling effects of copyright policies that the Special 301 Report condemns as not tough enough, the 404 report also highlights how flexible fair use interpretations can benefit communities, culture, and the economy. Additionally, EFF covers flaws in the USTR report, including lack of balance, questionable legal basis, lack of set criteria for analyzing copyright policies, and exclusion of a means by which countries can challenge findings.

"Our report puts a human face on the victims of defective IP policy, and tells the story of Diego Gomez, a masters student in Colombia who could be jailed and face huge fines after the government criminally prosecuted him for sharing an academic paper on Scribd,'' said Maira Sutton, EFF global policy analyst. "Countries around the globe should be skeptical when considering the recommendations of the USTR Special 301 Report and push for fair use and open access when adopting and enforcing IP laws."

For the full report visit:

This edited article as provided by the Electronic Frontier Foundation, a nonprofit group which advocates for innovators and users of technology. The article has been licensed under the Creative Commons Attribution License.

May 27, 2015

Chinese Professors Among Six Defendants Charged with Economic Espionage and Theft of Trade Secrets

Los Angeles, California - Chinese professors have been accused of having stolen valuable technology from Avago Technologies and Skyworks Solutions to benefit a university in the People's Republic of China.

On May 16, 2015, Tianjin University Professor Hao Zhang was arrested upon entry into the United States from the People's Republic of China ("PRC") in connection with a recent superseding indictment in the Northern District of California, announced Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Melinda Haag of the Northern District of California and Special Agent in Charge David J. Johnson of the FBI's San Francisco Division.

The 32-count indictment, which had previously been sealed, charges a total of six individuals with economic espionage and theft of trade secrets for their roles in a long-running effort to obtain U.S. trade secrets for the benefit of universities and companies controlled by the PRC government.

"According to the charges in the indictment, the defendants leveraged their access to and knowledge of sensitive U.S. technologies to illegally obtain and share U.S. trade secrets with the PRC for economic advantage," said Assistant Attorney General Carlin. "Economic espionage imposes great costs on American businesses, weakens the global marketplace and ultimately harms U.S. interests worldwide. The National Security Division will continue to relentlessly identify, pursue and prosecute offenders wherever the evidence leads. I would like to thank all the agents, analysts and prosecutors who are responsible for this indictment."

"As today's case demonstrates, sensitive technology developed by U.S. companies in Silicon Valley and throughout California continues to be vulnerable to coordinated and complex efforts sponsored by foreign governments to steal that technology," said U.S. Attorney Haag. "Combating economic espionage and trade secret theft remains one of the top priorities of this Office."

"The conduct alleged in this superseding indictment reveals a methodical and relentless effort by foreign interests to obtain and exploit sensitive and valuable U.S. technology through the use of individuals operating within the United States," said Special Agent in Charge Johnson. "Complex foreign-government sponsored schemes, such as the activity identified here, inflict irreversible damage to the economy of the United States and undercut our national security. The FBI is committed to rooting out industrial espionage that puts U.S. companies at a disadvantage in the global market."

According to the indictment, PRC nationals Wei Pang and Hao Zhang met at a U.S. university in Southern California during their doctoral studies in electrical engineering. While there, Pang and Zhang conducted research and development on thin-film bulk acoustic resonator ("FBAR") technology under funding from U.S. Defense Advanced Research Projects Agency (DARPA). After each earned a doctorate in approximately 2005, Pang accepted employment as an FBAR engineer with Avago Technologies ("Avago") in Colorado and Zhang accepted employment as an FBAR engineer with Skyworks Solutions Inc. ("Skyworks") in Massachusetts. The stolen trade secrets alleged in the indictment belong to Avago or Skyworks.

Avago is a designer, developer and global supplier of FBAR technology, which is a specific type of radio frequency (RF) filter. Throughout Zhang's employment, Skyworks was also a designer and developer of FBAR technology. FBAR technology is primarily used in mobile devices like cellular telephones, tablets and GPS devices. FBAR technology filters incoming and outgoing wireless signals so that a user only receives and transmits the specific communications intended by the user. Apart from consumer applications, FBAR technology has numerous applications for a variety of military and defense communications technologies.

According to the indictment, in 2006 and 2007, Pang, Zhang and other co-conspirators prepared a business plan and began soliciting PRC universities and others, seeking opportunities to start manufacturing FBAR technology in China. Through efforts outlined in the superseding indictment, Pang, Zhang and others established relationships with officials from Tianjin University. Tianjin University is a leading PRC Ministry of Education University located in the PRC and one of the oldest universities in China.

As set forth in the indictment, in 2008, officials from Tianjin University flew to San Jose, California, to meet with Pang, Zhang and other co-conspirators. Shortly thereafter, Tianjin University agreed to support Pang, Zhang and others in establishing an FBAR fabrication facility in the PRC. Pang and Zhang continued to work for Avago and Skyworks in close coordination with Tianjin University. In mid-2009, both Pang and Zhang simultaneously resigned from the U.S. companies and accepted positions as full professors at Tianjin University. Tianjin University later formed a joint venture with Pang, Zhang and others under the company name ROFS Microsystem intending to mass produce FBARs.

The indictment alleges that Pang, Zhang and other co-conspirators stole recipes, source code, specifications, presentations, design layouts and other documents marked as confidential and proprietary from the victim companies and shared the information with one another and with individuals working for Tianjin University.

According to the indictment, the stolen trade secrets enabled Tianjin University to construct and equip a state-of-the-art FBAR fabrication facility, to open ROFS Microsystems, a joint venture located in PRC state-sponsored Tianjin Economic Development Area (TEDA), and to obtain contracts for providing FBARs to commercial and military entities.

The six indicted defendants include:

• Hao Zhang, 36, a citizen of the PRC, is a former Skyworks employee and a full professor at Tianjin University. Zhang is charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, economic espionage and theft of trade secrets. Zhang was arrested upon entry into the United States on May 16, 2015.

• Wei Pang, 35, a citizen of the PRC, is a former Avago employee and a full professor at Tianjin University. Pang is charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, economic espionage and theft of trade secrets.

• Jinping Chen, 41, a citizen of the PRC, is a professor at Tianjin University and a member of the board of directors for ROFS Microsystems. Chen is charged with conspiracy to commit economic espionage and conspiracy to commit theft of trade secrets.

• Huisui Zhang ("Huisui"), 34, a citizen of the PRC, studied with Pang and Zhang at a U.S. university in Southern California and received a Master's Degree in Electrical Engineering in 2006. Huisui is charged with conspiracy to commit economic espionage and conspiracy to commit theft of trade secrets.

• Chong Zhou, 26, a citizen of the PRC, is a Tianjin University graduate student and a design engineer at ROFS Microsystem. Zhou studied under Pang and Zhang, and is charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, economic espionage and theft of trade secrets.

• Zhao Gang, 39, a citizen of the PRC, is the General Manager of ROFS Microsystems. Gang is charged with conspiracy to commit economic espionage and conspiracy to commit theft of trade secrets.

The maximum statutory penalty for each of the charges alleged in the superseding indictment is as follows:

• Count One: conspiracy to commit economic espionage: 15 years imprisonment; $500,000 fine or twice the gross gain/loss; three years' supervised release; and $100 special assessment.

• Count Two: conspiracy to commit theft of trade secrets: 10 years imprisonment; $250,000 fine or twice the gross gain/loss; three years' supervised release; and $100 special assessment.

• Counts Three through Seventeen: economic espionage; aiding and abetting: 15 years imprisonment; $500,000 fine or twice the gross gain/loss; three years' supervised release; and $100 special assessment.

• Counts Eighteen through Thirty-Two: theft of trade secrets; aiding and abetting: 10 years imprisonment; $250,000 fine or twice the gross gain/loss; three years' supervised release; and $100 special assessment.

Zhang was arrested on May 16, 2015, upon landing at the Los Angeles International Airport on a flight from the PRC. He made his initial appearance recently in Los Angeles before the U.S. Magistrate Judge Alicia G. Rosenberg of the Central District of California, who ordered the defendant transported in custody to San Jose for further proceedings. His next scheduled appearance will be before the U.S. District Judge Edward J. Davila of the Northern District of California, at a date to be determined.

The charges contained in an indictment are merely accusations, and a defendant is presumed innocent unless and until proven guilty.

The investigation is being conducted by the FBI's Palo Alto Resident Agency/San Francisco Division. The case is being prosecuted by Assistant U.S. Attorneys Matt Parrella and Dave Callaway of the Northern District of California, in consultation with the National Security Division's Counterespionage Section.

Zhang Superseding Indictment

May 20, 2015

Indiana Trademark Litigation: Integrity Trade Services Sues Ex-Employees Alleging Conspiracy and Conversion


South Bend, Indiana - Trademark attorneys for Integrity Trade Services, Inc. ("ITS") of Frankfort, Illinois filed an intellectual property complaint in the Northern District of Indiana naming as Defendants Integrity Employment Partners, LLC, Integrity Trade Services, LLC, Janice Hernandez, James Hernandez, Tiffany Heineman, Michaela Williams, and Jason Reis, all of Indiana, and alleging multiple claims, including trademark infringement, conversion of ITS trade secrets, breach of contract, and tortious interference with business relationships.

ITS is a national staffing services company, doing businesses in multiple states, including Indiana, Florida, Illinois, and Texas. ITS is wholly owned by John E. Cumbee, III. In 2008, ITS acquired all of the operational assets of the Knox, Indiana branch of a staffing company owned by CES America, Inc. ITS also hired most, if not all, of the CES employees then working at the Knox facility, including defendants James and Janice Hernandez.

ITS contends that, since purchasing the Knox facility, it has invested well over $1 million to build the Knox business and the ITS brand as it is related to that facility. It asserts in this federal lawsuit, inter alia, that Defendants conspired to convert ITS' customers, employees and trade secrets for their own use.

The accused in this case are husband and wife Janice Hernandez and James Hernandez; several family members of Janice Hernandez, including Tiffany Heineman, Michaela Williams, and Jason Reis; and two entities apparently owned by the Hernandezes, Integrity Employment Partners, LLC, Integrity Trade Services, LLC.

Defendant James Hernandez ("James") worked for ITS from the time that ITS acquired the business until April 30, 2015 when he was fired. ITS asserts that James engaged in a conspiracy to solicit away and convert (a) ITS' office employees at the Knox location, (b) at least the active ITS field employees servicing the Knox location, and (c) customers comprising the Knox-area business. He is accused of attempting to transfer them to Integrity Employment Partners, LLC, an Indiana limited liability company formed to process the Knox business converted from ITS for his benefit and the benefit of the other co-conspirators.

Defendant Janice Hernandez ("Janice"), also became employed by ITS when ITS was acquired from its prior owner. She has been accused of not only being an integral part of the alleged conspiracy but also of being "likely its "'mastermind.'" Defendant Tiffany Heineman ("Tiffany") is Janice's niece. Defendant Michaela Williams is Janice's daughter. Defendant Jason Reis is the ex-son-in-law of James and Janice, having been married to another of Janice's daughters.

ITS states that, in the last two weeks in April 2015, it discovered various anomalies in the Knox business. These anomalies alerted ITS to the activities that triggered this federal lawsuit. They included a drop off in weekly gross sales, the formation of Integrity Employment Partners, LLC ("IEP"), and checks issued by existing ITS customers made payable to IEP (and not ITS).

Defendants are accused of orchestrating a scheme to confuse ITS' customers and employees regarding with which staffing businesses using the name "Integrity" - Plaintiff's firm or Defendants' firms - those customers and employees were transacting business. In doing so, ITS contends, Defendants attempted with some success to convert ITS' business assets and relationships for Defendants' benefit. Allegations of criminal conduct by Defendants were also made. In a 48-page complaint, filed by trademark lawyers for Plaintiff, those claims and others are made:

• Count I: Federal Trademark Infringement
• Count II: Federal Unfair Competition
• Count III: Illinois Deceptive Trade Practices Act
• Count IV: Breach of Fiduciary Duty
• Count V: Breach of Tiffany's Agreement
• Count VI: Tortious Interference with Contract
• Count VII: Tortious Interference with Business Relationships
• Count VIII: Conversion
• Count IX: Computer Fraud and Abuse Act
• Count X: Uniform Trade Secrets Act
• Count XI: Civil Conspiracy
• Count XII: Unjust Enrichment

• Count XIII: Breach of Contract

Plaintiff asks the court for, inter alia, injunctive relief, compensatory damages, punitive damages, attorneys' fees, interest and costs.

Continue reading "Indiana Trademark Litigation: Integrity Trade Services Sues Ex-Employees Alleging Conspiracy and Conversion " »

May 14, 2015

Ninth Circuit Copyright Proceedings: Prenda Law Parties Ask to be Prosecuted

San Francisco, California - A lawyer for Prenda Law argued before the United States Court of Appeals for the Ninth Circuit and was heard by Judges Harry Pregerson, Richard Tallman and Jacqueline Nguyen. The appeal focused on the rulings of U.S. District Court Judge Otis Wright II.

The intellectual property attorney representing Prenda Law, the now-infamous copyright trolling law firm, squared off with the judges of the Ninth Circuit recently. In a hearing before the appellate court, he contended that the district court had denied due process to the Prenda Law parties. He noted that Judge Wright had threatened incarceration argued and, in doing so, Judge Wright had indirectly initiated a criminal contempt proceeding.

"The entire proceeding was tainted. Mark Lutz, the CEO of Ingenuity 13, was not allowed to testify. As soon as they asserted their Fifth Amendment rights, the judge stopped the proceeding," Prenda Law's lawyer said. "He can't use that against them," he continued, arguing that Judge Wright had punished the Prenda Law parties for invoking their Fifth Amendment rights against self incrimination.

Judge Tallman countered, "Sure he can." Because this was a civil proceeding, Judge Wright was allowed to "draw adverse inferences" as a result of an invocation of the Fifth Amendment. Judge Pregerson added that the Prenda parties "should have taken the Fifth, because they were engaged in extortion. They sent out thousands of extortionate letters."

"Let's say you're right," Pregerson said. "Do you want us to send this back and have this turn into a criminal contempt proceeding?" The court was surprised when the answer was "yes."

Judge Pregerson continued: "They used our court system for illegal purposes to extort money--they used our discovery system. They bought these pornographic films, and seeded the Internet with them.... If they really want to have a trial on this, with all protections of a criminal case--burden of proof, and a prosecutor, and all the rest of it--you sure they want that?"

"I'm amazed that you are asking us to vacate the sanctions and send it back for an independent prosecutor to pursue," said Judge Nguyen added, noting that the case currently before the court was not the only matter that prosecution could include.

Judge Tallman also seemed surprised that Prenda Law had asked that the matter be considered as a criminal matter: "With a potential penalty of life in prison for criminal contempt? They're prepared to run that gauntlet?"

Prenda Law's attorney repeated that, yes, the Prenda Law parties wanted their day in court.

March 18, 2015

Member Of Megaupload Conspiracy Pleads Guilty to Copyright Infringement Charges and is Sentenced to One Year in U.S. Prison


A computer programmer for the Mega copyright piracy conspiracy, Andrus Nomm, 36, of Estonia, pleaded guilty recently in connection with his involvement with and associated piracy websites. He was sentenced to a year and a day in federal prison for conspiring to commit felony copyright infringement.

Assistant Attorney General Leslie R. Caldwell of the Justice Department's Criminal Division, U.S. Attorney Dana J. Boente of the Eastern District of Virginia and Assistant Director in Charge Andrew G. McCabe of the FBI's Washington Field Office made the announcement. U.S. District Judge Liam O'Grady of the Eastern District of Virginia accepted the guilty plea and imposed the sentence.

"This conviction is a significant step forward in the largest criminal copyright case in U.S. history," said Assistant Attorney General Caldwell. "The Mega conspirators are charged with massive worldwide online piracy of movies, music and other copyrighted U.S. works. We intend to see to it that all those responsible are held accountable for illegally enriching themselves by stealing the creative work of U.S. artists and creators."

"This outcome is the result of years of hard work by our office and our partners from the Criminal Division and the Federal Bureau of Investigation," said U.S. Attorney Dana J. Boente. "The Mega Conspiracy engaged in massive criminal infringement of copyrighted works on the Internet, and we are confident that this case will be a sign to those who would abuse technology for illegal profit."

"Today one conspirator who infringed upon the work of countless artists, actors and musicians takes responsibility for his actions," said Assistant Director in Charge McCabe. "We continue to pursue his co-conspirators until they face justice in the American legal system. This sentence and the remaining charges in this case are the direct result of the hard work of dedicated FBI Special Agents, intelligence analysts and prosecutors who have invested countless hours of effort to bring justice in this case."

Nomm agreed to waive his extradition hearing in the Netherlands, where he was arrested in January 2012, and plead guilty in the United States. In light of his role in the conspiracy and acceptance of responsibility, prosecutors agreed to recommend the sentence of a year and a day in federal prison.

Nomm was initially charged along with six other individuals and two privately-held corporations by a federal grand jury on Jan. 5, 2012, and a superseding indictment with additional charges was subsequently returned on Feb. 16, 2012. The superseding indictment charged the defendants with three separate conspiracies: conspiracy to commit racketeering, conspiracy to commit copyright infringement and conspiracy to commit money laundering. In addition, the defendants are charged with five counts of criminal copyright infringement and five counts of wire fraud. The indictment alleges that, for more than five years, the Mega Conspiracy operated websites that willfully reproduced and distributed infringing copies of copyrighted works, including works that had not been commercially released. The charges and allegations contained in an indictment are merely accusations and the remaining defendants are presumed innocent unless and until proven guilty.

In court papers, Nomm agreed that the harm caused to copyright holders by the Mega Conspiracy's criminal conduct exceeded $400 million. He further acknowledged that the group obtained at least $175 million in proceeds through their conduct. had claimed that, at one time, it accounted for four percent of total Internet traffic, having more than one billion total visits, 150 million registered users and 50 million daily visitors.

In a statement of facts filed with his plea agreement, Nomm admitted that he was a computer programmer who worked for the Mega Conspiracy from 2007 until his arrest in January 2012. Nomm further admitted that, through his work as a computer programmer, he was aware that copyright-infringing content was stored on the websites, including copyright-protected motion pictures and television programs, some of which contained the "FBI Anti-Piracy" warning. Nomm also admitted that he personally downloaded copyright-infringing files from the Mega websites. Despite his knowledge in this regard, Nomm continued to participate in the Mega Conspiracy.

An extradition hearing for co-defendants Kim Dotcom, Mathias Ortmann, Bram Van der Kolk and Finn Batato is currently scheduled for June 2015 in Auckland, New Zealand. Co-defendants Julius Bencko and Sven Echternach remain at large.

This case is being investigated by the FBI's Headquarters and Washington Field Office. The case is being prosecuted by Senior Counsel Ryan K. Dickey and Brian L. Levine of the Criminal Division's Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Jay V. Prabhu of the Eastern District of Virginia. The Criminal Division's Office of International Affairs also provided significant assistance.

February 16, 2015

Third Member of International Computer Hacking Ring Pleads Guilty to Hacking and Conspiracy to Steal Intellectual Property; Charges Against Indiana Defendant Pending

picture02162015.pngDelaware - A third member of an international computer hacking ring has pleaded guilty to conspiring to break into computer networks of prominent technology companies to steal more than $100 million in intellectual property and other proprietary data.

Nathan Leroux, 20, of Bowie, Maryland, pleaded guilty to conspiracy to commit computer intrusions and criminal copyright infringement based on his role in the cyber theft of software and data related to the Xbox One gaming console and Xbox Live online gaming system, and popular games such as the "FIFA" online soccer series; "Call of Duty: Modern Warfare 3;" and "Gears of War 3." Leroux has been in custody since attempting to flee into Canada from Buffalo, New York, on June 16, 2014. A sentencing hearing is set before U.S. District Judge Gregory M. Sleet of the District of Delaware on May 14, 2015.

Sanadodeh Nesheiwat, 28, of Washington, New Jersey, and David Pokora, 22, of Mississauga, Ontario, Canada, previously pleaded guilty to the same conspiracy charge on Sept. 30, 2014. They remain in custody pending their sentencing hearings, which are scheduled for April 2015. Pokora's guilty plea is believed to have been the first conviction of a foreign-based individual for hacking into U.S. businesses to steal trade secret information. Charges against a fourth defendant, Austin Alcala, 19, of McCordsville, Indiana, remain pending.

According to Leroux's admissions in connection with his guilty plea, he was part of the hacking conspiracy between January 2011 and September 2012. During that period, hacking group members located in the United States and abroad gained unauthorized access to computer networks of various companies, including Microsoft CorporationEpic Games Inc., Valve Corporation and Zombie Studios. The conspirators accessed and stole unreleased software, software source code, trade secrets, copyrighted and pre-release works, and other confidential and proprietary information. Members of the conspiracy also allegedly stole financial and other sensitive information relating to the companies - but not their customers - and certain employees of such companies.

Specifically, the data theft targeted software development networks containing source code, technical specifications and related information for Microsoft's then-unreleased Xbox One gaming console, as well as intellectual property and proprietary data related to Xbox Live and games developed for that online gaming system.

Leroux admitted in court that he and others used the stolen intellectual property to build, and attempt to sell, counterfeit versions of the Xbox One console before its public release in November 2013. In July 2013, the FBI intercepted a counterfeit console built by Leroux, which was destined for the Republic of Seychelles.

Leroux also admitted that he developed a software exploit that allowed him and others to generate millions of "coins" for the FIFA soccer games playable on the Xbox Live platform. These coins are the virtual, in-game currency used to build a "FIFA Ultimate Team" in the games. Without the authorization of Electronic Arts, the intellectual property rights holder to the FIFA games, Leroux and others sold bulk quantities of the "FIFA coins" via online black markets.

The value of the intellectual property and other data stolen by the hacking ring, as well as the costs associated with the victims' responses to the conduct, is estimated to range between $100 million and $200 million. To date, the United States has seized over $620,000 in cash and other proceeds related to the charged conduct.

This case was investigated by the FBI, with assistance from the Criminal Division's Office of International Affairs, the U.S. Department of Homeland Security's Homeland Security Investigations and Customs and Border Patrol, and the U.S. Postal Inspection Service. The investigation also has been coordinated with the Western Australia Police and the Peel Regional Police of Ontario, Canada.

The case is being prosecuted by Trial Attorney James Silver of the Criminal Division's Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Edward J. McAndrew of the District of Delaware.

Assistant Attorney General Leslie R. Caldwell of the Justice Department's Criminal Division, U.S. Attorney Charles M. Oberly III of the District of Delaware and Special Agent in Charge Stephen E. Vogt of the FBI's Baltimore Field Office made the announcement.

Continue reading "Third Member of International Computer Hacking Ring Pleads Guilty to Hacking and Conspiracy to Steal Intellectual Property; Charges Against Indiana Defendant Pending" »