Three Defendants Used Expensive Replication Equipment and Fake FBI Anti-Piracy Labels As Part Of a Massive Copyright and Trademark Infringement Scheme To Manufacture Pirated and Counterfeit Software and Music CDs and DVDs for Retail Distribution Around The Country.

Agents Seized Nearly 500,000 CDs and 6,135 Stampers Capable Of Producing More Than 300 Million Pirated and Counterfeit CDs and DVDs

SAN JOSE ? United States Attorney Scott N. Schools announced that the final two of three defendants engaged in large-scale replication of pirated and counterfeit CDs and DVDs were sentenced today in Operation Remaster. United States District Court Judge Ronald M. Whyte sentenced co-defendants Ye Teng Wen, a.k.a. Michael Wen, 31, and Hao He, a.k.a. Kevin He, 32, both of Union City, California, each to 37 months of prison, a three-year term of supervised release, a $125,000 fine, and a $500 mandatory special assessment.

Following an extensive undercover investigation, on October 6, 2005, the FBI and the Rapid Enforcement Allied Computer Team (REACT) Task Force, in the undercover investigation called Operation Remaster, executed federal search warrants at thirteen locations in California and Texas, including the offices of Media Art Technology, Inc., in Hayward and Union City, California, and Magic Media Inc., BDG Publishing Inc., and a storage unit rented in Hayward, California. From the three replicators, agents seized approximately 494,000 pirated music, software, and movie CDs, and DVDs, and more than 6,135 stampers. Stampers and masters are used to manufacture CDs and DVDs.

The copyright and trademark violations involved Adobe Photoshop CS, Norton anti-virus software (including pcAnywhere 11.5, Norton Internet Security 2005, Norton AntiVirus 2005, and Norton System Works 2003), and music titles from numerous artists primarily in the Spanish language. Investigators learned that the infringed titles were sold in retail outlets in the San Francisco Bay Area; Los Angeles, California; Chicago, Illinois; and other locations. In court proceedings, the defendants each admitted using counterfeit labels with the FBI Anti-Piracy Seal on pirated music so the illegal product could be sold to consumers who would be less likely to question its authenticity. They also admitted infringing trademarks to make the CDs appear legitimate to customers.

Replicators are the leaders and directors of piracy and counterfeiting schemes, and often use sophisticated replication machinery for the mass reproduction of copyrighted works that are then distributed around the country through retail networks. Using equipment costing hundreds of thousands of dollars ? often including silk screening machines to place artwork on the CDs or DVDs ? replicators can quickly manufacture tens or hundreds of thousands of counterfeit CDs or DVDs. For example, a replicator using a "stamper" can potentially manufacture 50,000 to 80,000 counterfeit CDs or DVDs with each stamper, effectively flooding the market with copies of the infringed work. In this case, the more than 6,100 seized stampers were capable of reproducing more than 300 million infringed copies of pirated works, using modest estimates.

On June 4, 2007, U.S. District Judge James Ware sentenced the first replicator defendant, Yaobin Zhai, a/k/a Ben Zhai, 34, of Fremont, California, to 37 months in prison, a three-year term of supervised release, a $500 mandatory special assessment, and ordered him to pay $6.9 million in restitution. Zhai, who pled guilty on May 22, 2006, was the principal owner of Magic Media, Inc. and BDG Publishing, Inc., both located in Hayward, California.

United States Attorney Scott N. Schools thanked the REACT Task Force and the FBI for their work on the extensive investigation and operation. He added, "This case demonstrates the continuing resolve of our CHIP Unit to vigorously enforce our intellectual property laws."

According to Brad Buckles, Executive Vice President, Anti-Piracy, Recording Industry Association of America (RIAA), "These indictments reflect the historic nature of this particular piracy operation. This case was the largest ever manufacturing case in U.S. history, involving massive quantities of commercially duplicated counterfeits that closely resemble authentic CDs. The level of sophistication and scale involved was unprecedented. It is precisely this kind of illegal product that has the greatest potential for deceiving the consumer and displacing legitimate sales. The illegal profits generated by this highly sophisticated operation comes at the expense of the artists, songwriters, retailers, record labels and many others whose creative energies make music possible. We congratulate the U.S. Attorney?s Office and all numerous agents and officers who have worked this case along."

Adobe System, Inc. thanked the law enforcement officials and special agents that were part of the REACT task force on a successful conviction. Suresh Balasubramanian, Director of Worldwide Anti-Piracy, Adobe Systems Incorporated noted, "Software piracy is a serious problem to legitimate users of software and companies like Adobe and the technology industry as a whole, given that our business is based on intellectual property and copyright protection. Through successful convictions like this, the U.S. Department of Justice continues to demonstrate its commitment to combating piracy and protecting innovation."

"It cannot be understated how significant it has been for law enforcement agencies such as the FBI and the Rapid Enforcement Allied Computer Team (REACT) Task Force and the U.S. Attorney's Office to devote the resources, time, and manpower to bring this case to full closure," said Scott Minden, director, Symantec Legal department. "This case cuts across several industries, including movies, music and software. An untold number of consumers have been protected from being ripped off by these pirates, and we congratulate the FBI and the U.S. Attorney's office for the service they have rendered to the public at large."

The three defendants were each convicted of the following five counts:

1. Conspiracy to Commit Criminal Copyright Infringement and to Traffic in Counterfeit Goods and Labels, in violation of 18 U.S.C. ' 371;
2. Criminal Copyright Infringement and Aiding and Abetting, in violation of 17 U.S.C. ' 506(a)(1)(A), and 18 U.S.C. '' 2319(b)(1) and 2;
3. Trafficking in Counterfeit Labels and Aiding and Abetting, in violation of 18 U.S.C. '' 2318(a), 2318(c)(3), and 2;
4. Trafficking in Counterfeit Goods and Aiding and Abetting, in violation of 18 U.S.C. '' 2320(a) and 2; and
5. Counterfeiting a Department Seal (the FBI anti-piracy seal used on pirated music CDs), in violation of 18 U.S.C. ' 506(a)(1).

The three defendants also agreed to forfeit their manufacturing equipment and tools, including (among other things) counterfeit CDs and DVDs, stampers, masters, inserts, replication machines, silk screening machines, printers, copiers, labelers, shrink wrappers, forklifts, overwrapping machines, and shrink wrapping machines.

Anyone with information about illegal piracy can contact the local FBI office at (415) 553-7400, or REACT at (408) 558-1198 and www.reacttf.org/crime_form.html.

Mark L. Krotoski and Matthew A. Lamberti are the Assistant United States Attorneys from the CHIP Unit in the Northern District of California who prosecuted these cases. The operation is the result of a joint investigation led by the Rapid Enforcement Allied Computer Team High Tech Crimes Task Force (REACT) in San Jose, and the Federal Bureau of Investigation. The Recording Industry Association of American, Symantec Corporation, Adobe Systems, Inc., and the Motion Picture Association of America have also assisted in this investigation.