RealTime IT News

Feds Bust Massive Piracy Scheme

A federal grand jury indicted three San Francisco-area men Wednesday for their involvement in what the music industry calls the largest illegal CD manufacturing seizure in the United States.

The indictments follow the arrests of five individuals and searches of 13 locations in California and Texas on Oct. 6 as part of the Department of Justice's (DoJ) "Operation Remaster." The campaign targeted the large-scale suppliers of pirated copyrighted music, software and movies.

Operation Remaster primarily focused on replicators, the companies or individuals who use sophisticated machinery to create hundreds of thousands of copies of copyrighted works that are then distributed around the country.

Ye Teng Wen (a.k.a. Michael Wen, 29) of Union City, Hao He (a.k.a. Kevin He, 30) of Union City, and Yaobin Zhai (a.k.a. Ben Zhai, 33) of Fremont were charged in two separate indictments with conspiracy to commit criminal copyright infringement and traffic in counterfeit labels, criminal copyright infringement, trafficking in counterfeit labels and aiding and abetting counterfeiting.

Wen and He were charged in a 10-count indictment. Zhai was charged separately in a seven-count indictment.

Zhai was released Wednesday on a $150,000 secured bond. Wen and He were released on Oct. 6 on $75,000 secured bonds. Their next court appearance is set for Oct. 27.

"These individuals are charged with affixing counterfeit labels on CDs to create the appearance of legitimacy, including the FBI Anti-Piracy Warning that stated 'Unauthorized copying is punishable under federal law,'" U.S. Attorney Kevin V. Ryan said in a statement.

According to court filings, music and software piracy conspiracies usually involve geographically separate businesses that secretly handle different stages of the process of pirating intellectual property. The chain involves brokers, replicators, assemblers, packagers, printers, distributors and retailers.

Brokers solicit the orders, while replicators have the equipment to manufacture hundreds of thousands of CDs. Printers and packagers make the infringed work appear legitimate by assembling the CD case, booklet and artwork into a completed CD/DVD package that closely resembles the copyrighted work.

According to DoJ affidavits, Wen and He have been involved in large-scale replication of pirated music and software, including songs by numerous Latin artists, as well as anti-virus software manufactured by Symantec.

Similarly, Zhai has been involved in large-scale replication of pirated Latin music. All the counterfeited works at issue are copyrighted in the United States.

Replicators use machines to reproduce the CDs. The Recording Industry Association of America (RIAA) estimated one stamping machine has an approximate value of $25,000.

Wen, He and Zhai are charged with using more than 2,000 stampers with an estimated potential replicating value of millions of dollars.

"The allegations of massive piracy of music and software reflect the potential loss of millions of dollars to the artists and businesses who legitimately own the copyrights on these works," Ryan said. "We will continue in our work to protect intellectual property rights and prosecute those who pirate music, software and movies for their own enrichment."