For Microsoft, Eric Lundgren prison sentence becomes PR nightmare
In the wake of the first iPhone, personal devices became sleeker, slimmer, and more powerful.
They also became more difficult to repair, as companies locked them down with glue and proprietary screws. And so, instead of getting their stuff fixed, people got used to buying new devices and throwing old ones away. As the piles of e-waste grew, the "right to repair" movement was born.
SEE ALSO:3 reasons why Microsoft's more valuable than GoogleRight-to-repair activists want legislation to remove the manufacturing and legal barriers that make it harder for consumers to fix their stuff. It's an environmental movement, too. When people buy used devices and keep those devices working longer, fewer natural resources are needed for manufacturing and less e-waste ends up in landfills.
And while Apple is often the focus of the movement's attention, another tech giant is enduring a torrent of criticism over the same issue. That company is Microsoft.
Mountains of junk
"Right to repair is the idea that we should be able to fix everything that we own," said Kyle Wiens, CEO of iFixit. His company takes apart devices, provides guides on how to repair them, and sells necessary equipment. It also supports "right to repair" legislation around the U.S via iFixit.org.
"Right to repair is the idea that we should be able to fix everything that we own"
"If I buy a gizmo, it should come with repair information and I should be able to get parts to repair it when it breaks," he said.
Broken devices are a mounting problem. Human beings produced 44.7 million metric tons of e-waste in 2016 alone, according to the latest UN Global E-Waste Monitor report; only 20 percent of it was recycled. Discarded gadgets can leak mercury, cadmium, arsenic, and other toxins into the environment.
Mining the materials needed to build new gadgets can be harmful, too. In Congo, to feed the worldwide demand for lithium-ion batteries, child laborers often work in dangerous cobalt mines, which also expose neighboring communities to toxic metals.
On its website, Microsoft says it's "enabling a sustainable future" with a plan to reduce its carbon emissions by 75 percent by 2030 and build a "Net-Zero Water" campus in parched Silicon Valley. It also said it recycled more than 26 million pounds of e-waste in 2016.
But Microsoft also wants to sell more devices, like its Surface Laptop, the first laptop to get a zero repairability score from iFixit. The site called it a "glue-filled monstrosity" that "literally can’t be opened without destroying it.
And the FTC recently issued an official warning to Microsoft over the Xbox's warranty language, which right-to-repair advocates worry could dissuade people from fixing their consoles. (The FTC also hit rival companies, like Nintendo and Sony.)
The Surface Laptop is just the most extreme example of tech companies making DIY repairs difficult. Microsoft, Apple, and other companies don't release instructions on how to fix their devices. That's why iFixit and other independent repair shops literally tear tablets, phones, consoles, and computers apart.
Discarded monitors lie stacked on the roadside in Seelampur in New Delhi, home to the biggest e-waste market in India.Credit: Shams Qari / Barcroft Images / Barcroft Media via Getty ImagesEarlier this year in its home state of Washington, Microsoft, along with Apple, Verizon, Comcast, and other companies, fought a bill that would force manufacturers to make parts and device schematics available to third parties. It would also ban devices with difficult-to-replace batteries -- a major source of frustration for customers with slowing phones. Similar laws have been floated in various locations over the years, without much success.
Why oppose the legislation?
"Our root concern is that this bill will weaken basic rights that consumers have to security and privacy, as well as endangering intellectual property rights," said Dan Hewitt, vice president of media relations for the Entertainment Software Association (ESA), which defends the interests of Microsoft, Nintendo, Sony Interactive Entertainment, and other tech companies, in an email.
He said independent repair shops could "take risks or cut corners" when repairing consoles. Hewitt also said "sharing sensitive diagnostic tools and proprietary hardware data" could make it easier for hackers to break into devices.
Hewitt also said the ESA is worried that digital rights management (DRM) technologies could be compromised to allow software piracy. And that's a huge sticking point for companies like Microsoft — so huge, in fact, that Eric Lundgren is spending 15 months in jail.
An e-waste recycler goes to jail
Lundgren, 33, built a company, IT Asset Partners, which claims to recycle around 41 million pounds of e-waste each year from major corporations such as IBM and Sprint. That made him a major voice in the right to repair movement.
Of course, a recycled computer is no good without an operating system. Lundgren said he paid for thousands of Windows restore discs in China to extend the lives of used laptops. Essentially, he believed he was keeping hardware out of landfills by selling the tools needed to restore their software. He reasoned they were legal because they contained free software that's available online.
When you pay for an operating system like Windows, you're really purchasing permission to use it. Say you get a Lenovo PC at Best Buy: You're also buying the license to access the version of Windows installed on that computer. That license is good for the life of the device, no matter how many times it changes hands.
Microsoft accused Lundgren of profiting from an "elaborate counterfeit supply chain."
It's the license that matters -- not the software itself, which can be reinstalled if it gets slow or buggy.
Instead of trashing an old computer when it starts to lag, a consumer can pop in a restore disc to reinstall Windows and see if that helps. Maybe it doesn't, and they throw the thing away. But it could fix the problem and keep the computer from being trashed.
Those restore discs are the ones Lundgren paid to have made while living in Shenzhen, the epicenter of Chinese manufacturing. He was there to observe the e-waste stream and supply parts such as laptop batteries and hard drives to refurbishers, who take old computers, fix them, and resell them.
While in China, a broker named Bob Wolff from Florida told Lundgren a client was interested in 28,000 restore discs containing Windows 7 and Windows XP for Dell laptops. That might seem like a lot, but Dell sells tens of millions of PCs every year.
Fixing stuff.Credit: Stephen Brashear /Getty ImagesAgain, while you have to pay for a license key to activate it, the software on the discs is free. Anyone can download it, burn it onto a CD, and install it on their own computer. But that's kind of a pain, especially for a user who's not tech-savvy. It's easier to simply enter a CD that's been set up for you.
Lundgren said he was going to charge about 25 cents apiece for his restore discs to cover manufacturing and shipping. After Lundgren made them, however, the client decided instead to create their own discs. With the deal busted, Wolff ultimately offered him $3,400 for the whole shebang, a little more than 12 cents a CD.
Then, everything blew up. In 2012 U.S. Customs and Border Protection intercepted a shipment of the discs. Microsoft accused Lundgren of profiting from an "elaborate counterfeit supply chain."
Later, faced with a long list of charges, he pled guilty to conspiracy to traffic in counterfeit goods and criminal copyright infringement. He didn't think he did anything wrong, but facing 21 indictments, and the fact that he believed the discs to be worth basically nothing, he figured it was the right move.
Unfortunately for him, the court decided the CDs were worth $700,000.
Microsoft's lawyers said those discs "displaced Microsoft's potential sales" of Windows XP and Windows 7 through its Registered Refurbisher Program (RRP).
Now, here's the thing: Signing up for the RRP is completely optional. There's no legal requirement to join or pay Microsoft in order to sell refurbished PCs. If refurbishers join, they get perks like the ability to upgrade their machines with a newer version of Windows at a discounted rate, in this case $20 to $40 a computer.
So, while the software was free to download, theoretically refurbishers could have joined the RRP and paid Microsoft.
"In court, they didn't understand the difference between a brand-new licensed Microsoft operating system, and a Dell restore CD [that is] free online because the only way it can be used is with a valid Microsoft license," Lundgren said.
"That sealed the deal as far as where I was going. That's the reason I'm going to prison."
"When Microsoft came up and testified, they misrepresented the functionality and value of a free Dell restore CD," he said. "That sealed the deal as far as where I was going. That's the reason I'm going to prison."
Mashable reached out to Microsoft, but the company would not comment on the Eric Lundgren case.
Microsoft did, however, publish a lengthy blog post titled, "The facts about a recent counterfeiting case brought by the U.S. government" after the case made headlines. It accused him of trying to "scam the very community he claimed to champion."
The company also tried to battle the perception it was bad for refurbishers.
"We fully support refurbishing and recycling of computers and have robust programs to support this," wrote Frank X. Shaw, Microsoft's corporate vice president of communications. "Altogether these programs have more than 3,000 members, recycling millions of PCs."
Microsoft told Mashable that members of its refurbisher programs had refurbished more than 3 million PCs in the last 12 months.
In its blog post, Microsoft also highlighted incriminating emails from Lundgren provided to the prosecution by Wolff. An expert witness for the defense said they showed signs of being tampered with, and Lundgren claims Wolff changed them to take the heat off himself.
That’s where the details of the case get tricky. How Lundgren made the discs might have been illegal. He definitely didn’t do things by the book. But push the most dramatic elements of the case aside and you're left with the simple fact that a man was arrested for distributing freely available software that's used to extend the life of old computers.
Lundgren believes all of this is in service of Microsoft bullying refurbishers into paying for software they don't need. The threat of legal action could also dissuade people from making Windows restore discs.
That could make older computers less attractive to sellers. Why rescue ancient machinery when obtaining the software to keep it running could get you in trouble? And that could lead to more computers in landfills.
One thing Microsoft and Lundgren do agree on: it was wrong for him to put a Dell logo on the discs, which he said he did to make the discs' purpose less confusing to consumers.
"What I’m guilty of is printing a logo on a worthless piece of plastic," Lundgren said. "But that’s a civil issue," he said, and worth a fine, not jail time.
It's too late now. Lundgren lost his appeal in April.
He's not happy about going to jail. But he said he hopes the publicity garnered by the case helps send a message to Microsoft and other tech companies: "We're not going to stand for this anymore. If you're going to promote wasteful practices that are harmful to society, we're going to stop you."
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