U.S. Department of Justice - CyberCrime.gov Archived

Copyright Cases - U.S. v. Peterson (E.D. Va.)

September 8, 2006

(202) 514-2007
TDD (202) 514-1888

For-Profit Software Piracy Website Operator Sentenced to 87 Months in Prison

Defendant Made More Than $5.4 Million in Illegal Revenue

WASHINGTON - The owner of a massive for-profit software piracy Web site was sentenced today in federal court to 87 months in prison, Assistant Attorney General Alice S. Fisher of the Criminal Division and U.S. Attorney Chuck Rosenberg of the Eastern District of Virginia announced.

Nathan L. Peterson, 27, of Antelope Acres, Calif. was also ordered by Judge T.S. Ellis, III of the Eastern District of Virginia to forfeit the proceeds of his illegal conduct and pay restitution of more than $5.4 million. The forfeiture involves a wide array of assets, including homes, numerous cars, and a boat, which Peterson had purchased with the profits from his illegal enterprise. Today’s sentence is the second recent major prison sentence received for software piracy. In August 2006, Danny Ferrer, 37, the operator of www.BuysUSA.com, received a six- year prison sentence.

Peterson is believed to be the most prolific online commercial distributor of pirated software ever convicted in the United States, the Department said.

"This defendant lined his pockets by stealing the hard work of others," said Fisher. "Today’s sentence sends a clear message that those who sell pirated software will be convicted and punished."

Beginning in 2003, and continuing until its shutdown by the Federal Bureau of Investigation (FBI) in February 2005, Peterson operated the www.ibackups.net website which sold copies of software products that were copyrighted by companies such as Adobe Systems, Inc., Macromedia Inc., Microsoft Corporation, Sonic Solutions, and Symantec Corporation at prices substantially below the suggested retail price. The software products purchased on Peterson’s website were reproduced and distributed either by instantaneous computer download of an electronic copy and/or by shipment through the mail on CDs. Peterson often included a serial number that allowed the purchaser to activate and use the product.

"Stealing the intellectual property of others is always a bad idea in any context. It’s theft. And, so, a sentence of seven plus years in prison and restitution of $5.4 million is richly deserved," said Rosenberg.

The investigation was conducted by agents of the FBI’s Washington Field Office. After receiving complaints from copyright holders about Peterson’s website, an undercover FBI agent made a number of purchases of business and utility software from the site, which were delivered over the Internet and by mail to addresses in northern Virginia.

As a result of the FBI’s investigation, Peterson’s website was taken down in February 2005. Further investigation established that, during the time of its operation, www.ibackups.net illegally sold more than $5.4 million of copyrighted software. These sales resulted in losses to the owners of the underlying copyrighted products of nearly $20 million.

Peterson used the proceeds of his illegal conduct to fund an extravagant lifestyle, including the purchases of multiple homes, cars, and a boat. The government seized numerous assets from Peterson including: a number of bank and trading accounts, a fully restored 1949 Mercury Coupe purchased originally for $44,000, a 2005 Dodge Ram, a 2003 Chevrolet Corvette, a 2004 Toyota Camry, a 2005 Toyota Corolla, and a 2006 Mercedes-Benz S-Class purchased for $125,000.

Peterson pleaded guilty before Judge Ellis on Dec. 13, 2005, to two counts of criminal copyright infringement for selling pirated software. While awaiting sentencing in this case, Peterson was arrested, convicted, and sentenced in California on state gun charges resulting from an investigation by the Los Angeles Police Department. He was sentenced on June 1, 2006, to 16 months of incarceration on those charges. Federal prosecutors then sought his return to the Eastern District of Virginia for sentencing on the federal charges.

Trial Attorneys Jay V. Prabhu and Lily Chinn of the Criminal Division’s Computer Crime and Intellectual Property Section, and Assistant U.S. Attorney Stephanie B. Hammerstrom for the Eastern District of Virginia, prosecuted the case. The Business Software Alliance, a trade association which represents leading computer software companies, provided significant assistance to the investigation.


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