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 TWO FORMER MARYLAND RESIDENTS PLEAD GUILTY
TO SELLING COPYRIGHTED COMPUTER SOFTWARE ONLINE

March 16, 2001

GREENBELT, MD - Stephen M. Schenning, United States Attorney for the District of Maryland, Michael Mangano, Acting Inspector General, Department of Health and Human Services, Office of Inspector Genera (HHS-OIG), and James J. Rowan, Jr., Inspector in Charge of the Washington Metro Division, United States Postal Inspection Service, announced today that two former Maryland residents pleaded guilty to felony charges of willfully infringing copyrights by selling compact disks containing thousands of dollars of copyrighted computer software from Microsoft, Adobe and other copyright holders.

Jing Ping Xie, 36, a former National Institutes of Health (NIH) research scientist, and his wife, Shenglan Liu, 36, entered guilty pleas before United States District Judge Deborah K. Chasanow. Xie and Liu, formerly of Rockville, Maryland, now live in Cordova, Tennessee.

According to evidence presented at the guilty pleas, beginning in 1997, Xie, who worked at NIH beginning in 1996, and Liu maintained a number of electronic mail addresses and had access to the Internet through Xie’s NIH dial-up computer system. They maintained sites on the World Wide Web at "http://www.angelfire.com/md/HTCH," "http://i.am/wzcd," and "http://start.at/pcwarezcd." "Warez" is a term often used to describe "pirated," or illegally duplicated, copies of computer software. From November 1997 through June 1999, Xie and Liu:

• obtained the copyrighted software;
• used computer equipment to produce CD-ROM (Compact Disk Read-Only Memory) disks which contained unauthorized copies of copyrighted software;
• maintained Web sites which offered to sell the infringing CD-ROMs;
• instructed potential purchasers to pay for the infringing CD-ROMs by sending a payment to a specified address or post office box; and
• used electronic mail messages, including messages transmitted through Xie’s NIH computer account, to send potential purchasers instructions and confirmation notices relating to the purchase of the infringing CD-ROMs.
  
  "Intellectual property is the lifeblood of Maryland’s high-tech economy and must be protected by law enforcement," Schenning said. "People who steal, copy and resell valuable intellectual property commit the modern equivalent of stealing and fencing a truckload of records or appliances. We will use all appropriate investigative tools to locate and prosecute people committing these crimes."
  
  In the electronic mail messages the defendants sent to potential purchasers of the infringing CD-ROMs, Xie and Liu instructed potential purchasers to state in writing, "I swear I am not a law enforcement officer, I can not use the coming CD(s), by any means, against the CD maker," and further instructed potential purchasers, "[f]or both our protection," not to send personal checks. As a result of these solicitations, defendants received payments from customers and sent the infringing CD-ROMs to customers via the U.S. mails. Defendants retrieved items of mail from post office boxes, including cash and money orders from customers; used computer equipment to create some of the infringing CD-ROMs; and deposited funds sent by customers into bank accounts.
  
  Xie and Liu admitted to numerous sales of CDs containing copyrighted software, some of which were purchased by undercover law enforcement officers and investigators for software companies. For example, on November7, 1997, defendants offered the infringing CD-ROMs for sale at Web site http://www.angelfire.com/md/HTCH. After receiving an order, the defendants, using Xie’s NIH computer account, sent an electronic mail message from "pcwarezcd@hotmail.com" acknowledging the order and directing that payment be sent to Liu. Xie and Liu negotiated a $25 postal money order received from the purchaser and mailed an infringing CD-ROM which contained illegal copies of copyrighted software programs including: Adobe Acrobat and Pagemaker; Microsoft Office 97 Pro and Visual Basic5; and Symantec Norton Utilities. On October22, 1998, after receiving an order, the defendants, again using Xie’s NIH computer account, sent an electronic mail message from "pcwarezcd@hotmail.com" acknowledging the order and directing that payment be sent to Liu. They negotiated a $40 postal money order from the purchaser and mailed an infringing CD-ROM which contained illegal copies of copyrighted software programs including: Microsoft Windows 98, Office Pro 97and Money 99; Adobe Pagemaker; and Autodesk Auto CAD Mechanical Desktop. They admitted to additional sales throughout early 1999 of CD’s containing Adobe, Macromedia, Microsoft, Lotus, Symantec Norton, Corel and Bentley software. Some of the illegally copied programs were sophisticated engineering and architectural design programs with a retail value of more than $4,000.
  
  On June 2, 1999, law enforcement agents from the Department of Health and Human Services, Office of Inspector General, United States Postal Inspection Service and Montgomery County Police executed a search warrant at Xie and Liu’s apartment in Rockville. They located three computers and CD duplicating equipment. The computer monitor screen in the living room contained a message indicating that the duplication of a CD had just been completed. The computers in the apartment contained 2,903 computer programs, including all of the programs found on the illegal CDs described above. There were more than 300 recordable CDs containing computer software, many of them in CD cases with printed decorative covers bearing the title "Xie’s Collection." The agents also located 165 blank recordable CDs, and more than $7,000 in cash and money orders.
  
  Xie and Liu admitted that they acted for private financial gain. An analysis of defendants’ bank records indicated that between December 1997 and May 1999, deposits exceeded Xie’s salary – the only known legitimate source of income – by more than $47,000. The principal source of these deposits was the sale of CD’s containing illegally copied copyrighted software.
  
  The government’s investigation was conducted as part of the Justice Department’s nationwide Intellectual Property Initiative, announced in July 1999. The goal of the initiative is to increase the quality and quantity of intellectual property crime prosecutions nationwide.
  
  Schenning thanked the software industry group, the Business Software Alliance of Washington, D.C., for its assistance in identifying the location of the defendants and in identifying and valuing the copyrighted programs sold by the defendants. The case was prosecuted by Assistant United States Attorney Stuart A. Berman and Michael O’Leary, Trial Attorney, U.S. Department of Justice, Computer Crime and Intellectual Property Section.
  
  Evidence presented at the guilty pleas showed that Xie had four university degrees, including a Ph.D. in molecular biology from Vanderbilt University. He was proficient in three computer languages and had a working knowledge of at least four others; was familiar with DOS, Windows, UNIX and Apple computer operating systems; knew how to operate many different software programs; and had written computer files, managed computer networks, and designed personal and professional Web pages, including the Web pages described below. Liu had an M.D. degree from a university in China and knew how to operate a personal computer but had worked as a restaurant employee and office assistant since coming to the United States.
  
  Judge Chasanow scheduled sentencing for July 20, 2001 at 3:00 pm. Xie and Liu face a maximum penalty of five years in prison and a $250,000 fine. Restitution is mandatory. The Court will determine the appropriate sentence to be imposed under the United States Sentencing Guidelines.
  

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• More information on:  Protecting Intellectual Property Rights
• More information on:  Intellectual Property Crime Cases

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