Guilty Plea in Microsoft Code-Theft Case Seen as Important

The guilty plea, by a man who reportedly sold portions Microsoft's source code, is being viewed by analysts as a win in the fight against piracy.

A guilty plea in federal court in New York City by a Connecticut man who sold Microsoft source code over the Internet is being viewed as an important win in the fight against digital piracy, analysts tell Ziff Davis Internet.

According to a statement from the U.S. Attorney for the Southern District of New York, a 28-year-old man, William P. Genovese Jr., 28, of Meriden, Conn., entered his plea Monday in a Manhattan federal court to charges that he illegally sold and attempted to sell portions of Microsofts source code for Windows 2000 NT and Windows NT 4.0.

Lawyer Daniel E. Venglarik, of the Dallas-based law firm of Davis Munck, told Ziff Davis Internet that the stakes are higher—much higher—in this case than the typical software piracy case Microsoft has dealt with over the years.

"This was source code, not the typical bootleg copy of the executables," Venglarik said. "So the value to Microsoft is not just the sale price of a copy of Windows, but the value of any trade secrets—which means a completely different number of zeros somewhere after the dollar sign."

That means this case is important and may set precedent in IT criminal cases, said Tim Powers, an attorney, based in Denton, Texas.

Another issue for Microsoft is that security could be compromised by leaked source code making it "much easier to detect weaknesses or to design hacks if youve got the source," said Venglarik.

"This has happened to other technology companies in the past. The source for the copy protection used on DVDs was compromised in the late 1990s, and the DVD Copy Control Association is still trying to stuff that genie back in the bottle," said Venglarik.

According to government prosecutors, Genovese first found the source code last February, after another hacker stole the code and distributed it over the Internet without Microsofts authorization.

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The defendant, who was known by the alias of "illwill" and "," posted the code to his own Internet site and offered it for sale.

An undercover FBI agent and Microsoft investigators were able to download the stolen code and send a payment to Genovese last year.

Genovese, who was charged with one count of unlawfully distributing a trade secret, is expected to be sentenced this fall.

The U.S. criminal code allows a maximum sentence of up to 10 years in federal prison and a fine of up to $250,000 for this type of crime, but the prosecutors are apparently seeking a lighter sentence.

There may be civil litigation now that the criminal matter is settled.

"Plaintiffs lawyers are hungry and always looking for fresh meat. And Microsoft wouldnt want their source code out there because of potential liability for any bad code," said Venglarik, pointing to the $1 billion settlement by Toshiba for its apparently problematic floppy disk drives in 1999.

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