Novell awarded $680,000 in software piracy suit

A judge ruled that a California man must pay software vendor Novell Inc. $680,000 as punishment for a scheme to profit from pirated software, the company said.

According to Novell, Khanh "Kenneth" Nguyen learned the piracy scheme from a former employer, whom Novell successfully sued for copyright infringement on its software in 1997.

The Provo, Utah-based company won the award against Nguyen of Santa Ana on Oct. 16, although the defendant had filed for bankruptcy protection. U.S. Bankruptcy Judge Robert W. Alberts ruled that Nguyen's "infringing acts were willful and malicious" and that he couldn't avoid the penalty, according to Novell.

Nguyen's lawyer, William Burd, also of Santa Ana, didn't respond to requests for comment.

Novell originally filed the lawsuit in U.S. District Court for the Central District of California in 1997 but refiled in bankruptcy court in 1999.

"The most important part is he can't avoid penalty through bankruptcy," said Nathan Gage, U.S. and Canada antipiracy manager at Novell.

In 1997, Novell got complaints from its authorized resellers that Nguyen's Keynet Corp. in Fountain Valley, Calif., was advertising Novell NetWare for less than what it cost authorized resellers to buy the software themselves, Gage said.

"We had another reseller call into Novell [that] was concerned that Mr. Nguyen's company was able to advertise such low pricing," Gage said.

According to Gage, Nguyen applied for and received 300 upgrades to NetWare licenses but used the same license number repeatedly and entered incorrect user information into the applications. The result was that he was able to buy the upgrades much more cheaply than the cost of the initial version of the software.

When Nguyen received the software, he used a heat gun to remove the upgrade labeling, then resold the software as new, with high margins but a relatively low cost to users, Novell said.

Around the same time Novell was getting complaints about Nguyen and Keynet from authorized resellers, the vendor won a case against another software pirate, Frank Vanderputt, and his company, Vandy Micro Corp. A Novell press release about the lawsuit said the court awarded Novell $4.3 million plus attorney's fees for "fraudulently obtaining upgraded Novell NetWare and IntranetWare and passing the upgrades along to unsuspecting customers as new product. Vanderputt also exported the illegal Novell upgrades into Europe."

Gage said he found out that Nguyen had worked for Vanderputt after Novell won the case against Vandy Micro.

"[Nguyen] ended up leaving Vandy Micro, and obviously he saw the kinds of margins Mr. Vanderputt was making," Gage said.

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