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DoJ Media Release: Sklyarov & Elcomsoft Charged

August 28, 2001

DoJ Media Release: Sklyarov & Elcomsoft Charged

The United States Attorney's Office for the Northern District of California announced that Elcom Ltd. (also known as Elcomsoft Co. Ltd.) and Dmitry Sklyarov, 27, both of Moscow, Russia, were indicted today by a federal grand jury in San Jose, California on five counts of copyright violations.

The defendants were each indicted on one count of conspiracy to traffic in technology primarily designed to circumvent, and marketed for use in circumventing, technology that protects a right of a copyright owner, in violation of Title 18, United States Code, Section 371; two counts of trafficking in technology primarily designed to circumvent technology that protects a right of a copyright owner, in violation of Title 17, United States Code, Section 1201(b)(1)(A); and two counts of trafficking in technology marketed for use in circumventing technology that protects a right of a copyright owner, in violation of Title 17, United States Code, Section 1201(b)(1)(C).

This is the first indictment under the Digital Millennium Copyright Act ("DMCA"), enacted by Congress in 1998. The DMCA requires that the government prove a defendant offered to the public, provided, or trafficked in technology that was primarily designed to circumvent copyright protections, or was marketed for use in circumventing copyright protections. The statute provides criminal penalties where the copyright violations are perpetrated for purposes of commercial advantage or private financial gain. The DMCA also contains certain exemptions for nonprofit libraries, archives, and educational institutions, as well as for reverse engineering and encryption research.

According to the indictment, Elcom and Mr. Sklyarov are alleged to have conspired, for commercial advantage and private financial gain, to traffic in a technology that was primarily designed and produced for the purpose of circumventing, and was marketed by the defendants for use in circumventing, the Adobe Acrobat eBook Reader. The indictment alleges that prior to June 20, 2001, Mr. Sklyarov and others wrote a program called the Advanced eBook Processor ("AEBPR"), the primary purpose of which was to remove any and all limitations on an ebook purchaser's ability to copy, distribute, print, have the text read audibly by the computer, or any other limitation imposed by the publisher or distributor of the ebook.

The indictment alleges that Elcom made the AEBPR program available for purchase on the website elcomsoft.com which was hosted in Chicago, Illinois. According to the indictment, individuals wishing to purchase the AEBPR program were permitted to download a partially functional copy of the program from elcomsoft.com, and then were directed to pay approximately $99 to an online payment service RegNow, based in Issaquah, Washington. Upon making a payment via the RegNow website, Elcom provided purchasers a registration number permitting full-use of the AEBPR program.

The indictment states that Adobe Systems Inc. distributes the Adobe Acrobat eBook Reader for the reading of electronic books on personal computers. Consumers wishing to purchase ebooks formatted for the Adobe Acrobat eBook Reader can download a free copy of the eBook Reader to their personal computer and then purchase the ebook from an online retailer. Upon purchasing the ebook from the online retailer, a series of electronic communications between and among the computers of the online retailer - including, typically, an Adobe-supplied server - and the consumer's computer authorized the ebook to be read on the computer from which the purchase was made.

It is further alleged that when an eBook purchased for viewing in the Adobe eBook Reader format is sold by the publisher or distributor, the publisher or distributor of the ebook can authorize or limit the purchaser's ability to copy, distribute, print, or have the text read audibly by the computer. The eBook Reader permits the management of such digital rights so that in the ordinary course of its operation, the eBook Reader effectively permits the publisher or distributor of the ebook to restrict or limit the exercise of certain copyright rights of the owners of the copyrights for books distributed in the eBook Reader format.

The maximum statutory penalties for each count in violation of Title 17, United States Code, Sections 1201(b)(1)(A) and 1201(b)(1)(C) are five years imprisonment for an individual and a fine of $500,000 for an individual or corportation. The maximum penalties for a violation of Title 18, United States Code, Section 371, are five years imprisonment and a fine of $250,000 for an individual, and a fine of $500,000 for a corporation. However, any sentence following conviction would be dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and would be imposed in the discretion of the Court. An indictment simply contains allegations against an individual or corporation and, as with all defendants, Elcom and Mr. Sklyarov must be presumed innocent unless and until convicted.

Mr. Sklyarov made his initial appearance in federal court in San Jose on August 6, 2001. He was released on bail based on an agreement between the United States and the defendant. The corporation has not yet made an initial appearance in federal court. The next scheduled appearance is at 9:30 a.m. on August 30, 2001 for arraignment for both defendants before Judge Seeborg.

The prosecution is the result of an investigation by the Federal Bureau of Investigation. Scott Frewing and Joseph Sullivan of the Computer Hacking and Intellectual Property ("CHIP") Unit are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of legal technician Lauri Gomez.

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