Legal Question in Intellectual Property in California

Good afternoon - This is an excellent question, and I hope that I can help you out. In the technical legal sense, a party can attempt to establish that another party knew or should have known about the fraudulent nature of an item simply by virtue of the item being in that party's possession or control. In any event, it's always a good idea to document whatever proof one has in support of his innocence where it's suspected that innocence might be challenged.

That said, you might consider the odds of a large company like Microsoft pursuing action against someone who 1) doesn't appear to have knowingly purchased or used fraudulent software, and 2) assists the company in finding those who did. Of course, this cannot be estimated for certain. If you wish to tip Microsoft as to the fraudulent software code without drawing attention to yourself, you can always attempt to do so anonymously. Depending on what electronic information is linked to the code that might not be possible, but it's something to consider if you are intent on informing Microsoft.

You might be called an "innocent infringer" under Copyright law, but an infringer nonetheless. The penalties are much lower, but there are still penalties. The person who knowingly distributed a stolen operating system would be a "willful infringer" and the penalties are much higher. The statutory damages are $200 for an innocent infringement and $150,000 for each willful infringement (that means each copy the guy made). That's if there are no actual damages, or if the actual damages are lower than the statutes provide. As you can see, it's not a good idea to go around stealing other people's copyrighted work.

To give you a bit of insight into litigation: lawsuits are very expensive to bring, so one of the first things lawyers do before they prepare a lawsuit is determine whether the person their client wants to sue actually has any money. If not, they advise the client not to throw more money after it. Some very wealthy clients who want to set an example will sometimes go ahead and get a judgment they know they can't collect just to discourage other people from doing the same thing.