Pirates at the Dock

Sony, Electronic Arts sue, alleging Bay Area residents were part of international video game piracy ring

Two of the video gaming industry's biggest players are shining lights into the murky corners of international video piracy through a joint San Francisco lawsuit against alleged members of "Paradigm," a sophisticated ring of Internet pirates who stole the latest games and posted them to the Web.

Filed by Electronic Arts Inc., the industry's largest entertainment software publisher, and PlayStation licensor Sony Computer Entertainment America Inc., the lawsuit -- which has barely raised eyebrows outside the trade press -- alleges Bay Area residents Ensell Y. Lee and Michael S. Lewis used subterfuge to obtain pre-release copies of new video games, and then released them on the Web.

The case apparently is the first to target a group of alleged pirates working in concert. Normally, it is the less-than-razor-sharp lone wolf -- New Yorker Liam McLaughlin, for instance, who advertised pirated PlayStation games on his Web site -- who gets caught. But thanks to a clumsy ruse that backfired on Paradigm member Matthew Ferrari of Kennett Square, Penn., the scope and operating strategies of three alleged U.S. piracy rings -- Paradigm, Class, and Razor 1911 -- are beginning to come into public view. In the foreground of that view is Paradigm, a group known within the scene for "cracking" the anti-copying security codes for some of the industry's hottest new games.

Digital piracy -- the unauthorized copying and distribution of copyright-protected computer software -- has become an extraordinary international problem for video entertainment companies. According to the Interactive Digital Software Association, a watchdog trade organization, worldwide piracy cost the game industry -- which has annual revenues of about $5.5 billion -- more than $3 billion last year. Electronic Arts alone lost $400 million due to counterfeiting, and the loss in revenue has led the company to use what some view as strong-arm tactics abroad, where pirated versions of Electronic Arts offerings often outsell the originals. In 1998, for example, Electronic Arts participated in more than a dozen police-led raids in Turkey and Singapore, successfully seizing bogus software valued at $400,000. Within the United States, Electronic Arts' anti-piracy efforts have gone mainly into tracking and prosecuting civil lawsuits with the help of the IDSA. Other companies within the industry, such as the 3DO Co., Acclaim Entertainment, and Bethesda Softworks, have joined the IDSA's efforts to monitor and gather evidence against pirate groups.

Paradigm's activities came under suspicion in February, when Ferrari allegedly posed as a journalist from the Philadelphia Inquirer, soliciting pre-release copies of various games from 3DO, a video-game software distributor based in Redwood City. Journalists are routinely allowed to review games before they have been publicly released, and several copies of new games, including Heroes of Might and Magic III (also known as Heroes III), were sent by Federal Express to Ferrari's home in Pennsylvania. Ferrari had also requested a copy of Army Men II, a combat game, but because the software wasn't complete, 3DO's public relations director, Holly Hartz, offered to hand-deliver a copy to Ferrari at the New York City Toy Fair. According to a federal lawsuit 3DO filed in February, Ferrari cancelled the appointment, claiming his wife was going into labor, and instead sent his "intern" -- a girlfriend -- to pick up the advance copy.

Weeks later, after leaving repeated voice mail messages at Ferrari's work number, Hartz called a receptionist at the Inquirer, who told the 3DO executive that Ferrari wasn't listed in the newspaper's telephone directory. A few days afterward, according to sworn testimony, Ferrari left Hartz a rambling message saying he was no longer working at the Inquirer. "Um, but I am going to be on business for the next few weeks. Um, my future plans are in the dark, but I'll get back in touch with you, uh, from my new office when I'm back in a few weeks. Um, other than that ... (sigh) ... not much else going on." That same day, the suit says, 3DO discovered that Heroes III had been illegally posted on the Internet.

When 3DO's vice president, Mark Caldwell, downloaded a copy of Heroes III from the Web, the lawsuit claims, he found a file named "pdm99.nfo" inserted into its controlling software. This file was, supposedly, Paradigm's signature mark, a way of taking credit for having cracked the electronic protection that is meant to keep the software from being copied without authorization. Within the same cracked software was the name Matt Ferrari. Unluckily for Ferrari, who had secured games anonymously in the past, the Philadelphia Inquirerruse had led straight to his door: From working with Matt Ferrari the "reporter," 3DO had Matt Ferrari the alleged pirate's real phone number and address.

Once 3DO was convinced of Ferrari's involvement, the company filed suit. In exchange for financial clemency, Ferrari eventually agreed to cooperate with 3DO and to identify other pirates. When grilled by the IDSA, Ferrari coughed up aliases and real names of people allegedly involved in several groups, including Class and Razor 1911. But his testimony focused on Paradigm. The Paradigm aliases were standard Internet fare: Zeus, Drizzt, Angwee, Grazer, Mr. Skill, The Punisher. The real people allegedly included Ensell Lee, an information department manager at a San Francisco pager and cell phone company, and Michael Lewis, whose current employment is not spelled out in court papers. Lewis, it turned out, had been a senior product technician at Electronic Arts, and, allegedly, Paradigm's inside man there. But Lee, who, according to the lawsuit, had previously worked as an intern at Electronic Arts, was alleged to have spearheaded Paradigm's pirating of Electronic Arts' games. Also, Ferrari indicated in sworn testimony for the lawsuit, Lee had been responsible for pirating four Sony games, including Everquest. Electronic Arts and Sony Computer Entertainment America, which is based in Foster City, subsequently filed a joint lawsuit against Lee and Lewis.

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