Ex-Microsoft Employee Pleads Guilty to Trade Secret Theft

Former Microsoft Corp. (MSFT) employee Alex Kibkalo pleaded guilty to leaking company trade secrets to a blogger in France and agreed to pay $22,500 in restitution and spend three months in prison.

Kibkalo, a Russian national who worked for Microsoft in Lebanon, admitted he uploaded pre-release updates for Windows 8 and a software development kit for guarding against copyright infringement to his online backup storage in July and August 2012, according to a plea agreement filed yesterday in federal court in Seattle.

Kibkalo provided the blogger with links to the files in his account, encouraging him to share the development kit with others who might be able to write “fake activation” codes based on the software, according to the agreement.

The kit’s value “is substantial to Microsoft because it prevents software piracy across the line of Microsoft products,” according to the agreement, which is subject to a judge’s approval. Sentencing is scheduled for July 1.

Microsoft was alerted to the theft in 2012 by an individual who asked that his identity not be disclosed. He learned of Kibkalo’s theft when the blogger contacted him for help examining code for the Microsoft Activation Server Software Development Kit, a product developed for internal Microsoft use only, according to the criminal complaint.

Internal Investigation

The Redmond, Washington-based company’s internal investigation traced the leaked information to Kibkalo, a seven-year employee who was working as a software architect in Lebanon, prosecutors said. He has worked for another U.S. technology company since he returned to Russia, prosecutors said.

As part of the company’s internal investigation, Microsoft gained access to the blogger’s Hotmail account, which contained e-mail messages from Kibkalo with pre-release “hot fixes” for Windows 8 for mobile devices that weren’t publicly available, according to the complaint.

“While Microsoft’s terms of service make clear our permission for this type of review, this happens only in the most exceptional circumstances,” the company said in a March 20 statement. “We apply a rigorous process before reviewing such content.”

The case is U.S. v Kibkalo, 14-00087, U.S. District Court, Western District of Washington (Seattle).

To contact the reporter on this story: Karen Gullo in federal court in San Francisco at kgullo@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Fred Strasser, Andrew Dunn

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