15 months sounds excessive, but the fact the software could be downloaded by customers for free is not a mitigating factor in a guy attempting to make a profit making it look as much as possible like a paid for product sold by Dell/Microsoft...
These disks are only useful to people who already own a Windows license.
The OEM license attached to the hardware is still necessary to use the medium (which AFAIK is tied to the hardware, not the user), so I do not personally see any monetary loss for Microsoft. The only way Microsoft (or Dell, etc) lost money is because they charge an absurd price of money for something that is basically a DVD coaster without any license. They only have themselves to blame.
What he did sell was a way for refurbishers to avoid buying a refurbishing license from Microsoft if they had a computer with a Certificate of Authenticity but no recovery disc. If you do not supply the recovery disc with a refurbished machine, you do not have a valid Windows license according to Microsoft. And if you do not have a valid Windows license for the refurbished machine, Microsoft expects you to buy one for 25 United States dollars, which is the value for each counterfeit disc in this case.
I don't know if I would call it 'trying to make profit' when you make CDs in China, ship them to US and sell the CDs for 25 cent a piece.
According to himself he made no money off of this both because no one wanted to buy the CDs and the price didn't really allow for profit.
If you read the original court docs, Microsoft also claim the Dell disks normally supplied only to Dell customers allow Windows to be used without activating, and that an active secondary market exists for the real thing because of that.
They never did when I used such discs back in the days, and why would DELL be allowed to distribute software making such a thing possible? Of course you could argue that he has manipulated the program on the disc but as far as I know that has not been proven and he is claiming he did not.
They answer your question on the Dell disks, which basically boils down to the convenience of customers unable to reactivate properly for whatever reason, who merely get nag screens. May only have applied to some Dell customer groups and some Windows versions and I'm not about to dig out my old Dell XP reinstallation disk to find out! Presumably they trust that [certain groups of] Dell customers are not buying new computers with bundled Windows versions with the intention of reusing the software on unlicensed older machines, and make enough from selling the OEM licence not to care about the low level of piracy they anticipated as a result.
https://blogs.microsoft.com/uploads/prod/sites/5/2018/04/FIN...
Obviously someone in this whole mess is lying or grossly misinformed, the problem is figuring out who.
He said he had IT-experts testify in court that the emails had been tampered with, I assume one could look into that in some kind of public record over the case?
To be honest, whilst I wouldn't necessarily trust his partner trying to save his own skin, I'm even less convinced by someone that mentions a sale price of $3 for a Windows 7 and $4 for XP (odd pricing, but maybe reflects how convincing the counterfeit disks were or even how usable the software is without a license key...) in their defence in court, then tells the media he intended to give them away at $0.25 cost price.
Sometimes you have to look past the fact one party is a recycling entrepreneur and the other party is Microsoft...
https://www.youtube.com/watch?v=S7hnVYMoctM
EDIT: The court documents were linked in another comment, I relink it: https://blogs.microsoft.com/uploads/prod/sites/5/2018/04/FIN...