The court ignored expert witness testimony that the disks were useless without a valid license and came up with a ludicrous amount.
The defendants belief was that many customers weren't knowledgeable enough to download restore images from the internet. He was selling them to used computer shops so they could provide them to their customers as a courtesy.
He charged $0.25 per disc, and had 28,000. So his total would have been $7k? He eventually sold them for less than $5k. Not any kind of windfall profit.
Given you can download those restore images for free, what exactly was the copy right infringement?
I agree that the US system is fucked up when it imprisons people who haven't committed violent crime.
Do we know why? Courts don't throw out testimony for no reason.
In any case, from what I understand the calculation of value principally factors into the fine. The jail time results from the defendant selling disks with others' logos on them.
Another commentor dug up more detailed information, which intimated that the defendant wouldn't have made $80,000 worth of discs that had no value.
To be fair, arguing that someone you sold has no value is a bit hare-brained.
All that said, this is a side show. The criminal sentencing resulted, principally, from his using others' logos without permission on a product he sold. The combination of infringement and commerce is apparently something our laws are paranoid about.
It protects you from shoddy fakes that do stuff like install malware (which other counterfeiters might have tried if the law were more lax on counterfeits) or stuff not following safety guidelines (like fake chargers that burn your house down).
Well enforced trademark law means that you as a buyer can investigate a seller and know what you're getting based on their reputation. And well enforced trademark law means that you as a seller are incentivized to protect your brand by making good/safe products.
EDIT: you can argue copyright or patents are bad, but fundamentally I cannot see the world be a better place without trademark laws in some form.
Without a licence which he was not providing they are useless.