Their argument is that Lundgren's product, a CD that says it's a Windows restore CD from Dell, but is actually a counterfeit produced by Lundgren in China, is (duh) a counterfeit of the Windows restore CD, which sure enough Microsoft sells for (depending on which version exactly) $25.

If you sell your cheese, saying this is a Buxton Blue, (a protected designation) but it isn't, that's counterfeiting. You have counterfeit cheese. Saying "Oh, well I saw them giving cheese away in a supermarket once, so it's free, so there shouldn't be a penalty" doesn't wash. Are you giving it away as a promotion in a supermarket? No. You're selling it, saying it's Buxton Blue. So the right question is, "How much does Buxton Blue sell for?" and the equivalent here is exactly the question Microsoft was asked, "How much do you charge for these CDs?" to which the answer is $25.

Lundgren is a counterfeiter. It's sad how many people are buying what is literally a sob story from a convicted criminal as though it's a neutral third party discussing the case.