I'm sorry, but it seems as though you've been reverse scammed. If the software was indeed legitimate, then you had nothing to worry about from any investigation. I understand PayPal will freeze a transaction if there is a dispute, and claims of pirated software certainly constitute disputes. In future, tell a disgruntled buyer to use the PayPal dispute resolution, particularly since you say you were in the right.
Having received pirated software from two different sellers in the past month myself, I am aware of the likelihood, particularly through internet auctions. What I did, as the recipient of obviously fraudulent software, was politely and civilly contacted the seller through the auction website and explain that the software was not legitimate. I asked for a refund and promised to send the fake DVD back upon receipt. In both cases the full purchase price (including shipping, which I didn't expect) was refunded through PayPal almost immediately. I did send the DVDs back. Had one of these sellers balked, I would have proceeded through the dispute resolution processes of both the auction house and PayPal.
I suppose you could appeal to PayPal, but it looks as though your faith in fellow man has cost you. I am truly sorry.
