Microsoft Lawsuits Help Protect Consumers From Software Piracy

REDMOND, Wash. — July 17, 2006 — The swashbuckling pirates depicted in film and fiction and today’s software pirates have more in common than first meets the eye. The colorful sailors of the high seas sought their fortune by looting a ship’s cargo; one of the most frequent forms of modern-day piracy is the theft of a kind of personal cargo: intellectual property.

Software piracy is an offense that puts honest businesses and consumers at risk and to which Microsoft Corp. responded today with the announcement of an unprecedented move by the company: the filing of 26 lawsuits against alleged dealers of illegal software.

The lawsuits Microsoft is announcing today are against companies that allegedly pirated software or participated in hard-disk loading (installing unlicensed software on computers they sold). One of the lawsuits was filed against a reseller in Georgia who was recently indicted on federal criminal charges. Lawsuits were filed in Colorado, Georgia, Illinois, New Jersey, New York, Ohio and South Carolina.

The filing of these 26 cases demonstrates another step forward in Microsoft’s robust effort to protect consumers, business partners and its own intellectual property from the pandemic of pirated and counterfeit software in the marketplace. Filing lawsuits against companies selling pirated Microsoft® software is an integral part of the company’s Genuine Software Initiative. The initiative focuses the company’s multiple activities and investments directed at fighting software counterfeiting and other forms of software piracy into a single initiative with increased investments across three strategic areas: education, engineering and enforcement. Within each area, Microsoft is investing in activities that educate and help protect consumers and business partners from counterfeit software and other forms of software piracy.

“Our message should be made very clear by today’s lawsuits,” said Mary Jo Schrade, senior attorney at Microsoft. “To our honest partners, and to consumers who expect and should receive genuine Microsoft software wherever they go to buy it, we are listening and we are investing a tremendous amount of resources to help you. We are committed to finding the unscrupulous dealers of pirated software and making piracy a business model that doesn’t work.”

Microsoft sells much of its software through partners — those businesses that develop and market solutions based on Microsoft platforms, provide consulting or technical services on Microsoft systems, or recommend Microsoft technology purchases. The company partners with businesses of all sizes that are vital contributors to the local communities in which they are located. Often these honest companies lose business to companies offering pirated software at cheaper prices. Microsoft’s efforts to combat piracy are aimed at leveling the playing field for these honest partners.

As Tim Klan, president of Expert Computers Inc., a Microsoft Gold Certified Partner and member of the OEM System Builder Partner Advisory Council, describes it, the legal efforts by Microsoft are absolutely critical to the sustainability of legitimate business in the channel. He applauded Microsoft’s legal actions supporting fair competition.

“Honest resellers are losing business because of illegal sales,” Klan said. “Naturally customers are eager to find the best deal, which sometimes happens to be associated with an inferior, illegal product. This is simply unfair, and makes it very difficult for those of us operating within the law to compete. I think I speak for most of us when I say we strongly support Microsoft’s announcement today.”

Microsoft gathered evidence for these cases through the deployment of a program akin to a secret shopper concept. As part of its test purchase program, the company purchases hardware and software from computer dealers across the country and then tests the software and software components to determine their authenticity. In many of the cases, Microsoft notified defendants of the illegal activity and provided information on how the dealer could acquire and distribute legal, genuine software.

Complaints were also received about some of the defendants through the company’s anti-piracy hotline, (800) RU-LEGIT (785-3448).

“Today’s announcement is really about helping protect fair business practices and assuring that consumers — whether they are businesses or individuals — get what they pay for in terms of Microsoft software,” said John Ball, general manager for the U.S. System Builders Partners Group at Microsoft, which works with businesses that manufacture computers. “We remain deeply committed to leveling the playing field for our partners.”

According to the Business Software Alliance (BSA), 21 percent of all software in the United States is pirated. When consumers unintentionally purchase counterfeit or pirated software, they are not entitled to receive the benefits offered to genuine software users. In addition, customers using illegal software may unwittingly introduce viruses, malicious code or spyware into their computers and put their personal and business security and information at risk.

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

Microsoft and Windows are either registered trademarks or trademarks of Microsoft Corp. in the United States and/or other countries.

The names of actual companies and products mentioned herein may be the trademarks of their respective owners.

Note to editors: If you are interested in viewing additional information on Microsoft, please visit the Microsoft Web page at http://www.microsoft.com/presspass on Microsoft’s corporate information pages. Web links, telephone numbers and titles were correct at time of publication, but may since have changed. For additional assistance, journalists and analysts may contact Microsoft’s Rapid Response Team or other appropriate contacts listed at http://www.microsoft.com/presspass/contactpr.mspx.

Legal Case Summary-26 Cases