Microsoft Helps Protect Consumers by Tackling Illegal Software Sales

REDMOND, Wash. — May 5, 2008 — As part of its ongoing commitment to protect customers and partners, Microsoft Corp. today announced legal actions against eight software dealers in the United States, Canada, Egypt and the Netherlands that are alleged to have engaged in the illegal sale of unlicensed Microsoft software and software components. These actions were in response to hundreds of reports to the Microsoft anti-piracy hotline (800) RU-LEGIT (785-3448) from customers who were concerned they had been sold software they were not licensed to use.

Microsoft’s actions also are in response to concerns expressed by legitimate software vendors that they are being compelled to compete with dealers of unlicensed software who undercut their prices. “We appreciate Microsoft’s actions today. It is important to address this kind of illegal sale to level the playing field for legitimate distribution partners,” said Micheal LoPatriello, chief executive officer of Luna Development, a Microsoft industry partner based in Ontario, Canada.

The alleged illegal sales involved the unlawful importation of unlicensed software into North America from multiple dealers overseas. As alleged in the lawsuits, the dealers deceived customers by selling them software without also providing them with the necessary licenses. This software includes Student Media that is licensed for use only by students under special academic agreements between Microsoft, schools and governments. It also includes Volume License Media that is licensed for use by businesses under licensing agreements with Microsoft. In addition to the unlicensed software, some of the alleged dealers sold customers illegal Certificate of Authenticity (COA) labels that were improperly separated from their original software package.

“We want customers to receive the best possible experience with our products, including the benefits of support and service that come with the purchase of licensed, genuine software,” said Bonnie MacNaughton, senior attorney at Microsoft. “The legal actions announced today are part of our ongoing commitment to protect consumers and support our partners by preventing dishonest dealers from selling unlicensed software. The unlawful distribution and sale of this software has tangible, negative consequences for the marketplace. It undermines Microsoft’s legitimate partners and deceives customers who think they are receiving the full value of what they paid for, but instead unknowingly receive unlicensed software.”

A software product license grants customers the legal right to run or access a software program. Microsoft Volume Licensing programs offer businesses a convenient way to acquire and manage multiple software licenses. In the cases announced today, dishonest dealers were diverting software intended to be provided under a volume license or through a special academic agreement, and instead sold the software as though it were a fully licensed retail product — generally through an online auction or a Web site. The dealers also provided unauthorized product keys with the diverted software to enable it to be installed and activated. In two of the cases announced today, test purchases identified dishonest dealers who also were trafficking in COA labels. These labels are intended to help customers verify whether they have genuine Microsoft software and should never be sold or purchased separately from their original software package.

Stopping the Problem at the Source

Microsoft also is working to identify and remove the source of illegal, unlicensed software and has taken action in one of its lawsuits against an alleged source for unlicensed software in the Netherlands. Microsoft investigators were alerted to this source by a number of software dealers in the U.S. who settled prior lawsuits for selling unlicensed software. Microsoft has alleged that HW Trading BV and its principal, Samir Abdalla, received more than $3.7 million from just three dealers in the U.S. between March 2006 and May 2007 in payment, in whole or in part, for unlicensed software. These substantial profits were possible only because HW Trading and Abdalla did not purchase and transfer the necessary licenses for the software and, as a result, paid only pennies on the dollar for the software media.

On April 30, 2008, a second source of unlicensed software was raided by Egyptian law enforcement authorities, and computers loaded with unlicensed software, counterfeit software and software components, and various other unlicensed software products were confiscated. This source is alleged to be exploiting the Egyptian government’s PC Initiative — a program that provides low cost software to the Egyptian people in order to provide them with access to technology. Instead of supplying the software to the Egyptian people for whom it was intended, the dealer allegedly supplied them with counterfeit software and exported the real software to the U.S. The software was then paired with unauthorized product keys and allegedly sold to unsuspecting U.S. customers without the necessary licenses.

A Disturbing Trend

Microsoft and the software industry have witnessed an increase in the illegal sale of unlicensed software and software components. As far back as 2003, about 36 percent of the software installed on PCs globally was unlicensed, costing the global economy $28.8 billion. Between 2003 and 2006, that loss has risen by $10.6 billion, while the global software piracy rate has dropped only one point to 35 percent — this according to the May 2007 Business Software Alliance annual Global Software Piracy Study. By addressing this illegal activity, Microsoft is helping to level the playing field for legitimate dealers who are harmed when illegal sales cut into their business, and ensuring that consumers receive the full value of licensed, genuine Microsoft products.

Reporting Suspected Piracy

Today’s cases are part of Microsoft’s ongoing efforts to protect its customers and partners from all types of piracy. Microsoft customers and partners can play an important role in thwarting piracy by reporting tips to the Microsoft anti-piracy hotline at (800) RU-LEGIT (785-3448). Microsoft encourages anyone who receives software that is suspicious to call the hotline. More information about genuine Microsoft products, licensing and labels is available at http://www.howtotell.com.

About Microsoft

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

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Leakage and Fraud Campaign

Case Summaries

All case numbers available upon request.

Filed in the United States District Court for the Northern District of Ohio

Microsoft Corp. v. 9187-4024 Quebec Inc., d/b/a Buy Zone Direct, Buyzonedirect, Easybuysoft, and Futur-Soft; and John Does 1-5 (Cleveland, Ohio), alleging importation and distribution of infringing Windows XP Professional x64 Edition and Office 2003 Standard, and distribution of standalone Certificate of Authenticity Labels.

Case No. 1:08-cv-1086

Filed in the United States District Court for the Southern District of Florida

Microsoft Corp. v. CietDirect.com LLC, d/b/a CietDirect.com; ADM Managing, Inc.; Aaron Markizer; and John Does 1-5 (Davie, Florida), alleging importation and distribution of infringing Windows XP Professional x64 Edition.

Case No. 08-cv-60668-Ungaro-Simonton

Filed in the United States District Court for the Northern District of California

Microsoft Corp. v. A&S Electronics, Inc., d/b/a TrustPrice.com; Alan Z. Lin; and John Does 1-5 (Milpitas, California), alleging importation and distribution of infringing Windows XP Professional x64 Edition, Windows 98, and unauthorized Product Keys.

Case No. C08 02321 BZ

Filed in the United States District Court for the Central District of California

Microsoft Corp. v. Tinh Nguyen, d/b/a PTKTCOMP and tptcomputer.com; and John Does 1-5 (Anaheim, California), alleging distribution of infringing Windows XP Professional x64 Edition, and Windows Server 2003 Standard x64 Edition software, and the illegal distribution of Product Key labels and counterfeit Volume License Keys.

Case No. SACV08- 499 DOC (RNBx)

Filed in the United States District Court for the Central District of California

Microsoft Corp. v. Hoa Thao Vu Tran, a/k/a Hoat Tran, d/b/a CDX Software, CDXSoftware.com, HTTFISH, and HTTFISH42; and John Does 1-5 (Garden Grove, California), alleging distribution of infringing Windows Small Business Server 2003 Premium, Windows XP Professional x64 Edition, a counterfeit Volume License Key, and standalone Certificate of Authenticity Labels.

Case No. SACV08- 498 DOC (ANx)

Filed in the United States District Court for the Eastern District of Virginia

Microsoft Corp. v. Pronet Cyber Technologies, Inc., d/b/a Pronetcd.com and USSoftware.com; Joseph Teshome; and John Does 1-5 (Alexandria, Virginia), alleging importation and distribution of infringing Windows XP Pro x64 Edition and Windows XP Home, counterfeit Windows Server 2003, unauthorized Product Keys, and counterfeit and illicit Product Key Labels and Certificate of Authenticity Labels.

Case No. 1:08-cv-434-TSE/TCB

Filed in the United States District Court for the Central District of California

Microsoft Corp. v. Samir Abdalla; H.W. Trading, B.V., and John Does 1-5 (Los Angeles, California), alleging importation and distribution of infringing Office 2003 Professional, Office 2003 Standard, and Windows XP Professional.

Case No. CV08- 2929 DSF (JCx)