Lawsuits Confirm Company’s Commitment to Protecting California Consumers And Legitimate Resellers

FOSTER CITY, Calif., Nov. 12, 1998 — Microsoft Corp. officials today announced the company has filed six lawsuits resulting from its investigative sweep of Bay Area computer resellers suspected of illegally distributing counterfeit products and installing unlicensed software on computers sold to consumers. The complaints are part of an ongoing effort to help protect legitimate Bay Area distributors and customers from the effects of software piracy.

The lawsuits, filed on Nov. 9, 1998, in the U.S. District Court for the Northern District of California, San Francisco and San Jose Divisions, allege copyright violations and trademark infringement under federal law. All six complaints allege that defendants have distributed counterfeit Microsoft® products; two of them have also been charged with hard disk loading, the practice of loading unauthorized copies of Microsoft software onto the hard drives of computers they sell.

“Software piracy, which cost California 18,900 jobs and $2.5 billion in lost wages, retail sales and tax revenues last year, has the potential to severely limit the growth of our state’s software industry,”
said Sandra Boulton, director, piracy prevention at Autodesk.
“With so many companies in the area that depend on the success of the industry to survive, it is imperative that we work to mitigate the harmful effects of piracy in California.”

In Microsoft vs. K-Square Computers Inc. of San Francisco, Civil Action No. 98-04353 TEH, defendants allegedly distributed counterfeit versions of OEM Windows® 95 operating system software, intended for distribution only on new computers. In Microsoft vs. Fred Haney & Sons of Newark, C.A., Civil Action No. 98-04355 MHP, defendants allegedly distributed counterfeit Worldwide Fulfillment copies of Office Pro 97, product components that are designed to meet the needs of volume license customers. Fred Haney & Sons is also charged with allegedly distributing counterfeit retail versions of Office Pro 97.

Genesys Advanced Technology Enterprises Inc., Civil Action No. 98-21117 JF/EAI, and North American Computer Inc., Civil Action No. 98-04352 TEH, both of Sunnyvale, Calif., have been charged with allegedly distributing counterfeit OEM Windows 95 and counterfeit
Windows NT® Server operating systems. North American Computer has also allegedly distributed the academic versions of Office Pro 97 and Windows NT Server 4.0, software that is offered at a discount price to educational institutions, to noneligible customers.

Microsoft has also sued an individual doing business as Atman MPC Computers of San Francisco, Civil Action No. 98-04357 CW, for allegedly hard disk loading counterfeit copies of Microsoft Office Pro 97. The last defendant, Tuniss Computer of Burlingame, Calif., Civil Action No. 98-04354 TEH, has allegedly hard disk loaded and distributed counterfeit copies of Windows 95. Hard disk loading, counterfeit distribution by resellers, and unauthorized multiple installations of software in businesses are the most prevalent forms of software piracy.

“I appreciate any effort Microsoft can make to help educate customers on software licensing requirements and the legal issues regarding piracy, as well as by pressing charges against resellers that continue to use pirated software as a marketing tool to attract customers,”
said Dan Sanguinetti, president of PC Professional, Oakland, Calif.
“Over the last 17 years, PC Professional has lost hundreds of thousands of dollars to competitors that deliver systems with preloaded pirated software applications and network operating systems. The bottom line is software piracy results in higher prices and bankruptcy for companies that play by the book.”

The companies were investigated as a result of tips to the Microsoft anti-piracy hot line, most of which are received from honest resellers or from customers who obtain suspicious products. Microsoft receives more than 2,000 calls and e-mail messages each month that are reviewed by investigators to identify computer resellers and end users that are using or distributing Microsoft software illegally. In such cases, Microsoft customarily notifies the defendants that it suspects they have acted illegally and then determines whether this behavior has continued before filing a lawsuit.

The software industry is a significant driver of the current economic prosperity in the United States, accounting for the creation of more than 2 million jobs, $102.8 billion in software and software-related services, and payment of $7.2 billion in taxes. However, software piracy threatens the ability of the industry to continue to contribute to the American economy. According to a 1997 study by Nathan Associates Inc. of Arlington, Va., commissioned by BSA, software piracy in 1996 resulted in the loss of 130,000 jobs in the United States, $5.3 billion in wages and salaries, and nearly $1 billion in tax revenues.

Consumers who obtain counterfeit products could find they are missing key elements, such as user manuals and product identifications, Certificates of Authenticity and even software code. They may also find that the counterfeit software contains viruses or does not work as well as the genuine product. Microsoft encourages consumers to become familiar with the warning signs that can help them identify counterfeit or illegal software.

  • Prices that are
    “too good to be true.”
    These may indicate counterfeit product, or product that has been misdirected, such as product authorized for distribution only to educational institutions but is being offered to the general public.

  • Back-up disks or CD-ROMs with handwritten labels, or components that appear to be of inferior quality

  • Manuals that appear to be photocopied or are of inferior quality

  • Products marked with a phrase, such as
    “For distribution with a new PC only,” “Special CD for licensed customers only,” “Not for retail or OEM distribution”
    or
    “Academic price – not for use in a commercial environment,”
    that does not describe the transaction

In addition, when users acquire a new computer system, it will include operating system software. If that software is the Microsoft Windows 98 operating system, it will be accompanied by a users manual that incorporates a Certificate of Authenticity as the cover. The customer will also receive a CD-ROM with the software program. There must be an end-user license agreement (this may be seen online when the program is first run). If any of these elements is missing, the product is suspect.

Customers or resellers with questions about the legitimacy of Microsoft products should contact the Microsoft anti-piracy hot line, toll free, at (800) RU-LEGIT (785-3448), or send
e-mail to piracy@microsoft.com. Resellers may obtain information regarding the Microsoft System Builder Program, OEM products and authorized distributors at http://www.microsoft.com/oem/ . Customers and resellers can also obtain information about software piracy by calling the Business Software Alliance anti-piracy hot line at (888) NO-PIRACY (667-4722) or sending e-mail to software@bsa.org.

Founded in 1975, Microsoft (Nasdaq
“MSFT”
) is the worldwide leader in software for personal computers. The company offers a wide range of products and services for business and personal use, each designed with the mission of making it easier and more enjoyable for people to take advantage of the full power of personal computing every day.

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

Other product and company names herein may be trademarks of their respective owners.

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