Latest Investigative Efforts Indicate Counterfeiting of Microsoft Software On the Rise in Southern California

REDMOND, Wash., March 3, 1999 — Microsoft Corp. officials today announced that the company has filed lawsuits against nine software distributors in Southern California and stopped one company from allegedly distributing counterfeit Microsoft® software over the Internet. The results of the latest anti-piracy investigations by Microsoft and law enforcement officials in Southern California indicate that consumers need to be more aware than ever about purchasing counterfeit and pirated software due to the increase in the illegal distribution of software in the area and more sophisticated methods of counterfeiting.

Investigations throughout Southern California in recent months have resulted in an increased number of both criminal and civil actions against software pirates. Recent action also demonstrates the need for enforcement against the growing counterfeit distribution channel taking advantage of the Internet. A court-ordered seizure and subsequent temporary restraining order required Softman Products Co. of Los Angeles to refrain from distributing counterfeit software (Civil Action No. 98-7961 RAP [MANx]). Softman Products allegedly advertised counterfeit end-user license agreements for Office Professional 97, Project 98, and the
Windows NT® Workstation operating system on its Web site ( http://www.cheapsoftware.net/ ), a method of promotion which offers counterfeiters easy access to consumers and a low risk of detection.

In addition, last month law enforcement officials broke up one of the largest software counterfeiting operations in California, seizing approximately $30 million in counterfeit Microsoft software.

“The increased sophistication of Southern California counterfeiters has created the need for what we call an ‘enforcement sandwich,’ said Anne Murphy, Microsoft corporate attorney. “Law enforcement has been extremely proactive in investigating and prosecuting the criminal, or supply, side of the counterfeiting problem. We’re busy working on the demand side of the sandwich to crack down on all the parties distributing software directly into the hands of unwitting customers.”

Five complaints in Southern California allege that the defendants distributed counterfeit Microsoft product and that three of them also “hard disk loaded” unauthorized copies of Microsoft software onto the hard drives of computers they sell. The complaints are as follows:

  • CC & B Inc., dba PC House Upland in Upland, Calif., allegedly distributed counterfeit Office Professional 97 and allegedly hard disk loaded Office Professional 97 (Civil Action No. 99-02040 AHM [RCx]).

  • Nova Tek of Orange allegedly distributed counterfeit Office Professional 97 and allegedly hard disk loaded Office Professional 97(Civil Action No. 99-02037 CM [AIJx]).

  • Pan Computer of Santa Ana allegedly distributed counterfeit Office Professional 97. The company also allegedly violated a settlement agreement with Microsoft, whereby it agreed not to infringe Microsoft trademarks and copyrights (Civil Action No. 99-02036 TJH [RZx]).

  • PD Software of Westminster allegedly distributed counterfeit copies of Office Professional 97 (Civil Action No. 99-02035 RSWL).

  • Tenico Computers Corp. of Walnut allegedly distributed counterfeit copies of Office Professional 97 and the OEM version of the Windows® 98 operating system. The company also allegedly hard disk loaded Office Professional 97 and Windows 98 (Civil Action No. 99-02043 RSWL [CWx]).

“The amount of counterfeit software sold at a discount in businesses near mine puts extreme pressures on my ability to make a profit,” said Dave Rhomberg, network sales consultant at Coastline Micro, a systems integrator in Costa Mesa, Calif. “This software is often duplicated by sophisticated counterfeiters, often belonging to organized criminal enterprises, and purchasing their software only contributes to the problem. I’m thankful that Microsoft has stepped in to ensure that the channel is honest and that distributors provide customers with complete, working software.”

Four other companies, all located in Los Angeles, allegedly loaded unauthorized copies of the Windows operating system and Office Professional 97 onto the hard drives of computers they sell. These complaints are as follows:

  • Fat Computers allegedly hard disk loaded Windows 98 and Office Professional 97 (Civil Action No. 99-02034 CM [Mcx]).

  • Luna Tech Inc., dba Computronics, allegedly hard disk loaded Windows 98 and Office Professional 97 (Civil Action No. 99-02038 ABC [Mcx]).

  • The Computer Place allegedly hard disk loaded Windows 95 and Office Professional 97 (Civil Action No. 99-02045 HLH [CTx]).

  • Tricom Computers Inc. allegedly hard disk loaded Windows 98 and Office Professional 97 (Civil Action No. 99-02042 JSL [Mcx]).

Microsoft investigates companies as a result of tips to the anti-piracy hot line by honest resellers or customers who obtained suspicious products. In civil cases, Microsoft customarily notifies the defendants that it suspects them of acting illegally and then determines whether this behavior has continued before filing a lawsuit.

Consumers who acquire pirated products could find they are missing key elements, such as user manuals and product identifications, Certificates of Authenticity and even software code. Customers may also find that pirated software contains viruses. Microsoft is continually researching the viability of new anti-piracy technologies that create more value for customers while maintaining the integrity of the distribution channel and reducing the costs of piracy.

“Although the Microsoft legal team and local law enforcement officials have made some great strides, there is still a long way to go before the Southern California area is free of this menace,” continued Murphy. “In the meantime, to ensure they aren’t hoodwinked by this fake software, it is important that consumers and resellers are aware of the warning signs before purchasing.”

Microsoft encourages consumers to become familiar with the following 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 should be accompanied by a user 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 (visible on screen 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. In addition, a list of authorized distributors and details regarding the Original Equipment Manufacturer (OEM) System Builder program is available at

http://www.microsoft.com/oem/ . Consumers can obtain more 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.

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