Microsoft to Donate Anti-Piracy Proceeds to Community Outreach

REDMOND, Wash., June 29, 1999 — Counterfeiters and
have never been busier, and the effects of their illicit activities continue to be felt in state and national economies around the world.

The Business Software Alliance (BSA), an industry advocacy group representing many of the world’s leading software and computer manufacturers, just last May released data indicating that software piracy in the United States alone was responsible for the loss of 109,000 jobs, $4.5 billion in wages and nearly $1 billion in unrealized tax revenue in 1998. The BSA also estimates that roughly one out of every four software applications in use in the United States was illegally produced or obtained.

Although it continues to plague economies worldwide, software piracy has never been under such aggressive industry attack. Empowered by growing consumer awareness and an increased commitment from federal and local law enforcement agencies, technology companies are seeing a greater measure of success in bringing counterfeiters and other software thieves to justice.

For its part, Microsoft wants to give back to communities some of the proceeds gained by bringing such criminals to justice. The company today announced its commitment to donate half of any settlement proceeds in anti-piracy cases to organizations around the world that are working to extend access to technology and training for disadvantaged people. Through the new commitment, in addition to Microsoft’s other community affairs giving, Microsoft expects to donate at least $25 million over the next five years, or approximately 50 percent of the recovered funds, to a variety of nonprofit organizations that provide technology and training to people with little previous access to or familiarity with computers and software applications. The company also plans to give selected academic institutions some of the settlement proceeds to promote creativity and entrepreneurship in science and technology.

Microsoft hopes this unprecedented commitment will parlay its continuing efforts to battle two
— both the pervasive problem of software theft and counterfeiting, and the lack of technology access that still hamstrings people in many sectors of society — into several significant positive programs.

“Fighting software piracy is not only a question of countering an illegal activity, but also of countering its negative effects on the economy and the communities it pervades,”
said Brad Smith, Microsoft’s general counsel, worldwide sales and support, and head of the company’s anti-piracy efforts.
“We think it’s appropriate that monies recouped from illegal software operations be redirected into programs that teach people how to leverage technology skills, so that they can advance their own lives and play a role in increasing the benefits the software industry can bring to their communities.”

Microsoft’s plan will help organizations such as Virginia-based Green Thumb, a nonprofit organization that specializes in helping people 55 and older who are out of work and whose job experience has become undervalued in today’s work place, and Italy’s Centro Nazionale Opera Salesiana (CNOS), a public agency that specializes in the industry-recognized certification of young people whose lack of experience in the technology field has kept employment doors closed to them.

Emptying Pirate Chests to Fill the Needs of the Technologically Disadvantaged

Microsoft has already made a large donation of anti-piracy proceeds to aid in Green Thumb’s technology training programs for displaced workers like Jim Lacey, a former mid-level manager. Before receiving technology skills training through Green Thumb, Lacey
“thought there was absolutely no chance I was ever going to be hired again in a job that would pay me my worth.”

Lacey’s story is a riches-to-rags-to-riches saga. He is a native of Laredo, Tex., but it was in Monterey, Mexico, that Lacey discovered what he considered to be a gold mine of a career that would carry him comfortably into retirement. His educational pedigree and bilingual abilities translated into a quick rise from a ground-floor transportation job all the way to corporate vice president.

Then came NAFTA. In the wake of the trade agreement, exports from Lacey’s company into the U.S. dried up like the Rio Grande in mid-summer, and soon he was downsized out of a job.
“You have to be disenfranchised before you know what it is to be disenfranchised — It’s an awful feeling,”
Lacey said.

After spending more than two years looking for a job that could offer the compensation and challenges he felt he deserved, Lacey had exhausted his savings. Dejected and broke, he left the streets of Laredo for the Lone Star capital of Austin, where he swallowed his pride and went to the state employment agency to look for work.
“There was no reason I should have had to go — with my credentials,”
he said. But it would prove to be a fortuitous decision. At the agency, a caseworker put Lacey in contact with Green Thumb.

Though he was starting from scratch when he entered his intensive technology training program, Lacey was up to the challenge.
“It was incredible, because I had never touched a computer in my life,”
he said. Now, using the skills he developed through Green Thumb, Lacey is one of 10 program graduates working as a computer help-desk troubleshooter at Sears. And, as he puts it, his technology training provided
“something that would guarantee absolutely that I [will have] a job for the rest of my life.”

According to Andrea J. Wooten, president of Green Thumb, Lacey’s story is the rule, not the exception. Excited about Microsoft’s commitment to provide anti-piracy proceeds to organizations like her own, Wooten said:
“IT opportunities should be broadly available to all individuals, and we’re very pleased that Microsoft is working with us — to provide technical training to people who might’ve not otherwise had access to it. And we are delighted that Microsoft is expanding its donations by using recoveries from the crime of software piracy.”

Microsoft Program Successful in Europe and Asia

Microsoft already has had considerable success with similar programs designed to return recouped piracy settlement funds in countries overseas, where the problem of software theft is even more widespread (though less economically devastating) than it is in the U.S. In some countries, the piracy rate is staggering — nine out of every 10 software applications in use in Vietnam, China and Russia are illegal. According to the BSA, revenue losses to piracy outside the U.S. in 1998 totaled more than $8 billion. A Price Waterhouse Coopers study estimated that a quarter-million jobs will be lost in Western Europe by the year 2001 if piracy rates are not reduced.

Microsoft’s European Scholar Programme, an initiative funded with anti-piracy monies, has provided thousands of jobless people with the skills and confidence they need to succeed in the technology industry. Since the program was launched more than five years ago, more than 6,000 people throughout Europe have been trained, and more than 90 percent of the program’s graduates have secured well-paying technology-sector jobs.

Italy, like many of its Western European neighbors, has been plagued by high unemployment among its young people. Despite a degree in management engineering from the University of Naples, Paola B. was unable to land a good job for three years, before participating in the training program offered by Scholar Programme-partner CNOS.
“After my degree, there was no company willing to select a young person with no practical experience,”
she said.

After earning management certification through CNOS, Paola said she expects new opportunities to open up. She hopes to one day leverage her skills into the creation of her own consulting firm. The piracy-funded Scholar Programme training in Italy has offered
“a big opportunity, especially for young people coming from the south, where unemployment is really a problem,”
Paola said.

Counterfeiters and Pirates Steal from Everyone in the Community

Microsoft’s commitment to returning half its proceeds from anti-piracy lawsuits to local communities is expected to provide a variety of worthy organizations a share of at least $5 million a year for the next five years. While Microsoft officials are excited about the scope of the new donation initiative and the opportunity to give back to the people and areas that have suffered due to piracy, they also recognize that such large recoupment figures provide a sobering indication of just how widespread software theft and counterfeiting have become.

Industry officials say that, in the war against software theft, they are not simply fighting a group of increasingly sophisticated cybercriminals, they also are wrestling with several public misconceptions regarding what piracy is and who its victims really are.

Smith, who in April appeared before a U.S. Senate foreign relations subcommittee to represent Microsoft in a forum on the worldwide piracy issue, pointed out that the criminal nature of grand-scale piracy schemes such as counterfeiting, often as part of an organized crime ring, are fairly obvious. However, other forms of software theft (including end-user piracy, which includes such common practices as copying software programs for friends or for other users in an office setting) should be recognized as equally destructive. And just as illegal.

Smith said the numbers from the recent BSA study make it clear that software theft is a virus that infects economies at every level.
“Piracy’s impact goes much deeper than many people realize,”
he said.

The impact of piracy on the economy through lost jobs, lost wages and lost tax revenue is enormous, and should not be tossed aside lightly.

“The lost jobs hit software manufacturers, where reduced revenues mean that there is less money available for research and development,”
he said.
“But there is a domino effect that leads to more lost jobs — both upstream at materials suppliers, and downstream among resellers, trainers and support people throughout the world. In addition, high piracy rates snuff out creativity and innovation in the software industry. A small, startup software developer, for instance, cannot afford to put the time, effort and money into development of a new software program if the company is unable to market it without fear of theft.”

Forcing Cyberpirates to Walk the Legal Plank

Most industry representatives dealing with the software theft issue agree that important strides toward purging piracy have been taken in recent years. These range from concerted efforts within the industry to increase public awareness of the crime in all its various manifestations, to the provision of more legal leverage (brought to bear on both the legislative and enforcement fronts) to pry pirates out of the woodwork.

“We have seen many jurisdictions increase their focus on fighting intellectual piracy crimes,”
said Smith.
“In some regions, like Southern California, the growth of counterfeiting activities — especially those linked to other organized criminal activities such as narcotics dealing, prostitution, weapons violations and terrorism — has fueled the interest of law enforcement.”

One recent exponent of this increased police scrutiny was played out in a California courtroom earlier this month, when eight leaders of an alleged multinational criminal counterfeiting ring were indicted in Orange County. The defendants were arrested in February after a lengthy investigation that culminated in a raid that turned up $56 million worth of illegal Microsoft software and product components. It was the largest single seizure of counterfeit Microsoft software to date.

“In addition to the legal commitment in some areas, we have seen an increase in public awareness regarding the problems and issues of software piracy,”
said Smith.
“Both of these factors have helped bring about some small reductions in piracy rates in various countries, so yes, there has been progress. But there’s still a huge challenge and opportunity waiting for us in the fight against piracy.”

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 [email protected]. 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 [email protected].

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