Microsoft Battles Latest Trend in Software Fraud – Distribution of Counterfeit Software Licenses

REDMOND, Wash., July 21, 1999 — Microsoft Corp. today announced that the company has filed lawsuits against computer retail businesses in four states in the first major crackdown by Microsoft on the illegal distribution of counterfeit Microsoft® software licenses. Although counterfeiting software requires expensive equipment and technical knowledge, counterfeiting licenses is an easy, inexpensive process. Counterfeiters can duplicate the agreement with a photocopy machine or a computer and trick unwitting customers into purchasing the worthless licenses.

Government agencies have been among the most susceptible to this growing trend of counterfeiting because of their established guidelines to purchase from the lowest bidder. In the past year, Microsoft has identified more than 40 federal, state and local government agencies across the United States that have purchased more than 1,200 counterfeit software licenses.

“Counterfeiters are realizing that the true value of software is in the license, and that they can easily replicate licenses and pose as legitimate distributors,” said Tim Cranton, corporate attorney at Microsoft. “It is also increasingly easy for customers to be fooled into thinking they are purchasing the real thing, because many counterfeit license manufacturers are able to advertise their worthless licenses over the Internet and sell them sight unseen. We have worked closely with government agencies during the past year to help prevent them from acquiring counterfeit licenses, but due to the upsurge in this disturbing trend we feel that we must share the warning more proactively with all consumers.”

Customers who acquire counterfeit software licenses could find they are missing key elements, and are ineligible for technical support or upgrades. By spending money on counterfeit licenses, customers also are inadvertently contributing to the loss of tax revenue and employment for the economy. In 1998, software piracy caused losses amounting to nearly $1 billion in taxes and 109,000 jobs in the United States.

When acquiring a program, consumers are buying the right to use the software in accordance with the license, or End User License Agreement (EULA), that comes with the software. To run the program on more computers than the license agreement allows, consumers must purchase the right to do so through additional software licenses. Genuine Microsoft software licenses are either distributed in packaged Microsoft License Paks or included in packaged retail software along with CD-ROM, user’s manual, Certificate of Authenticity, and other components that make up a complete software package. Customers should be suspicious of software licenses on a stand-alone basis, such as an unpackaged piece of paper, or in bulk without product packaging. If purchasing through Microsoft’s online licensing program, organizations should receive an authorization code and license number that can be used to confirm licenses on a Microsoft Web site.

Microsoft generally initiates investigations as a result of tips to the Microsoft anti-piracy hot line, most of which are received from resellers or consumers who receive suspicious software or materials. In this latest action by Microsoft, companies across the United States were investigated, and businesses in California, Colorado, Texas and Utah were charged with distributing counterfeit Microsoft EULAs to investigators. Four of these businesses operate Internet sites; five of the complaints also allege that, in addition to EULAs, the defendants distributed counterfeit software to investigators or customers. The complaints are as follows:

  • 4 Star Trading Company of Layton, Utah, which also operates a Web site at http://www.4startrading.com/ , allegedly distributed counterfeit components of Office Professional 97 and a counterfeit EULA License Pak for Office Professional 97 (Case No. 1:99-CV-85C).

  • Centurion Computers and Software Inc. of Waco, Texas, allegedly distributed counterfeit Office Professional 97 and counterfeit EULAs for Office Professional 97 (Case No. W-99-CA-212).

  • Gateway USA Inc. of Denver, which also operates a Web site at http://www.gatewayusainc.com/ , allegedly distributed counterfeit EULAs for Office Professional 97 (Case No. CV 99-07331 RJK (MANx)).

  • MJ Micro Inc. of Walnut, Calif., allegedly distributed counterfeit components of Windows® 95 and counterfeit EULAs for Office Professional 97 and Windows 95 (Case No. CV 99-7366-MRP (RCx)).

  • R.P.M. International Inc. of Orange County, Calif., allegedly distributed a counterfeit EULA for Office Professional 97 (Case No. SACV 99-914-AHS(EEx)).

  • Software Wholesale Club Inc. of Jewett, Texas, which also operates a Web site at http://www.swclub.com/ , allegedly distributed counterfeit components of Office Professional 97 and counterfeit EULAs for Office Professional 97 (Case No. H-99-2310).

  • Volume Software Inc. of Denver, which also operates a Web site at http://www.volumesoftware.com/ , allegedly distributed counterfeit Office Professional 97 and counterfeit EULAs for Office Professional 97 (Case No. 99-S-1377).

“It is important to remember that software is a type of intellectual property, the same as books, music and scientific developments, and that the software industry has fueled in large part the economic boom that we are now enjoying in the United States,” said Brad Smith, general counsel, worldwide sales and support at Microsoft. “Intellectual property theft hampers innovation in the development of software programs because it diminishes returns on investment and decreases resources and incentives for further investment to develop newer and better products. In order to continue the growth of the economy in the digital age, it is imperative that we protect the integrity of intellectual property.”

Customers or resellers with questions about the legitimacy of Microsoft software 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 OEM System Builder program are available at http://www.microsoft.com/oem/ .

About Microsoft

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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