Microsoft Applauds Federal Initiative To Combat Theft of Intellectual Property

REDMOND, Wash., July 23, 1999 — Microsoft Corp. officials today commended the Department of Justice, along with the Federal Bureau of Investigation and the U.S. Customs Service, for the establishment of a tough intellectual property enforcement initiative. The federal plan will include several domestic and international components aimed at increasing the prosecution of intellectual property crime and promoting respect for intellectual property rights.

“This initiative to step up enforcement of intellectual property crimes indicates the seriousness of the threat to technological innovation and the economic opportunities the software industry creates,” said Brad Smith, general counsel, Worldwide Sales and Support at Microsoft. “The software industry holds the potential to spur even greater growth as we enter the new millennium. Providing law enforcement with the education and tools necessary to identify and prosecute offenders of intellectual property theft will help ensure the health of the software industry and the economic benefits the industry generates for the nation.”

The digital nature of software makes it vulnerable to quick and anonymous duplication and distribution, which is known as software piracy. According to a recent economic study commissioned by the Business Software Alliance, in 1998 software piracy caused losses amounting to nearly $1 billion in tax revenue, $4.5 billion in wages, and 109,000 jobs in the United States.

One of the most harmful forms of software piracy is large-scale criminal counterfeiting. In the past year, Microsoft reported a total of more than 4.3 million units of counterfeit software seized by law enforcement authorities, nearly five times the amount recovered the previous year. The profits from distribution of counterfeit software are often used to strengthen a range of criminal activities, including money laundering, narcotics deals, kidnapping and even terrorist operations. Numerous large corporations and government agencies, with the intention of acquiring genuine product, have been misled into acquiring counterfeit software. This software is increasingly distributed over the Internet, and customers deceived into acquiring such software could find that it is defective and lacks adequate documentation. In addition, those who acquire pirated software are ineligible for technical support or upgrades.

“Software counterfeiting increasingly has become dominated by sophisticated criminals, making it difficult for copyright owners to combat the problem solely through civil litigation,” Smith said. “We are encouraged that this initiative will also help shut down counterfeiting operations in order to prevent unwitting customers and the honest distribution channel from falling victim to counterfeiters.”

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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Melissa Covelli, Waggener Edstrom, (425) 637-9097, melc@wagged.com
Devin Driggs, Waggener Edstrom, (503) 443-7000, devind@wagged.com

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