Microsoft Intensifies Worldwide Campaign Against Internet Piracy and Criminal Counterfeiting

REDMOND, Wash., April 2, 2001 — Microsoft Corp. today announced actions taken against organized criminal counterfeiters in 22 countries by enforcement agencies worldwide, marking a new wave in Microsoft’s global campaign against software piracy and online fraud. In addition, Microsoft has sought the immediate removal of alleged counterfeit and illegal software offerings from Internet sites and auctions, bringing the total number of takedowns to more than 47,000 over the last six months and 88,000 in the last two years.

Criminal Counterfeiting Reaches High-Tech Age

“The explosive growth of Internet users has spawned an equally explosive growth of Internet abusers,”
said John Varrone, assistant commissioner, Office of Investigations, U.S. Customs Service.
“Cyber-savvy criminals increasingly use the speed and anonymity of the Internet to sell and distribute counterfeit software, music and videos worldwide. The potential revenue losses to legitimate businesses are enormous.”

Widespread use of and access to the Internet has significantly changed the counterfeit software distribution model, allowing counterfeiters to more easily market and distribute smaller quantities of counterfeit software internationally, often directly to consumers.

“In the past year, nearly 5 million units of counterfeit Microsoft® software and hardware were seized worldwide, and this number is up dramatically from the previous year,”
said Tim Cranton, Internet anti-piracy attorney for Microsoft.
“Microsoft has put significant resources behind its global anti-counterfeiting efforts. We’re also working cooperatively with law enforcement agencies, industry partners and business organizations to help protect consumers and bring counterfeiters to justice.”

Software piracy and counterfeiting take a toll on the global economy and adversely affect honest resellers, consumers and the software industry worldwide. According to a Business Software Alliance study, software piracy caused the loss of $12 billion in revenue worldwide in 1999, which translates into nearly 107,000 lost jobs and more than $5 billion in unrealized wages in the United States alone.

Microsoft’s campaign against Internet piracy and criminal counterfeiting has included legal actions in 22 countries, including Argentina, Brazil, Canada, Colombia, Germany, Hong Kong, Hungary, Macau, Malaysia, Peru, the Philippines, the People’s Republic of China, Poland, Romania, Singapore, Taiwan, Thailand, Venezuela, the United Kingdom and the United States.

“The U.S. Customs Service is proud to team up with Microsoft and other producers of intellectual property to fight these cyber-pirates. Together, we can attack their illegal activities far better than either of us could do alone,”
said Varonne.

Fighting Internet Piracy

Since the launch of its worldwide Internet anti-piracy campaign and Internet Scanning Tool six months ago, Microsoft has taken legal action against 47,000 auction postings and Internet sites for allegedly offering counterfeit and illegal copies of software bringing the total number of auction postings and Internet site takedowns to 88,000 over the last two years. The Internet Scanning Tool, which operates 24 hours a day, 7 days a week to identify illegal online offerings, expedites the process of finding Web pirates and has enabled Microsoft to identify and address thousands of illegal sites in a single day and work with Internet service providers and auction sites to remove illegal products from the Internet.

The Need for Intellectual Property Protection

Creators of legitimate software and other intellectual property content are increasingly disadvantaged when their rights to protect their own ideas are not respected and their work is illegally copied.

“As the courts have indicated with the recent Napster ruling, the importance of protecting intellectual property in today’s digital age can’t be underestimated,”
said Brad Smith, deputy general counsel for Worldwide Sales at Microsoft.
“As distribution models change and more content moves to the Internet, it is critical that we continue to take steps to protect creators’ intellectual property rights and foster broad economic growth.”

Microsoft is committed to developing and implementing technology solutions that disseminate and protect intellectual property on the Internet. As emerging technologies continue to make it easier to distribute pirated products online, it is imperative that content and service providers work together to provide consumers with legitimate online content and improve ways to legally access and distribute copyrighted works.

Consumers Are the Victims

Consumers – both knowingly and unwittingly – often become victims of piracy and online fraud by purchasing software that turns out to be counterfeit. In some cases, consumers who order products over the Internet never receive anything at all, and sometimes they receive a defective CD or a download infected with a virus. With an upsurge in consumer complaints to the Internet Fraud Complaint Center regarding counterfeit goods purchased online, it’s important for consumers to be smart shoppers by learning to spot the warning signs of pirated software on the Internet and being aware of the risks that accompany it.

Tips on how to shop safely for software online are available on Microsoft’s Anti-Piracy Web site at http://www.microsoft.com/piracy/ . 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.

Founded in 1975, Microsoft (Nasdaq
“MSFT”
) is the worldwide leader in software, services and Internet technologies for personal and business computing. The company offers a wide range of products and services designed to empower people through great software – any time, any place and on any device.

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Microsoft Intensifies Worldwide Efforts to Combat Software Piracy

Case Fact Sheet

April 2, 2001

North America Civil Actions

  • Since January 2000 73 cases involving Internet piracy were settled. Related settlements and judgments totaled more than $17.7 million.

  • Microsoft Corp. recently filed the following five Internet piracy civil cases in the United States:

– Bi-Rite Computers of Riverside, Calif., for the alleged distribution of counterfeit Microsoft® Office 2000 Professional, Office 97 Professional and Windows NT® Server. Civil case number: EDCV – CV-01-214 VAP, in the Central District of California, Eastern Division.

– EasyPCsoftware.com of Los Angeles, Calif., allegedly distributed counterfeit Office 2000 Professional and Office 2000 Premium. Brian Calderon used a variety of aliases including http://www.easyPCsoftware.com/ to allegedly post more than 3,000 illegal downloads of Microsoft software on Internet auction sites. Civil case number: EDCV – CV-01-215 VAP, in the Central District of California, Eastern Division.

– Happy Beagle Marketing (aka Modems Unlimited) of Washington and Bloomington, Ill., for alleged distribution of counterfeit Office 97 Professional and Windows® 98 via the Web site http://www.fastmodems.com/ . Civil case number: 01-1145, in the Central District of Illinois, Peoria Division.

– Liz Tapanes Enterprises of Memphis, Tenn., for alleged distribution of counterfeit Office 2000 Professional and Office 97 Professional via the Web site http://www.cheap-software-online.com/ . Civil case number: 01-2225 MLA, in the Western District of Tennessee, Western Division.

– Metro-Tek Inc. of Southfield, Mich., for alleged distribution of counterfeit Office 2000 Professional, Office 97 Professional and Windows 98 via the Web site http://www.metro-tek.com/ and their retail location. Civil case number: 01-71141, in the Eastern District of Michigan, Western Division.

North America Criminal Actions

Calgary: In December 2000 the Calgary Royal Canadian Mounted Police seized over $167,000 in illegal software from the residence of Dean Wolf of Muckabout.com. Wolf allegedly was selling illegal Microsoft software on his Muckabout.com Web site and he advertised on Amazon, eBay and Yahoo! Wolf has been charged with offenses under section 42 of the Copyright Act.

California: Defendant Paul Stamatis is awaiting sentencing in May 2001, stemming from a joint law enforcement effort among the Los Angeles Sheriff’s Office, Los Angeles Police Department, U.S. Postal Service and FBI in New York. Stamatis, along with 11 others, was arrested after daylong surveillance that took place in the greater Los Angeles area in February 2000. Approximately 12,000 units of counterfeit software were seized. Five defendants, including Stamatis, have pleaded guilty and four of them have been sentenced.

Illinois/Massachusetts: Federal agents uncovered a worldwide ring of sophisticated software pirates who electronically hijacked thousands of copyright computer programs over the Internet, including, at the time, the yet-to-be released Microsoft Office 2000 Premium. The ring’s members, who call themselves
“Pirates with Attitude,”
used a barter system in which they were allowed to download pirated software from the group’s inventory in exchange for contributing copyright programs under their control. The group, which operated a Web site called
“Sentinel,”
had hundreds of members worldwide. Membership was by invitation only, and access to the site was available only through recognized computer addresses.

A man described as a founding member of the group’s
“council,”
Robin Rothberg of North Chelmsford, Mass., was arrested and charged with conspiracy to infringe on copyrights. The impending criminal prosecution in this case is scheduled for May 7, 2001, in Illinois.

Asia Criminal Actions

Hong Kong: Hong Kong’s Independent Commission Against Corruption (ICAC) raided the offices of the Optical Disk Manufacturers Association and seized over two-dozen counterfeit Microsoft
“stampers”
(used to produce software CDs), valued at approximately $50 million U.S. The raid also resulted in the arrest of five individuals. In an unrelated action, ICAC officials arrested an individual associated with sales of counterfeit software over the Internet.

Macau: As a result of two separate vehicle searches at the border between Macau and southern China, Macau police recently seized more than 4,500 pieces of counterfeit software and made two related arrests.

Malaysia: On Aug. 19, 2000, the Special Copyright Task Force led by the Ministry of Domestic Trade and Consumer Affairs (MDTCA) raided nine locations for suspected manufacture and distribution of counterfeit products for a regional counterfeiting ring. One of the locations was a factory located in the Klang Valley. The 84-member raid team was led by the MDTCA and was supported by the Malaysian police, Anti-Corruption Agency and Microsoft investigators.

More than 100 CD stampers/gold masters, 200,000 counterfeit CDs and 20 personal computers were seized, and 17 vehicles were impounded as a result of the raid. More important, the team secured evidence from the raid that led to suspicion of large-scale production and global distribution of counterfeit Microsoft products. The estimated value of the seizures is over $80 million U.S. This is the largest counterfeiting ring breakup in South Asia to date.

This case began with an investigation of a Malaysian-based Web site that was allegedly offering counterfeit Microsoft products to Australia via the Internet. Seizures in Australia subsequently confirmed the origin of the counterfeit products being the Malaysian-based Web site.

Philippines: In August 2000, an enforcement team of officials from the National Bureau of Investigations, Videogram Regulatory Board and the Council to Combat Video Piracy raided a CD factory in the Clarkfield Special Economic Zone, Pampanga. The raiding team represented the interests of the Motion Picture Association, Sony Computer Entertainment, Sega Enterprises, IFPI and the Business Software Alliance along with Microsoft. More than 250,000 counterfeit CD-ROMs were seized. The production equipment confiscated included a Krauss Maffei replicating machine, a CD-printing machine and CD-production paraphernalia.

People’s Republic of China: Chinese officials recently raided a factory in Shenzhen and seized 2,600 pieces of high-quality counterfeit software, together with loose counterfeit manuals and related documentation. In a separate raid of a Shenzhen warehouse, Technical Supervision Bureau officials discovered and seized over 5,000 counterfeit Microsoft keyboards.

Singapore: In February 2001, after hours of surveillance, the Intellectual Property Rights Branch of the Singapore police arrested the owner of a van and seized its contents of approximately 20,000 pieces of counterfeit CDs. Singapore police then identified the suspect in the raid as a syndicate leader. Later that same day, the police raided a retail shop at Toa Payoh Central owned by the suspect and detained three other syndicate members. Later in the month, Singapore police raided a retail outlet in Queensway Shopping Center and found it to be linked to the same syndicate. That raid resulted in the arrest of two additional syndicate members and a seizure of 10,000 counterfeit CDs consisting of counterfeit product of the Business Software Alliance’s member companies, including Microsoft, Interactive Digital Software Association, Singapore Phonogram & Videogram Association and Sony Computer Entertainment.

Singapore: On Feb. 7, 2001, the Intellectual Property Rights Branch of the Singapore police raided a makeshift stall outside Sim Lim Square. Inspection of the seizure confirmed 147 pieces of the CDs that were seized contained infringing Business Software Alliance member programs. The raid was a follow-up to police actions focused on tackling counterfeit CD rings operated by illegal syndicates.

Taiwan: The Police Administration of Taiwan conducted a national Internet piracy sweep from late December 2000 through early January 2001 to crack down on optical disc piracy and pornography and to protect copyrights in cyberspace.

Prosecutor’s offices issued 241 search warrants, targeted 189 illegal Web sites offering pirated optical discs and child pornography and detained 237 defendants. More than a half-million pieces of illegal CD-ROMs and CD-Rs from 142 Web sites were seized.

Thailand: On March 15-17, 2001, police officers from the Economic Crime Investigation Division raided two outlets located in Pantip Plaza and Mahboonkrong Shopping Center for distribution of counterfeit CD-ROMs. The raids resulted in the seizure of 17,000 pirated CDs and CD-ROMs. Three shopkeepers were arrested and charged with copyright infringement.

Europe Criminal Actions

United Kingdom: Late last month, a London jury convicted a criminal ring responsible for a multimillion-dollar international counterfeiting racket. The gang specialized in trading counterfeit Microsoft software internationally and is suspected to have sold millions of pounds worth of counterfeit software. The racketeers, who relied on various hard-core criminal tactics, bundled counterfeit disks imported from Asia with genuine Certificate of Authenticity labels obtained in the armed robbery of a Scottish printing factory.

In November 2000, as part of its global
“Operation Bidder Beware”
sweep, the Business Software Alliance filed and served three sets of legal proceedings in the United Kingdom against suspected suppliers of counterfeit software. Those suppliers were using the auction site http://www.qxl.com/ to advertise their products for sale and are believed to have sold numerous copies of counterfeit software through the auction site.

Germany: In March 2001, Microsoft sent 30 cease-and-desist letters to targets that sold counterfeited software or burned CD-Rs on auction sites, including IEZ Auktionen, offerto.de, Ricardo.de.

In November 2000, a software pirate near Frankfurt sold illegal software to a police officer. The police raided the target’s home and seized six PCs, 10 burners and approximately 1,000 gold CD-Rs. The target was arrested.

Since January 2001, Microsoft has filed five criminal complaints against additional targets that have allegedly sold counterfeited software or burned CD-Rs through auction sites in Germany.

Hungary: In October 2000, law enforcement officers raided an alleged counterfeiter who distributed BSA member company software products over the Internet. During the raid the police seized CDs containing software applications from Adobe, Autodesk, Corel, Microsoft, Symantec and other products. This case led to the police conducting a raid of another pirate’s operation where they seized more than 1,000 CDs containing various software publishers’ software.

In November 2000, law enforcement officers raided an alleged counterfeiter in Hodmezovasarhely who published a software program list on the Internet. The police seized nearly 10,000 compilation CDs

with illegally copied software products. Damages are estimated at approximately $16,000 U.S.

Poland: In November 2000, law enforcement officers, with the assistance of the Business Software Alliance, raided the home of an individual in Poznan, who was allegedly distributing software over http://www.cdzone.prv.pl/ .

In November 2000, a district court in Wroclaw found a software pirate guilty of selling illegal copies of Business Software Alliance member company software products over the Internet. The accused was ordered to pay a fine and court fees. This is the first judicial decision against an Internet software pirate in Poland.

Romania: In October 2000, Sibiu police raided the home of an individual, Manea Bogdan, who was allegedly distributing illegal software over the Internet using three different sites, including http://www.megaone.com/oferta/ . The police found approximately 350 illegal CDs containing Adobe, Autodesk, Corel, Microsoft and Symantec programs. They also found illegal software on the defendant’s computers as well as a list of the defendant’s customers.

Latin America Criminal Actions

Argentina: On Nov. 23, 2000 at the request of the Argentinean local software association (Software Legal) and the music industry’s anti-piracy association, judicial authorities and the federal police in Buenos Aires raided the home offices of six resellers who were suspected of offering counterfeit Business Software Alliance member software, including Microsoft programs and music CDs, over the Internet. These resellers used Internet advertising to help market and sell the unauthorized products through SPAM e-mail and various Web pages. The raids conducted by the federal police yielded more than 6,000 unauthorized copies of music and software and several PCs and CD-burners. Five people were arrested in connection with the raid.

Argentina: On Jan. 16, 2001, the Anti-Fraud Division of the Argentinean police raided GRG Computaci
ó
n, a reseller from Buenos Aires who was offering allegedly unlicensed software product via the Internet. During the raid, law enforcement authorities seized four PCs that were hard-disk loaded with unauthorized copies of software, as well as 20 CDs containing unlicensed copies of Microsoft products and other Business Software Alliance member companies’ software.

Brazil: On Jan. 2, 2001, Brazilian authorities performed a civil inspection of a reseller who was offering unlicensed software via the Internet. The reseller, who was located in S
ã
o Paulo state, was offering computers with unlicensed software products through his Web site http://www.curriculum.com.br/ . Ultimately, the court audited 78 computers.

Brazil: On Feb. 13, 2001, Microsoft and the Specialized Police Department in Computer Crimes from Minas Gerais state conducted a police raid against an Internet company called Mega CD. This company was offering unlicensed copies of software through the Internet. The police officers seized four duplicators, 2,165 CDs with Microsoft software and 450 unused CDs. Two employees were arrested in the raid.

Colombia: After 10 days of surveillance, DAS (Colombia intellectual property police) raided the home of an Internet reseller in Bogot
á
, on Dec. 14, 2000. The reseller sold unauthorized copies of software products through a popular auction site called MercadoLibre.com. As a result of the raid, authorities seized 500 unauthorized software CDs, one PC, a CD burner and six catalogs listing software programs. New invoices for more than 20,000 copies of unlicensed software products were also confiscated. Law enforcement authorities believe that the software piracy operation, which allegedly sold pirated copies of Microsoft, Adobe, AutoDesk and Corel software, had been in operation for a number of years. The reseller was taken into custody by enforcement authorities.

Peru: On March 1, 2001, the Public Ministry arrested an Internet reseller who was offering unlicensed copies of software through the Internet. The authorities raided the reseller’s home in Lima where he ran http://www.clubdelsoftware.com/ . Authorities found and seized 143 CDs containing unauthorized copies of Microsoft Office 97, Office 2000, Windows 95, Windows 98 and Adobe software. They also seized 27 compilation CDs, eight CDs with movies, one PC and lists of the products he advertised.

Venezuela: On March 1, 2001, Venezuelan authorities raided the premises of Red Maniaco, an Internet company that was offering unlicensed copies of software through the Web site http://www.free20000@cantv.net/ .


©2001 Microsoft Corp. All rights reserved.

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

The names of actual companies and products mentioned herein may be the trademarks of their respective owners.

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