Microsoft Files Lawsuits in Seven States as Part of Ongoing Program to Better Protect Customers and Partners and to Combat Alleged Software Counterfeiting

REDMOND, Wash. — April 11, 2005 — Microsoft Corp. today announced the filing of eight lawsuits against computer system builders and resellers for alleged distribution of counterfeit, illicit and unlicensed software and software components.

The distribution of counterfeit software hurts the honest businesses that distribute legitimate software and the communities where they operate. According the Business Software Alliance, 22 percent of the software being used on computers in the U.S. today is unlicensed, including counterfeit and pirated software.

“Our partners are coming to us and asking for our help,” said Bonnie MacNaughton, senior attorney at Microsoft. “They are being undercut and forced out of business by having to compete with dishonest PC manufacturers and resellers who continue to sell illegitimate software. That isn’t fair to our partners or to the customers who depend on them.”

The lawsuits are the result of Microsoft’s ongoing test purchase program, started in 1997, to ensure that software being distributed is legitimate. Under the program, Microsoft acquires software, software components or computer systems from dealers and tests the software and components for authenticity. If it is not legitimate, the dealer is generally sent a cease-and-desist letter and told how it can obtain legal, genuine software.

Microsoft filed today’s eight lawsuits in California, Florida, Texas, New Jersey, Alabama, Maryland and Rhode Island. This action follows similar action in November 2004 against eight other dealers.

“Resellers who sell counterfeit software and components at a supposed ‘discount’ are certainly undercutting honest businesses and creating a competitive disadvantage in the marketplace,” said Sean Dion, education sales director for TKO EDucation in Westlake Village, Calif. “The really sad thing is they are putting consumers and businesses at risk because, ultimately, the buyer is buying illegitimate product. The lure of cheap software is real, but the risk is far too great not to be 100 percent legal. TKO EDucation fully supports Microsoft’s continued action to level the playing field for honest businesses.”

The federal Anti-Counterfeiting Amendments Act of 2003 was signed into law by President Bush on Dec. 23, 2004. It provides for criminal and civil penalties for the distribution of genuine standalone Certificate of Authenticity (COA) labels or authentic COA labels that are separated from the software they were intended to certify.

In addition to sending cease-and-desist letters to targets of the test purchase program — thousands of system builders and resellers — Microsoft sent an additional round of letters in January alerting them to the passage of the new legislation and warning them of the illegality of distributing standalone or separated COA labels.

“There is only one purpose for distributing standalone COA labels: to falsely make infringing software appear legitimate. The federal law makes this deceptive practice now clearly illegal,” MacNaughton said. “It closes a perceived legal loophole and allows us to more effectively protect the channel and consumers who deserve to receive the genuine product they believe they are acquiring.”

The lawsuits, which allege copyright and trademark infringement and in one of the cases, violation of the new legislation, were filed against Abacus Computer Corp., of Anaheim, Calif.; Avantek Inc., of Orlando, Fla.; First E-Commerce (dba Discount Electronics and/or, of Austin, Texas; M&S Computer Products Inc., of Boonton, N.J.; Micro Excell Inc., of Gadsden, Ala.; Odyssey Computers, of Pasadena, Md.; Signature PC, aka Signature Computers, of Warwick, R.I.; and Technology One, of Los Angeles.

Defendants in each case allegedly continued their distribution of counterfeit software or software components, separated COA labels, or unlicensed software even after they were contacted by Microsoft requesting that they halt their illegal activities.

“The IT industry is a vital contributor to a vibrant U.S. economy, and small businesses are the economy’s backbone. To ensure continued viability of our industry, we must preserve the incentives to innovate that fuel productivity increases and economic growth,” said Jonathan Zuck, president of the Association for Competitive Technology (ACT). “ACT commends Microsoft’s efforts to take legal action against purveyors of pirated and counterfeit software, along with its efforts to work together with channel partners to promote healthy industry competition and innovation.”

In addition to the test purchase program, Microsoft has established an aggressive and ongoing education campaign to communicate to its channel partners specifically how it is taking aim at the dishonest system builders and resellers who unfairly undercut them in the marketplace. Through a series of targeted print advertising campaigns and direct mail marketing, the company provides them with information on how to work only with reputable dealers and communicates the results of its ongoing test purchase program, including enforcement actions.

A COA label helps identify genuine Microsoft software. For authorized preinstalled Microsoft Windows® operating systems, the COA label should be affixed to the PC chassis and should not be removed from the PC. When the Windows operating system is acquired separately from the computer, the COA label is affixed to the top of the box. The COA label includes sophisticated anti-counterfeiting features to help verify the software’s authenticity. The COA label also includes a product key code, used in the event that the operating system needs to be reinstalled. More information on COA labels can be found on Microsoft’s How to Tell Web site at

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

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

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

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Case Summary

Filed in the U.S. District Court for the Central District of California

Microsoft Corporation v. Abacus Computer Corp., of Anaheim, Calif., alleging distribution of infringing Microsoft Office 2000 Premium, Office XP Professional, Windows Millennium Edition (Windows Me) and Windows 2000 Professional

(Case No. CV 05 2569 RGK (PLAx)

Filed in the U.S. District Court for the Middle District of Florida

Microsoft Corporation v. Avantek Inc., of Orlando, Fla., alleging distribution of infringing Microsoft Windows XP, Office 2000 Premium and Office XP

(Case No. 6:05-CV-519-ORL-18-KRS)

Filed in the U.S. District Court for the Western District of Texas

Microsoft Corporation v. First E-Commerce dba Discount Electronics and/or, of Austin, Texas, alleging distribution of infringing Windows 95, Office 97 Professional Edition and Windows 2000 Server (TM) and/or related components

(Case No. A05CA251 SS)

Filed in the U.S. District Court for the District of New Jersey

Microsoft Corporation v. M&S Computer Products Inc., of Boonton, N.J., alleging distribution of infringing Microsoft Windows 2000 Professional and Office 2000 Professional

Filed in the U.S. District Court for the Northern District of Alabama

Microsoft Corporation v. Micro Excell Inc., of Gadsden, Ala., alleging distribution of counterfeit and infringing Windows XP and/or related components

(Case No. CV-05-PT-0730-M)

Filed in the U.S. District Court for the District of Maryland

Microsoft Corporation v. Odyssey Computers of Pasadena, Md., alleging distribution of illicit Certificate of Authenticity labels for Microsoft Windows 98 and Windows 2000 Professional (Case No. WMN05-964)

Filed in the U.S. District Court for the District of Rhode Island

Microsoft Corporation v. Signature PC aka Signature Computers of Warwick, R.I., alleging distribution of infringing Microsoft Windows 2000 Professional, Windows 98 and Windows XP Professional

(Case No. CA 05 144 S)

Filed in the U.S. District Court for the Central District of California

Microsoft Corporation v. Technology One of Los Angeles, alleging distribution of counterfeit and infringing SQL Server (TM) 2000 software components, counterfeit Windows 98 software, a counterfeit Windows XP Professional End User License Agreement and counterfeit Windows 2000 Professional Certificates of Authenticity

(Case No. CV 05 02572 TJH (Mcx))

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