Genuine Software Initiative’s First Year and Beyond

REDMOND, Wash., March 30, 2007 — As an industry leader, Microsoft continues to innovate in the area of software protection technologies and has taken steps on behalf of its customers and partners to reaffirm its commitment to reducing software piracy.

Cori Hartje, Director, Microsoft Genuine Software Initiative

Microsoft’s Genuine Software Initiative (GSI) accomplishes two steps: First, it coordinates activities across a number of internal business groups, and then it participates across industry associations to support a healthy software ecosystem. These efforts include support of intellectual property protection while ensuring a good customer and partner experience around the use of genuine software.

The GSI is a global program that has been successful in helping educate users to guide them toward the use of genuine software, in engineering sophisticated anti-piracy and anti-counterfeiting technologies, and in working with government authorities to promote the enforcement of intellectual property laws.

This month marks the one-year anniversary of the GSI. To mark the occasion, PressPass checked in with Cori Hartje, director of the Microsoft Genuine Software Initiative, for an update on progress.

PressPass: At the one-year mark for the Genuine Software Initiative, can you give us a “state of the union?” What progress has been made under GSI?

Hartje: We have had an amazing year and have made a lot of progress on many fronts. The Windows Genuine Advantage (WGA) program has processed more than 600 million unique product validations since July 2005. During the year, we also launched the Office Genuine Advantage program (OGA). Both of these programs add value for customers who have genuine product through various add-ons and downloads, and alert users whose product may not be genuine that they may be a victim of counterfeit software.

We’ve also done a lot more outreach and education around the world. We’ve tightened up our distribution model to decrease the opportunity to pirate or counterfeit Microsoft products. We have worked with law-enforcement agencies around the globe, which has resulted in several major cases against counterfeiters and software pirates.

We’ve also had a lot of success working with government officials in numerous countries, such as in Brazil, where the Ministry of Justice created the National Council to Combat Piracy and Crimes Against Intellectual Property – which brings together public and private entities in an effort to protect IP. Similarly, China has encouraged its business enterprises to use genuine software to reduce the risks that come from counterfeit products. Why are countries and governments around the world stepping up their efforts in these areas? Because they understand that technology contributes to economic development. For example, authorities in Greece and Hungary have initiated stronger activities to ensure that their economies benefit from the tax revenue that should be collected on legitimate software and technology sales.

Through this type of government engagement we are experiencing greater local cooperation, and increased awareness by customs officials at the country’s borders.

This is a long-term project for us. We see the support that various governments are putting toward this effort as a good sign for the technology industry and customers alike. We also believe the engineering changes we’ve made will have a positive impact as well. But there is still a lot of work to be done.

We will continue to improve all of our efforts in engineering, in enforcement and in education. It’s important that customers get what they pay for, are fully licensed, and are experiencing the benefits of genuine software.

PressPass: One of Microsoft’s primary areas of focus is on engineering new technologies to make software counterfeiting and piracy more difficult. What is new in that regard?

Hartje: The new Software Protection Platform (SPP) built into Windows Vista and Windows Server “Longhorn,” the forthcoming next generation of Microsoft’s server operating system, incorporates new anti-piracy technologies and tamper-resistant features that change the game for pirates. Genuine Windows Vista customers will have a different experience than non-genuine customers. For example, key product features, including Windows Aero, Windows Defender, and Windows ReadyBoost, are reserved for customers running a genuine, properly licensed copy of Windows Vista. WGA for Windows Vista will provide a notice to consumers if they have installed a counterfeit copy.

In addition, all Windows Vista installations, including volume-licensing versions, require some form of activation. If a PC fails to activate properly, the operating system will be put into a reduced functionality mode after a 30-day grace period, which limits use of things like printers and Internet access time, but does not prevent access to personal files.

As a reminder to those that helped with Windows Vista beta testing, the beta installations are set to expire at the end of May 2007. So customers need to decide if they want to move to Windows Vista or back to Windows XP if they have test versions of Windows Vista on their PCs.

SPP also provides a new layer of protection to our volume-license customers and helps them avoid mis-licensing scenarios. Through volume activation, we are providing improved security and management of volume license keys to help customers reduce the risk of theft, leakage and unauthorized use of the keys. We have seen this new solution already starting to make a difference, as customers are taking advantage of new management tools to help activate multiple Windows Vista-based PCs in their desktop environments.

Customers deploying Windows Vista need to be aware of the product activation methods, whether OEM, full packaged product or volume-licensing versions are obtained. You’ll see more emphasis in the coming months on giving our partners a better understanding of these processes so they can help prepare their customers.

PressPass: Software pirates and counterfeiters keep innovating too. What are some interesting things you’ve seen in terms of how they operate?

Hartje: There are those in the marketplace who make it a hobby of theirs, or even a business, to try and hack through the activation technology or distribute counterfeit software. As Microsoft discovers those attempts, we take action.

In past versions of Windows, counterfeiters could take volume licensing media and make sellable copies using the media in combination with a stolen or artificially generated volume licensing key. That practice was typical of some of the high-quality counterfeit packages for Windows XP and Microsoft Office.

Thanks to some of the engineering advances in Windows Vista, the practice of combining media with a key will not work as easily. For instance, on a recent trip to South America, we met a street vendor who had a copy of Windows Vista that included an inkjet-printed package, obviously counterfeit. He said, “This isn’t going to work very long because Microsoft is going to shut this key off and you won’t be able to activate it. But you can use it for a trial.”

This was eight days after the business launch of Windows Vista to volume licensing customers in the first part of December. So on one hand, low-quality copies are already out there, but on the other, the counterfeiters are aware that that Windows Vista’s anti-piracy technologies are working, and we’ve yet to see high-quality packaged counterfeit versions of our new operating system software.

We recognize that in some parts of the world, including in emerging markets, it may be difficult to find genuine product. We will make a concentrated effort to do a better job of making sure genuine product is readily available for consumers when they want to make a purchase.

PressPass: What is the state of software piracy overall and why is it important for Microsoft to keep up the fight?

Hartje: Software counterfeiting and piracy continues to be a huge issue for the entire industry and has a negative impact on technology jobs and user experiences throughout the world. Commercial software is a US$175 billion industry worldwide and generates jobs for 2.3 million people around the world, according to the Business Software Alliance (BSA).

However, right now we know that the rate of counterfeit or unlicensed software is around 35 percent worldwide and over 80 percent in some countries. What that means for all software developers, not just Microsoft, is that that the loss is equivalent to the entire industry getting paid for only three of every five days worked. The economic impact to the industry is huge.

But beyond that, companies like Microsoft, which depend on our partner ecosystem, are concerned that partners don’t have a level playing field on which to compete. If a partner is bidding to sell 20 PCs, and the guy down the street is bidding on the same sale with counterfeit or pirated product, their cost is likely lower, and the honest reseller with genuine product will have a harder time making the sale. Our partners have asked us for help, and we feel a responsibility to respond. This is why we continue to support government involvement, industry policy organizations, and when appropriate, file civil actions against counterfeit resellers of our products.

PressPass: There are those who would say that pirated software at least has the positive effect of getting Microsoft products into more people’s hands. What do you say to that argument?

Hartje: Simply put, piracy hurts the industry and the computer user. For example, it costs the company because in many cases we’re still paying to support the products through updates.

But more importantly, pirated software can have a serious and damaging effect on our brand. We know from our own forensic research that systems running counterfeit software have more than a 40 percent chance of containing additional spyware or malware or other binaries. This additional code can cause very frustrating and harmful experiences for consumers and businesses.

Even in emerging markets, counterfeit software is not something that should be embraced. Technology overall is a huge contributor to economic development. Counterfeit and pirated software take opportunities away from legitimate businesses that contribute jobs and collect taxes that pay for infrastructure improvements, education and healthcare.

In fact, according to a 2006 study by the BSA, a 10-point drop in the global piracy rate over a four-year period would create 2.4 million new jobs and $400 billion in contribution to economic growth, as well as $67 billion in tax revenue. Think of what that could mean for education and infrastructure worldwide.

PressPass: How can consumers and businesses protect themselves from obtaining counterfeit software?

Hartje: A simple thing people can learn to do is recognize when a price is too good to be true. Just shopping around a little can show you what the prices ought to be, and working with a trusted reseller is also a good idea.

We encourage everyone to visit the Windows Genuine Advantage and Office Genuine Advantage web sites to validate their software and access the benefits created exclusively for genuine users. There is also a site that includes samples of both genuine and counterfeit product with tips on how to tell the difference,

We recognize that with high-quality counterfeit the packaging is often very good, the price is reasonable, and it can be hard for a consumer to know the difference. That’s why we needed to take another approach and re-engineer the product, as we’ve done with Windows Vista. Upon installation these measures make it more obvious when the software is non-genuine.

I’ve been in contact with several hundred victims of high quality counterfeiting, and they had a lot to say about their experiences. Most wanted to use genuine software, paid money for it and were expecting a genuine product. Instead they got a high-quality counterfeit version of our software. We’re doing more to protect these folks from unscrupulous resellers.

PressPass: What value and benefits does your program bring to consumers and businesses?

Hartje: In all of our efforts, we want to make sure that our products are still easy to install, and that we reward our genuine, licensed users with added benefits. For example, with Windows XP, customers get access to Internet Explorer 7, Windows Media Player 11, Windows Defender and other add-ons and tools after validation. In Microsoft Office, the extras include useful downloads, add-ins, templates, learning tools and more.

We also have solutions in place for customers that include support and legalization. For example, through WGA and OGA we provide a way to purchase genuine product at a discount if a consumer fails the validation process. In addition, if they have a high-quality counterfeit product and would like to report their source, they can complete a counterfeit report form and send a copy of their invoice along with the counterfeit product to see if they qualify for a complimentary replacement. To date, we’ve followed up on all of the approximately 60,000 counterfeit reports submitted through the WGA and OGA systems.

PressPass: What is your strategy for the Genuine Software Initiative in the coming year?

Hartje: We want to make sure we take thoughtful actions to reduce counterfeit and other forms of software piracy. We also want our genuine customers to have a great experience and to add extra value to the products through the add-ons available via the Genuine Advantage program. We will continue our efforts to raise awareness of the inherent risks of counterfeit software and help prevent counterfeiters and software pirates from taking advantage of our customers.

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