Microsoft Takes a Bite Out of Software Fraud on the Internet

Company Files Lawsuits for Distribution of Counterfeit Software on Auction Sites To Help Protect Online Consumers During Holiday Shopping Season

REDMOND, Wash. -- Dec. 8, 1999 - Microsoft Corp. today announced that it has helped make holiday Internet shopping safer for millions of consumers by filing legal actions and asking for injunctions ordering defendants in six different states to stop offering and distributing counterfeit Microsoft® software. The defendants in each lawsuit use the Internet as a primary forum for distributing counterfeit Microsoft software. Three of them operate by offering illegal software via Internet auction sites. Others offered counterfeit software to consumers over a variety of Web sites, while at least two relied heavily on advertising through mass unsolicited e-mail.

Software is one of the leading products distributed online and, according to a report published by International Data Corp., the worldwide market for electronic software sales will reach $3.5 billion in 1999. The Business Software Alliance, a software industry trade association, estimates that there are 840,000 Internet sites selling illegal software as genuine product. Many consumers who acquire software over the Internet never receive the programs they paid for. Others are not able to get their money back if they discover that the software they acquired is counterfeit. Disreputable Internet businesses often quickly vanish, leaving behind hundreds of dissatisfied consumers.

"Unfortunately I was among the thousands of consumers who unknowingly obtained counterfeit software from the Internet this year," said Denise Flatt of Olympia, Wash. "What looked to be a great deal at an online auction site turned out to be too good to be true. Although I learned my lesson the hard way, I am glad to know that companies like Microsoft are educating consumers on the prevalence of counterfeit software on the Internet and what signs they can look for to avoid making the same mistake I did."

In addition to distribution of counterfeit software, it is believed that two of the Internet businesses, Capital One CDRom Warehouse and KT Services, sent unsolicited e-mail to millions of consumers throughout the world attempting to pass off fake software as genuine. Capital One is also alleged to have deceived customers by disguising the origin and source of the e-mail or forging the e-mail header and making it untraceable.

Microsoft investigated these companies as a result of thousands of tips to the Microsoft anti-piracy hot line, most of which were submitted by honest resellers or consumers who have received suspicious products or materials. The following complaints have been filed:

"Internet piracy is growing nearly as rapidly as the Internet itself, and it is severely harming consumers and their confidence in feeling safe to conduct legitimate business online," said Tim Cranton, corporate attorney in charge of Microsoft's Internet piracy efforts. "There is a possibility that this problem could spiral out of control, and we need consumers to help us hold back the floodgates by being knowledgeable online shoppers."

Customers who acquire counterfeit software could find that, in addition to the increased potential for viruses, such software may be missing key elements, including software code, which could render the program unusable. Customers with pirated software are also ineligible for technical support, warranty protection or upgrades. By spending money on counterfeit software, customers also are inadvertently contributing to the loss of tax revenue and employment. In 1998 software piracy accounted for losses amounting to nearly $1 billion in taxes and 109,000 jobs in the United States.

When dealing with software vendors over the Internet, consumers should beware of the following:

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

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Founded in 1975, Microsoft (Nasdaq "MSFT") is the worldwide leader in software 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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