Early-Morning Raid Breaks Up Counterfeit Software Manufacturing

Thousands of Bogus CD-ROMs Seized

REDMOND, Wash. - March 16, 1998 - Police in Baldwin Park, Calif., confiscated more than 17,000 counterfeit copies of Microsoft® Office 97 and the Microsoft Windows® 95 operating system during early-morning raids March 6. The raids originated from a tip to Microsoft Corp.'s anti-piracy hot line.

The first raid was at Compact Media Inc, a manufacturing facility suspected of producing counterfeit copies of Microsoft software. More than 3,000 counterfeit copies of Microsoft software CD-ROMs were seized. Six people were arrested and charged with possession of counterfeit materials and possession of equipment used in counterfeiting: Shawn Wang, 24, owner of Compact Media Inc., and five people believed to be employees, Kristen Chu, Kai Chen, Kaiwei Chen, Kenneth Khoung and Martin Sitter.

Police also confiscated equipment used in the production, replication and packaging of counterfeit software products.

"This facility was operating four concurrent production lines capable of producing several hundred thousand units per month," said Dennis Kies, Baldwin Park acting police chief. "We were successful in stopping them from filling what we understand to be orders for more than a half-million units of software."

Two additional raids - one at the home of Wang and another at a storage shed rented by Khoung - led to the seizure of an additional 14,000 counterfeit copies of Microsoft software. The total retail value of software confiscated at the three sites is estimated at more than $5.6 million.

Nancy Anderson, senior corporate attorney for North American anti-piracy at Microsoft, said officials are not yet sure how long the counterfeit operation had existed, nor do they know whether any of the counterfeit software may have been sold into the retail distribution channel.

"For the past several years, Microsoft and the Business Software Alliance have worked together to combat software piracy," Anderson said. "Usually, we take civil action against counterfeiters. But this time, we clearly felt the magnitude of the operation warranted criminal prosecution. We are grateful for the efforts of Baldwin Park police in helping put a stop to this illegal activity."

Counterfeiting cases typically involve both copyright and trademark infringements. Under federal trademark law, criminal penalties include fines up to $2 million and 10 years in jail per infringement; federal copyright laws include fines up to $250,000 and five years in jail per violation.

The software industry is a significant driver of the current economic prosperity in the United States, accounting for a $102.8 billion market for software and software-related services, payment of $7.2 billion in taxes and the creation of more than two million jobs. However, software piracy threatens the ability of the industry to continue to contribute to the American economy. According to a 1997 study by Nathan Associates of Arlington, Va., commissioned by the Business Software Alliance, software piracy in 1996 resulted in the loss of 130,000 jobs in the United States, nearly $1 billion in tax revenues and $5.3 billion in wages.

According to Microsoft, a number of warning signs can help computer buyers identify illegal software:

• Microsoft's agreements with computer manufacturers prohibit them from distributing Microsoft software without accompanying PC hardware. Microsoft products on the retail shelf should never include a line on the front cover of the users guide that states "For distribution with a new PC only." OEM versions of Microsoft products do not include end-user support.
• No Certificate of Authenticity
• Prices that are "too good to be true"
• No end-user license agreement
• No product registration card
• No backup disks, manuals or other materials for software installed on a new computer system
• Backup disks that have handwritten labels, are not shrink-wrapped or appear to be of inferior quality
• Manuals that are photocopied, are not shrink-wrapped or appear to be of inferior quality

Customers or resellers with questions about the legitimacy of Microsoft products should contact the Microsoft anti-piracy hot line toll free at (800) RU-LEGIT (785-3448) or send e-mail to piracy@microsoft.com. More information about software piracy can be obtained by calling the Business Software Alliance (BSA) anti-piracy hot line at (888) NO PIRACY (667-4722) or by sending e-mail to software@bsa.org.

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.

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

Other product and company names herein may be trademarks of their respective owners.

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