Microsoft Stops a New Form of Software Piracy

Contempt Claim Filed Against Shawn LePorte, Alleged Mastermind Of Fulfillment Program Abuse

REDMOND, Wash. - Aug. 12, 1998 - - Microsoft Corp. today announced that it has filed a contempt charge in its suit against Shawn LePorte, who allegedly masterminded a network to defraud both consumers and Microsoft. Microsoft's lawsuit charges that LePorte fraudulently obtained software components through the Microsoft® Easy Fulfillment (MEF) Program and then sold those components illegally to end users. Specific claims in the suit, filed May 26 in U.S. District Court in Houston, include conspiracy, fraud, theft, unfair competition and federal trademark infringement. Ten other individuals were also named in the suit. The motion to find LePorte in contempt of court, filed Aug. 10, 1998, claims that LePorte refused to comply with a court order that he turn over rare coins that were in his possession earlier this year and that Microsoft believes were purchased with the profits of his illegal scheme.

When the suit was filed, the court authorized a search of LePorte's home, to seize business records and software components, and a freeze of his assets. According to Microsoft Corporate Attorney Jim Lowe, who attended the May 28 search, "We seized lots of records from LePorte's home that corroborate the charges in our complaint against LePorte and the other defendants. During the search, we saw what appeared to be gold coins, but LePorte has never included them in the court-ordered reporting of his assets. It was as if we had found a real pirate with his plunder in 'pieces of eight'."

Microsoft Easy Fulfillment Program

The Microsoft Easy Fulfillment program was designed for customers that need to acquire multiple software components. Rather than acquiring software in the full packaged product available at local resellers, corporate customers often prefer to purchase volume-licensing agreements. Microsoft offers supplemental CD-ROMs and user manuals only to customers who have already purchased an Open or Select license. The MEF program provides only the CD-ROM component in a jewel case, without an individual end-user license agreement, a user's manual, a registration card, a warranty or other features that accompany genuine Microsoft retail products. The Microsoft Easy Fulfillment program recently has been renamed Microsoft Worldwide Fulfillment.

"The MEF program was created as an easier way for our customers to secure additional software components for the products that had already been licensed," said Sam Jadallah, vice president, organization customer unit, Microsoft. "We have reviewed the system and tightened procedures so that others will not be able to defraud the system. We will continue to offer a fulfillment program because it is important to many of our customers. Customers who have acquired MEF components without licenses should contact an authorized Microsoft reseller and ask about the Open License program."

How the System Was Defrauded

Microsoft claims that Shawn LePorte created a number of fictitious companies, including Premier Computers and SCL Computers, through which he sold Microsoft Open License Program (MOLP) licenses to other fictitious companies. Microsoft further claims that LePorte then placed orders for MEF components on behalf of these purported customers. The software components shipped to Premier Computers and SCL Computers were then allegedly redistributed to co-conspirators, who in turn distributed them to unsuspecting third parties as if they were complete, licensed Microsoft products, at prices far below the customary cost for full retail products.

Through various connections with LePorte and other companies, Valerie and Donnie Frank, Donald S. Graham, Jeffrey S. Frank, Mark LePorte (LePorte's brother) and Shawn E. Easley allegedly ordered MEF components through Microsoft, representing themselves as legitimate software resellers.

The software components these individuals allegedly obtained through the MEF program include CD-ROMs for Microsoft Office 97, Office 97 Professional Edition, Office 95, the Windows® 95 operating system and other Microsoft products. Microsoft is seeking actual and exemplary damages, attorneys' fees and a permanent injunction against the defendants.

"This fraud took business away from our legitimate resellers," Jadallah said. "It's important to take action when we see those resellers being harmed."

According to Microsoft, a number of warning signs can help customers avoid obtaining fulfillment components when acquiring new software:

• Genuine Microsoft products should always include more than a simple jewel case and a CD-ROM. Look for a license agreement, a Certificate of Authenticity, a registration card, a warranty and additional packaging materials. All genuine Microsoft products will have some of these additional components.
• Consumers should be wary of prices that are "too good to be true."

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 anti-piracy hot line at (888) NO PIRACY (667-4722) or sending e-mail to software@bsa.org.

The software industry is a significant driver of the current economic prosperity in the United States, accounting for $102.8 billion in software and software-related services, payment of $7.2 billion in taxes and the creation of more than 2 million jobs. However, software piracy threatens the ability of the industry to continue to contribute to the U.S. economy. According to a 1997 study by Nathan Associates Inc. 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.

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.

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