Microsoft Files Lawsuits Against Five California Resellers, Alleging Software Piracy

Microsoft Aims to Protect Consumers, Legitimate Southern California Resellers

SANTA MONICA, Calif. - Oct. 14, 1998 - Microsoft Corp. officials today announced they have filed lawsuits against five resellers in Southern California, alleging copyright violations and trademark infringement. The lawsuits were filed in the U.S. District Court for the Central District of California. They are the result of ongoing investigations of area businesses conducted to help protect legitimate resellers, distributors and customers from the effects of widespread software piracy in Southern California.

Three of the complaints allege that defendants have distributed counterfeit Microsoft® products. Zenon, located in the City of Industry, Calif., allegedly distributed counterfeit Office 97 Professional and OEM versions of the Windows® 95 operating system (Civil Action No. 98-8177 JSL [Ex]), which are intended for distribution only on new computers by computer manufacturers and system builders. Computer Direct Inc. of San Gabriel, Calif., allegedly sold counterfeit products including OEM versions of the Windows NT® and Windows 95 operating systems as well as alleged counterfeits of the OEM version of Microsoft Mouse (Civil Action No. 98-8182 JSL [JGx]). The third complaint was filed against an individual dba Elite Computers of Pasadena, Calif., for allegedly distributing counterfeit Office 97 Professional and counterfeit OEM versions of Windows 95 (Civil Action No. 98-8179 DT [RNBx]).

Consumers who purchase a counterfeit product often find they are missing key elements, such as user manuals and product identifications, Certificates of Authenticity, and even software code, and may find that the counterfeit software contains viruses or does not work as well as the genuine product. Counterfeit copies of hardware products such as Microsoft Mouse are frequently defective.

"We commend Microsoft for its efforts to crack down on piracy and counterfeiting in Southern California, a region known worldwide for its counterfeiting crimes," said John Bliss, president of the International AntiCounterfeiting Coalition (IACC), a multinational organization devoted to combating product counterfeiting and piracy. "We strongly support actions that will keep our members safe from illegal copying, infringement and other forms of theft."

Next week, Microsoft will be one of approximately 180 attendees participating in the IACC Fall 1998 Conference, which is being held Oct. 18-20 in Santa Monica.

Microsoft has also filed lawsuits against two companies alleging hard-disk loading, which means loading unauthorized copies of Microsoft software onto the hard drives of computers they sell. An individual dba Beta Computers of Long Beach, Calif., allegedly hard-disk loaded unauthorized copies of Windows NT Server (Civil Action No. 98-8180 JSL [RNBx]), and an individual dba US Computers, of Norwalk, Calif., allegedly hard-disk loaded unauthorized copies of Windows 95 and Office 97 Professional (Civil Action No. 98-8178 DDP [CTx]). Hard-disk loading, along with counterfeit distribution by resellers and unauthorized multiple installations of software in businesses, are the most prevalent forms of software piracy.

"In 1997, California lost more than 18,900 jobs and $2.5 billion in combined lost wages, retail sales and tax revenues from software piracy, and a significant portion of those jobs and revenues rightfully belong to honest resellers," said Anne Murphy, Microsoft corporate attorney. "By filing suits against companies in California that engage in alleged illegal activities, we affirm Microsoft's commitment to protecting legitimate resellers and innocent consumers from the detrimental effects of software piracy."

Last night at the Westminster, Calif., City Council meeting, Microsoft honored officials from the Westminster Police Department in a ceremony recognizing their assistance in fighting software piracy in Southern California.

"The Westminster Police Department has been a valuable ally, providing the ongoing cooperation and resources to help protect the jobs and tax revenues of our local communities," Murphy said. "We will continue to support law enforcement in efforts to reduce the crime of piracy in California."

The software industry is a significant driver of the current economic prosperity in the United States, accounting for the creation of more than 2 million jobs, $102.8 billion in software and software-related services, and payment of $7.2 billion in taxes. 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, $5.3 billion in wages and salaries, and nearly $1 billion in tax revenues.

Microsoft encourages consumers to become familiar with the warning signs that can help identify counterfeit or illegal software:

• Prices that are "too good to be true." This may be counterfeit product, or product that has been misdirected, such as product authorized for distribution only to educational institutions but is being offered to the general public.
• Backup disks or CD-ROMs with handwritten labels or components that appear to be of inferior quality
• Manuals that appear to be photocopied or are of inferior quality
• Products marked with a phrase, such as "For distribution with a new PC only," "Special CD for licensed customers only," "Not for retail or OEM distribution" or "Academic price - not for use in a commercial environment," that does not describe the transaction

In addition, when users acquire a new computer system, it will include operating system software. If that software is the Microsoft Windows 98 operating system, it will be accompanied by a users manual that incorporates a Certificate of Authenticity as the cover. The customer will also receive a CD-ROM with the software program. There must be an end-user license agreement (this may be seen online when the program is first run). If any of these elements is missing, the product is suspect.

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 also 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.

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, Windows and Windows NT 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.