Microsoft Files Four Software Piracy Lawsuits In First North Carolina Undercover Sweep

Anti-Piracy Sweep Intended to Protect Consumers, Honest North Carolina Resellers

CHARLOTTE, N.C. - Oct. 26, 1998 - Officials at Microsoft Corp. today announced the company has filed four lawsuits resulting from Microsoft's first investigative sweep of Charlotte-area computer resellers suspected of illegally distributing counterfeit products and installing unlicensed software. These lawsuits, the first Microsoft has filed alleging software piracy in North Carolina, are part of a nationwide campaign to help protect legitimate resellers, distributors and customers from the effects of software piracy.

Each of the complaints, filed in the U.S. District Court for the Western District of North Carolina, Charlotte Division, alleges copyright violations and trademark infringement arising from the defendants' distribution of counterfeit Microsoft® products from their businesses in Charlotte. The allegations were brought under federal law as well as North Carolina's Unfair Competition and Unfair and Deceptive Trade Practices laws.

In Microsoft Corporation vs. Fortress Systems International Inc. (Civil Action No. 3:98 CV 468 MCK), the defendants allegedly distributed counterfeit copies of the Microsoft Windows® 95 operating system, and in Microsoft Corporation vs. CTG Systems Inc. (Civil Action No. 3:98 CV 471 MU), the defendants allegedly distributed counterfeit products that included Windows 95 and Office 95 Professional.

In Microsoft Corporation vs. Palmyra Inc., dba Computer Renaissance (Civil Action No. 3:98 CV 470 H), and Microsoft Corporation vs. PC Lab Computer (Civil Action No. 3:98 CV 469 MCK), in addition to the distribution of counterfeit product, the defendants allegedly engaged in the practice known as "hard disk loading," the installation of unlicensed software on computers that are in turn sold to customers. Palmyra Inc., dba Computer Renaissance, allegedly distributed counterfeit Office 97 Professional products, and PC Lab Computer allegedly distributed counterfeit Office 97 Professional. Hard disk loading, counterfeit distribution by resellers and unauthorized multiple installations of software in businesses are the three most prevalent forms of software piracy.

"A significant portion of the 3,700 jobs and $108 million in wages and salaries lost in North Carolina to piracy rightfully belongs to honest resellers," said Chandran Rajaratnam, president, SoftChoice Corp. "We are gratified that Microsoft is exercising its responsibility to take action against companies engaging in illegal activities to protect legitimate resellers and others affected by software piracy."

Leads for the Charlotte lawsuits originated from the Microsoft anti-piracy hot line and subsequent undercover purchases by Microsoft investigators. Microsoft receives more than 2,000 calls and e-mail messages each month and investigates them to identify computer resellers using or distributing Microsoft software illegally.

In addition to the harm piracy does to resellers, consumers who purchase counterfeit products could find they are missing key elements, such as user manuals and product identifications, Certificates of Authenticity and even software code. They may also find that the counterfeit software contains viruses or does not work as well as the genuine product.

"To maintain and increase the contributions of the technology industry to North Carolina, it is imperative that the business and legal communities unite to protect intellectual property rights," said J. Thomas Warlick, an attorney in the Charlotte office of Kilpatrick Stockton LLP, a Southeast-area law firm active in the intellectual property field. "Taking action against counterfeiters in the software industry and other industries plagued by widespread counterfeiting will inevitably contribute to a stronger economy in North Carolina, enabling all North Carolinians to continue to prosper."

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 Inc. 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 them 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.
• Back-up 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 (visible 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. They can obtain more information about software piracy 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.

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