Microsoft Takes Legal Action Against Ten New York and New Jersey Resellers

Lawsuits Alleging Hard Disk Loading and Distribution of Counterfeit Software Intended to Protect Legitimate Resellers and Consumers in New York Area

NEW YORK - Nov. 18, 1998 - Microsoft Corp. officials today announced the company has filed nine lawsuits and one Motion for Contempt resulting from its investigative sweep of New York area computer resellers suspected of illegally distributing counterfeit products and installing unlicensed software on computers sold to consumers. The lawsuits, which allege copyright violations and trademark infringement under federal law, are part of an ongoing effort to help protect legitimate distributors and customers from the effects of software piracy. One of the lawsuits, and a separate Motion for Contempt filed against a tenth local reseller, involve violations of previous settlement agreements with Microsoft. The companies were investigated as a result of tips to the Microsoft anti-piracy hot line, most of which are received from honest resellers or from customers who receive suspicious products. According to the complaints, each of the defendants continued to distribute unauthorized Microsoft® software even after receiving a prior written request from Microsoft to stop their unlawful activities.

"In addition to putting customers who purchase counterfeit software at risk, software piracy gives illegal operators an unfair competitive advantage over companies like mine that obey the law," said Chandran Rajaratnam, president of SoftChoice, a reseller targeting small and medium-sized businesses with 22 offices across the United States. "My livelihood depends on my ability to compete, so it is critical to my business that software vendors take action against illegitimate resellers and distributors."

The five complaints in New York allege that the defendants hard disk loaded unauthorized copies of Microsoft software onto the hard drives of computers they sell. One of the New York complaints also alleges that the defendant distributed counterfeit Microsoft product. The charges are as follows:

• 3D Pro System Inc. of Brooklyn allegedly hard disk loaded Microsoft Office 97 Professional (Civil Action No. CV 98 7066).

• Comp-U-Tech of America Inc. of Brooklyn allegedly hard disk loaded Office 97 Professional (Civil Action No. CV 98 7065).

• D.S.I. Computer Service Inc. of Elmont allegedly hard disk loaded Windows 95 and Office 97 Professional (Civil Action No. CV 98 7063).

• Ace Comp. Solution Inc. of Manhattan allegedly hard disk loaded Office 97 Professional (Civil Action No. 98 Civ. 8079).

• MacField Computers Inc. of Brooklyn allegedly hard disk loaded the Microsoft Windows® 98 operating system and Microsoft Office 97 Professional, and allegedly distributed counterfeit Office 97 Professional (Civil Action No. CV 98 7064).

MacField Computers has violated a previous settlement agreement with Microsoft, whereby it agreed not to infringe Microsoft copyrights and trademarks.

In addition, Microsoft announced that it has filed a Motion for Contempt against another New York company, PCI a k a Prime Computers Inc., located in Manhattan (Civil Action No. 97 Civ. 8987) based on the company's alleged hard disk loading of Windows 98. The motion stems from PCI's alleged violation of a permanent injunction entered by the United States District Court for the Southern District of New York on May 19, 1998, prohibiting any further infringement by PCI of Microsoft's copyrights and trademarks.

In New Jersey, all four defendants allegedly distributed counterfeit copies of Microsoft products, and three of them allegedly hard disk loaded products as well. The New Jersey complaints are as follows:

• Spectra Systems of New Jersey Inc. t/a and dba Express Services and Distribution and/or Xpress Services Distributing of Carteret allegedly hard disk loaded Office Professional 97 and allegedly distributed counterfeit Office Professional 97 and a counterfeit copy of a Windows 95 user manual (Civil Action No. 98CV5147).
• An individual dba Aspen Graphics of Glen Gardener allegedly distributed counterfeit copies of Office Professional 97 and Windows 95 (Civil Action No. 98CV5152).
• American Micro Professionals Inc. dba American Micro Products Tech of South Plainfield allegedly hard disk loaded and distributed counterfeit Office Professional 97 (Civil Action No. 98 CV5145).
• Procom America Inc. t/a and dba Micromax Computers of Whippany and Parsippany allegedly hard disk loaded and distributed counterfeit copies of Office Professional 97 and Windows 95 (Civil Action No. 98CV5146).

"In 1997, software piracy drained the New York economy of more than $860 million in combined lost wages, tax revenues and retail sales, and caused the loss of an estimated 7,800 jobs," said Nancy Anderson, Microsoft senior corporate attorney. "And as evidenced by the resellers that have violated previous settlements, we're seeing recurrent willful acts of software piracy in the New York area. We intend to make it increasingly difficult for dishonest resellers to succeed at the expense of those who are running their businesses lawfully."

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 BSA, 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.

Consumers who obtain 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. 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." These may indicate counterfeit product, or product that has been misdirected, such as product authorized for distribution only to educational institutions but 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 user 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. In addition, a list of authorized distributors and details regarding the OEM System Builder program is available at http://www.microsoft.com/oem/. Consumers 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.

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