Major Manufacturing Site of Alleged Counterfeit Microsoft Software Shut Down

Joint Efforts of State and Federal Authorities Praised by Microsoft

REDMOND, Wash. - Feb. 4, 1999 - Microsoft Corp. today announced the breakup of a major counterfeiting operation in Paramount, Calif., that had been allegedly manufacturing multiple Microsoft products and product components. A task force comprising the FBI, the Westminster Police Department, Orange County District Attorney's Office and Microsoft Corp. worked together to investigate and bust this organization. On Wednesday, Feb. 3, 1999, 30 investigators served search warrants on seven locations, including a gigantic warehouse and several other facilities loaded with copies of alleged counterfeit Microsoft® software and materials. Seven arrests have been made. At least 10 people are being detained pending further investigation and arrest.

A preliminary estimate of the value of products seized was at least $30 million. While a complete inventory of seized materials is not yet available, items seized include the following:

• Hundreds of thousands of Certificates of Authenticity (COAs) for the Microsoft Windows® 95 operating system
• Equipment for producing the COAs, including a foil stamper and printing press
• Integrated COA cover stock for the manuals for Microsoft Windows 98
• Two pallets of alleged counterfeit, full-packaged product of Microsoft Office 97 and additional alleged counterfeit copies of the Microsoft Windows NT® operating system
• Labels used to identify product components available under the Microsoft Easy Fulfillment program

"Counterfeiting is one of the most serious forms of software piracy," said Brad Smith, Microsoft general counsel, International. "More and more, law enforcement officials find that commercial counterfeiters are also involved in other illegal activities, including money laundering, gun-running and narcotics. We applaud the efforts of all the involved law enforcement agencies to stop these criminals."

Counterfeiting cases typically involve both copyright and trademark infringements. Under federal trademark law, criminal penalties include fines of up to $2 million and 10 years in jail per infringement; federal copyright laws include fines of 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 2 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 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, nearly $1 billion in tax revenues and $5.3 billion in wages.

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.
• 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 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 (visible on-screen 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 Original Equipment Manufacturer (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.

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.

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