Microsoft Files Its First Software Piracy Claims in Illinois

Ten Lawsuits Against Chicago-Area Resellers Intended to Protect Customers And Honest Distributors

CHICAGO - March 2, 1999 - Microsoft Corp. officials today announced at a press conference at the Chicago Bar Association that for the first time the company has filed software piracy lawsuits in the state of Illinois. The suits were filed against 10 Chicago-area computer resellers suspected of illegally distributing counterfeit products or installing unlicensed software on computers sold to consumers, and are part of an ongoing effort to help protect legitimate distributors and customers. A Chicago Bar Association seminar on computer law follows today's announcement.

"Software piracy robbed the Illinois economy of nearly $560 million and caused the loss of more than 5,600 jobs in 1997," said Nancy Anderson, senior corporate attorney at Microsoft. "Hopefully, these lawsuits will show that Microsoft is serious about helping to ensure an honest and successful software marketplace in Illinois. We also appreciate efforts by others in the industry and in the legal community to assist us in tackling this issue head-on."

"Piracy's deep penetration into the Chicago software market is alarming, as evidenced by the number of lawsuits filed," said Jerry Kaczorowski, systems sales manager for Kissane Business Systems. "The unfair advantage that software pirates possess will eventually drive honest resellers out of business, jeopardizing our livelihood and the livelihoods of the hundreds that our industry employs. We affirm our commitment to joining Microsoft and the software industry in its fight against piracy."

The companies were investigated based on tips to the Microsoft anti-piracy hot line, most of which are received from honest resellers or from customers who receive suspicious products. The lawsuits allege copyright violations and trademark infringement under federal statutes, and were all filed in the U.S. District Court for the Northern District of Illinois.

The first eight complaints allege that the following defendants distributed counterfeit copies of Microsoft® software:

• Computer Marketing Technology Inc. of Chicago allegedly distributed counterfeit copies of the Windows® 95 and Windows 98 operating systems, and Office Professional 97 (Civil Action No. 99C1304).
• Computer Plus Inc. of Batavia allegedly distributed counterfeit copies of Windows 95 and Office Professional 97 (Civil Action No. 99C1306).
• Risk Free Disks Inc. of South Holland allegedly distributed counterfeit copies of Windows 95, Windows 98, Office Professional 97 and Microsoft Mouse 2.0 (Civil Action No. 99C1303).
• EOS Technologies Inc. of Palatine allegedly distributed counterfeit copies of Windows 95 and Office Professional 97 (Civil Action No. 99C1301).
• FosTec Computers Inc. of Gurnee allegedly distributed counterfeit Office Professional 97. The company also allegedly hard-disk loaded Office Professional 97 and Windows 98 (Civil Action No. 99C1309).
• Logical Choice Computers Inc. of Chicago allegedly distributed counterfeit copies of Windows 95 and Office Professional 97 (Civil Action No. 99C1300).
• United Comtec Inc. of Des Plaines allegedly distributed counterfeit copies of the Windows NT® Workstation and Windows NT Server operating systems, and Office Professional 97 (Civil Action No. 99C1302).
• Worldwide PC Source Inc. of Woodridge allegedly distributed counterfeit copies of Windows 95 and Office Professional 97 (Civil Action No. 99C1305).

The other two complaints allege that the companies hard-disk loaded Microsoft software, a practice by which computer system builders sell PCs with illicit software preinstalled.

• Advanced Computer Systems Inc. of Niles allegedly hard-disk loaded Office Professional 97 and Windows 98 (Civil Action No. 99C1307).
• Lion Computer of Downers Grove allegedly hard-disk loaded Windows 95 (Civil Action No. 99C1308).

"Chicago's consumers and honest distributors alike are unfairly exposed to the harmful effects of software piracy and other forms of intellectual property theft," said Roberta Rosenthal Kwall, a professor at DePaul University College of Law whose expertise includes copyright and trademark laws. "Chicago's legal community must work with other government agencies and the software industry to ensure that laws evolve to keep pace with advancing technology, and that appropriate penalties are established for software pirates."

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.

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 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 should 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 are 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.

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