Microsoft Files Its First Software Piracy Lawsuits in Michigan

Company Commits to Protecting State's Honest Distributors and Consumers

REDMOND, Wash. - March 23, 1999 - Microsoft Corp. officials today announced that the company has filed its first software piracy lawsuits in Michigan. The suits, alleging copyright violations and trademark infringement, were filed against six software distributors. A result of the company's ongoing anti-piracy investigations, the lawsuits are aimed at protecting Michigan's legitimate distributors and customers from the negative effects of software piracy.

"If the distribution of pirated software continues to grow, the effect on our business - as well as the businesses of many other honest resellers - will be devastating," said Tracy Walczak, software business development manager at Inacom, a software solutions provider with several branches in Michigan. "Software piracy casts a direct blow to our hiring abilities, our revenue and our livelihoods. We look forward to joining Microsoft and the rest of the software industry in their fight against software piracy."

In most cases, investigations are initiated by tips called in to the Microsoft anti-piracy hot line by honest resellers or customers who have obtained suspicious products. Microsoft customarily notifies the defendants that it suspects them of acting illegally and then determines whether the behavior has continued before filing a lawsuit.

The first five complaints allege that the following defendants distributed counterfeit copies of Microsoft® software to undercover investigators:

• Compusource Distributors Inc. of Bloomfield Hills allegedly distributed counterfeit copies of the Windows NT® Workstation 4.0, Windows® 98 and Windows 95 operating systems, and Office Professional 97 (Civil Action No. 99-71369).
• Your Software Source Inc. of Walled Lake allegedly distributed counterfeit copies of Office Professional 97 and Windows 98 (Civil Action No. 99-71373).
• Competitive Computer Systems Inc. of Ann Arbor allegedly distributed counterfeit copies of Office Professional 97 (Civil Action No. 99-71375).
• Michigan Micro Inc. of Royal Oak allegedly distributed counterfeit copies of Windows NT Server, Windows 95 and Office Professional 97.
• Sholly Computer Services of Jonesville allegedly distributed counterfeit copies of Office Professional 97 (Civil Action No. 1:99-CV-219).

The final complaint alleges that US Computer Exchange Inc. of Troy hard disk loaded Office Professional 97 software, a practice by which computer system builders sell PCs with illicit software preinstalled. The company also allegedly distributed counterfeit Office Professional 97 to an undercover investigator. All lawsuits were filed in the U.S. District Court for the Eastern District of Michigan, except for the Sholly Computer Services complaint, which was filed in the District Court for the Western District of Michigan.

According to a study released by the Business Software Alliance and the Software Publishers Association, more than one in every four copies of the software in use in the United States is illegal. Data gathered by the International Planning & Research Corp. of Redmond, Wash., indicates that Michigan's comparable piracy rate of more than 25 percent cost the state's workers approximately 5,200 jobs, translating into more than $186 million in wage and salary losses. In addition, the data shows that Michigan lost over $15.7 million in state tax revenues that could have instead contributed to local and state improvement projects.

Microsoft cautions that, in addition to the increased potential for viruses, consumers who acquire pirated products could find they are missing key elements, such as user manuals and product identifications, Certificates of Authenticity, end-user license agreements and even software code. Microsoft is continually researching the viability of new anti-piracy technologies, such as the hologram on the hub of the Windows 98 CD, to maintain the integrity of the distribution channel and reduce the costs of piracy.

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 should 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 (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.

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