Software Piracy Drained More Than $440 Million From Ohio Economy

Microsoft Announces 6,100 Jobs Lost to Software Piracy

CLEVELAND - April 1, 1999 - Microsoft Corp.'s Cleveland office today released statistics revealing that Ohio lost more than 6,100 jobs and $440 million in combined wages, tax revenues and retail sales in 1997 as a result of piracy in the state's software industry.

The economic data was released as part of an effort to raise awareness that the detrimental effects of software piracy - the theft of software through unauthorized installations of genuine programs or through counterfeiting and distribution of imitation products - reach further than just the software industry. The data was supplied by International Planning & Research Corp. of Redmond, Wash., which utilized data from a 1997 international piracy study published by the Business Software Alliance (BSA) and the Software Publishers Association (SPA) along with additional data and analysis of piracy in Ohio.

"Most people don't realize that the act of copying software onto more machines than a license allows sets off a chain reaction that ultimately harms Ohio's honest resellers as well as the local economy," said attorney Mark Pomeroy, a partner at Columbus-based Bricker & Eckler LLP who specializes in information technology, network access and intellectual properties law. "We need to ensure people understand that when they engage in software piracy they are stealing intellectual property, the protection of which is critical to advancing creative thought in this digital age."

Higher than the national average of 27 percent, Ohio's piracy rate of almost 29 percent indicates that nearly one in every three copies of software on Ohio desktops is illegal. Software piracy also robbed the state of more than $20 million in taxes, which could have instead contributed to state services and improvement projects. Ohio workers did not fare well either as evidenced by the 6,100 jobs lost to software piracy in the state, representing more than $182 million in wage and salary losses. The wage and salary losses in Ohio were calculated based on the Nathan Associates data for the United States with information from the BSA and SPA study on job losses in the core software and packaged business software industries. Job losses in the retail sector were also taken into account.

"The figures illustrate how the local technology industry can impact the entire state's economy," said Mary Oksas, anti-piracy manager of Microsoft's central region. "By supporting and maintaining the fight against piracy, we're aiming to ensure that the industry's contribution to Ohio's economy is strengthened."

"If left unrestrained, software piracy will continue to threaten honest software distributors, their employees and customers, and will further threaten an important source of employment for Ohio," said Doug Brennan, a Microsoft business development manager based in Columbus.

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 of Arlington, Va., commissioned by the 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.

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 Microsoft® Windows® 98 operating system 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 that 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. Resellers may obtain information regarding the Microsoft System Builder Program, OEM products and authorized distributors at http://www.microsoft.com/oem/. Customers and resellers can also obtain 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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