Microsoft Files Lawsuits in Washington For Alleged Distribution of Counterfeit Software

Software Piracy Strikes Industry and Customers Close to Microsoft's Hometown

REDMOND, Wash. - April 7, 1999 - Microsoft Corp. officials today announced that the company has cracked down on software piracy close to home by filing software piracy lawsuits against seven Washington resellers. The actions are part of the company's nationwide effort to more energetically protect legitimate software distributors and customers from the negative effects of software piracy.

"I appreciate any effort Microsoft can make to help educate customers on the pitfalls of pirated software and am pleased to see them taking action against resellers that continue to use piracy as a marketing tool to attract customers," said Matt Vasey, district manager for SoftChoice Corp., a software reseller with 28 offices throughout the United States and Canada that provides information technology products and services to small and midsize businesses. "SoftChoice has lost significant business to competitors that deliver counterfeit software or sell systems with preloaded pirated software, and the impact on smaller resellers must be devastating. The bottom line is that software piracy results in poor customer service, as well as higher prices and loss of business to companies that play by the book."

All seven complaints allege that defendants have distributed counterfeit Microsoft® software to undercover investigators. Three of the defendants have also been charged with hard disk loading, the practice of loading unauthorized copies of Microsoft software onto the hard drives of computers they sell. The lawsuits allege copyright violations and trademark infringement under federal law.

"It's hard to believe that so much counterfeit distribution is going on in the back yard of an area known worldwide for its contributions to the software industry," said Jim Harper, vice president of North American sales at Attachmate Corp., a Bellevue, Wash.-based provider of host access management solutions and the newest member of the Business Software Alliance. "It is time that we turn our attention to our own state. By placing more value on the intellectual property that is produced and sold here, we can work together toward the continued growth of our local software industry and support the innovations Washington state contributes to the global economy."

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

• ACI Micro Inc. of Seattle allegedly distributed counterfeit copies of and allegedly hard disk loaded Office Professional 97 (Civil Action No. C99-0475 JCC).
• Alpine Industries Computers Inc. of Spokane allegedly distributed counterfeit copies of the Windows® 95 operating system and Office Professional 97 (Civil Action No. CS 99-0087 WFN).
• Computers and Applications of Bellevue allegedly distributed counterfeit copies of and allegedly hard disk loaded Office Professional 97 (Civil Action No. C99-0478 WD).
• Compuwest Computers Inc. of Issaquah allegedly distributed counterfeit copies of Office Professional 97 (Civil Action No. C99-0480 JCC).
• Infotech Systems Inc. of Federal Way allegedly distributed counterfeit copies of and allegedly hard disk loaded Office Professional 97 (Civil Action No. C99-0476 WD).
• Now Max Corp. of Seattle allegedly distributed counterfeit copies of Office Professional 97 (Civil Action No. C99-0481 JCC).
• Soft Center of Seattle allegedly distributed counterfeit copies of Windows 95, Windows 98 and Office Professional 97 (Civil Action No. C99-0482 WD).

The lawsuits were filed in the U.S. District Court for the Western District of Washington, except for the Alpine Industries Computers complaint, which was filed in the U.S. District Court for the Eastern District of Washington.

"In Washington we have been forced to increase attention to the software piracy problem as it takes on a new shape due to the ubiquity of computers," said Anne Murphy, corporate attorney at Microsoft. "Legislators are making some progress in Olympia toward passing a Washington state anti-counterfeiting felony provision, and we will continue to work with government and the local software industry until we are able to better deter software pirates and make a significant dent in this problem."

EHB 1007, which would make counterfeiting in the state a felony, has passed the House and is now awaiting a recommendation by the Senate Judiciary Committee.

By the end of this year, Microsoft will have increased its anti-piracy spending worldwide to approximately $50 million. The company has more than 100 employees committed to increasing awareness about software piracy and its impact on customers and resellers, and hindering the continued growth of software counterfeiting.

According to a study released by the Business Software Alliance and the Software Publishers Association, more than one in every four copies of software used in the United States is illegal. Data gathered by International Planning & Research Corp. of Redmond, Wash., indicates that Washington's piracy rate of 22 percent deprived the state of at least 3,700 jobs and more than $719 million in combined lost wages, tax revenues and retail sales.

"There is an enormous need to educate people, particularly in small and medium-size businesses, about the importance of recognizing how to avoid acquiring illegal software and how to ensure license compliance," said Samir Bodas, director of worldwide anti-piracy efforts at Microsoft. "Such software already puts customers' information systems at risk and makes customers ineligible for upgrades and technical support. Unfortunately, having pirated software in a business will only become more hazardous as we roll closer toward the year 2000."

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.

Consumers are encouraged 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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