Software Piracy Robbed Indiana's Economy of More Than $200 Million

Microsoft Announces Over 3,700 Jobs Lost to Piracy

INDIANAPOLIS - April 12, 1999 - Microsoft Corp.'s Indianapolis office today released statistics revealing that software piracy cost Indiana more than 3,700 jobs and $200 million in combined lost wages, tax revenues and retail sales in 1997. The data also showed that Indiana's piracy rate of more than 33 percent is higher than the national average of 27 percent.

The information was released as part of an educational effort to raise awareness that software piracy - the theft of software through unauthorized installations of genuine programs or through counterfeiting and distribution of imitation products - adversely affects local businesses and economies, as well as the value placed on people's ideas. International
Planning & Research Corp. (IPR) of Redmond, Wash., 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 Indiana.

"It is appalling that more than one in every three software programs on Indiana's computer desktops is pirated," said Jeff Chamberlain, director of the Indiana Information Technology Association. "Our local economy is increasingly dependent on the contributions made by Indiana's software industry. We must unite against piracy to allow unrestrained growth of the software industry and its correlating benefits to our communities."

Information gathered by the IPR also revealed that software piracy robbed the state of $20 million in state and federal taxes, which could have instead contributed to essential state services and improvement projects. Indiana workers did not fare well either as evidenced by the more than 3,700 jobs lost to software piracy in the state, representing more than $96 million in wage and salary losses. The wage and salary losses in Indiana 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.

"Software piracy is against the law, just like stealing a car or other property," said Fred Cate, an internationally recognized information law attorney and professor at the Indiana University School of Law in Bloomington. "It not only harms the software publisher, but also inhibits creativity and the development of new high-tech products and drags down one of the fastest-growing segments of the economy."

"It is critical that Indiana join the other states that are cracking down on software piracy by vigorously enforcing the laws against making illegal copies of software and by seeking strict penalties against those who violate them," Cate said.

"The awareness campaign aims to show software piracy's impact on the state, in addition to stressing the importance of acquiring legal and licensed software, especially for small and medium-size companies," said Paul Houghton, general manager for Microsoft's Midwest district. "Businesses that engage in piracy knowingly or unknowingly are compromising their information systems and their eligibility for technical support and upgrades, which unfortunately may become more apparent with the advent of year 2000."

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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