Microsoft Files Software Piracy Complaints Against Five New York Businesses

Company Pledges to Protect State's Consumers and Honest Distributors

REDMOND, Wash. - Aug. 18, 1999 - Microsoft Corp. today announced that it has filed software piracy lawsuits in New York as part of the company's continued commitment to protect legitimate distributors and customers from the negative effects of software piracy. The lawsuits, filed against five businesses in the New York metropolitan area, allege the illegal distribution of counterfeit software, unlicensed software on computers sold or counterfeit software licenses. One of the lawsuits involves alleged violations of a previous settlement agreement with Microsoft.

"The distribution of illegal software not only takes hundreds of thousands of dollars away from honest software resellers, but also makes it difficult for legitimate software resellers to compete," said Robert Morse, president of Morse Micro Solutions Inc., a hardware and software reseller. "We support Microsoft's legal actions against unscrupulous companies and their attempt to level the playing field for law-abiding businesses."

Most of the businesses named in the complaints were investigated as a result of tips to the Microsoft anti-piracy hot line, which typically are phoned in from honest resellers or from consumers who receive suspicious products. According to allegations in the complaints, each of the defendants continued to distribute unauthorized Microsoft® software even after receiving a written request from Microsoft to stop unlawful activities.

Three of the lawsuits allege that the defendants distributed counterfeit copies of Microsoft software to investigators. Two of the cases allege the distribution of computers to investigators after hard disk loading, the practice of loading unauthorized copies of software onto the hard drives of computers to be sold. One of the cases also alleges the distribution of counterfeit software licenses to a customer. The lawsuit against Data Wheel Computer Inc. of Flushing, N.Y., further alleges that Data Wheel Computer Inc. violated a previous settlement agreement with Microsoft whereby it agreed not to infringe upon Microsoft copyrights and trademarks. The complaints are as follows:

Filed in the United States District Court for the Eastern District of New York:

• Beat Street Electronics of Brooklyn allegedly distributed counterfeit Microsoft Windows® 95 and Windows 98 operating systems and components of Office 97 Professional Edition (Case No. 99 Civ. 4698).
• First Communications Technology Development Corp. of Brooklyn allegedly hard disk loaded Windows 98 and Office 97 Professional (Case No. 99 Civ. 4699).
• Data Wheel Computer Inc. of Flushing allegedly hard disk loaded Windows 98 and Office 97 Professional in violation of a settlement agreement (Case No. 99 Civ. 4697).

Filed in the United States District Court for the Southern District of New York:

• Deep Discount Software of Manhattan allegedly distributed counterfeit components of Office 97 Professional (Case No. 99 Civ. 8904).
• PC Computer Solutions of Manhattan allegedly distributed counterfeit components of Office 97 Professional and counterfeit end user license agreements (Case No. 99 Civ. 8905).

The software industry lost more than $11 billion in revenue worldwide to software piracy in 1998, according to a recent Business Software Alliance (BSA) study. The United States' piracy rate of 25 percent cost its software industry more than $2.9 billion in revenue during the same year.

"The software industry in the New York metropolitan area has become a substantial economic force and greatly balances our economy, which has been heavily reliant on the financial sector for so many years," said Bruce E. Bernstein, president of the New York Software Industry Association. "Unchecked, software piracy can significantly diminish the growth of this emerging industry."

"New York's higher-than-average piracy rate has an extremely negative effect on the state's economy," said Nick Psyhogeos, corporate attorney at Microsoft. "During 1997, New York lost more than $860 million in combined wages, tax revenues and retail sales to piracy. Our core goals are to lessen the impact that software piracy has on both state and national economies and to protect consumers from the risks and harm of pirated software."

Microsoft has announced that it will donate an estimated $25 million over the next five years - half of its software piracy recoveries during that time period - to nonprofit organizations worldwide. These funds will be donated to a variety of groups focused on providing access to technology for disadvantaged communities, as well as to select academic institutions to promote innovation, entrepreneurship and creativity in the fields of science and technology.

Microsoft cautions that consumers who acquire pirated software could find, in addition to the increased potential for viruses, that such software is missing key elements such as user manuals, product identifications, Certificates of Authenticity, end user license agreements and even software code. Customers with pirated software are also ineligible for technical support or upgrades. Microsoft continually researches the viability of new anti-piracy technologies, such as the holograms on the hub of Windows 98 and Office 2000 CD-ROMs, to maintain the integrity of the distribution channel and reduce the costs of piracy.

Consumers and resellers 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"
• 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 of inferior quality
• Software 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
• Microsoft OEM Windows 98 or OEM Office 2000 that is not accompanied by a user manual that incorporates a Certificate of Authenticity as the cover, as well as backup media and an end user license agreement that is visible on-screen when the programs are first run

Customers or resellers with questions about the legitimacy of Microsoft software 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.

About Microsoft

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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