Software Piracy Continues to Impact Communities Across the Country

Microsoft-Sponsored Study Shows That, Despite Decrease in National Average, 21 States Suffer From Rising Piracy

REDMOND, Wash. - Sept. 2, 1999 - Microsoft Corp. officials today announced the results of a state-by-state analysis of software piracy in the United States. The study shows that, despite increased attention to the issue from the government and industry, software piracy still has a severe impact on states and local communities. The software piracy rates increased last year in 21 states, including California and Virginia, where much of the recent growth in the technology sector has been fueled.

"Although we have made some gains in protecting intellectual property and reducing the impact of software piracy worldwide, criminal counterfeiting and the Internet have posed distinct challenges for Microsoft and the rest of the software industry in battling this issue," said Brad Smith, general counsel, Worldwide Sales and Support, Microsoft. "This year, through education of the risks and impact of software piracy as well as by taking action against companies and large-scale counterfeiters that repeatedly break the law and fracture the honest distribution channel, we will continue to increase efforts to thwart the distribution of illegitimate goods to consumers."

Some of the information revealed in the study, which was conducted by International Planning and Research (IPR), includes the following:

• The increased software piracy rates experienced by 21 states caused a loss in excess of $2 million in wages and salaries, over 56,000 jobs and over $500,000 in tax revenue.
• The 10 states with the highest wage, salary and tax losses due to software piracy were (in rank order) California, Texas, New York, Virginia, Massachusetts, Florida, Washington, Pennsylvania, New Jersey and Illinois.
• Total losses for the 10 most impacted states equaled approximately $3.5 billion, or
  57 percent of the nation's losses.
• Eight states had piracy rates over 40 percent: Alabama, Kentucky, Louisiana, Mississippi, Montana, Nevada, Utah and Wyoming.
• In 1998, tax losses due to software piracy increased by approximately $40 million over 1997.
• Twenty-nine states had piracy rates higher than the national average of 25 percent.
• Communities nationwide lost over a billion dollars in 1998 tax revenues.

"The software industry provides a tremendous source of employment, innovation and tax revenue for our country and could have propelled the economy even faster if not for the continuing presence of software piracy," said Rob McCord, president and CEO of the Eastern Technology Council. "By working with the software industry to educate our local communities, we have the ability to attack this problem."

Last year Microsoft filed actions against 168 resellers for distribution of counterfeit software and hard disk loading, the practice of installing pirated software on computers sold to consumers. In addition, the company has worked alongside law enforcement agencies to address criminal counterfeiting of Microsoft® software. More than 4.3 million units of counterfeit Microsoft software were seized in the last year alone, much of it from criminal operations with revenues in the millions.

Customers who acquire counterfeit software could find they are missing key elements including computer code, have an increased risk of viruses, and are ineligible for technical support or upgrades. By pirating software or spending money on counterfeit products, customers also are inadvertently contributing to staggering losses in the form of tax revenue and employment in an industry that has recently been responsible for much of the growth of the economy.

As a result, Microsoft has put systems in place to give back to many of the communities that have been harmed by software piracy. In addition to its other community affairs activities, the company will donate an estimated $25 million over the next five years - half of its software piracy recoveries - to nonprofit organizations focused primarily on providing access to technology in disadvantaged communities.

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.

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