Microsoft Takes a Bite Out of Software Fraud on the Internet

Company Files Lawsuits for Distribution of Counterfeit Software on Auction Sites To Help Protect Online Consumers During Holiday Shopping Season

REDMOND, Wash. -- Dec. 8, 1999 - Microsoft Corp. today announced that it has helped make holiday Internet shopping safer for millions of consumers by filing legal actions and asking for injunctions ordering defendants in six different states to stop offering and distributing counterfeit Microsoft® software. The defendants in each lawsuit use the Internet as a primary forum for distributing counterfeit Microsoft software. Three of them operate by offering illegal software via Internet auction sites. Others offered counterfeit software to consumers over a variety of Web sites, while at least two relied heavily on advertising through mass unsolicited e-mail.

Software is one of the leading products distributed online and, according to a report published by International Data Corp., the worldwide market for electronic software sales will reach $3.5 billion in 1999. The Business Software Alliance, a software industry trade association, estimates that there are 840,000 Internet sites selling illegal software as genuine product. Many consumers who acquire software over the Internet never receive the programs they paid for. Others are not able to get their money back if they discover that the software they acquired is counterfeit. Disreputable Internet businesses often quickly vanish, leaving behind hundreds of dissatisfied consumers.

"Unfortunately I was among the thousands of consumers who unknowingly obtained counterfeit software from the Internet this year," said Denise Flatt of Olympia, Wash. "What looked to be a great deal at an online auction site turned out to be too good to be true. Although I learned my lesson the hard way, I am glad to know that companies like Microsoft are educating consumers on the prevalence of counterfeit software on the Internet and what signs they can look for to avoid making the same mistake I did."

In addition to distribution of counterfeit software, it is believed that two of the Internet businesses, Capital One CDRom Warehouse and KT Services, sent unsolicited e-mail to millions of consumers throughout the world attempting to pass off fake software as genuine. Capital One is also alleged to have deceived customers by disguising the origin and source of the e-mail or forging the e-mail header and making it untraceable.

Microsoft investigated these companies as a result of thousands of tips to the Microsoft anti-piracy hot line, most of which were submitted by honest resellers or consumers who have received suspicious products or materials. The following complaints have been filed:

• Abu Salahuddin of Morgantown, W.Va., for alleged distribution of counterfeit Office 97 Professional Edition via Internet auctions.
• Capital One CDRom Warehouse aka Internet Marketing of Corpus Christi, Texas, for alleged distribution of counterfeit Office Professional 97 via mail as advertised through mass unsolicited e-mail.
• KT Services aka Vantage Software, Pacific Ventures of Los Angeles for alleged distribution of counterfeit Microsoft Windows® 98 operating system and Office Professional 97 via various Web sites as advertised through unsolicited e-mails. www.vantages.com, http://www.softwareselect.com/, http://mall5.register.com, www.cdsales.com, www.ebiz5.com, www.kts1.com, http://www.cheapy.net/, http://208.12.66.216, http://63.68.194.43, http://63.68.194.44
• Martin Johns of Fond Du Lac, Wis., for alleged distribution of counterfeit Office Professional 97 via Internet auctions. NC Software/Kent Bishop of Wilmington, N.C., for alleged distribution of counterfeit Windows 95 and 98 and Office Professional 97 via Web sites and Internet auctions. http://store.yahoo.com/ncsoftware/
• Software Blowouts and Arthur Young of Hackettstown, N.J., for alleged distribution of counterfeit Office Pro 97 via various Web sites. http://www softwaremadness.com, http://www.nationalsoftware.com/, http://www.bargainsoftware.com/, http://www.softwareblowouts.com/

"Internet piracy is growing nearly as rapidly as the Internet itself, and it is severely harming consumers and their confidence in feeling safe to conduct legitimate business online," said Tim Cranton, corporate attorney in charge of Microsoft's Internet piracy efforts. "There is a possibility that this problem could spiral out of control, and we need consumers to help us hold back the floodgates by being knowledgeable online shoppers."

Customers who acquire counterfeit software could find that, in addition to the increased potential for viruses, such software may be missing key elements, including software code, which could render the program unusable. Customers with pirated software are also ineligible for technical support, warranty protection or upgrades. By spending money on counterfeit software, customers also are inadvertently contributing to the loss of tax revenue and employment. In 1998 software piracy accounted for losses amounting to nearly $1 billion in taxes and 109,000 jobs in the United States.

When dealing with software vendors over the Internet, consumers should beware of the following:

• Companies or individuals unwilling to verify their identity or full business name or provide a physical street address and telephone number for follow-up after the transaction has occurred
• Online distributors unwilling or unable to provide adequate or satisfactory descriptions of their return, service or warranty policies
• Online distributors that offer unusual inventory explanations (e.g., special deals with the software publisher, liquidated inventories or acquisition through bankruptcy sales)
• Vendors offering software products at prices and in packaging inconsistent with offerings through legitimate retail channels. If the price seems too good to be true, it probably is.
• Vendors offering OEM software alone, without the sale of a new computer. OEM product bought separately from a new computer is illegal.
• For Microsoft software, software components being sold solely as a CD housed in a jewel case or as a loose or individual end-user license agreement, because these items are not distributed in this form through legitimate channels

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.

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