Microsoft Takes Action Against Five Resellers in Arizona and New Mexico For Alleged Distribution of Counterfeit Software

Piracy Rates Exceed National Average for Both States

PHOENIX -- March 2, 2000 -- Microsoft Corp. today announced that it has filed software piracy lawsuits against two companies in Arizona and three in New Mexico. The lawsuits, alleging copyright violations and trademark infringements, were filed against businesses in both states for allegedly distributing counterfeit and/or infringing Microsoft® software. The lawsuits aim to protect customers and legitimate distributors from the effects of software piracy.

"Consumers are being duped by companies that sell software at suspiciously low prices. They're throwing good money at software that isn't worth anything," said Ann Ting, owner of Transource Computers. "Consumers who purchase counterfeit software do not own a license and are therefore not eligible for technical support or product upgrades - and may receive software that is missing critical software code. We are dedicated to educating our customers about the impact of software piracy and appreciate all software companies that are working to educate consumers about this as well."

The average piracy rate in the United States is 25 percent, which means that one in four computers are running pirated software. Arizona has a piracy rate above the national average at 31.8 percent; New Mexico has a slightly higher piracy rate of 33.0 percent. In 1998, software piracy cost the states an estimated 3,300 jobs, according to a recent study by International Planning & Research Corp. The study indicates that these unrealized jobs equate to nearly $63 million in lost wages and salaries in Arizona and more than $32 million in New Mexico. Furthermore, the drain on tax revenues from piracy in the two states amounted to nearly $22 million - money that otherwise could have contributed to local and state improvement projects.

"Arizona's economic prosperity is due in large part to the technology industry," said Chris Gordon, executive assistant of information technology for the State of Arizona. "Because software piracy has the ability to damage our state's thriving economy, we must all work together to combat it."

Software piracy has a significant impact on state and local economies across the country, as well as throughout the world. According to a study by Nathan Associates commissioned by the Business Software Alliance (BSA), software piracy cost the national economy 109,000 jobs, $4.5 billion in wages and nearly $1 billion in lost taxes during 1998.

Most of the Arizona and New Mexico businesses named in the complaints were investigated as a result of tips to Microsoft's anti-piracy hot line. These tips are typically phoned in from resellers or consumers who acquire suspicious software. According to allegations, each of the defendants continued to distribute unauthorized Microsoft software even after receiving a written request from Microsoft to stop unlawful activities.

Wade C. Fink is also linked to a seizure of counterfeit software by the Australian Customs Service. In that case, an Australian importer ordered software from Wade C. Fink via the Internet at wfink@doitnow.com. The counterfeit software was intercepted by Australian Customs before it reached the importer and was identified by Microsoft as counterfeit. Australian Customs seized the software and the importer agreed to forfeit it.

The explosive growth, ease of use and anonymity of the Internet have made it easier for pirates to sell and distribute counterfeit and otherwise illegal software. Consumers in the United States and around the world need to exercise caution when buying software online.

All of Microsoft's lawsuits allege that the defendants distributed counterfeit and/or infringed copies of Microsoft software or software components to investigators and/or customers. The complaints are as follows:

Filed in the United States District Court for the District of Arizona:

• Intergalactic Inc. (dba Bookman's Used Books and Music), located in Mesa and on the Internet at www.bookmans.com, allegedly distributed counterfeit components of Microsoft Office Professional 2000 and Office Professional 97 (Case No. CIV 00 0367 PHX LOA).
• Wade C. Fink (dba ebuyitnow.net), located in Phoenix and on the Internet at www.ebuyitnow.net, allegedly distributed counterfeit components of Office Professional 2000 and Office Professional 97 (Case No. CIV 00 0368 PHX EHC).

Filed in the United States District Court for the District of New Mexico:

• Alternative Computing Solutions Inc. of Farmington allegedly distributed counterfeit components of the Microsoft Windows® 98 operating system and Office Professional 97 (Case No. CIV 00-0279).
• CRC Computer Technologies Group Inc. of Rio Rancho allegedly distributed counterfeit components of Office Professional 97 (Case No. CIV 00-0277).
• STS Systems & Solutions Inc. (aka STS Sykes Technology Solutions Inc.), located in Santa Fe, N.M., and on the Internet at www.sykestechnology.com, allegedly distributed counterfeit components of Windows 98, Office Professional 2000 and Office Professional 97 (Case No. CIV 00-0275).

"Throughout the distribution channel there are many people who provide legitimate software and great service. They need a fair, competitive playing field in order to survive and prosper," said Anne Murphy, corporate attorney for Microsoft. "Microsoft is working to combat software piracy through education programs and enhanced security features, and by taking legal action against those who distribute counterfeit software."

Through the implementation of new anti-counterfeiting features, Microsoft is taking steps to make counterfeit software easier to spot and to assist honest resellers and OEM system builders in distributing genuine software.

Microsoft has recently announced new anti-counterfeiting features for Windows 2000, including an edge-to-edge CD-ROM hologram and a new Certificate of Authenticity (COA) label. These features will make it more difficult for counterfeiters to pass off counterfeit software as genuine to unsuspecting customers.

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"
• Suspicious methods of delivery and/or payment
• Retail software distributed in jewel cases only, rather than in full-color retail boxes
• Software marked with a phrase, such as "For distribution with a new PC only" or "Special CD for licensed customers only," that does not describe the transaction. These phrases are often used to dupe customers into purchasing counterfeit software.

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 by sending e-mail to software@bsa.org.

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