Microsoft Steps Up Intellectual Property Protection in Maryland

Microsoft Files Legal Actions Against Five Local Businesses for Allegedly Distributing Counterfeit Software

REDMOND, Wash., March 29, 2000 — Microsoft Corp. officials today announced that the company has found an even greater need to protect consumers, honest resellers and the value of intellectual property in Maryland. Microsoft's most recent efforts uncovered five Maryland computer resellers that have allegedly distributed counterfeit and infringing Microsoft® software and/or end user license agreements.

Software Piracy's Impact on Maryland

In March, the U.S. Labor Department released its 1999 fourth-quarter productivity report, estimating that the increase of 6.1 percent was the largest in the past seven years. This increase in worker productivity is widely attributed to ongoing advances in the computing and technology industries. In Maryland alone, the high-tech industry employed more than 97,000 people and doled out wages of more than $5.4 billion, according to a 1997 study by the American Electronics Association. Maryland ranks 15th in the United States in high-tech employment and ninth highest in average high-tech wages. High-tech products also represent 34 percent of Maryland's total exports. This productivity and growth is threatened, however, by the persistence of software piracy; in Maryland, nearly one in five desktops is running pirated software.

Nationwide, software piracy is having a significant impact on state and local economies. According to a study by International Planning & Research Corp., software piracy in Maryland cost the state $27.9 million in taxes in 1998 and more than 3,310 jobs, which translates to more than $143 million in lost wages that same year.

"Software piracy has a large impact on Maryland's economy and its citizens," said Nick Psyhogeos, a corporate attorney at Microsoft. "As a software developer, we will continue to work with local government, state agencies and industry associations to make consumers aware of the substantial negative impact of software piracy and the risks that accompany pirated software programs that are being offered in the marketplace."

Counterfeit Software Distribution in Maryland

Tips called in to Microsoft's anti-piracy hot line by customers or resellers who have obtained suspicious software and/or received suspicious advertisements initiate most of Microsoft's investigations into the distribution of pirated software. Microsoft customarily notifies a company in writing that it is suspected of acting illegally, asks the company to stop the illegal activity, establishes whether the activity has continued, and then determines whether legal action is necessary.

"It's astounding to think about how much software piracy has affected our business and our customers who unknowingly receive counterfeit software from competitors," said Maury Weinstein of System Source, a Baltimore-area systems integrator. "We lose a lot of valuable business, and customers lose the right to tech support and could even be getting faulty software that simply doesn't work. My experience is that consumers without properly licensed products are demoralized because they cannot turn to Microsoft and System Source for support and version upgrades."

All five of the lawsuits allege copyright violations and trademark infringements due to the alleged distribution of counterfeit copies of Microsoft software or software components to investigators and/or customers. Two of the cases also allege that the defendants distributed either counterfeit end-user license agreements or computer systems after hard disk loading, the practice of loading unauthorized copies of software onto the hard drives of computers that are sold to customers. The lawsuit against Integrated Computers Electronics Inc. of College Park further alleges that the defendant violated a previous court order where it had agreed, as part of a previous settlement agreement with Microsoft, to a permanent injunction regarding its distribution of counterfeit Microsoft software.

The legal actions were filed in the U.S. District Court for the District of Maryland against the following companies:

• Expert Computer Technology Inc. of Catonsville allegedly distributed counterfeit Microsoft Windows® 95 and Office 97 Professional Edition; hard disk loaded Office Pro 97 and Windows 95 and, despite receiving four cease-and-desist letters, distributed counterfeit components of Office 2000 (Case No. AMD00CV842).
• Integrated Computers Electronics Inc. of College Park allegedly distributed counterfeit Office Pro 97 in violation of a permanent injunction (Case No. AMD00CV844).
• Micromatix.Net of Baltimore allegedly distributed counterfeit components of Office Pro 97 and Office 2000 (Case No. AMD00CV876).
• Opal Technologies Inc. of Columbia allegedly distributed counterfeit components of Office Pro 97 (Case No. AMD00CV843).
• PC Micro Dealers Co-Op. Inc. of Baltimore allegedly distributed counterfeit components of Office Pro 97 and counterfeit Office Pro 97 end-user license agreements (Case No. AMD00CV841).

"Piracy has become an increasingly large problem for honest resellers in Maryland and across the country," said Jeff DiBella of Information Integration Inc., a Maryland-based computer and software wholesaler. "As a business that distributes hardware and software to resellers, both we and our honest reseller customers find it exceptionally difficult to compete with resellers who are distributing counterfeit software at artificially low prices. We think it's a great thing that Microsoft is taking steps to stop these businesses from distributing counterfeit software."

New Anti-Piracy Features and Warning Signs

With the launch of the Microsoft Windows 2000 operating system, Microsoft announced the implementation of new anti-counterfeiting features - including an edge-to-edge CD-ROM hologram to make it easier for customers to identify genuine copies of Windows 2000 and the upcoming service release of Office 2000. In addition, a new Certificate of Authenticity (COA) label that has more security features than any currency in the world will be included on the tower of all new PCs sold with Windows 2000. Other signs that can help consumers and resellers identify counterfeit or illegal software include:

• 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

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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