$22 Million of Alleged Counterfeit Microsoft Software Seized in Pennsylvania

State Troopers, Following Leads About Stolen Laptops, Uncover Huge Worldwide Counterfeiting Operation

HARRISBURG, Pa., June 12, 2000 — Officials of Microsoft Corp. today applauded the Pennsylvania State Police for the investigation and discovery of a significant counterfeit distribution operation in Harrisburg, Pa. This operation allegedly distributed thousands of counterfeit and illegal copies of Microsoft® software. This company, doing business as Automated Distributing Inc. (ADI), 3913 Jonestown Road, Harrisburg, has alleged connections to a worldwide criminal enterprise. An arrest and charges of trademark and copyright infringement are pending.

The investigation and raid early Thursday recovered over 8,000 copies of alleged counterfeit Microsoft software, including Windows® 98, Office 97 Professional, Office 2000 Professional, Windows NT® Workstation and Server, and Microsoft Project 98, as well as more than 25,000 counterfeit End User License Agreements (EULAs). The estimated retail value of the alleged counterfeit software and EULAs is more than $22 million.

While investigating the theft of several state police laptop computers stolen recently at a conference, leads took state police to an individual at ADI. After conducting a software purchase from ADI and determining that the product was counterfeit, a search warrant led to the uncovering of more than 10 rooms stacked with software and DVDs -- enough to fill a 24-foot U-haul truck 3 1/2 times.

Supplementing the investigation undertaken by the Pennsylvania State Police, Microsoft had previously served several notices to ADI for offering counterfeit software via Internet web and auction sites. Microsoft reports they had received numerous citizen complaints about the company in recent months. Citizens complained of not receiving licenses with their products and not being able to register the software with Microsoft.

"Counterfeiting is one of the most pervasive and rapidly growing forms of software piracy in the country," said Richard LaMagna, senior manager of Worldwide Investigations for Microsoft. "The anonymity of the Internet has made it considerably easier for criminals like these to dupe unsuspecting consumers. When hidden operations like the one discovered in Harrisburg have links around the world, it makes it much more challenging for law enforcement officers to catch them."

"We applaud the outstanding work of the Pennsylvania state troopers involved in uncovering this piece of a massive counterfeiting enterprise," LaMagna continued. "Piracy operations like this harm consumers and rob Pennsylvanians of the economic benefits they deserve to enjoy from legitimate technology and software enterprises in their community."

Counterfeiting cases typically involve both copyright and trademark infringements. Under federal trademark law, criminal penalties include fines of up to $2 million and 10 years in jail per infringement. Federal copyright laws include fines of up to $250,000 and five years in jail per violation.

The Economic Impact of Piracy

According to an analysis by International Planning and Research Corp., during 1998, Pennsylvania lost 6,156 jobs due to software piracy, resulting in lost wages and salaries of more than $211 million. Pennsylvania's retail dollar loss to piracy for business software applications was in excess of $94 million in 1998.

Consumers Must Know Warning Signs

Consumers who acquire counterfeit software could find that, in addition to the increased potential for viruses, such software may be 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.

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

Prices that are "too good to be true"
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, such as 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
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.

About Microsoft

Founded in 1975, Microsoft (Nasdaq "MSFT" ) is the worldwide leader in software, services and Internet technologies for personal and business computing. The company offers a wide range of products and services designed to empower people through great software -- any time, any place and on any device.

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