Microsoft Works Hand-in-Hand With Government Agencies in Combating a $2.8 Billion Per Year Piracy Industry

States and cities across the U.S. follow a national example in confronting the costly problem of counterfeit software.

REDMOND, Wash., Nov. 29, 2000 — Even though the 2000 election season has undoubtedly earned its place in history as one of the most dramatic ever, one issue has managed to hold its place on the political horizon through all the ups and downs -- software piracy. Throughout the election, both major presidential candidates discussed software piracy and the need to protect intellectual property, calling attention to the severe impact counterfeiting and piracy has on local economies.

According to a 1999 study by International Planning & Research, the nation's software piracy rate is at 25 percent. That means that one in four software applications used throughout the country is illegal. The manufacturing and sales of counterfeit software has evolved into a $2.8 billion per year industry in the United States alone. Worldwide, it is estimated that the counterfeit software industry costs close to $13 billion per year in lost jobs, wages and tax revenues.

Government agencies are especially prone to acquiring counterfeit software, as a result of the low bid procurement process, which makes them prime targets for outfits that manufacture and sell illegal software.

To address the problem -- and to make sure it remains a prominent issue on the public's radar -- Microsoft is working with government agencies across the nation to help call attention to the bite that software piracy takes out of local economies. Software piracy robs cities and states of money that could otherwise be used for state and local improvement projects.

In addition to President Clinton's 1998 executive order requiring federal agencies to use legal software, governors in Arkansas, California, Colorado, Hawaii, Nevada, New Hampshire and Washington have followed President Clinton's lead in issuing their own anti-piracy orders committing their state agencies to acquire and use only genuine software products. Michigan's Governor Engler recently signed a month-long anti-piracy Executive Declaration for his state. Moreover, "no-piracy proclamations" have been issued by the mayors of Cincinnati, Phoenix, St. Louis, San Diego and San Francisco. Mayor Martin O'Malley of Baltimore signed a proclamation declaring November as Software Truce Month.

While the business of selling illegal software is as complex as any other organized crime, the primary reason for targeting the public sector is relatively simple.

"Government agencies themselves tend to be the victims of resellers of counterfeit software because, often through their procurement process, they are required to accept the lowest bid," says Janice L. Block, a corporate attorney with Microsoft's Central region in Chicago. "When you're dealing with software, any packages that are for sale noticeably below market value are suspect."

When a public agency mistakenly acquires counterfeit software, it may save money initially, but once it realizes the error -- and the serious potential risks -- replacing it with legitimate software immediately becomes a priority. No government agency wants to spend taxpayers money on illegal software. Moreover, no government agency wants to risk its critical data to bogus, and often virus-ridden, software.

Paying for legitimate software to replace counterfeit software is an expensive proposition. One that, in the case of public agencies, according to Block, will ultimately be paid for by the public. "The high-tech industry is a driving force behind our nation's economic prosperity, and when software is distributed illegally, it costs citizens money and jobs," she says. "It's not just the software developers -- everyone gets hurt."

Block says that Microsoft has made a commitment to working closely with organizations across the country to enhance anti-piracy efforts specifically for government agencies.

"As a leading software publisher, we take our role in protecting consumers of software products seriously," she says. "We have a duty and obligation to protect our consumers, honest resellers and local communities. By working arm-in-arm with customers, partners and government officials, including those in law enforcement, we are moving toward stamping out this problem."

Government Agencies Take Action to Preserve Economic Health

In Michigan, 1999 was a profitable year for the counterfeit software industry, and a costly one for the state. In one year alone, Michigan lost nearly $283 million in retail sales, $180 million in wages and salaries and $57 million in tax revenues. The state also suffered the loss of 3,580 jobs.

"Counterfeit and other forms of pirated software expose consumers -- including state departments and agencies -- to the risk of computer viruses, reduced technical support and other problems that prevent the efficient operation of information systems," says Michigan governor John Engler, who issued an executive declaration that made November "Computer Software Piracy Awareness Month."

"Software piracy has had a serious, chilling effect on creativity, innovation and profitability in Michigan's high technology economy," Engler says.

And high technology, Engler explains, plays an important role in the overall fiscal health of the state.

"High technology jobs are high-paying, with the average Michigan high technology worker earning nearly $50,000 per year. These are high-wage, high skill and high demand 'gold collar' jobs for Michigan residents," he says. "The positive impact of high technology in Michigan does not end with workers, but extends to the businesses that provide goods and services to technology companies, resulting in an overall impact of 188,000 jobs and more than $6.9 billion in wages."

At the city level, government officials have also taken steps to thwart software piracy, raise awareness of its negative impact on the economy, and protect citizens through the signing and implementation of anti-piracy proclamations.

"I am proud to affirm the actions that Microsoft has taken in order to protect both businesses and consumers from software piracy by declaring November 28, 2000 'Anti-Piracy Day' in the City of Cincinnati," said Cincinnati Vice Mayor Minnette Cooper.

"Software piracy cost the state of Ohio 4,129 jobs last year alone," she adds. "Combined financial losses for Ohio -- including wage and salary, tax revenue and retail dollars for business software -- amounted to more than $302 million in 1999, due to software piracy. That's money that could be used for supporting education, improving roads and traffic congestion or for leveraging private dollars for economic development."

Working to Protect Consumers and Promote Innovation

In addition to working with industry and agency leaders worldwide, Microsoft offers services through its Anti-Piracy Business Desk, a service designed to help customers avoid the pitfalls of counterfeit software. The desk aims to respond to questions or concerns about software piracy within 48 hours of being contacted, and can be reached at 800-RU-LEGIT (785-3448).

The goal of the service, according to Block, is to educate customers about the severe negative impact that counterfeit software will almost certainly have on a business or government agency.

"The Anti-Piracy Business Desk serves as a link between buyers and sellers to ensure that everyone's getting legitimate software," Block says, adding that resellers have stepped up to offer their assistance in the process. "The desk has been a very successful resource."

Block says Microsoft will continue to work with government agencies to diminish and, ultimately, eliminate the proliferation of software piracy.

"It's reassuring to see the government serving as a role model for its citizens," she says. "Whenever our laws are at stake -- such as U.S. copyright laws, which protect against copyright infringement -- it's important that our very own government create an awareness of how important it is to abide by our nation's laws."