Largest Counterfeit Software Seizure in U.S. History; Law Enforcement Breaks Highly Organized Counterfeit Software Supply Chain

Microsoft Praises Joint Efforts by State and Federal Law Enforcement

REDMOND, Wash., Nov. 16, 2001 — Today Microsoft Corp. officials applauded efforts of the Southern California High Tech Task Force, including the Los Angeles Sheriff's Department, the U.S. Customs Service, the Los Angeles Police Department, and the U.S. Secret Service, among others in executing the most significant raid and seizure of counterfeit Microsoft® software and components in U.S. history. A preliminary inventory of the seized products puts the estimated retail value at US$60 million.

In the 18-month undercover investigation run by the Customs Service, Microsoft investigators worked with the Southern California High Tech Task Force, to interrupt a major counterfeit software distribution pipeline that moved containers of counterfeit software and other illegal components by ship from Taiwan through the Port of Los Angeles.

"We are immensely appreciative of the collective efforts of law enforcement in breaking this case," said Rich LaMagna, manager of worldwide investigations for Microsoft. "At a time when our nation's economy is struggling, steps to protect intellectual property have perhaps never been more critical. We applaud the joint efforts of the agencies that make up the Southern California High Tech Task Force in stopping this highly organized criminal counterfeiting operation."

The joint investigative efforts resulted in the arrest of Lisa Woo Chen, a legal immigrant from Taiwan, in Los Angeles on Friday, Nov. 9. Chen, was arrested as she attempted to rent a vehicle for a trip to Las Vegas. At the time of her arrest, Chen was holding an airline itinerary for travel to Taiwan.

"Perhaps most disturbing is the high quality of the counterfeit products seized in this case," said LaMagna. "It is clear that this is a highly organized and well-funded counterfeiting operation. The quality of the illegal software was at a level where consumers would have a difficult time distinguishing it from genuine Microsoft software. This is serious, because illegal software holds no safeguards for consumers and is created to rob the economy of legitimate gains."

While a complete inventory is not yet available, Microsoft items seized included the following:

• Nearly 31,000 counterfeit copies of Windows® Millennium Edition (Windows Me) and Windows 2000 Professional operating systems
• More than 4,300 counterfeit Windows XP manuals
• More than 93,000 counterfeit certificate of authenticity (COA) labels for Windows Me, Windows 2000, Windows 98 and Office 2000 Professional
• More than 25,000 counterfeit End User License Agreements (EULAs) for various software products
• Thousands of jewel-case liners and packaging materials
• Several thousand counterfeit Windows 98 and Windows NT® manuals, including cover stock
• Thousands of counterfeit registration cards

Intellectual property-based industries are significant drivers of the nation's economic growth and long-term prosperity. Software and software-related services alone account for a $140.9 billion market, payment of $12.3 billion in taxes and the creation of more than 2.7 million jobs. However, software counterfeiting threatens the ability of the industry to maintain its significant contribution to the U.S. economy. According to a 2000 software piracy study by International Planning & Research Corp., software piracy resulted in the loss of 118,026 jobs in the United States, nearly $1.6 billion in tax revenues and $5.6 billion in wages. In California alone, the software piracy rate of 30.7 percent accounts for significant losses, including 14,869 jobs, $322 million in tax revenues and $869 million in wages.

Microsoft has applied anti-piracy technical measures to help consumers ensure that they acquire genuine Microsoft software. All new PCs purchased with Microsoft software preinstalled should have a new COA label attached to the system. This COA label has an embedded holographic design revealing the words "Microsoft" and "genuine." Retail versions of Microsoft software products also will include a COA label on the retail box. In addition, many retail versions of Microsoft software products, including Windows XP, Windows Me, Windows 2000, Office XP and Office 2000, include an edge-to-edge hologram that is etched into the entire surface of the CD.

Microsoft also has created the How to Tell Web site, http://www.microsoft.com/piracy/ . The site is designed to help consumers better distinguish between genuine and counterfeit Microsoft software.

Consumers who use counterfeit software may risk introducing harmful computer viruses into their system. Moreover, such software may be missing key code that could render it unusable. Consumers who acquire counterfeit Microsoft software are not eligible for technical support, warranty protection or upgrades.

Customers or resellers in North America with further questions on what features are included on genuine 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. Microsoft anti-piracy hot lines outside North America can be found at http://www.microsoft.com/piracy/reporting/piracy_out_us.asp . Additional information on piracy is available at Microsoft's anti-piracy Web site, http://www.microsoft.com/piracy/ .

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