Microsoft Sues 26 Companies Over Allegedly Pirated Software

Published July 19, 2006

| Associated Press

Microsoft Corp. (MSFT) has filed 26 lawsuits accusing U.S. companies of selling pirated software, the latest move in its ramped-up efforts to boost sales by cracking down on illegal copies.

The world's largest software maker filed the lawsuits Friday in federal courts in Georgia, Illinois, Ohio, Colorado, South Carolina, New York and New Jersey. The lawsuits accuse the companies of selling illegal copies of its Windows operating system and Office business software.

The lawsuits are the latest in Microsoft's increasingly aggressive steps to curb piracy of its two flagship products — and cash cows — Windows and Office.

The company has begun widespread distribution of a program, called Windows Genuine Advantage, that checks whether users are running legitimate copies of Windows. And it scored a coup earlier this year when China agreed to crack down on piracy.

Redmond-based Microsoft still rakes in billions of dollars in profits from Windows, but the market is growing more saturated. That's left the company more eager to curb illegal copies, in the hopes those users will buy legitimate versions.

"We're worried about it because it does seriously affect our business, in the sense of people not paying for the research and development but reaping the benefits," said Mary Jo Schrade, a Microsoft senior attorney.

Schrade said the intent of the lawsuits isn't necessarily to recoup costs but instead to raise awareness and prevent further piracy.

Microsoft has long raised concerns about countries such as China, Russia and India, where piracy is thought to be rampant, but it has more recently increased its monitoring in the United States as well.

Schrade said that although the piracy rate is thought to be lower here than elsewhere, the sheer number of computers running Windows still makes it a big company concern.

Forrester Research analyst Ted Schadler said the company also may feel that it must crack down in the U.S. to boost its international efforts.

He said the company may be thinking, "If we don't mind our store at home, how can we ask the Indian government or the Chinese government to mind their stores?"

The 26 cases filed Friday were aimed at companies that sell Microsoft products to businesses and consumers.

In each of the cases, Schrade said Microsoft first sent a warning letter to companies it believed were selling pirated software. If the company continued the practice, Schrade said Microsoft filed a lawsuit.

But Chu Son, a co-partner in Denver-based Microcomp Solutions Inc., said he never received a warning letter before a lawsuit was filed accusing him of selling pirated Office copies.

Son, who settled 2001 charges over Windows sales, said his company mainly repairs computers and rarely sells Office. He believes the allegedly pirated copy came from a batch of 10 or 15 licenses he purchased on eBay (EBAY), which he believed were legitimate.

"I'm more angry than anything else that these guys, just because they're big and stuff, you know, they're just throwing their muscle around," he said.

Justin Harrison, whose company Sales International LLC was among those sued, also was indicted by a federal grand jury. The Oxford, Ga. resident is accused of selling certificates of authenticity that, the prosecutor says, were meant to vouch for software that was actually illegitimate.

Harrison's lawyer, Steve Sadow, said he hadn't seen the Microsoft lawsuit. But, responding to the federal charges, he said that his client was selling legitimate copies of Microsoft software obtained from legitimate sources.

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