Busted: Microsoft's Anti-Piracy Blitz

Claiming a more than 100 percent increase in reports from people who unknowingly purchased counterfeit software, Microsoft Corp. (www.microsoft.com) has announced Consumer Action Day, a simultaneous launch of education initiatives and enforcement actions in more than 70 countries to “help protect consumers and increase awareness of the risks of counterfeit software.” The company reports more than 150,000 voluntary reports have come in over the past two years, many of which figured in the enforcement cases announced this week.

It's been a busy week for Microsoft, with hundreds of enforcement actions. "There are 300 and more than 50 percent of the cases were referred to us by customers," says David Finn, associate general counsel for Microsoft anti-piracy.  

In the U.S., legal actions were launched against 18 companies for selling pirated software preloaded on PCs, based on responses from more than 1,000 people. In Canada, two civil lawsuits were filed, and concluded another 12 out-of-court settlements.

It’s an action welcomed by some solution providers, who say they’ve been losing out selling on price to those selling illegitimately.

Ramon Sykes, president of Atlanta-based reseller Software More, Inc., says software piracy hurts everybody in the channel. His company sells to the Fortune 500, schools and the federal government, and Microsoft products account for more than half of his sales.

"We've noticed that particular companies were selling well below mainstream distribution costs. We did a couple of undercover buys and discovered they weren't selling what they were advertising they were selling." So Sykes contacted Microsoft who went after these companies.

While it has cost his company sales, he believes it's an even greater problem for the majority of small solution providers. "We're a small business, in business since 1996. I've seen a lot of my competitors go out of business because they couldn't compete with resellers that weren't legitimate."

Piracy is a significant problem, he says.

"Piracy is rampant. Vendors are doing what they can, but they need to be more aggressive. There needs to be more prosecutions, not just filing suits."

The cost to the channel can be significant, according to various reports. In October IDC produced its annual study on the economic impact of IT, software and the Microsoft ecosystem, illustrating why software piracy is a big concern for Microsoft and the channel at large. The study covered the 52 countries that account for 98 percent -- $1.414 trillion -- of total IT spending in 2009, and packaged software represents 21 percent of that number. Nearly 700,000 hardware, software, services, and channel firms make up the Microsoft ecosystem in these countries and for every unit of revenue – dollar, euro, peso, etc. – that Microsoft will earn in 2009, other companies will earn 8.70.

Couple that with another recent Microsoft study on software piracy, and the true costs become clearer. According to the UK study, counterfeit software was discovered within a significant portion – 37 percent -- of the midsize businesses reviewed. Microsoft states that all of the counterfeit software found was high-quality, which points to an increase in sophistication on the part of counterfeiters. Because the businesses had purchased the software in good faith, they were surprised to find that the software was not genuine. The companies spent on average $10,222 on these purchases.

The Consumer Action Day initiatives include an intellectual property rights education program in schools across China, an originals club for software resellers in Germany, a risk-of-counterfeit training course for the consumer protection authority in Mexico, a children's online safety program in Greece, and a study of piracy's impact on small and midsize businesses in Argentina.
As part of Microsoft's enforcement efforts, it has invested in nine Product Identification (PID) Analysis Labs where forensic experts examine counterfeit software and provide information to local law enforcement agencies. That's resulted in more than 1,000 customs border patrol seizures of counterfeit software in just over two years.


 

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