Microsoft’s Piracy Lawsuits Draw Mixed Reactions

Microsoft Corp. this week announced piracy lawsuits against a second set of resellers and systems builders, a move that was applauded by some of the company’s Windows partners but raised a few eyebrows in the Linux and open-source community.

“We’re doing this because our honest resellers and systems builders need a level playing field on which to compete, so they can stay in place,” said Mary Jo Schrade, a senior attorney for Microsoft, in an interview with The Channel Insider.

In the latest batch of lawsuits, Microsoft filed charges against eight companies in seven U.S. states for alleged distribution of “counterfeit, illicit and unlicensed software and software components.”

Microsoft initiated similar legal actions against eight other resellers and systems builders in November. The first set of actions is still in various stages of “discovery,” or evidence-building, according to Schrade.

Beyond counterfeiting, some of the charges also involve allegations of “hard-drive loading,” or the practice of loading software onto a hard drive without giving the customer a software license and charging for that license.

Click here to read more about the earlier lawsuits.

Sean Dion, education sales director for TKO EDucation, of Westlake Village, Calif., said his company is among those victimized by rivals that perform hard-drive loading.

TKO EDucation, a division of TKO Electronics Inc., bases its business on loading fully licensed copies of Windows XP onto used, off-lease PCs, and selling the machines into the education market.

“We price our ‘legal solution’ at $349, much less than the $600 or $700 a school would pay for a [new] Dell OptiPlex, for instance,” Dion said. But meanwhile, a handful of competitors have managed to charge only $200 for “illegal solutions” resulting from hardware loading.

Schrade said Microsoft learns about possible licensing interlopers in a number of ways, including reports from customers and legitimate resellers.

“We also send out people who are sort of secret shoppers, and we look around on the Web,” she said. Information pointing to possible licensing abuse shows up in a variety of places on the Internet, including postings on auction sites.

Before bringing resellers to court, Microsoft typically sends out cease-and-desist letters and tries to “educate them about what they’re doing wrong,” Schrade said.

Meanwhile, Microsoft also works with the Business Software Alliance to prevent similar kinds of licensing abuse by user organizations, sometimes pressing charges along with other group members.

Some industry analysts said Microsoft’s actions are justifiable.

“Microsoft has a right to enforce its intellectual property, if you believe in the concept of commercial software,” said Matt Rosoff, an analyst at Directions on Microsoft.

Small resellers, in particular, might lose out to software pirates and hardware loaders, according to Rosoff.

Microsoft plans to make its Windows anti-piracy program mandatory. Click here to read more.

Yet, predictably, reaction from the Linux and open-source community was very different.

“It isn’t the [Windows] systems builders who should be blamed. They’re just responding to what customers want,” said John DeVito, senior marketing manager at Arkeia, a Linux system builder in the storage backup space.

“Customers want easy-to-use, scaleable systems that can work in a variety of environments, and that don’t cost them a lot,” he said.

But systems builders and customers can gain these benefits—without worrying about licensing fees—by using the Linux operating system, according to DeVito.

Yet many channel members prefer Windows instead. Although Windows is pricey and some organizations in the educational market have already turned to Linux, TKO wants to stick with Windows for a couple of reasons, Dion said.

“The most obvious is that classes in schools are geared to teaching students how to run a spreadsheet or use a word processor. In the real world, almost all of these things are still on Windows,” he said.

“Secondly, everything in Windows is pretty much compatible—and that isn’t true outside of Windows, except for [Apple Computer Inc.’s] Macintosh. There are still some problems with Linux drivers, for instance, although that is changing,” Dion said.

Dion also contended that by successfully loading Windows XP before deployment, he can generally rule out hardware problems such as a bad disk drive or faulty memory in a legacy PC. “This can reduce maintenance [in the field],” he said.

Microsoft filed its latest privacy lawsuits, alleging copyright and trademark infringement, and in one case violation of the federal Anti-Counterfeiting Act of 2003, against Abacus Computer, of Anaheim, Calif.; Avantek, Inc., of Orlando, Fla.; First E-Commerce (dba Discount Electronics and/or DiscountElectronics.com), of Austin, Texas; M&S Computer Products Inc., of Boonton, N.J.; Micro Excell Inc., of Gadesden, Ala.; Odyssey Computers, of Pasadena, Md.; Signature PC (aka Signature Computers), of Warwick, R.I.; and Technology One, of Los Angeles.

In related news, Microsoft this week also launched a new offering, the ISV Advisory Service, meant to provide software development partners—as opposed to resellers and systems builders—with dedicated help around a range of technical issues.