Microsoft Sues Internet Software Pirates

Microsoft (Nasdaq: MSFT) announced Thursday that it had taken legal action against two online Florida businesses for alleged distribution of counterfeit software.

One of the companies involved, Global Spider, Inc., which Microsoft believes also did business as Nico International LLC, allegedly distributed counterfeit software from a variety of Web addresses located in New Mexico, New Jersey and Florida.

The other company, New Media Computer Corp. of Fort Lauderdale, Florida, also maintained a Web presence, but customers were required to phone or fax their orders in, Microsoft said.

“We perceive Internet sales of counterfeit software as a burgeoning problem,” Microsoft corporate attorney Mary Jo Schrade told the E-Commerce Times, adding that the trend has become serious enough for Microsoft to employ a separate unit to deal with Internet piracy.

Tough Penalties

Schrade said that Internet pirates could face millions of dollars in penalties for selling just one counterfeit copy of Microsoft Office, because the software involves multiple copyrights and trademarks.

She added that a single, intentional copyright violation could cost a violator a US$150,000 fine and that the willful violation of one trademark could carry a $1 million penalty.However, intellectual property attorneys agree that penalties in those ranges are rarely awarded.

Microsoft said that it decided to take action after receiving numerous complaints from users and other resellers alleging that the companies were selling counterfeit software. Schrade pointed out that resellers often complain if they notice a company selling software for a price that seems too good to be true because legitimate companies “can’t make any money” when pirates are selling the product for a discount.

Microsoft Undercover

Test purchases made by Microsoft confirmed that the products being sold were counterfeit, the company said, and so it sent cease-and-desist letters warning the companies that they were violating Microsoft’s copyrights and trademarks.

According to Microsoft, the companies failed to stop selling bogus software, so the software giant filed suit. Microsoft has asked the U.S. District Court for the Southern District of Florida to award it monetary damages and issue an injunction prohibiting the companies from selling pirated software.

If the companies continue to sell after an injunction has been issued, Schrade said they could face criminal penalties.

Not Your Corner Store

According to Schrade, unwitting customers who buy counterfeit products are left without technical support and often cannot get a refund from the vendor.

Schrade said that Internet pirates are a “bigger problem than a store in your neighborhood” because it is easier for them to defraud consumers. She said that in some instances, online pirates have shown consumers pictures of real software packages and then sent out disks with handwritten labels and photocopied manuals.

Piracy Crackdown

Microsoft and other high-tech firms have begun a concentrated crackdown on Internet pirates and others who sell consumers counterfeit versions of software.

In addition to the Florida cases, Microsoft also announced Thursday that it had been awarded a total of $162,000 in settlements and judgments stemming from legal actions the company has taken against four Minneapolis, Minnesota-area resellers for the alleged distribution of counterfeit software.

The software giant said it intends to donate the net proceeds of its judgment to nonprofit anti-piracy groups.

Auction Sales

In January, the Software & Information Industry Association (SIIA) filed lawsuits against two people who were allegedly selling pirated software to contacts made through online auction houses.

The SIIA settled with one alleged pirate, Julian Kish, in February. The settlement included a confidential payment for the unlawful distribution of software, a letter of public apology from Kish, and an order not to infringe copyright in the future.

The other defendant has not yet settled, and could be liable for up to $150,000 per violation, the association said.

The Business Software Association (BSA) estimates that the software industry loses $13 billion annually due to software piracy.

9 Comments

  • “unwitting customers who buy counterfeit products are left without technical support ”

    Everyone knows you can’t get technical support on Microsoft products.

      • DUH… If Microsoft would sell there products for “What There Worth” they’d be a lot better off, before i’d pay for anything microsoft I WILL PIRATE it or do what i’m doing and use Redhat and StarOffice screw microsoft.

        • Uh what i want to know is why people are paying for warezed software. I thought the point of warezing it was to get it for free… But then if you are going to buy it why not support the people making it not the morons ripping them off.. it would be like you doing all the work and other getting paid for it… OMG that is corporate America.. oh never mind… it should be free anyhow… but then as to microsoft they only sell upgrades to support the people debugging it… and one day i will have an OS that won’t blue screen.. oh yea i do and it was free.. you just have to love open source .. and linux is free.. one last little thing… why does microsoft have more people with a net worth of over 10 million US dollars then any other company… you really think that is R&D or Marketing.. I AM going to just have to guess NOT.

          Oh have a nice day

          • Fellini, you need a small course in economics. I’ll give an example from the Canadian government – about 5 years ago, a pack of smokes was around $6 up here. 90% of that was tax. The native indians loved this because they got smokes tax-free and then could resell at a lower price than could be purchased legally. So what did the government do? They lowered the taxes on smokes drastically – smokes could be purchased for $2.50 a pack. The funny thing thing about all this is that the government’s revenue from cigarette taxes actually INCREASED after the tax cut. Strange stuff, eh?

          • It’s not just Microsoft, as another poster noted — Adobe and many other software companies also sell software for extremely high sticker prices that seem outrageous.

            The thing is, they’re stuck in a Catch-22. So many people pirate their software that they jack up the prices to take that into account. In effect, the people who actually do shell out for the software are paying for the people who are pirating it, too.

            It’s like paying extra for your car insurance because there are uninsured drivers out there — you have to, and it sucks, but there’s nothing you can do about it because you can’t pirate car

            insurance 🙂

            It’s a cruddy situation, and I don’t see either side caving. Software companies aren’t going to spontaneously lower their prices, and people who can’t afford $600 price tags — or just feel it’s an unfair price, which it really is — aren’t going to start buying.

            Personally, I love lower-priced alternatives like Paint Shop Pro ($99 vs. whatever ridiculous price Photoshop is selling for today, and it does basically the same thing).

          • Another problem is that the people who are buying the pirated MS software know perfectly well that the product they are buying is not legitimate. The copyright nightmares are not going to end until society agrees that software and music either should — or should not — be proprietary.

  • If the computer software companies would lower the prices on all their software then the millions of dollars lost to software piracy would decrease. Microsoft sells their products at outrageous prices thats why their software gets pirated so much. Adobe Systems Inc. is the same way.

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