Microsoft Settles Counterfeiting Suit With French Firm

Scoring a victory in its worldwide efforts to curb piracy of its software, Microsoft said it had agreed to settle a lawsuit with a French company that had allegedly made and sold thousands of unauthorized versions of Microsoft business software.

Microsoft said its settlement with MPO Group included a “multimillion dollar” payment, but did not provide any additional details on the financial aspects of the agreement. MPO Group also agreed to put safeguards in place to prevent future piracy.

Pirated Software

The pirated software included versions of Microsoft Exchange and SQL Server that Microsoft discovered starting in July 2003. The software, which had been copied without authorization and was backed by forged licensing agreements, was traced to MPO’s operations in Thailand.

Some 20,000 copies of the software were believed to have been made at that plant, according to an investigation by Microsoft’s Worldwide Anti-Piracy team and various law enforcement agencies. Though many pirated copies have been recovered, some are believed still to be in circulation.

MPO claims its Thailand-based plant made the disks based on a forged licensing agreement presented by a third party. Microsoft noted that it does not authorize third parties to reproduce its software; therefore, the agreement was a fake.

The software giant credited MPO for cooperating with the investigation.

“We appreciate the steps MPO has taken to tighten their security procedures to prevent a recurrence of this type of wholesale counterfeiting of Microsoft software, and to help track down all those responsible for distributing the counterfeits,” said David Finn, Microsoft’s associate general counsel in charge of worldwide anti-piracy and anti-counterfeiting efforts.

Microsoft expects to have an ongoing relationship with MPO, Finn added, likely using it to produce CDs of its software for overseas distribution.

Future Efforts Pledged

MPO operates the largest disk replication plant in France, making it a key outsourcing partner to many software firms, music labels and others.

“MPO values and recognizes the rights of artists and creators of intellectual property,” said MPO Industrial Manager Gerard Courcier.

Courcier noted that the company is part of the International Recording Media Association’s Anti-Piracy Compliance Program; however, the Thai plant has not yet been certified under that program.

Software piracy remains a massive problem for the high-tech industry and for Microsoft in particular, which likely loses tens of millions of dollars in revenue each year due to unauthorized use of its various products.

Piracy is especially acute in foreign countries and emerging economies, where the price tag of authorized software often drives business and consumer users to lower-cost alternatives.

Anti-Piracy Push

A report commissioned last year by the Business Software Alliance and conducted by IDC estimated that 35 percent of all PC software used worldwide is counterfeit or otherwise illegal. That same study estimated that if the piracy rate was lowered by 10 percent over the next four years, it would create as many as 2.4 million new jobs and add US$400 billion in economic growth to the global economy.

Microsoft has made a number of tweaks to its existing anti-piracy programs of late — for instance adding technology to alert businesses when it appears their software may be in use beyond the scope of licensing agreements.

Also, it has been aggressive on the enforcement side, making headlines earlier this year by suing some of its own partners and third-party integrators for selling unauthorized software.

The Business Software Alliance has stepped up its own efforts, announcing in July that it would offer rewards for the first time to those who report instances of piracy.

The piracy crusade is a double-edged sword for Microsoft, however, possibly driving would-be users of its software to open source options, such as Linux, which can have lower up-front costs.

Nonetheless, Microsoft was forced to stop overlooking piracy because the cost was becoming significant and because its once robust growth has slowed some, Enderle Group analyst Rob Enderle told the E-Commerce Times.

In fact, areas where piracy is most acute — the Far East and Eastern Europe, for instance — are markets that Microsoft and other tech companies are hoping will drive growth over the next decade and beyond as their economies grow and mature.

“When Microsoft was expanding rapidly, the cost of piracy could be justified to some degree,” Enderle said. “As growth slows and competitors such as Linux gain steam, those losses become much more significant.”