Microsoft Sues Partners in Piracy Crackdown

Continuing its legal war against piracy of its popular software titles, Microsoft said it filed 10 more lawsuits against companies accused of selling illegal copies of its products, with some of the software giant’s own partners and re-sellers named in the suits.

Seven lawsuits filed against nine individuals from California, Maryland, New York, Texas and Virginia charge end-users with breach of an agreement made when they enrolled in the Microsoft Action Pack Subscriptions program. (MAPS).

MAPS is a program that provides those already enrolled as Microsoft Partners to receive discounted software packages for product evaluation, application development, testing and other internal uses at a company’s main office location. Those programs are not intended for resale, but some of those sued are alleged to have put them up for sale through online auctions at eBay and elsewhere.

The three other suits involve PC-system builders who sold computers loaded with allegedly counterfeit Microsoft software installed on them. Microsoft said it filed those suits only after the companies ignored requests to cease and desist the practice. Those sued are: Auction Hut in Toledo, Ohio; Comp-Discounts Software of Boca Raton, Fla. and Computer Techs, based in Grove City, Penn.

As with other recent actions, Microsoft said some of the suits had roots in consumer complaints made to a hotline established to field piracy reports.

“Our partners are negatively affected by the activities of those who compete unfairly by either selling illegal software and components or abusing agreements that other partners abide by,” said John Ball, general manager for Microsoft’s U.S. System Builders Partner Group. “These dishonest resellers sell products at minimal costs, undercutting the business of legitimate resellers.”

Sizing it Up

Microsoft said the MAPS suits got under way based on its own monitoring activities, which found that some partners were downloading more software than they were entitled to, which sparked an investigation that led to the lawsuits.

“Our honest partners have asked us to intervene to help protect those who abide by laws and rules governing software use and distribution,” said senior attorney Mary Jo Schrade. “We want to protect the business of honest resellers and try to ensure a level playing field for our partners.”

The latest suits coincided with the release of new data by the Business Software Alliance (BSA) underscoring the scope of the piracy issue and the potential economic impacts.

The BSA released a study performed by research firm IDC that said that every percentage point drop in piracy could result in US$40 billion worth of economic activity, with a 10 point reduction enabling the worldwide information technology industry to expand by 45 percent over the next four years, a level that would create 2.4 million new jobs, $400 worth of economic activity and $67 billion in taxes flowing into government coffers.

BSA President and CEO Robert Holleyman said the report should be a wake up call that motivates more countries to take piracy seriously and devote the necessary resources to stemming it.

“When countries take steps to reduce software piracy, just about everyone stands to benefit,” Holleyman said in a press release. “Workers have new jobs, consumers have more choices, entrepreneurs are free to market their creativity, and governments benefit from increased tax revenues.”

Fighting the Good Fight

Analysts note that Microsoft’s aggressive anti-piracy campaigns has grown as the company’s sales growth as slowed.

Enderle Group principal analyst Rob Enderle said while the lost sales always hurt Microsoft, the impact of piracy wasn’t as noticeable as it is now that the company’s growth has moderated and as emerging economies, where piracy is often more rampant, have become more important to the company’s overall sales.

There are also some benefits to Microsoft’s image, giving it a boost among fellow software makers as well as partners and re-sellers.

“The software industry as a whole is eager to put a dent in piracy, so Microsoft as a leading vendor can say it has stepped up to do its part in the fight,” Enderle noted.