Microsoft cracks down on fraudulent retailers

Copyright infringement Investigation results in $34,000 in settlements from six stores

By Simon Eskow, Auckland | Friday, 09 November 2012
A recent investigation undertaken by Microsoft New Zealand has identified six Auckland computer stores selling pirated software to consumers, according to the company.

The six stores admitted to breaching Microsoft’s copyrights on Windows and Office products after private investigators purchased systems from them and testing showed they had been loaded with counterfeit software.
IT Serve International, Comtech International, D&J IT Solutions, Computer Xpress, R.A.Y Tech and Powernet Computers settled with the software vendor for a total of $34,000. The enforcement was separate from any criminal investigation, although the investigation did not preclude criminal prosecution, which would be up to the New Zealand Police to pursue.

The investigation was part of Microsoft’s periodic checks into local markets. The company says that it hopes to look into other parts of the New Zealand market, as part of the company’s regular copyright enforcement exercise.

“We have a team that moves around to different parts and it was time to take a swing through the Auckland area and check out the retailers and system builders around there and see whether they were selling genuine or licensed goods,” says Clayton Noble, legal counsel for Microsoft. “We have a team of analysts who then go in and review and determine if it’s genuinely licensed or pirated.”

According to Microsoft, New Zealand has a relatively low rate of software piracy. Citing a recent Business Software Alliance report, the company states that 22 percent of software sold here is unauthorised.

"New Zealand's strong respect for intellectual property, its robust legal system and general awareness of the benefits of using genuine, licensed software mean that New Zealand has one of the lowest software piracy rates in the world, " says Noble.

Noble says the investigations are costly, but are meant to assure honest resellers and retailers that the market is “clean”.

“That’s one of our most important roles in doing these exercises,” he says. “Of course it is to deter people, but we want people in the channel to know that we do police these things,” Noble says. “The message is for the resellers running an honest business and competing fairly is we have your back and we’re trying to keep the market clean and promote fair competition in the market for our products and the IT market generally.”

Noble would not comment on what other software companies do to enforce their product copyrights. Microsoft investigations can be triggered by an unusually high rate of validation or registration failure rates generated from IP-addresses in a particular market. Microsoft may also receive tips or complaints from retailers that discover a competitor is selling illegal software.

Noble says it is highly improbabe that the retailers in this case did not know they were selling counterfeit goods, and adds that consumers take a risk since pirated software frequently includes malware.

“Some strains of counterfeit software products contain hidden key-logging software that allows criminals to steal passwords, bank account details and other personal information," Noble says in a statement released to the general media.

Microsoft is hoping to publicise the case to a wider audience to educate consumers about the risk of purchasing software, and how to determine if a product is counterfeit.