Canadian firms named in US$15million bogus software case

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Two Canadian and several American Web-based software distributors are facing a US$15 million law suit for allegedly selling counterfeit Symantec Corp. security software products.

In a case filed last week before the U.S. District Court of Los Angeles, security software maker Symantec Corp. sought a permanent court injunction against the companies Symantec claims are part of a large criminal network of counterfeiters.

The two Canadian firms named in the complaint are Advanced Sales Productivity Inc. and Tri-Union Development Inc. – both based in Ontario.

Other defendants included ANYI and SILI Inc. of Los Angeles, as well as six other U.S.-based companies.

“ANYI, SILI and their affiliates run a global counterfeit distribution operation with a major focus in the United States and Canada,” William Plante, director of security for Cupertino, Calif-based Symantec said in a statement.

“Their operation posed a tremendous threat to our customers,” he added.

Symantec said since February of 2004, it has conducted investigations into the alleged scam and has purchased dozens of bogus Norton Anti Virus, Norton System Works, PC Anywhere, Norton Internet Security and Backup Exec from the distributors.

The security software manufacturer said the bogus products were made to appear like originals and were packaged in boxes similar to those used for genuine Symantec programs. The products sported the company logos and fake security codes.

The defendants allegedly sold the software through offshore-based Web sites such as Alibaba.com.

Symantec said the products were designed to “intentionally confuse and fool customers”.

A series of raid conducted by the police on offices in Whitestone, Farmingdale and Great Neck, N.Y., yielded 134,000 units of counterfeit software bearing Norton and Symantec logos.

The software firm has estimated that lost sales resulting from the counterfeit operations amounted to more than US$15 million and demanded as much in compensation, plus a court order to permanently stop the operations.

Two Canada-based analysts said Symantec should be commended for its actions.

“The company is doing consumers a great service,” said Stephen Lawson, vice-president, technology and CIO of Fox Group Consulting in Mount Albert, Ont.

He said counterfeit security software acquired from questionable sources, actually poses a danger to consumers. Instead of protecting the computer, the fake software “might do the opposite and download malicious programs into a user’s machine.”

Lawson said buyers of such counterfeit tools might not be able to get much needed upgrades from the legitimate manufacturers.

Although sizeable, seizure of bogus software so far constitutes “the tip of the iceberg”, the analyst said.

He said the network apparently spans the continent and the Web site featuring the distributor, Alibaba.com, is based in China.

“This is definitely not a basement operation but an organized ring,” said Lawson.

James Quin, research analyst for Info-Tech Research Group Inc. of London, Ont. agrees.

He said world-wide counterfeiting operations cost legitimate companies anywhere from US$10 -12 billion annually. About half of this amount can be attributed to operations similar to those busted by Symantec.

Apart from counterfeiting, software vendors also lose big time from piracy.

In Canada, leading vendor organization battling software piracy is the Canadian Alliance Against Software Theft (CAAST).

CAAST usually brokers a deal with organizations found using unauthorized copies of software. Under the CAAST scheme, the erring company agrees to pay the alliance an amount equivalent to the number of copies of pirated software found on their premises to escape legal action.

CAAST has a US affiliate called the Business Systems Alliance (BSA).

Quin said Symantec went straight to the authorities as the company believed it was dealing with the actual distributors of the counterfeit products and wanted “to send out a strong signal against counterfeiters.”

He said Symantec’s choice of filing complaints before a civil court also means the company intends to put an immediate stop to the operation and recovery as much of their losses as possible.

“The civil courts require a lesser burden of proof than criminal courts,” said Quin.

Lawson, however, said the Web-based nature of the distribution network might make it hard for authorities to establish the connections between principals of the organization.

For instance, one of the distributors in question, GT Micro, was listed in the Symantec complaint as US-based business but Alibaba.com had GT Micro as a Canadian company.

“On the Web, names of persons and companies can easily change,” said Lawson.COMMENT ON THIS ARTICLE

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