Microsoft launches lawsuits against seven Ontario resellers

Microsoft Canada Co. is showing no signs of relenting in its fight against piracy at the Federal Court of Canada, suing seven Ontario resellers for copyright and trademark infringement.

The Mississauga-based company has announced that Microsoft Corp. filed lawsuits against the seven PC system builders for allegedly selling unlicensed, pre-installed copies of its software on computers.

Since August 2004, Microsoft has instituted lawsuits in the Federal Court against 26 Canadian resellers for allegedly distributing unlicensed Microsoft software.

Microsoft Canada alleges the seven Ontario resellers – four in Toronto and one each in Mississauga, Brampton and St. Catharines – have been hard-disk loading the software, which means pre-installing software and then selling the PCs without the Microsoft CDs, certificates of authenticity and other components that come with genuine licensed Microsoft software.

Hard-disk loading is the biggest form of piracy for Microsoft and occurs very frequently, says Susan Harper, licence compliance manager, Microsoft Canada. “And it’s really negative for the end-user because they’re not getting any backup media. They just have no idea what they’re getting,” she says.

In order for it to be a legal system, says Harper, it should have the recovery CD and the certificate of authenticity, which contains the product key.

The lawsuits seek injunctive relief, Microsoft’s damages or an accounting of the defendant’s profits, or in the case of the copyright allegations, statutory damages of up to $160,000, punitive and exemplary damages, as well as declaratory relief, according to a statement from the company.

Microsoft says that prior to taking legal action, cease-and-desist letters were sent to each of the resellers, notifying them of the consequences.

Harper says the majority of the leads that come in are either from Microsoft’s 1-800-RU-LEGIT hotline or from private investigators who do walk-ins to uncover illegal activity.

“Part of Microsoft’s strategy around helping the partner community to stay legal has always been to do walk-ins,” says Harper. “Investigators will go in undercover and make an offer to buy, to find out what the reseller is offering.”

If it ends up that it is illegal product they’re selling, Microsoft issues a cease-and-desist warning letter to give the resellers the opportunity to discontinue their unlawful practice, says Harper.

Microsoft then lets a certain amount of time to go by to allow them to go legit. The investigators go back in again and conduct a PC buy, and if the cease-and-desist hasn’t been done, then Microsoft at that time will engage in litigation, says Harper.

“This is a constant cycle that Microsoft follows when leads come in,” she says.

The software that was allegedly installed includes Microsoft Windows XP Professional operating system and versions of Microsoft Office, including Microsoft Office Professional 2003, Microsoft Office XP Professional with FrontPage and Office 2000 Premium.

Microsoft says end-users must ensure that software includes the certificate of authenticity and CD. The company recommends users participate in its Windows Genuine Advantage program to verify the authenticity of software.

The Canadian lawsuits are similar to a recent case in Sydney, where the Australian Federal Court awarded Microsoft Australia Pty. Ltd. Aus$1.3 million ($1.13 million) in damages and costs for copyright and trademark infringements, as well as breaches of the Trade Practices Act.

PC Club Australia Pty. Ltd. was found to be issuing counterfeit certificates of authenticity with preloaded Windows operating system software. PC Club said it believed it was legitimate for system builders to license copies by distributing software with a loose authentication certificate. The Federal Court rejected the argument.

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Jim Love, Chief Content Officer, IT World Canada

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