Galesburg
firm on Microsoft's radar for alleged software piracy
By
Mike Kroll
If you believe that living or working in the anonymity
and obscurity of small-town rural America provides you with insulation from the
oversight of corporate America think again. On Monday computer software
behemoth Microsoft served papers on 26 businesses, including a small Galesburg
firm among four targeted Illinois firms, they allege have sold or distributed
pirated copies of the company's Windows XP and Office XP software,. Representatives
of the Springfield law firm of Londrigan, Potter & Randle served papers on
The Computer Shop at 419 East Main Street specifically naming the former owner
Keith Straitiff as a defendant in a lawsuit, also filed Monday, in U.S.
District Court – Central District, Peoria.
According to a Microsoft press release, this was Òan
unprecedented move by the company [to] illuminate [the] company's stronger
enforcement efforts as part of its Genuine Software Initiative.Ó As the world's
largest software manufacturer Microsoft has long been an active player in
protecting its intellectual property rights by fighting software piracy and
counterfeiting along side the industry's enforcement group, the Business
Software Alliance. The BSA claims that one out of five software products now in
use across the United States are illegally pirated.
While many of those pirated software titles are the
result of individuals sharing copies of software with family and friends
Microsoft and its industry has traditionally focused its enforcement efforts
against businesses installing a
single copy of a software title on multiple computers. Industry officials note
that as the drop in computer system prices has resulted in severe pressure on
profits, it has become increasingly common to find computer resellers who
attempt to boost their margins by bundling pirated copies of software with the
systems they sell to unwitting retail customers. The cost of a legitimate copy
of Microsoft's Windows XP software
can add anywhere from $80-160 dollars to the wholesale cost of a computer
system that may retail for only $500-600, especially for a small computer
business. All 26 of Monday's lawsuits targeted resellers doing just that with
either of Microsoft's two cash cow software brands, Windows XP and Office XP, both of which are marketed under a variety of differing configurations.
The complaint against The Computer Shop and Straitiff
alleges that Straitiff personally sold a computer to a Microsoft investigator
bundled with an unauthorized or pirated copy of Microsoft Office XP Pro in May of this year. Microsoft also claims that
Straitiff Òdistributed counterfeit and infringing Office XP Pro softwareÓ and that Òthis was not an isolated
incident.Ó As an important adjunct to the piracy itself the lawsuit
additionally alleges that The Computer Shop Òcommitted and continues to commit
acts of copyright and trademark infringement against Microsoft,Ó made
Òunauthorized use of Microsoft's trademark and copyrightsÓ in its advertising
and Òmisappropriated Microsoft's advertising ideas and style of doing business
and infringed Microsoft's copyrights, titles and slogans.Ó
The importance of citing all the different alleged
violations of Microsoft's trademarks and copyrights is based on a Federal law
known as the Lanham Act (covering U.S. Tradmarks) that designates severe
financial penalties for each instance of such violations following a 2005
revision. ÒEach copyright infraction can draw a penalty of up to $150,000 while
each trademark infraction can cost as much as $1 million,Ó said Kevin Sangsland
of Airfoil Public Relations, a Detroit-based firm specializing in public
relations for high tech companies like eBay and Microsoft, on Tuesday.
Sangsland explained the process Microsoft uses to
identify and target potential violators of its software copyrights and
trademarks.
ÒThere are a number of avenues that Microsoft uses to
learn of potential violators. Most involve someone becoming suspicious of
software they purchased or that came with a computer they bought. They may
contact Microsoft through the company's anti-piracy hotline, 800-RU-LEGIT, or
they may have become aware of the problem as a function of the Windows Genuine
Advantage program. In any event, investigations are based on specific leads and
are not conducted on a random basis. Microsoft gathered evidence for these
cases through the use of a secret shopper type program. An investigator hired
by Microsoft approaches a suspected reseller and makes a test purchase,
typically of a computer system. The purchased system is then analyzed to
determine if any or all of the included Microsoft software is genuine and
appropriately licensed. When it is determined that unauthorized Microsoft
products have been sold company lawyers send a cease and desist letter to the
reseller providing information on how they can acquire and distribute genuine
Microsoft products and demanding that they immediately stop selling pirated or
unlicensed software. They are asked to agree in writing to honor all Microsoft
licenses, copyrights and trademarks in the future. At some later point a second
secret shopper will make another purchase from the reseller and it is
determined whether or not they are honoring their agreement with Microsoft. If
not, legal actions such as this are likely to result.Ó
The Genuine Advantage program is a controversial
Microsoft anti-piracy program that requires users of newer Microsoft's software
products to activate them with the company either by telephone or over the
Internet after installation. That activation identifies the product by license
key and ties it to a specific computer system through a form of system
signature that captures characteristics of the computer's hardware
configuration. Subsequent to such activation if the user attempts to update the
software through Microsoft's Internet updating services, ÒWindows UpdateÓ or
ÒMicrosoft Update,Ó the current hardware characteristics of the system
requesting the update are compared to the activation signature. It these
characteristics vary in any ÒsubstantialÓ but unspecified way access to the
update is forbidden and the product may even be deactivated by the Microsoft
website. Once deactivated the user must contact Microsoft and explain just why
the signature might not have matched and assured a Microsoft representative
that this is a genuine Microsoft product and installed on one and only one
machine.
The controversy over this program stems from the very
common practice of system upgrades that many computer owners engage in. Over
the life of a given computer it is not uncommon for a user to add additional
memory or a larger hard disk or different video or audio card or a CD or DVD
burner. Any of these changes will alter the hardware signature of your computer
and it is somewhat unclear just how much change is accepted by Microsoft before
triggering an activation problem. It is also common for computer systems that
suffer major software damage or infection from viruses or spyware to have
Windows XP reinstalled from scratch to restore proper operation of the computer.
Many, if not most, times when this is done an owner or computer repair shop
will encounter software activation problems with Microsoft's Genuine Advantage
program despite the reinstallation of totally legitimate Microsoft software.
Complicating the case against Straitiff and The
Computer Shop here in Galesburg is the fact that the store changed hands last
summer. Straitiff had formerly operated The Computer Shop and its predecessor
business, On-Trak Systems, Inc., until he sold the business to Jerry Wade. Wade
previously operated another downtown Galesburg computer business, Computers
Etc. until he bought The Computer Shop from Straitiff and consolidated
operations at 419 East Main Street. Wade contends that Straitiff has had no
further involvement with the operations of The Computer Shop since he acquired
the business last summer and that none of the alleged violations have occurred
during his ownership.
ÒI first learned of this lawsuit when I was served
with papers on Monday at the shop. All I know is that this is about Keith's
business dealings, not mine. I don't pirate computer software and never have.
They served me even after I tried to explain that I wasn't Keith and merely
purchased the business from him last year. All the software we sell are
authentic licensed copies purchased and sold legally. I know that Keith must
have used a corporate copy of Windows XP Pro on many and maybe even all of the
computer systems he sold. A number of his former customers have come back into
the shop complaining of problems with their operating system and I have to
point out that they don't have any Microsoft Product ID code that would permit
me to reinstall a copy of Windows on their machine. Keith did the same thing
with a single corporate copy of Office XP. He seems to have installed that on
most of the computers he sold. That's what is behind the Microsoft lawsuit.Ó
While Wade resolutely asserts his innocence and
non-involvement in the alleged violations the circumstances are muddied by the
date of violation cited in the lawsuit. It remains unclear at what exact point
during 2005 that Straitiff ceased doing business as The Computer Shop and Wade
assumed responsibility for the business. However, there is no disputing that
Wade was the sole responsible person as of May 2006, the date cited in the
Microsoft lawsuit. Wade believes that date is in error. Perhaps it should have
read May 2005 or 2004 but the lawsuit is also unclear whether this date was for
the initial secret shopper purchase or the subsequent follow-up purchase. Even
if the date should have read May 2005 that wouldn't clear Wade completely as he
told me Tuesday that he purchased the business from Straitiff in April 2005.
Mary Jo Schrade, senior attorney at Microsoft
confirmed Wednesday morning that the company's investigator did in fact
purchase a computer system from The Computer Shop in May 2006. That computer
system was analyzed and found to contain a counterfeit copy of Microsoft's Office
XP Pro software although the
operating system software was genuine. Schrade explained that the company
determined ownership of The Computer Shop through public records at the Knox
County Courthouse and corporate registrations through the Illinois Secretary of
State's office in Springfield. Although Schrade couldn't definitively say
Wednesday whether this was the initial or subsequent investigator purchase she
presumed by the timing that the May 2006 purchase represented a second purchase
of a computer system at The Computer Shop containing unauthorized Microsoft software.
ÒWe've really ramped up our enforcement efforts
nationwide and made a special effort to include violations in smaller
communities as well as large cities to emphasize Microsoft's commitment to
legitimate dealers as well as end users,Ó noted Schrade. ÒMost of these
investigations are prompted by reports to our hotline. The victims of software
piracy include not only Microsoft and our end users but also the legitimate
resellers of our products whose livelihood is threatened by competitors who
compete unfairly using pirated software. The message we are sending through
these lawsuits should be made very clear. To our honest partners, and to
consumers who expect and should receive genuine Microsoft software wherever
they go to buy it, we are listening and we are investing a tremendous amount of
resources to help you. We are committed to finding the unscrupulous dealers of
pirated software and making piracy a business model that doesn't work."
Sangsland said Tuesday that many of these lawsuits are
settled outside of court and couldn't provide any estimated court date at this
time and Schrade concurred. ÒOur experience is that the offending resellers are
much more responsive to us following the filing of a lawsuit and often times
eager to remedy their actions and seek to resolve the issues outside of a
courtroom. We prefer to work this out directly with the defendants and that is
why we send either the cease and desist letters or a warning letter prior to
filing lawsuits. Our goal is to correct the problem not face off in a
courtroom.Ó
The other Illinois cases involve a Buffalo Grove firm,
Software Plus Inc. and two Chicago firms, Apollo Computer Corporation and the
Chicago Computer Club Corporation. Additionally, firms in Colorado, Georgia,
New Jersey, New York, Ohio and South Carolina were among the 26 lawsuits filed
by Microsoft Monday. It should also be clear that doing businesses in the
anonymity and obscurity of small-town America is no shield against being held
accountable for your business practices. Whether you" do business in
Austell, Georgia (a small town of 5,359 located between Atlanta and Marietta),
Iselin, New Jersey (a city of 16,698 known as ÒJersey's Little IndiaÓ following
a substantial immigration begun in the 1990s) or Galesburg, Illinois corporations
such as Microsoft are forever vigilant.