Microsoft Sting Targets Resellers For Alleged Hard-Disk Loading

Following a 12-month sting, the Redmond, Wash., software giant filed the lawsuits, which allege copyright and trademark infringement, against Monarch Technology, San Clemente, Calif.; Kenneth Xu, Union City, Calif.; Era Limited of Lake Zurich, Ill.; Micro Info Tech, Edison, N.J.; Affordable Computer Warehouse, Clinton, N.Y.; Warp Systems/Computers, Raleigh, N.C.; Master Computer, State College, Pa.; and Software Provisions, Vancouver, Wash.

Microsoft claims it test-purchased hundreds of the Certificate of Authenticity (COA) labels and computer systems with the labels to identify unlicensed software being sold to customers. The COA label, which was adopted two years ago to slow piracy and counterfeiting of Microsoft software, ensures a customer has genuine, licensed product from Microsoft.

Pip Marlow, general manager for U.S. partner enablement at Microsoft, said the company snagged fake COAs from thousands of resellers but only filed lawsuits against those that failed to stop shipping offending merchandise after Microsoft sent a "cease and desist" letter to them. Microsoft found resellers selling systems with counterfeit labels and labels separated from PCs after they had been purchased, she said. These PC resellers copy unlicensed Windows software onto the systems and then attach the COA to make the product look authentic. The practice is known as hard-disk loading.

Microsoft has ramped up its antipiracy efforts significantly over the past three years to ensure that its software is legally licensed--and paid for--in the market.

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Microsoft also hopes to stem the flow of unlicensed software to help legitimate reseller and unsuspecting buyers, said Marlow, noting that the practice of hard-disk loading hurts margins for legitimate resellers and prevents end users from receiving benefits of "genuine" Microsoft software, such as technical support.

The COA sticker and product key is adhered to the chassis of all PCs.

Marlow said Microsoft is focused primarily on educating partners and did not file cases against resellers that discontinued the practice after the cease and desist letters were sent. "We're letting the channel know we have a program that identifies counterfeit COA and we're prepared to take action," Marlow said. "Education and enforcement are important."