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Microsoft targets pirates
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May 28, 1998: 5:35 p.m. ET
Company offering cash rewards to halt contraband software distribution
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NEW YORK (CNNfn) - In what could be considered digital-age bounty hunting, Microsoft Corp. has been stepping up efforts to prevent software piracy worldwide.
On Thursday, Microsoft's Australian subsidiary reported it has been flooded with calls after it offered rewards of $3,100 to people who report friends and colleagues who copy software illegally.
Microsoft said it will extend the reward program to other Asian-Pacific countries, though it has no plans to offer such a program in the United States.
Microsoft does not hide its concern over illegal copies of its software floating around the world. The software titan also publishes an anti-piracy report online in conjunction with the Business Software Alliance. The Web site is loaded with stories that sound more like high-profile drug busts than anything to do with software.
"Customs officers arrested an individual, en route from Singapore, with a suitcase full of counterfeit BSA members' software, including Microsoft," one report says.
A trip through the BSA's Web site informs readers who provide tips on illegally distributed software that "every lead is followed, but rest assured that all sources and tips will remain strictly confidential."
It all sounds a bit dramatic for software crimes, but it's an issue Microsoft and the BSA take very seriously, and it's easy to see why.
A BSA study estimated piracy cost the worldwide software industry $13 billion in 1996. More than half of the loss come from bootleg Microsoft products, which accounted for $7 billion that year in unlicensed software.
In an extreme case, a raid on a California manufacturing facility in March uncovered more than $5.6 million in counterfeit copies of Microsoft software.
Undercover operations
Nancy Anderson, Microsoft senior corporate attorney for North American anti-piracy, said Microsoft employs an extensive network of investigators to make undercover purchases from suspect distributors, based on tips received through its hotline number.
"We look at piracy in two segments: the distribution channel and within the end-user community," Anderson said.
"In the U.S., our work with law enforcement focuses on criminal computer networks. With legitimate businesses that copy software illegally, we generally follow through with a civil suit."
Anderson said Microsoft receives about 2,000 tips per month through its hotline.
In terms of percentages, Anderson said eastern Europe and parts of Asia boast the biggest black market, with 80 to 90 percent of the software distributed in those regions illegal copies.
The biggest losses, however, are in large markets such as North America and western Europe. In North America alone, Microsoft loses $2 billion a year in pirated software.
Why so serious?
Because Microsoft is the biggest software maker in the world, it may be difficult to understand why the company is spending so much time and effort sending dogs to sniff out those who copy and distribute its software illegally.
Money, of course, is an issue. But it's the principle of the matter, as well.
"Is it okay to shoplift from a store that's doing well?" said Sarah Alexander, Microsoft international corporate issues manager. "It's called piracy, but the reality is that it's nothing more than theft."
Anderson said the programs most often distributed illegally are the Windows 95 operating system and the Office 97 suite of business applications.
The underground market for Windows 98, due to hit store shelves in mid-June, is sure to be large. What effect the government's antitrust suit will have on the number of illegal copies distributed, however, is uncertain.
"I don't know if [that issue] would change the number of piracies," Alexander said. "Also, with every new version of our products, we're looking for ways to protect them from counterfeiting, and there will be some new anti-counterfeiting measures in Windows 98." 
-- by staff writer John Frederick Moore
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