RealTime IT News

Microsoft's Counterfeit Auction Dragnet

Using online auctions to hawk counterfeit software hasn't paid off for dozens of alleged sellers named by Microsoft .

In its largest effort so far, the software giant said it filed suit against 50 online dealers who used eBay and other Internet auction sites to sell counterfeit products to unaware consumers and businesses.

The U.S. topped the focus of the worldwide enforcement effort with 15 legal auctions. Others include 10 each in Germany and the Netherlands with five online dealers named each in France and the U.K., according to a statement.

Microsoft said there are also proceedings in Argentina, Belgium, Korea, Mexico and Poland.

Before filing the lawsuits, the defendants had been sent cease-and-desist letters, as well as the items removed from the online auction site, according to a statement.

In all cases, it was found the sellers had engaged in copyright and trademark infringement, according to Microsoft.

Microsoft intervenes in about 50,000 eBay software auctions each year that are viewed as involving copyright infringement. The software maker said more than 50 percent of discs its purchased on eBay were suspect for one reason or another.

More than a third of the time -- 39 percent -- the software giant said its purchases were counterfeit while another 12 percent was either counterfeit or had been tampered with.

"It is simply not worth putting your personal and confidential information at risk to save a few dollars on software," Matt Lundy, Microsoft's senior attorney, said in a statement. "It can cost much more in the long run."

A single incident of malicious software could cost an organization more than $1,000 for a single workstation, according to IDC. The price of lost or compromised data could reach $10,000 per incident, according to researchers.

Lundy said counterfeit software auctions "are a significant problem," and sites such as eBay are becoming more and more popular with sellers. However, Lundy denied auctions are to blame.

"We believe strongly in online commerce," he told internetnews.com.

While a large portion of online software auctions are potentially illegitimate and the nature of auctions make purchases risky, the Microsoft exec refused to rule out auctions as a valid source for software sales. "If the offer seems too good to be true, it probably is," Lundy advised.

In June, Microsoft analyzed counterfeit Windows XP disks and found 34 percent could not be installed on a computer, and another 43 percent were altered, containing added programs or code not part of genuine Microsoft Windows.

In 2005, Microsoft filed several lawsuits focused on the sale of counterfeit Windows applications. In June 2005, Microsoft hit companies selling counterfeit copies of its software to consumers.

Months later, the software maker targeted resellers using its distribution channels to sell counterfeit copies.

However, Microsoft hasn't exhausted its legal attack on counterfeiters. "Our enforcement effort will continue."

At the tip of Microsoft's legal attack against software counterfeiters is its year-old Windows Genuine Advantage (WGA) program.

The WGA, designed to allow Windows users know if they've purchased legitimate Microsoft software, has also been criticized by users because it walls-off non-critical updates for Microsoft software that fails the WGA test.

Microsoft said this latest round of legal action was assisted by tips provided by consumers using the WGA program.

Earlier this year, Microsoft expanded its ant-counterfeiting efforts to create the Genuine Software Initiative (GSI).

Along with suing counterfeiters, the software maker said it would invest in education, engineering and enforcement.