Education push from Microsoft drives rogue resellers to turn over a new leaf

As the channel feels the squeeze, Microsoft takes concerted legal action to defend channel margins from illegal traders

Reading, UK - February, 2009 -Microsoft today announced settlements with 15 traders caught selling illegal software in regions throughout the UK. One reseller agreed a £75,000 settlement after customer complaints revealed he was illegally reselling Microsoft Windows recovery discs, many of which didn’t work. A further 14 traders faced court action in respect of hard disk loading1 and selling improperly licensed software to unsuspecting customers over the last six months.

According to Microsoft market research, a surprising 37% of UK resellers don’t think that piracy directly affects them. Perhaps when the economic outlook was rosier, resellers were happy to believe that piracy wasn’t having a great impact on their margins or revenues. However, a recent IDC study2 showed that for every £1 Microsoft loses to software piracy, all the businesses in the channel that sell the software lose £5.50.

Alex Buckland, Corporate Technical Manager of Microsoft Gold Certified Partner Grace Electronics comments, “It’s easy to stick your head in the sand when you have so much else to contend with day-to-day, but the reality is that piracy can be very damaging. In today’s belt-tightening times, pressure from legitimate competition is tough enough, without the prospect of illegal traders eating into precious margins. With Microsoft’s continued support we are able to offer expert licensing solutions to everyone in the channel, and aid their efforts against the pirates. Together, I believe we help to maintain a level playing field for everyone.”

These latest cases highlight Microsoft’s determination to stamp out illegal trading that harms honest retailers. Microsoft recognises that piracy is a global problem but that it needs to be tackled at a local level. Telford-based Genner Sales first came to Microsoft’s attention in 2006 when several complaints were received from customers about Windows recovery discs, carrying the reseller’s name, that didn’t deliver what they promised. Microsoft recovery discs are not authorised for resale, and can’t be re-branded without the software vendor’s permission, which owner Kevin Genner wrongly claimed he had. In an effort to prevent customers from being ripped off, Microsoft challenged Genner over his illegal business model and he signed undertakings in October 2007 not to sell the recovery discs again. However, he continued to do so throughout 2008, disregarding the legally binding commitment he had made.

Microsoft tried persistently to work with Genner to educate him about its licensing rules and rehabilitate him, and was eventually forced into court action. Genner finally agreed to stop trading illegally and to pay £75,000 costs and damages for copyright infringement. Microsoft has agreed to defer enforcing this obligation unless Genner resumes his illegal trading.

Successful settlements were reached with the following 14 resellers, who all admitted to selling software illegally:

Microsoft has been working closely with each retailer to help them ‘get legal’ - to ensure the owners know how to sell software in a legitimate way and that all their staff are trained and understand that selling reliable, genuine software is the best way for them to keep their customers happy and their businesses profitable. Being caught out and named and shamed is never good for business, especially for small firms like these.

Mr Chistopher Hunt from Lichfield Computer Centre Ltd, one of the computer shops that faced legal action, said: “We recognise that we weren’t installing Microsoft software correctly, and that’s something we take seriously. We’ll be working with Microsoft over the next few weeks to make sure what we do falls within their software rules from now on. It’s good to see Microsoft working with small computer shops like ours to ensure we’re up to speed on the right way to use and sell their software. Getting it right is important to us and to our customers - the lifeblood of a local business like ours.”

Microsoft visits computer shops on a regular basis to make sure their knowledge of the software rules is completely up to date. It’s clear that, despite encouraging results, it’s a huge undertaking and the education process still has some way to go. According to the BSA’s most recent software piracy study, the UK lost nearly £935m in 2007 to software piracy. So it’s vital in the current climate that partners work with Microsoft to turn around rogue traders who are eating into their margins. It may no longer be simply a question of piracy reducing profits, but actually putting people out of business.

Graham Arthur, anti-piracy attorney at Microsoft UK said: “We recognise that conditions are getting more challenging, and Microsoft’s resolve to eradicate illegal trading is strengthened as we see honest businesses threatened. We are constantly building on the momentum we have created so far in reducing the amount of counterfeit and illegal software.” Arthur continues, “We hope that these cases, along with recent press stories regarding the approach we take to piracy, will help deter other resellers, particularly as the downturn increases the temptation to cut corners.”

These cases demonstrate that whether pirates are operating online or through more traditional bricks-and-mortar operations, they can’t expect to get away with illegal trading. At a time when more and more people are feeling the pinch and searching online for the cheapest deals, Microsoft makes every effort to quickly stamp out any unlawful sales on sites such as eBay and eBid, and works with five of the biggest online auction sites and shops in the UK to make sure software sold is genuine.

And as consumers intensify their search for those too-good-to-be-true prices, retailers have a role to play in educating them in the same way that Microsoft is educating resellers. Helping consumers understand the true value of the hardware and genuine software they’re buying - along with legalisation options such as the Windows Get Genuine Kit3 - will help establish retailers’ expert credentials.

Trading Standards Institute backs effort to protect consumers
Microsoft’s aim to protect consumers from the dangers of illegal software, ensuring that they’re buying genuine Microsoft products is supported by the Trading Standards Institute.

As Bryan Lewin, Lead Officer with the Trading Standards Institute commented: "Trading Standards Departments take the issue of rogue trading very seriously. Ridding the channel of piracy is more important now than ever as it impacts everyone from the unwitting consumer to the hard-working, family owned computer shop selling genuine software. Times are hard for many small businesses without the added strain of having to compete on an uneven footing."

"It is disturbing to see so many cases at the start of the New Year but we are one hundred percent behind any industry efforts to protect consumers and to ensure they aren’t being duped when buying goods or services."

Notes to editors:

1. Hard disk loading normally happens when builders of computer systems sell PCs with unlicensed software pre-installed. These dealers use one copy of a software program but install it illegally on many machines. The original discs and the documents that should come with the PC are often missing or incomplete. If they are supplied, they frequently turn out to be counterfeit.

2. Source: Global IDC Partner Piracy Impact Study, July 2008

3. Click here for details of Get Genuine Kit for Windows® XP Professional.

Customers that have lost their recovery media or partition need to go back to their system builder/OEM (for pre-installed software) or to Microsoft (for boxed software) to source recovery discs. They need a genuine product key that they have already bought for either pre-installed or boxed software in order for the installation to be legal. Implying that buying a recovery disc and then somehow getting hold of a product key, for example, on the internet, gives customers a legally licensed copy of Windows software is misleading and dishonest.

A recent BSA-IDC study found that cutting software piracy in the UK by 10% could create 13,622 new jobs. It would also add £4.42 bn to the UK economy and increase tax receipts by £1.08 bn.

Resellers can report piracy here.

A list of Authorised Distributors in the UK and Ireland can be found here. A list of illegal traders that Microsoft has taken legal action against in the UK can be found here.

Unlicensed software

Unlicensed software is a common type of piracy. It happens when individuals and businesses make copies of software without a license to do so. People may copy a program and give it to their friends/family without realising that this is software piracy.

Sometimes an organisation will install software on more computers than its licences allow. Aside from the financial harm this causes, it puts users at risk because they are using software without a licence.

About Microsoft

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realise their full potential.

The names of actual companies and products mentioned herein may be the trademarks of their respective owners.

For further press information about this release, please contact:
Beth Handoll
Inferno Communications
0208 735 9731
beth.handoll@infernopr.com

Contact Information

Journalists should contact The Microsoft Press Centre. Telephone 0870 6010 100, lines are open 9.00am to 6.00pm Monday to Friday.

Customer enquiries should be directed to Microsoft on 0870 6010 100. Opening hours are 8.00am to 6.00pm.

Top of page