Sat, Feb 09, 2008 page1

• Microsoft's piracy crackdown fails to stop counterfeiters

  • AP
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  Near-perfect knockoffs of 21 different Microsoft programs began surfacing around the world just over a decade ago.

  Soon, PCs in more than a dozen countries were running illegal copies of Windows and Office, turning unwitting consumers into criminals and, Microsoft says, exposing them to increased risk of malicious viruses and spyware.

  The case began to turn in 2001 when US Customs officers seized a shipping container in Los Angeles filled with US$100 million in fake software, including 31,000 copies of the Windows operating system.

  From there, Microsoft pushed the investigation through 22 countries. Local law enforcement officials seized software, equipment and records and made arrests. A court in Taiwan handed down the last of the major sentences last month. Microsoft estimates the retail value of the software the operation generated at US$900 million.

  "That is a tremendous accomplishment," said James Spertus, a former federal prosecutor in Los Angeles who later led anti-piracy efforts for the Motion Picture Association of America. "There are only going to be a few cases like this a decade."

  Now Microsoft is eager to talk about the experience because taking down that operation -- responsible for about 90 percent of the fake software the firm found between 1999 and 2004 -- didn't actually stop piracy. It just left room for more counterfeiters to rise. Microsoft hopes would-be pirates will think twice if they know how far it will go to protect the computer code worth billions in revenue each quarter.

  The pirates mimicked complex holograms stamped directly onto disks and packaging materials embedded with the kind of tiny safety threads used in making money. In some cases, it took experts with microscopes to notice that disks printed with codes used by legitimate software factories lacked certain minuscule, unique smudges.

  "The copies were so good, we went to tremendous forensic and scientific lengths to establish that the counterfeits were, in fact, counterfeits," said David Finn, an associate general counsel at Microsoft.

  Without a solid lead on the source, Microsoft continued to gather string. Members of its 80-person worldwide anti-piracy team made test buys to see if retailers were selling fake disks, knowingly or unwittingly, and worked leads back up the black-market supply chain.

  The seizure of the container in Los Angeles led to Taiwan, where the Ministry of Justice raided Chungtek Hightech Enterprise Ltd (中帝科技), recovering an estimated US$100 million in software and equipment. Months later, Taipei City police and other investigators hit Cinway Technology Co (碧盈科技), a related manufacturer in the same industrial complex, seizing another US$126 million in phony software. Records found there led to a packing, storage and shipping center in China's Guangdong Province and back to distributor Maximus Technology Inc (鈞富資訊) in Taiwan.

  Finally, last year, the owner and operator of Chungtek and Cinway, Chen Bi-ching (陳碧卿), was sentenced in Taiwan to four years in prison, while her two codefendants received jail terms of three years and one year respectively. The distribution outfit's owner, Huang Jer-sheng (黃哲聖), was sentenced to four years in prison.

  China's Public Security Bureau raided the packing and shipping company, Zhang Sheng Electronics (展聖電子), and Li Jian, the manager, was sentenced to three years in 2004.

  Matching the Taiwanese counterfeits to copies found around the world, Microsoft gave law enforcement agencies ammunition for raids and criminal cases in the US, the UK, Italy, Canada, Germany, Singapore, Australia, Paraguay and Poland. Dozens of big distributors, middlemen and retailers were convicted, including 35 people in the US.

  One was Lisa Chen, who according to a Customs press release arrived at the scene of the 2001 shipping container bust with additional counterfeit software in her vehicle. Chen was prosecuted by the Los Angeles district attorney's office as a major US distributor of the Taiwan-made fakes and received a nine-year prison term in November 2002. She has since been released, her lawyer at the time said.

  Microsoft would not say how much it spent on the investigation or how many counterfeit copies of Windows and other programs were found in use on PCs.

  After the raids in Taiwan, the number of high-end Microsoft counterfeits dropped -- but only for a while. A Chinese operation that stepped in cranked out an estimated US$2 billion in copies before it was brought down last July.
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