For more than a year, Microsoft employees have kept tabs on eBay and other online auctions for software sales that the company believes violate its copyright or trademark rights. When they surface, Microsoft and the auction house work together to shut them down.
Under the licensing agreement with Microsoft, people who buy a computer with pre-loaded software cannot break out the software and sell it.
Ron Faul learned about this the hard way. Faul, who infrequently sells video games on eBay "when I'm tired of them," was trying to auction off two copies of Windows 95 for between $5 and $10 apiece, and a trial copy of Windows XP for $5. Faul said he obtained the Windows 95 programs by removing them from two computers he owns. Microsoft objected and down went his auction.
"Microsoft demands that you cease and desist from distributing unauthorized Microsoft software immediately," said the e-mail he received from eBay.
Auction houses have always worked with software companies to bar or take down illegal auctions of used software. But there has been an increased awareness of the Microsoft sales lately because of the looming launch of Windows XP. Many sellers say they are dumping their old Windows software because they are planning to get Microsoft's Windows XP, which is due in stores next month.
"I'm not dealing in pirated software," Faul said. "I'm just a guy cleaning out his closet. Why does Microsoft care about 5-year-old software anyway? I think they want to prevent people from selling used software so others have to buy the latest and greatest from Microsoft."
Charmaine Gravning, a product manager for Microsoft's Windows XP, said the policy is clear that people cannot sell or even share the software that comes pre-loaded on computers. If a consumer buys a copy of Windows in a store, they can transfer or give away the software for free, provided they include the license agreement, and all other documentation.
For Microsoft, it is a matter of control, said Matt Sargent, an analyst at research company ARS. Unlike books or CDs, software is easier to replicate, which makes a secondary market more problematic. Users can buy a CD, copy it to their hard drive, and resell the disc.
"It's not really piracy, but they probably look at it as piracy-like," he said.
Microsoft in many ways could find itself in an uphill battle to police these kinds of sales. The used-PC market has been around for ages, and exchanges happen in more places than just eBay and Amazon.
"There is enough value out there in used computers that people will make a market out of it," IDC analyst Roger Kay said. "If it leaves eBay, it will open up somewhere else. It can be like one of those floating craps games."
He added, "The preponderance of history is against them in this case, but light bends when it gets near Microsoft."
Like eBay, charities are a way for second-hand PCs to get passed on to new users, but the software that was on them often doesn't go on to that new user. Many charities look to keep a good relationship with Microsoft, so they have rather stringent guidelines for when they'll accept software with a used PC and when new software needs to be installed.
Microsoft says those who want to donate PCs and attendant software through charities need to make sure that the software is licensed to begin with and that the license goes hand in hand with the hardware; all documentation needs to go with it.
If a machine doesn't have the operating system or other software on it--that is, if the hard drive has been cleaned off--the recipient needs to secure a license through another legal means, according to Bruce Brooks, director of community affairs at Microsoft. For nonprofit organizations, a legal channel recommended by Microsoft is CompuMentor
The National Cristina Foundation says that donors should wipe hard drives clean, but added that the older software is acceptable in the right circumstances. "If it comes from people who have saved the license, you can transfer it if you have the original documentation and diskettes," said Yvette Marrin, president of the Greenwich, Conn.-based foundation that provides computer technology to people with disabilities and to the economically disadvantaged.
"Usually individuals have their paperwork, so it's usually a simpler transfer."
Charities, she said, have to have site licenses or get them. Charities can make use of operating systems no earlier than Windows 98 and can receive only a limited number of copies of Windows or other software.
If anything, Microsoft will likely have the best success of stopping unauthorized sales by dealing with large companies like eBay.
Over a year ago, eBay began the VeRO program, which allows owners of intellectual property to notify eBay when they find an infringement of their property rights. The auctioneer will make "good faith effort" to close the sale, eBay spokesman Kevin Pursglove said.
Besides Microsoft, among the other 2,000 VeRO members include Adobe, Warner Bros, Vanderbilt University and the Hard Rock Caf?.
When eBay gets a complaint, the company pulls the auction and notifies the seller of the complaint without trying to determine whether there has been an actual violation. It is up to the seller to prove the sale is legitimate for it to be re-listed.