The software giant was tipped off on its antipiracy hotline, which receives 1,000 calls a month from consumers who have received pirated software.
But that's not the only tactic Microsoft is taking to tackle this ongoing problem.
Microsoft recently deployed undercover "mystery shoppers" in the United States and Canada to find illegal resellers. Based on consumer tips, the shopper enters a store and expresses interest in purchasing a computer and software.
Most of the time, they receive the same answer. "The dealer usually says, 'I'll give you a good deal and I'll throw in Windows 95 for free," Jim Lowe, Microsoft attorney said today. The dealer goes on to say, "You won't get a manual or back-up disk, but it will be on the hard drive."
As a result of the mystery shopper effort, Microsoft identified 11 computer dealers who were either selling copied software or installing it in computers.
Eight of the dealers signed settlements agreeing to stop selling the software and agreed to pay Microsoft for past losses, but three refused.
The three remaining lawsuits against Dollar Computer Corporation in Santa Ana, California; Power 1-2-3 Computers -N- Printers of Norwalk and Orange, California; and PC Expo of City of Industry, California; have been filed in the U.S. District Court for the Central District of California.
The Los Angeles investigation follows four similar antipiracy sweeps in New York, Silicon Valley, Texas, and Toronto.
Lowe expects these resellers to settle when they think about the consequences. "Most figure that the game is over when they get caught," Lowe said. "But, the few that don't usually realize that they don't have a chance because we will take each individual case as far as we have to in order to win."