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Microsoft sues resellers

In a show of force against piracy, the software giant takes 12 computer resellers to court for alleged software theft.

In a show of force against a $2.7 billion problem in the U.S. market, Microsoft today said it has sued 12 computer resellers for alleged software piracy.

Filed over the last month or so, the suits are the result of the company's beefed-up campaign to stem unlicensed use of its operating system and applications software. All of the defendants engaged in "hard disk loading," or the preinstallation of unlicensed software, according to the Redmond, Washington, company.

A number of the resellers have previously settled piracy claims with the software giant, Microsoft said. The resellers are located in Northern California, New York, and Boston, according to Microsoft press releases.

The action is designed to protect buyers, who are often unaware that the software included on their new computer is unlicensed, Microsoft asserted. Microsoft also warned other computer resellers that only software sold from a list of authorized delivery service partners is legal.

While Microsoft said it is confident the targeted resellers knew they were violating the software giant's trademarks and copyrights, at least one of the defendants strongly disagreed. "We are really careful," said Russ Lu, owner of Distar, a reseller in San Jose, California. "We asked them why this [software] is a fake, and they didn't answer. They just went to the federal court [and sued]."

Lu added that his three-person company, which has been in business for 15 years, will probably go out of business as a result of the suit. "My attorney says it costs a half a million dollars to defend" the suit, Lu said. "We cannot play this game with Microsoft."

A Microsoft spokeswoman disputed Lu's claims, saying the company gives infringing resellers two warnings before taking them to court. "They definitely have lots of chances to get legal," said Microsoft's Claire O'Donnell. "It's not like they're not aware that what they're doing is illegal."

A spokesman from a software trade group said that piracy is a big problem for software companies and that "mom and pop shops" are some of the biggest offenders.

"The cases we've come across have always been the smaller shops selling hardware," said Steve Bowers, a spokesman for the Software Publishers Association. "To our knowledge it's not usually the big national retailers."

Bowers estimated that 28 percent of software used in North America is pirated, costing the industry $2.7 billion a year.

To combat the problem, Microsoft has launched a "continuous sweeps" program in several regions throughout the U.S. The company says it investigated 57 separate companies in its latest series of sweeps. Microsoft says it receives 2,000 tips each month concerning potential pirating of its products.