To crack down against software piracy, Microsoft Corp. and the San Diego Better Business Bureau jointly announced plans to take legal action against two San Diego computer resellers for software piracy.
The companies involved in the Microsoft lawsuit are Software Direct, with offices in Vista and Encinitas, and PC Highway, with offices in San Diego, Solana Beach and Encinitas.
The lawsuit filed in the Federal District Court of San Diego last week seeks unspecified monetary damages for trademark and copyright infringement and an injunction against distribution of pirated software.
Microsoft sent cease-and-desist letters in the past two years and claimed the two local firms ignored the letters.
“We’re trying to make sure customers are not victimized by software piracy,” said Anne Murphy Kelley, senior attorney for Microsoft. “People are concerned they are not getting genuine products from these vendors.”
Kelley said software piracy costs the software industry some $3 billion annually in the United States and $12 billion annually worldwide.
According to the West Chester, Pa.-based International Planning & Research Corp., California has the highest national piracy rate at 29.7 percent, higher than the national average of 25 percent. Last year, it was estimated software piracy cost California 18,000 jobs and $244 million in state tax revenues.
Kelley said she cannot predict the monetary damages the companies may pay until the court determines the scope of copyright and trademark violations. A copyright violation can cost up to $150,000 per article upon willful infringement and up to $10 million for corporations upon willful infringement of trademarks.
Half of the damages collected will be donated to nonprofit organizations under Microsoft’s name.
“Microsoft and other companies are continuing an all-out anti-piracy program which informs consumers that the people who pirate software are, in the opinion of the Better Business Bureau, nothing more than thieves, and consumers dealing with these people are accepting stolen merchandise,” said Gerry Wilson, president and CEO of the San Diego Better Business Bureau.
“The BBB recommends consumers thoroughly know about the products they are buying and deal only with legitimate companies,” Wilson said.
An information brochure regarding software piracy is posted on the Better Business Bureau’s Web site at (www.bbb.org). Wilson referred to San Diego as “Scam Diego” during the press conference for its high volume of piracy. He said San Diego is second to Miami in terms of scam artists.
Thomas Lord, attorney for Software Direct, said Microsoft went overboard on cracking down on software piracy.
“(Software Direct) is a very small company, which is being punished for a bigger problem,” Lord said.
Lord said Software Direct received a cease-and-desist letter in July 1999 after Microsoft indicated it caught one Microsoft product traceable back to the company. He said the company made efforts to comply with the letter and never received another letter since then regarding the case.
The 20-employee company primarily sells hardware, accessories and software on the Internet and by telephone to customers. The company purchases its products from outside supply vendors, which suppliers handle most of the packaging.
“It’s more important to us that we sell legitimate top-quality products to our customers,” Lord said. “By selling counterfeit products, it can ruin and destroy a company’s reputation and that’s not what we want.”
He predicts a settlement can be reached fairly quickly, because the company has complied with Microsoft.
Microsoft product sales compose less than 1 percent of the Software Direct’s sales. None of the other software companies’ products has filed a complaint regarding this company, Lord said.
“Software Direct is doing everything they can do to ensure quality,” Lord said. “They really caught us by surprise.”
