Microsoft alleges false labeling

Microsoft Corp. yesterday filed its first-ever lawsuits over allegedly counterfeit and illicit certificates of authenticity, the shiny labels attached to software packages and computers to verify the legitimacy of the programs inside.

The suits target eight small- and medium-size computer resellers and software vendors across the country, including one in Vancouver, Wash. Microsoft alleges the companies distributed unlawful versions of the labels, known as COAs.

In some instances, the company says, counterfeit or illegitimately obtained certificates were affixed to computer hardware in an attempt to make pirated software loaded on the machines appear valid. In other cases, Microsoft alleges that the labels were sold individually, without associated software, an inherently fraudulent practice.

The suits resulted from a test program in which Microsoft purchased more than 2,000 certificate of authenticity labels on the open market, primarily over the Internet, said Bonnie MacNaughton, a senior attorney with the company. Some of the labels turned out to be counterfeit. Others were legitimate labels that had been removed from packages or hardware to be sold on their own.

"All of these labels were destined to be sold to someone who would use them to deceive a customer, a business," MacNaughton said, explaining that there is "no legitimate reason why someone would need to buy a certificate authenticating an item without the item attached to it."

The test program identified hundreds of companies involved in the practice, MacNaughton said. Microsoft stopped many of them with cease-and-desist letters. The suits, which allege copyright and trademark infringement, were filed against those who refused to stop even after they were asked, she said.

The suits were filed in federal court in seven states. Named in the suits are Monarch Technology Inc. of San Clemente, Calif.; Kenneth Xu of Union City, Calif.; Era Limited of Lake Zurich, Ill.; Micro Info Tech (USA) Corp. of Edison, N.J.; Affordable Computer Warehouse of Clinton, N.Y.; Warp Systems/Computers LLC of Raleigh, N.C.; Master Computer Inc. of State College, Pa.; and Software Provisions of Vancouver, Wash.

Efforts to reach representatives of the companies for comment were unsuccessful last night.

The problem of counterfeit and illicit certificates of authenticity has worsened during the past year, MacNaughton said. She attributed the spike partly to advances that have made it more difficult for counterfeiters to make fake copies of software CDs -- forcing them to look for easier methods of making pirated software appear legitimate.

Microsoft also is working on a solution that would make it harder to counterfeit the certificates or to remove legitimate ones for individual resale.

Legitimate computer resellers and system builders who work with Microsoft had urged the company to take action. David June, development and business relations director with Northwest Computer, a Bellingham-based system builder, said companies using illegitimate certificates of authenticity are able to make unnaturally low bids for business, undercutting firms playing by the rules.

And in the long run, customers who buy systems with illegal certificates and unlicensed software aren't able to get technical support and other benefits. That undermines their confidence in the computer industry.

"The total effect is quite pernicious," said June, a member of a special council of system builders and hardware makers that advises Microsoft. He said he is pleased the company is taking the issue seriously.

More headlines and info from Redmond.