Microsoft wins copyright lawsuit against computer dealer who installed pirated software in branded computers

Concern over branded computers sold with pirated software leading to cyber security risks

Kuala Lumpur, 19 April 2012 – Microsoft Corporation (“Microsoft”) has won a civil lawsuit against Vital IT Marketing Services Sdn. Bhd. (“Vital IT”), a company incorporated in 2002 and whose shares are valued at RM1 million. Vital IT has been in operation for over 9 years. The lawsuit, commenced on 31 May 2011, was against Vital IT for infringing on Microsoft’s copyright in Windows 7 and Office Enterprise 2007 by pre-installing unlicensed Microsoft software into new computers sold to consumers.

The Honourable Judge Dato’ Hanipah Binti Farikullah of the Kuala Lumpur Intellectual Property High Court on 4 April 2012, after a 3 day trial, awarded Microsoft a permanent injunction against Vital IT, prohibiting them from any further acts of infringement. The High Court further allowed additional as well as exemplary damages.

Jonathan Selvasegaram

Commenting on the lawsuit, Microsoft Corporation’s Corporate Attorney, Jonathan Selvasegaram, said, “We file a lawsuit as a last resort when all negotiations fail.  In most cases, our investigations start when we receive consumer complaints that the new computer they purchased encountered problems such as validation failures and virus infections, or when we receive complaints from other computer dealers against certain outlets unfairly undercutting their price by selling new computers with pirated software.  Our lawyers will issue legal letters to seek a settlement meeting. In most cases, dealers are remorseful and agree to settle the matter amicably, which would be our preference.”

The court’s decision comes at a time when the Government is seeking to stem the alarming rate of cyber security incidents due to software piracy, which has resulted in initiatives such as the recently launched “SAFE with GENUINE” consumer awareness campaign by the Government.

Government Concerned About Cyber Security – Launches SAFE with GENUINE Campaign

On 7 March 2012, CyberSecurity Malaysia, an agency under the Ministry of Science, Technology and Innovation (MOSTI) and the Ministry of Domestic Trade, Cooperatives and Consumerism jointly launched the “SAFE with GENUINE” campaign in response to the whopping 88% increase in cyber security incidents recorded in 2011. The campaign is dual-prong effort aimed at both consumers and computer dealers to reduce the cyber security risks that Malaysians face through using pirated software.

According to Lt. Col. (R) Prof. Dato’ Husin Jazri, Chief Executive Officer of CyberSecurity Malaysia in a press announcement made during the above campaign launch, “Pirated software may not get crucial updates or may already contain malware if downloaded from the internet, thus exposing computers to exploitation by cyber criminals. Further, there have been incidences around the world where cyber criminals have been able to exploit unprotected and outdated computer systems to steal bank account information or even “siphon” money from people’s bank accounts.”

Well-known brands found to be installed with pirated software

“On Microsoft’s part, we wanted to ensure computer dealers not only play fair when competing with other dealers, we wanted to take firm action against dealers that risk consumers’ online safety by preinstalling new computers sold with pirated software. Dealers selling computers with pirated software are passing on to consumers a risk where the impact will be felt much later, when they least expect it and at the worst possible time. Imagine losing all your valuable data, work and photos the day before your examination or business presentation when the computer crashes due to viruses and malware in the pirated software,” added Mr. Selvasegaram.

According to Microsoft’s investigations over the last 2 years, many well-known branded laptops are also “falling victim” to software piracy. Consumers assume buying a well-known brand should be more reliable and safer, but may not realize that unscrupulous dealers may have installed pirated software in these computers.

According to Mr. Selvasegaram, “Our investigators purchased 56 computers in the last 2 years across 9 computer brands, and all were found to contain pirated software.  The biggest victims affected by the conduct of errant computer dealers were Acer and Compaq machines which represented a majority of the purchases at 38 computers.  According to our test reports, 46 of the computers were installed with some additional software commonly used by hackers to bypass and circumvent software activation. Such software usually works by tampering with the memory of the computer. The pirated software in the remaining computers were found to be installed using product keys downloaded from the internet, mostly found in sites run by hackers.

In a press announcement made by Mohd. Roslan Bin Mahayudin, Director of Enforcement, Ministry of Domestic Trade, Co-operatives & Consumerism during the “SAFE with GENUINE” campaign launch, it was noted that the Government was “very concerned that more and more computers, even some of the branded ones are now sold without any software to drive more sales, requiring consumers to go out and find their own ‘solution.’ What inevitably happens is that either computer dealers are pressured to install pirated software or consumers on their own may patronize night markets stalls to buy pirated DVD-ROMs. This is not the trend we want to see in Malaysia. Computer manufacturers also have a part to play in this fight against piracy. By doing this, they are causing piracy and may likely result in an increase in security incidents. We strongly urge computer manufacturers to not put profits ahead of ensuring a clean and safe computing experience for consumers.”

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