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Don't get MicroShafted (tm)

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Don't get MicroShafted (tm)

Old 18th Apr 2002, 20:22
  #1 (permalink)  

Jet Blast Rat
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Angry Don't get MicroShafted (tm)

A good friend who owns a small computer software company and occasionally supplies systems along with branded software was recently summonsed by Microsoft for having bought unlicenced software. He had bought in good faith a large number of licences along with some CDs from a company advertising in the national computer press, both the trade and retail press.

Microsoft's solicitor demanded £8000 compensation on the spot, against a threat of a £16000 law suit if he did not sign before leaving her office. He was also told he should only buy from an "authorised dealer" and that it was illegal to buy from any other, even threatening him with criminal prosecution for having done so. Apparently she seemed very sure of her case, as well as extremely aggressve, and claimed similar cases went to MS. From what I hear she used the exact techniques used by professional interrogators to extract information in order to extract a signature.

Now MS found that my friend had bought this "counterfeit" software through raiding the vendor. Therefore they were quite aware my friend had acquired the licences in good faith, and paid a reasonable amount for them, so was not out to make profit from cheating MS.

I first find it absolutely disgraceful that MS behave in this way It was unwarranted to chase someone in this overbearing, arrogant manner, and the fact that my friend was an unwitting transgressor puts this behaviour below the gutter.

Secondly, if anyone has any legal knowledge of intellectual property law how strong is MS's case for (a) compensation at above wholesale price of the licences (even £8000 was to much), even though the original transaction was in good faith and (b) preventing the sale of software by unauthorised dealers, and criminal prosecution of the purchaser.

Thirdly, if you have knowledge of contract law, is my friend's signature binding given that it was under duress with no time given to think or consult a legal representative?

My friend immediately visited his solicitor, but apparently he was non-commital for now.

I cannot believe that the British courts would countenance such disgusting behaviour from a large business towards a very small (around 8 employees) company, but as I say this lawyer seemed very sure of her case. How come such compensation can be demanded from someone who was the victim of an unlawful transaction? It is hateful that MS feel they can get away with enforcing their copyright in such a confrontational, spiteful, arrogant, demanding way, with no time for sensible discussion.

Is there nothing we can do about this appalling company?
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Old 18th Apr 2002, 20:50
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In a civil case, the verdict goes on the balance of the evidence. This is different from a criminal case, where the prosecution's case has to be proven beyond a reasonable doubt.

In a civil case, therefore, it would therefore be incumbent upon Microsoft to prove on the balance of probability that the purchaser knew, or had reasonable grounds for believing, the software to be counterfeit.

Were a criminal case to be brought, it would, of course, be harder to eliminate any remaining reasonable doubt.

And any contract signed under duress is not worth the paper it is printed on. Witnesses wouldm however, be extremely useful since otherwise it is one person's word against the other.
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Old 18th Apr 2002, 23:49
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Hug, I don't think we are talking about damages here. I think that we are talking about receipt of stolen goods.

The Microsoft position:

You have received stolen property (even inadvertantly), and as such you either have to return that property, or buy it off the rightful owner (us). The cost is 8000 pounds.

Yes we know that you have been ripped off by the person from whom you innocently purchased that property - but that is your problem to be sorted out with them, not our problem.

It would be the same if the property was a stolen car, TV etc etc - if it is stolen, even if you buy it in good faith, it still isn't yours - it belongs to the original owner and the money you paid you have to sue the vendor for.

To put it another way - your friend was scammed out of his cash by the vendor, by the vendor selling something he didn't own. Your friends problem is with the vendor, not Microsoft. (I am not in the computer industry, or legal profession!) You can avoid such scams by checking the ownership before you buy (as you do with a car) or by buying only off a registered dealer.

Last edited by Checkboard; 18th Apr 2002 at 23:54.
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Old 19th Apr 2002, 00:27
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I once bought a car in good faith from a car dealer. It didn't stop the local CID paying me a visit informing me that it was stolen and the insurance co. wanted their pound of flesh.
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Old 19th Apr 2002, 07:46
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SC,

Agree that their seems little doubt that your friend will have to re-imburse MS for the cost of the software, since it was stolen. This doesn't seem fair, but, as others have pointed out, is the same as if you'd received a stolen car unwittingly.

You mentioned criminal prosecution. For what? Handling stolen goods is the only thing that I can think of. I was a member of the jury in a case of handling stolen goods, and, as far as I am aware, there are absolutely no grounds for criminal proceedings in this case. The judge on the case I was involved in explained, very clearly, that there were 3 requirements for conviction of this crime:

1) The good must be stolen. (It seems there's little doubt of this in your friends case.)

2) The accused must have been aware that they were stolen. This clearly was not the case with your friend, and would therefore mean he is innocent.

3) The accused must have been acting in bad faith. (This really exists only because, in the case of a police officer recovering stolen goods, the officer would be guilty if 3) didn't exist, since the goods would be stolen, and the officer would know they were stolen - it rarely has any relevance to any case which comes to court.)

Hopefully that will put you and your friends mind at rest a little, although it is sad (and unfair) that your friend will find himself out of pocket through no fault of his own. But there are plenty of peole here with legal expertise who can probably give a much fuller answer.

FFF
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Old 19th Apr 2002, 08:47
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Hmm. Seems a little different to me than a stolen car.

Since software can be duplicated indefinitely, Microsoft hasn't really been deprived of the use or ownership of something in the same way as the owner of a stolen car has.

It always amazes me that companies who spend millions on advertising can then go and spoil the whole effect on something like this where they create themselves a hugely negative image over a tiny amount of money.

8000 quid here or there is nothing to Microsoft. They could get far more than 8000 quid's worth of positive publicity by accepting that this person has been the victim not the perpetrator and offering him free support or something.
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Old 19th Apr 2002, 09:03
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Thanks for the point about 'stolen goods'. However the criminal "offense" mentioned was buying from an unauthorised dealer, regardless of the veracity of the licence. If the licence is genuine, then nothing had been stolen, surely?

If they are serious then any small computer shop selling a computer with MS software is criminal, as is any individual selling on a computer with the software intact.

In fact since my friend no longer has the goods, and was not intending to buy stolen goods, I'm not sure if they can recover damages for handling stolen property - surely that responsibilty goes to my friend's customer? If he is liable, is the customer also liable for having, effectively,done the same thing, thus MS potentialy receiving the licensing revenue three times for a single item of software (assuming the licences are actualy genuine and paid for by th original vendor, just not valid due to onward sale, which I suspect to be MS's case)?

Part of my point is that £8000 is over the odds price for the licences involved (my estimate is less than £5000 trade price). Sounds like MS trying to extract punitive damages from a victim of the crime.

Another part is that this was one in a manner not aimed to resolve the issue, but to extort cash. They did not tell my friend details before the meeting, so he could discuss the issue with a solicitor, or have one present. They did not try to persuade him of their case, but to browbeat him into giving them money.
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Old 19th Apr 2002, 10:46
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Hi, this is my first post, hope it's useful…

With regard to copyright, there are two types of infringers, primary and secondary. In essence, primary infringers are those who actually commit the infringing act whereas secondary infringers are those who do not themselves infringe but who deal commercially with infringing articles.

The main difference between primary and secondary infringers is that primary infringers are liable even though they have no reason to believe that they are infringing copyright, whereas secondary infringers are only liable if they know or have reason to believe that the article in question is an infringing article. In effect, this means they can be liable for negligence.

Accordingly, I would suggest that if your friend can show that he had no reason to believe that the computer software which he bought were infringing copies, then he has a valid defence. However, whether or not this defence will stand up in Court will depend upon the facts of the case. It is possible that if Microsoft has taken steps to give notice to traders that infringing articles are on the market together with information on how to identify those articles, then proof of receipt of such a notice from your friend could constitute a 'reason to believe' that his source was dealing in infringing articles.

With regard to damages, it is possible in copyright cases for the Court to award exemplary damages i.e. damages which go beyond the actual damage suffered as a result of the infringement. Whether such damages are awarded will depend upon numerous issues, including the flagrancy of the infringement and the benefit gained by the infringer by the infringement.

I would strongly recommend that your friend obtains some legal advice from a firm of solicitors which has an IP capability or, even, approach a firm of Patent and Trade Mark Attorneys which will also be able to advise upon copyright issues.

Last edited by la fresher; 19th Apr 2002 at 14:19.
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Old 19th Apr 2002, 10:51
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Thanks very much, Fresher, and welcome to PPRuNe. That was a good deal to consider.
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Old 19th Apr 2002, 11:36
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Send Clowns, software licences are usualy non-transferable so even with a legal copy it cannot be sold to you unless it has Microsofts authorisation. And you cannot then passit on to someone else either.
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Old 19th Apr 2002, 12:40
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I am intrigued by the MS position that the third party is 'in receipt of stolen goods'...I can understand the goods being 'counterfeit' if they are pirate copies (if I am following the jist correctly) but cannot see that they are 'stolen goods' within the definition of UK law...therefore your friend could be charged by the police and/or trading standards with 'dealing in counterfeit goods'...but not a demand from MS to return or recompense for property 'stolen' from them (which in any case would be a criminal action). The third party did not 'produce' these counterfeits and therefore has no case of copyright infringement to answer??

As Fresher is saying actually...

Last edited by Boss Raptor; 19th Apr 2002 at 12:43.
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Old 19th Apr 2002, 12:41
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Hi Grainger, whilst comparing using unlicenced/illegal to a stolen car may seem a little extreme the principal is the same. The guy had bought software and licences to use on multiple computers in good faith but ufortunately like myself had been 'stitched up'.

Every time you install software on another machine you need to buy another licence (commercialy at least).
Regardless of wether you can duplicate the software or simply use the same piece of media to install the software, each time you do so without a licence you have effectively stolen it. I think it's called 'theft of itellectual property' though I stand to be corrected on that.

It is people who willfully buy/sell and use illegal software that drive the prices up. This guys case may seem a little different but unfortuately ignorance is no defence.

Microsoft have a legitimate case with him and indeed the company who sold him the software, it is now down to him to seek compensation from the company he bought the software from. Pain in the ass I know but that's how it works.

It's interesting that Microsofts lawyers offered him the old out of court settlement. I wonder if they actualy would have gone to court over what probably amounts to peanuts to them
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Old 19th Apr 2002, 13:24
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OK, but two things:

First, the fallacy that illegal copying drives the prices up. This would only so if all those doing the copying would otherwise have bought a legitimate copy which clearly isn't the case. Microsoft have been handosmely rewarded for their development efforts.

Same thing happens in the recording industry - from time to time we get the howl that millions of pounds are lost because of taping CDs. Now I'm not condoning it, just pointing out the obvious that stopping copies would mean lots fewer illegal copies going round, not lots of extra albums purchased legitimately. The total revenue would be much the same in both cases.

Second - back to the enlightened self-interest: sure Microsoft might get a few thousand quid back by shafting this person, but they'll get far more than a few thousand's worth of adverse publicity. Or are they so arrogant that we're all a captive market anyway so they don't care ?
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Old 19th Apr 2002, 13:32
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Just on the legal side again, I think that the analogies with theft are clouding the issue.

The case seems to be primarily a copyright issue. The software which MS is producing will be covered by copyright (the actual coding is protected as a literary work) and it is the licensing of copyrighted work which allows third parties to do what would otherwise be infringement (see below).

MS, as the owner of the copyright, is given the exclusive right under the Copyright, Designs and Patents Act 1988 to, amongst other things:
- copy the work;
- issue copies of the work to the public.

To do any of the above without the authorisation of MS is an infringement of its copyright and gives rise to the remedies afforded in the Act, such as damages, injunctions, account of profits and delivery up of the infringing articles.

Accordingly, Clown's friend's supplier who is issuing copies of MS software to the public without the proper licence (i.e. proper authorisation) is infringing MS's copyright. Further, it appears that Clown's friend may himself be infringing MS's copyright for the same reason (assuming MS can show that he had reason to believe the software purchased were infringing articles (see my previous post)).

As well as civil proceedings, the Act also provides for criminal offences for those who infringe copyright (generally for commercial purposes i.e. counterfeiting) when they know or have reason to believe that they are infringing. The penalties for such criminal offences include fines and imprisonment for up to two years!

Last edited by la fresher; 19th Apr 2002 at 16:25.
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Old 19th Apr 2002, 14:00
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Red face

Ha. And people wonder why I wont have anything to do with MS (like that bloodey IE browser) or the d!ck who runs the company.

Anything non-MS is thumbs-up in my books. Thats why I use Nutscrape and Opera iso IE, Novell iso Word.

All the MS crap Ive ever bought is pirated anyway (China and Thailand have the cheapest and best quality pirated stuff BTW if you know where to look). Be stuffed if Im payin full price to that bloodey Gates and his empire.

PS how dificult is it to change from W98 to Linux?
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Old 19th Apr 2002, 15:40
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'la fresher' certainly talks my kind of language...more, more...

so as I understand it bottom line is that MS have to prove that the third party was knowingly buying dodgey software with the intent to sell it on...defence being the third party bought in good faith as genuine goods...

The fact that the third party paid a good price doesnt seem to constitute 'knowingly buying dodgey' in my laymans' opinion!

...and if the offences/penalties as described above are in fact 'criminal' then MS must pursue the action via a complaint to the Police and not through civil recourse as they are threatening?!

Last edited by Boss Raptor; 19th Apr 2002 at 15:47.
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Old 19th Apr 2002, 16:39
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That's about it - wasn't that what I said in the first place?
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Old 19th Apr 2002, 17:03
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Ineresting, the upshot seems to be that the licence infringement comes about due to selling on the licence, whether or not originally a genuine licence. I had this suspiscion. This means that the majority of independent computer shops operate illegally, as do the majority of computer owners who sell on machines. You can only sell on a machine if all MS software is wiped!

This means that MS are prosecuting regardless of any loss to themselves, simply because they can. If they sell a licence, why should they bother who ultimately uses it (yes, if it was used serially by different users this would reduces sales, but that was not the case here)? Only because it is a chance to make money

The only software licence I ever really understood described the intellectual property therein as comparable to a book : so long as there was only one copy used at any one time it could be lent or resold, installed on a network, and copied for backup. That made sense. This doesn't. Can't the Monopolies and Mergers Commision (Competiion Commision now?) do something about this company's practices?

Personally on unlicenced use I think MS would sell more software, and people wouldn't bother to copy if the price was reasonable. I have Office software of a quality with MS, superior in some ways, not so good in others (Lotus). It saves MS files, .doc etc (somewhat more efficiently than Word) and can be bought for around £30-80 depending on licence type, instead of £130-350 for Office 2000 Professional. As it is more convenient to use with files from work I would have bought MS had the price been lower. I have a lot of sympathy with people who use unlicenced copies - overpricing and monopoly are bound to encourage this. The same happens in music. A CD costs less than a cassette or vinyl album to produce and distribute, yet costs as much as double retail, purely for profit. I would never copy music if the price was comparable with cassettes, as I could afford what I want. As it is I can't, so could either never have the music or could burn a CD.
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Old 19th Apr 2002, 17:09
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Sounds like we're reaching some agreement here.

So why do we have to keep going (tm) anyway, every time we mention MS or one of the other corporates ??

What happens if you don't say (tm) ???

Let's annoy 'em a bit:

"Microsoft, McDonald's, Coca-Cola.... "

Ha ha ! No (tm)'s there - bet that's made 'em mad !!!
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Old 19th Apr 2002, 17:11
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Dealers can sell-on software if they have an OEM or a Dealer's licence from the software manufacturer. I suspect that they are not permitted by their licence to sell-on in bulk.
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