Microsoft Sues Over Sales Of Student-Only Software

Retailers Alleged to Have Skirted Rules for Licensing

Microsoft said copies of Windows and Office were sold to "unsuspecting retail customers who were not licensed" to use student copies. (Microsoft Via Associated Press)

Microsoft has filed nine lawsuits since last fall against individuals and companies that it claims were involved in selling discounted Windows and Office software intended for students.

Microsoft filed five of the suits Monday in federal courts in California, Nevada and Florida, alleging that the parties infringed its copyright by importing and distributing versions of Windows and Office that were not meant to be sold through the retail channel.

"The defendants in these lawsuits and others are charged with profiting from selling clearly marked educational software to unsuspecting retail customers who were not licensed to use it," Bonnie MacNaughton, senior attorney for Microsoft, said in a statement.

Named in the most recent lawsuits are EEE Business Inc., doing business as eBusZone.com; Eric Chan and Ruhui Li, doing business as LCTech; Intrax Group Inc., doing business as Surplus Computers; Global Online Distribution LLC; and Big Boy Distribution LLC.

"We're not selling counterfeit or stolen software," said Mike Mak, owner of Intrax, which is based in San Jose. "We bought software from legitimate sources in the U.S."

Mak said his company had sold the discounted "student media" software but stopped after it learned about the lawsuit yesterday morning. "When we sell it, we disclose exactly what it is to our customers. We tell them it is academic software, that it may require a separate license," Mak said. He said he did not consider that illegal.

He added that it was impossible for his businesses to sell boxed retail versions of Microsoft software and still make a profit. Instead, he said, "you try to seek out alternatives that are legal," including student media programs.

Dale Harelik, managing director of Global Online Distribution, said his company, based in Las Vegas, has never sold the discounted students-only software. He said that the company received a cease-and-desist letter from Microsoft in January and that he spoke by phone with the software maker's lawyers, who assured him that Global Online Distribution was not a target of an ongoing investigation.

"We're not the bad guys," Harelik said. "We agreed with Microsoft. We complied with Microsoft."

Lillian Shan, a manager at EEE Business, said the company had not seen the legal filings and did not want to comment without having reviewed them. Big Boy Distribution, of Florida, did not return a call for comment.

Microsoft has pinpointed a handful of companies, including one in Jordan and one in Latvia, as sources for the discounted student media software sold on U.S. Web sites, MacNaughton said in an interview Monday.

These education-only copies of Office and Windows, which universities around the world buy from academic resellers and offer to students at a fraction of the retail price, are a prime target for fraud, MacNaughton said.

"We knew we had to try to do something to maintain the integrity of our academic programs," she said.

MacNaughton said Jordan-based Educational Solutions had a contract to sell 150,000 copies of Windows and Office to Jordan's Education Ministry. It received the software from Microsoft but never paid for it, she said. Instead, it resold the disks to software retailers in the United States, she said, making $3 million to $4 million in profit.

MacNaughton said a company in Latvia perpetrated a similar scam, but she declined to give the company's name.

Microsoft also said Monday that EDirectSoftware.com, which it claimed was one of the largest sellers of the discounted student software, agreed to settle a previous lawsuit out of court. EDirectSoftware.com said it no longer sells Microsoft products but would not comment on the settlement.