Retailing, Franchising, and Consumerism Business Intelligence in China

Chinese Raids End Aspirations For Software Counterfeiting Syndicate

Microsoft says raids and arrests in China over the past two weeks mark the culmination of a multiyear investigation into a major software counterfeiting syndicate based in Guangdong.

"Microsoft deeply appreciates the work of China's Public Security Bureau in taking such strong enforcement action with these arrests and raids in Southern China," said Brad Smith, senior vice president and general counsel at Microsoft. "This case represents a milestone in the fight against software piracy — governments, law enforcement agencies and private companies working together with customers and software resellers to break up a massive international counterfeiting ring. This case should serve as a wake-up call to counterfeiters. Customers around the world are turning you in, governments and law enforcement have had enough, and private companies will act decisively to protect intellectual property."

The syndicate is allegedly responsible for manufacturing and distributing more than US$2 billion worth of counterfeit Microsoft software. The investigation into this syndicate, which is believed to be the largest of its kind in the world, was led by the FBI and China's Public Security Bureau. Microsoft says hundreds of its customers and scores of Microsoft partners also assisted in the investigation.

These raids and arrests by the PSB, drawing on information provided by the FBI Los Angeles and Microsoft, targeted sources behind the illegal commercial production of Microsoft software, software components and certificates of authenticity. Law enforcement authorities and forensic specialists identified numerous replication plant lines that were involved in the CD production and were the source of counterfeit Microsoft products that had been supplied and sold to business customers and consumers around the world. The counterfeit software, found in 27 countries and on five continents, contained fake versions of 13 of Microsoft's most popular products — including Windows Vista, the 2007 Microsoft Office release, Microsoft Office 2003, Windows XP and Windows Server. The counterfeits were produced in at least eight languages: Croatian, Dutch, English, German, Italian, Korean, Simplified Chinese and Spanish.

During the course of the multiyear investigation, more than 55,000 sophisticated-quality copies of counterfeit software were traced back to the same southern China criminal syndicate. These counterfeit products came from seizures by law enforcement and customs authorities, through submissions made by Microsoft customers and partners, and from test purchases. The 55,000 examined discs are believed to constitute less than 1 percent of the millions of counterfeit copies that are estimated to have been produced and shipped to distributors and countries across Europe, the Middle East, Asia, Australia, the United States and Canada. Countries around the world are expected to experience a significant decrease in the volume of counterfeit software as a direct result of this action.

According to World Customs Organization Secretary General Michel Danet, "Customs around the world, from Cairo to London, Vancouver to Hamburg, and New York to Beijing, seized dozens of shipments numbering thousands of counterfeit Microsoft software products produced by these criminals. This clearly shows that customs around the world are at the forefront of the battle to protect consumers from harm by counterfeit goods, and that sharing information is vital in order to build strong enforcement."

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