Software Companies Sound Alert as Counterfeiters Fool More Buyers Investigators Estimate That Piracy Costs Industry Billions in Lost Sales

Article excerpt

The underworld has a new kind of crook: the software counterfeiter.

In the past year, counterfeit copies of dozens of popular computer programs have been popping up on store shelves. The fakes are good enough to fool retailers.

"This is not the back streets of Hong Kong," says Anne Murphy, a Microsoft attorney investigating software counterfeiting. "We have an indigenous counterfeiting industry in the United States."

"Everyone believes there's no problem in the United States," adds Ron Barker, a former piracy investigator and now spokesman for Novell Inc., the Provo, Utah, manufacturer of the leading networking software for desktop computers. In fact, so much software is sold in the US that overall losses dwarf other countries.

Or at least they appear to.

Counterfeiting losses are hard to estimate. Overall software piracy - which includes illegal copying of software for friends and colleagues as well as outright counterfeiting - cost the software industry nearly $2.9 billion in US sales last year, according to estimates by the Business Software Alliance (BSA), a Washington, D.C., trade group. That's $800 million more than the No. 2 country for piracy: Japan.

So far, much of the activity is in California. For example:

*This month, investigators for the Los Angeles district attorney arrested a computer-software dealer and seized some $1 million of illegally copied software. The district attorney alleges that the dealer, Thomas Nick Alefantes, is "Captain Blood," a counterfeiter who has operated for at least five years.

*This summer a federal court issued preliminary injunctions that barred five California companies from selling any more counterfeit copies of software named in the suit. The suit, initiated by the Software Publishers Association (SPA), marks the first time the association has taken legal action against alleged counterfeiters. "It's a growing problem," says Peter Beruk, litigation manager for the SPA, the principal trade group representing the software industry.

For several years, software counterfeiters have churned out fake copies of operating systems and graphical interfaces, especially the DOS and Windows programs from Microsoft. Now counterfeiters are replicating other software programs. Mr. Beruk says he has seen counterfeits of some 20 titles. "It's not a lot, but a year ago we weren't seeing this. My suspicion is that it's going to go up," he says.

The counterfeit operations are not only branching out, they're getting more sophisticated. Instead of making one-by-one copies of software on easy-to-spot recordable disks, illegal shops stamp out the optical disks just as legitimate software companies do. …