Microsoft Corporation vs Media Centre case in the SC: Parties agree for settlement

Computer dealer, Media Centre, as part of a settlement, has agreed to sign an express undertaking affirming that they, amongst others, will no longer sell or distribute any computers containing pirated orunlicensed Microsoft software in the future.

The case was originally filedby Microsoft in December 2010in the Commercial High Court against Media Centre (now Shad’s Digital) of No. 315, 1st Floor Unity Plaza, Colombo 4 on 31 May 2011, for infringing on Microsoft’s copyright in Windows XP Professional and Office Enterprise 2007 by pre-installing unlicensed Microsoft software into new computers sold to customers. There was no Certificate of Authenticity affixed on the computer, no original DVD disks and no manuals.

Risk of Pirated Software to Consumers and Legitimate Businesses

Commenting on the lawsuit, Microsoft’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.”

“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.

“Branded laptops” falling victim to piracy and grey market imports

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.   Furthermore, there is a trend in Sri Lanka where laptops and software packages meant for overseas markets are illegally imported and sold in Sri Lanka.Distributors of “high end” counterfeit/pirated software usually mix counterfeit with parallel imported (grey market) software. There is a risk that products sourced from overseas may also be falsely declared and undervalued to achieve a lower price. According to section 52 of the Customs Ordinance if the goods are undervalued, it is an offence and such goods shall be forfeited.

“When purchasing new computers, it is important to ensure the computers and software packages sourced by you are not grey market goods illegally imported into Sri Lanka. Since you are already doing the right thing by getting genuine, why stop halfway, and put yourself at risk by purchasing a grey market product?” said MrSelvasegaram.

In Sri Lanka approximately 150 local hardware vendors are operative whose main business is the sale of PC’s with operating systems.  Their bottom line depends on revenue based on genuine, legal software sales and so they depend on the effective rule of law to protect their businesses from being impacted negatively by the trade in counterfeit/pirated or illegal software. This level playing field is believed to be essential to enable the local PC outlets to continue runningprofitable businesses serving customers / consumers throughout Sri Lanka. Intellectual Property protection is therefore vital for the success of local companies such as these vendors.

“We are pleased to see intellectual property rights (IPR) upheld and protected in Sri Lanka in its highest Court of the land.  This is also a win for local software developers, local IP right holders, honest computer dealers and all consumers,”  Selvasegaram added.