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Court punishes software sellers 'not lining Bill Gates's pockets'

'I'll do you an Office without a licence for £85'

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Microsoft has won a judgment against three individuals behind a company which unlawfully sold genuine and counterfeit Microsoft software and certificates.

The three were found to be selling counterfeit software and of selling 'loose' certificates of authenticity – i.e. certificates not attached to computers – in breach of the licence terms of the software.

Judge Richard Havery of the High Court issued a summary judgment for Microsoft, which means that he found in the corporation's favour and that the case will not go to a full trial.

Havery wrote in his judgment that "there is no real prospect of any of the defendants resisting" the various claims, and that "there is no other compelling reason why the case should be disposed of at a trial".

Among the evidence produced were transcripts of conversations which Microsoft claimed took place between a test purchaser, Kenneth Anderson, and Edward Hill, the principal salesman of the company involved, Digital Now! Limited.

Hill was quoted as telling Anderson, whom he thought was a buyer, "I can do you an Office 2003 [Microsoft software] without a licence for eighty-five quid. The licensed version is one hundred and eighty-five quid. With the eighty-five quid one we're not lining Bill Gates's pocket. If he's installing it in a business or something he might want to do the licence. He might want to do it properly."

Hill claimed that his remarks were taken out of context and that the confusion arose because he did not know if Anderson had a volume licence. "The reference to not lining Bill Gates's pockets was to emphasise that there was no point in paying twice for the same right," he said in his witness statement.

Havery ruled that: "It is clear on the totality of the evidence that there is no real prospect of any of the defendants successfully defending the claim against them that Digital to their knowledge traded in counterfeit products of Microsoft".

The defendants in the case, two of whom owned the company between them, argued that in some of the cases they were trading in licences for which Microsoft had already been paid.

The defence argued that if a large organisation, such as a bank, bought a large number of computers and never used the bundled Microsoft software and sold on the licences, that a company such as Digital could sell those licences, for which Microsoft had already been paid.

The judge rejected the argument. "The fallacy in the argument is that if the bank does not accept the EULA [licence] terms [by operating the software and agreeing the terms], it receives no licence. Thus it can confer no licence for the use of any Microsoft software by passing on the COA (certificate of authenticity), nor can the COA be evidence of, or itself confer, such a licence. Thus, provided that the licensing system is enforceable in law, the circumstances exemplified cannot give rise to a legitimate trade in COAs."

In fact, there are circumstances in which disused or unwanted volume licences for some Microsoft software can be transferred; but this trade must be compliant with Microsoft's own transfer terms and conditions.

Havery gave judgment for Microsoft, including its claim for additional damages to be assessed.

See: The judgment

Copyright © 2006, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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