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Judge blocks Microsoft from banking Utah software piracy winnings

MBC gets a new day in court

An appeals court has temporarily rescued a small Utah software distributor from the legal clutches of Microsoft by throwing out an earlier decision that confirmed software piracy charges.

A judge for the Tenth Circuit Court of Appeals wrote that too much doubt surrounds Microsoft's case against MBC Enterprises for the court to back up a previous decision (from a district court) granting Microsoft summary judgment in the matter. This, at least momentarily, halts the payment of damages to Microsoft and reverses an injunction against MBC that stopped it from selling Microsoft software. Microsoft accused MBC of buying and selling counterfeit Windows 98, Office and NT software.

MBC allegedly bought the tainted software from a Texas company called Bantech and then sold equally tainted code to a Michigan company known as Mr. Software.

"The district court concluded defendants engaged in 'knowing infringement' of Microsoft's copyrights and trademarks," wrote judge Mary Beck Briscoe. "Based upon this conclusion, the court assessed a total of $990,000 in damages: $430,000 in statutory damages for copyright and trademark infringement related to the Windows 98 software (damages on one copyright and four trademarks); $330,000 for infringement related to the Microsoft Office product (damages on one copyright and three trademarks); and $230,000 in statutory damages for infringement related to Windows NT (damages on one copyright and two trademarks) . . ."

"In appeal, defendants contend the evidence relating to their intent was controverted and that the district court improperly found facts. We agree. As outlined in detail above, we conclude there are genuine issues of material fact concerning whether MBC actually sold any units of counterfeit Microsoft software."

The court points to numerous items that could raise doubts about whether or not MBC knowingly purchased counterfeit software. In its decision, the court states that much of the evidence obtained by Microsoft could be seen as circumstantial.

In addition, an MBC employee was able to convince the court that he takes very special care to ensure that all software sold by the company is thoroughly verified.

You'll all love this bit:

(The employee) personally authorizes each purchase of software by MBC and takes certain steps to verify the authenticity of the Microsoft software," the judge wrote. (He) visits Microsoft's piracy web site and news web sites on a daily basis to check for new guidelines to verify the authenticity of Microsoft software.

Utilizing those guidelines, he inspects each piece of Microsoft software purchased by, among other things, (a) examining the hologram on the CD or its inner ring, (b) inspecting the heat-sensitive strip woven into the fabric of each software manual or COA, (c) inspecting the holographic thread woven into each manual or COA, and (c) inspecting manuals, COA's and licenses for appropriate watermarks.

According to (the employee), MBC receives counterfeit software once or twice a week. When a piece of counterfeit software is received, MBC returns it to the seller with a label expressly indicating it is counterfeit. (The employee) also regularly sends e-mail messages to Microsoft regarding what he believes are counterfeit software products.

A model of diligence.

The case is now on its way back to a district court.

Novell settled a similar lawsuit with MBC in May of 2003. ®

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