Microsoft's Piracy Check Draws Complaints, Lawsuits

When Microsoft Corp. said it planned to begin checking for pirated copies of its Windows operating system using the method it set up to send people security fixes, even some of the company's traditional critics could sympathize.

After all, although Microsoft rakes in billions, piracy of its flagship products remains a huge, costly problem, particularly in developing countries such as China and Russia. The Business Software Alliance estimates that 35 percent of software installed on PCs worldwide is pirated.

Nevertheless, 18 months after announcing the Windows Genuine Advantage piracy check, Microsoft faces controversy and backlash, including two lawsuits. Some say the company clumsily handled several elements of the program, including a key privacy issue.

"They have a right to say, `If you want patches from Microsoft, you know, you should let us make sure you're not running a pirated copy of Windows,'" said Gartner analyst John Pescatore. "That's a valid claim, and with the Windows Genuine Advantage tool, I think, they tried to go a little too far."

Microsoft introduced the piracy check in mid-2005 as a condition for downloading security fixes and other software, such as anti-spyware technology, from its Web site.

Now the anti-piracy check is also being sent to customers whose computers receive security updates automatically. For now, users can take extra steps to opt out of the piracy check. But Microsoft strongly encourages people to run it, calling it a "high priority update," and says the check might become mandatory at some point.

Once installed, the program checks whether it believes the user's version of Windows is legitimate. It gathers information such as the computer's manufacturer, hard drive serial number and Windows product identification.

Microsoft still offers important security fixes even if the company alleges the version of Windows is pirated, although those users can't get non-security downloads, such as a test version of the new Internet Explorer browser. Those users also receive a barrage of notices that they are running an illegal copy of Windows.

While Microsoft had told users the new software would gather information related to piracy, some people became alarmed when they discovered that the software also was performing a daily check-in with the company.

Microsoft said the daily "call home" was a safety measure designed to let the company shut the program down quickly if something went wrong. But critics saw the undisclosed communications as a breach of privacy and trust.

Marc Rotenberg, executive director of the Electronic Privacy Information Center, said the concern is that users did not know about or control the interaction.

"It feels very much like a digital trespass -- you know, someone is getting access to your system without your consent," he said.

Microsoft conceded that it should have told users it was making the daily connection. It has since discontinued the daily check and revised its disclosures. The system will, however, continue to occasionally check in with Microsoft to make sure it still believes a person's software is legitimate.

Even so, although many had sympathized with Microsoft's original anti-piracy efforts, to some this misstep was enough to call into question the entire program.

"To use the security mechanism to install marketing software that is designed to increase Microsoft's revenue but actually interferes with some people's use of their PCs is a real breach of faith with customers," said Brian Livingston, editor of Windows Secrets, a newsletter and Web site that offers tips for using Microsoft software.

He thinks the episode will have a long-term, negative effect on how well people regard the software maker.

"The trust has been broken," he said.

Microsoft faces two federal lawsuits over the software, both of which accuse the company of violating laws that seek to combat spyware. The lawsuits seek class-action status.

Microsoft spokesman Jim Desler insists the piracy check is not spyware.

"These lawsuits are without merit and they really distort the objective of our anti-piracy program," he said.

Pescatore, the Gartner analyst, said he thinks Microsoft has found a good middle ground by backing off on the daily checks, and he doesn't think most users will be affected by the controversy.

But for those who were already suspicious of Microsoft, this adds more fuel.

"I definitely think that there's paranoia -- I would argue unwarranted paranoia," said Russ Cooper, a security researcher at Cybertrust Inc. who approves of the privacy check.

Microsoft has taken great pains to improve its privacy policies since it came under intense fire about five years ago for a system called Passport that sought to store all sorts of personal information under one log-on. The program was scaled back considerably and, despite some ongoing concerns, Rotenberg said Microsoft has come to play a leading role in privacy issues.

"Since that time you can say simply, they got privacy religion," Rotenberg said.

But he thinks Microsoft has misstepped with the privacy check, and should separate it from the system for sending security updates.

Because the piracy check isn't mandatory -- for now at least -- Microsoft is using incentives to try to get people to download it. One short-lived offering, called Private Folder, gave people a special place on their computers to password-protect data they didn't want to share with family members or co-workers. The company was forced to pull that product amid complaints that the secret folders would create headaches for corporate technology experts trying to manage big computer systems, and raise other problems if consumers forgot their passcodes and couldn't get at their data.

Despite such flubs, Microsoft appears if anything to be redoubling its commitment to crack down on illegal Windows copies, part of a larger push to increase profits from the highly lucrative franchise.

Microsoft takes legal action against those it believes are distributing pirated copies -- and it says it has used data from the piracy check to help track down some sellers. The company also is working with government officials in places like China to try to make piracy less acceptable.

But in a meeting with financial analysts in late July, Microsoft also made clear it is counting on the individual check as part of its overall bid to grow sales by slashing piracy.

Kevin Johnson, co-president of the Microsoft division that includes Windows, said: "We're really trying to amplify the fact that being genuine enables a set of benefits and value."


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