Is UK retail giant Comet really a Windows pirate?

Is UK retail giant Comet really a Windows pirate?

Summary: It's not unusual for Microsoft to file lawsuits against PC makers who pirate its software, but its case against giant UK retailer Comet is different. What did Comet do that was wrong, and why has Microsoft hauled them into court?

SHARE:

Microsoft has filed suit against a major UK-based retailer, accusing Comet of “creating and selling” more than 94,000 counterfeit Windows recovery CDs in 2008 and 2009.

It's not unusual for Microsoft to file lawsuits against PC makers who pirate its software or against resellers who offer copies of Windows that are clearly marked "not for resale" or have been diverted from the proper channel.

This case, however, is different. Comet is not accused of selling phony or unauthorized Windows licenses. Rather, Microsoft has accused the company of making illegal copies of Windows discs and selling those discs to Comet customers who bought PCs.

The actual civil complaint is not yet available for inspection, but I've been able to piece together the details of the story from statements issued by Microsoft and Comet. It gets into an arcane thicket of licensing and copyright agreements between Microsoft and its PC-making partners, and the issues can be confusing.

Comet is a retailer that currently sells a selection of desktop PCs, all-in-one PCs, and laptops. It offers the usual assortment of consumer PCs with brand names like Acer, HP, Compaq, ASUS, Sony, and Packard Bell. (Wait, the Packard Bell brand is still around? Who knew?)

Those brands are from top global manufacturers, who are known collectively as royalty OEMs. I first wrote about the different channels through which Microsoft sells Windows way back in 2005. Some minor details have changed since then, but the broad outlines have not.

Royalty OEM agreements are available only to the largest manufacturers of Windows-based computers in the world. Here's how the official Microsoft documentation described the process

Royalty OEMs receive a ‘golden master’ copy of Windows from Microsoft. The royalty OEM may customize Windows as described in the OPK, their license agreement, or a signed addendum… These OEMs obtain all customized media, end-user manuals, and bulk quantities of COA stickers from MS authorized replicators.

Royalty OEMs may provide recovery media for each computer, and that media must be protected so that it can be used only on that particular computer. Both printed books and any recovery media display the OEM name and branding.

System-locked preinstallation (SLP) is an anti-piracy technology that helps prevent the copying of legitimately licensed operating system software onto non-licensed systems. SLP is available only to royalty OEMs.

Microsoft requires a royalty OEM to provide a recovery solution to its customers. That recovery option can be a hard disk partition that includes an option for the end user to create his or her own recovery media using blank discs and a DVD burner, or it can include actual media on CDs or DVDs. The customized media contains an assortment of antipiracy features, such as holograms, designed to make them distinguishable from unauthorized copies.

Based on Microsoft's allegations and Comet's response, it is apparent that Comet didn't go to an authorized replicator and buy copies of recovery discs—in fact, it could not have legally done so. Instead, it made its own copies of recovery discs. Here's Microsoft's description:

This action focuses on Comet’s unauthorized production of recovery discs, which are one type of recovery solution.  Recovery solutions allow customers to repair an operating system, or to reinstall it in the rare event of a system failure.

In 2008 and 2009, Comet approached tens of thousands of customers who had bought PCs with the necessary recovery software already on the hard drive, and offered to sell them unnecessary recovery discs for £14.99.  Not only was the recovery software already provided on the hard drive by the computer manufacturer but, if the customer so desired, a recovery disc could also have been obtained by the customer from the PC manufacturer for free or a minimal amount. 

Comet's defense says it was only acting in the best interests of its customers, supplying them with recovery media that wasn't supplied with the PCs they sold. Even if you believe that flimsy defense, they had plenty of other, legal options. They could have supplied written instructions on how to create recovery media from the hard disk partition, and sold the customer a package of blank discs. Or they could have provided contact information for the system makers, with instructions on how to order recovery media.

Instead, they apparently made unauthorized copies of copyrighted disks and then sold them for £15 a set. Given that the cost of goods on those disks was probably well under £1, that's a very profitable business. Microsoft alleges that Comet sold 94,000 disc sets at £15 each, for a total revenue of £1.4 million (nearly $2.2 million at current exchange rates). Had Comet given the discs away, or sold them for actual costs, their moral argument might have been stronger, but the legal case would still have been impossible to defend. Without the permission of the copyright owner, making and distributing copies simply isn't permitted.

There is indeed a separate consumer issue here: are consumers being served by PC makers who cut costs by not providing reinstallation media? It's a good question, but the answer isn't for retailers to arbitrarily insert themselves in the process by creating and distributing unauthorized versions of copyrighted material.

For those who still contend that this is perfectly harmless, let me offer one additional example. Comet also sells Apple MacBooks (Pro and Air) and iMacs. What if they had made their own backup copies of Apple's OS X and iLife installation media and offered them to Mac purchasers? How long do you think that practice would last before Apple's lawyers showed up with a sheaf of legal papers?

Meanwhile, I'm still looking for a copy of the civil complaint. I'm also eager to hear from Comet customers who might have purchased one of these unauthorized recovery CDs. If you've got your hands on one of those original disc sets, please contact me.

Related:

Topics: Hardware, Enterprise Software, Microsoft, Operating Systems, Piracy, Security, Software, Windows

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

188 comments
Log in or register to join the discussion
  • I don't see anything morally wrong with what they did.

    They sold, for a small fee, the convenience of having recovery media for legally licensed software. It's as if Micro Center offered a service where they sell you a new PC and said "For $15 we'll create the recovery discs for you". I see nothing wrong with that. As long as the media included the same software licensed for the specific system I don't see any harm to Microsoft (or other software vendors).

    The same applies to Apple's OS X. Media is not a grant of license whether it be physical or electronic.
    ye
    • The end user has that right

      @ye

      If a retailer offers a service of helping the customer to set up the new PC, and as part of that service they get a blank DVD or two or three and create the media recovery disks for the customer, that's fine. But they don't have a legal (or in my opinion moral) right to mass-produce those disks and sell them with an unopened PC.

      And I never said anything about a grant of license. But the Windows and OS X media are copyrighted. That law literally controls the right to copy a creative work. A business can't just ignore that law and make its own copies because it's convenient. A user, otoh, can indeed make backup copies for their own personal use and be within their rights.

      If you don't understand the difference between what a business can do with product it does not own and what an individual can do with purchased copyrighted material, the discussion falls apart.
      Ed Bott
      • Note I used the word MORAL and not LEGAL.

        @Ed Bott: [i]If a retailer offers a service of helping the customer to set up the new PC, and as part of that service they get a blank DVD or two or three and create the media recovery disks for the customer, that's fine.[/i]

        From what I've read this is essentially what they did. They said "If you'd like to pay us $20 we'll provide a set of recovery media so you don't have to create your own". I fail to see how this is much different than if they came over to the buyers house and made the media there.

        [i]But the Windows and OS X media are copyrighted.[/i]

        Media is not copyrighted. The material on that media is. Merely having media does not grant me a right to the contents of the media. Therefore providing media with copies of software already licensed doesn't harm Microsoft. Explain to me how Microsoft has been harmed financially from this. Microsoft was paid their license fee for Windows. Providing a disc with a copy of that software to be used solely on the PC for which the license fee has been paid financially harms Microsoft how? Or Apple? Or any other software maker whos software is on the media.
        ye
      • RE: Is UK retail giant Comet really a Windows pirate?

        @ye With copyright, the clue is in the name: it's a right to copy. When you get a new PC, you don't have a right to copy any and all code included with it in any way you so choose. You have rights limited by license to do so.

        What's more, Comet never had *any* right to copy any code granted to them by Microsoft. Their customers had that right, but Comet didn't.

        Referring back to your original comment, too - ??15 isn't a "nominal fee" when the cost of duplication, posting and packing wouldn't have amounted to more than ??5 (and I'm being generous). A 200% margin isn't nominal.

        The question isn't "how was Microsoft harmed?" - it's why did Comet do something it must have known it had no right to do.

        What's more, in offering this "service" at a grossly-inflated markup, it was basically ripping off naive users who may have been unaware that they could make their own install discs, for no more than 50p, in half an hour. Comet was attempting to exploit the naivity of its customers, and that's reprehensible.
        Ian.Betteridge
      • RE: Is UK retail giant Comet really a Windows pirate?

        @ye With copyright, the clue is in the name: it's a right to copy. When you get a new PC, you don't have a right to copy any and all code included with it in any way you so choose. You have rights limited by license to do so.

        What's more, Comet never had *any* right to copy any code granted to them by Microsoft. Their customers had that right, but Comet didn't.

        Referring back to your original comment, too - ??15 isn't a "nominal fee" when the cost of duplication, posting and packing wouldn't have amounted to more than ??5 (and I'm being generous). A 200% margin isn't nominal.

        The question isn't "how was Microsoft harmed?" - it's why did Comet do something it must have known it had no right to do.

        What's more, in offering this "service" at a grossly-inflated markup, it was basically ripping off naive users who may have been unaware that they could make their own install discs, for no more than 50p, in half an hour. Comet was attempting to exploit the naivity of its customers, and that's reprehensible.
        Ian.Betteridge
      • Copyright is intended to prevent people from making copies of others work..

        @Ian.Betteridge: <i>With copyright, the clue is in the name: it's a right to copy.</i><br><br>...and selling / giving it away thus harming the copyright holder. I see nothing morally wrong here as Comet did nothing to harm Microsoft, save for maybe slight harm to their reputation.<br><br>While legally this may be prohibited morally there is nothing wrong with what they've done.
        ye
      • RE: Is UK retail giant Comet really a Windows pirate?

        @Ed Bott
        Lets be honest here, this is Microsoft rattling the sabre to make a point about licensing, it likes a big license compliance story every now and again to remind us all to ensure we are complying.
        ben.rattigan
      • Doesn't quite wash, Ed

        [i]For those who still contend that this is perfectly harmless, let me offer one additional example. Comet also sells Apple MacBooks (Pro and Air) and iMacs. What if they had made their own backup copies of Apple???s OS X and iLife installation media and offered them to Mac purchasers? How long do you think that practice would last before Apple???s lawyers showed up with a sheaf of legal papers?[/i]

        The big difference is Apple makes their own hardware and they can get away with people not being able to do this. Their EULA is quite clear and straightforward, unlike Microsoft's.

        And btw, does Microsoft own Acer? HP? Dell? Or any number of OEM brands? Do tell us, Ed. Let us know that Microsoft owns the OEMs as much as Apple owns it's own hardware so we can clear up a lot of things.
        ScorpioBlue
      • RE: Is UK retail giant Comet really a Windows pirate?

        [i]@ye With copyright, the clue is in the name: it's a right to copy. When you get a new PC, you don't have a right to copy any and all code included with it in any way you so choose. You have rights limited by license to do so.[/i]

        Well if that's the case, then what right do I have to using 3rd party cloning software like Acronis or Ghost and storing that code on multiple spare HDs or multiple discs? Which "you" are you referring to?

        And another thing: This whole problem could have been avoided if the OEMs did their job and included these discs with every PC they sold without the customer having to ask for it. Just like they used to do as recently as five or six years ago. Not to mention Microsoft trying to kill a fly with a hammer and acting like a bunch of copyright thugs about it.

        I actually agree with @ye on this and it's a rare thing when I do.
        ScorpioBlue
      • RE: Is UK retail giant Comet really a Windows pirate?

        @Ed Bott Just spit balling here, but perhaps the reason for the suit lies in your SLP quote? Maybe the copies Comet sold were not SLP enabled (for lack of a better term), and would install on any PC, provided they use the OEM product key? I'm just tossing out ideas here, so don't shoot me if I don't have it straight. Not a lawyer. <img border="0" src="http://www.cnet.com/i/mb/emoticons/happy.gif" alt="happy">
        Dell-Bill B
      • Say it again, slower, and use smaller words.

        @Ed Bott

        Just call them stupid and be done with it. How dumb do you need to be to think the retailer has any right to any of the media that comes with the machine?

        The retailer offering to charge you for a 'service' you've already paid for is like a mechanic offering to check the High Speed Bumper Fasteners on you car for a small fee. It's dishonest in and of itself, separate from any claim of media rights.

        And if, when you first turn on that spankin' new PC, and it tells you how VERY important it is to create a recovery DVD, but you are in SUCH a hurry to log in to Facebook that you just don't have the TIME for that, well, you deserve to pay out the a** for the service. Call it a 'stupidity fee'. Because if it weren't for you, 65% of the people in IT would have to find another job.
        pishaw
      • RE: Is UK retail giant Comet really a Windows pirate?

        @Ed Bott I have to say I find myself in total agreement with ye and with ScorpioBlue on this issue. Partitioned hard drives are fine IF the end user creates a physical recovery disk FIRST in case of hard drive failure however how many users do so? IMHO each PC OEM should include a recovery DVD with each PC.

        Legally Microsoft is in the right and from a certain perspective they are protecting their IP - from a moral perspective Microsoft needs to put pressure on OEMs to include the recovery DVD... not make it an option or available for purchase via the OEM's website.
        athynz
      • RE: Is UK retail giant Comet really a Windows pirate?

        @Ed Bott Regardless as to if they made the copy as part of a "set up a pc service" or just sold the service by making the discs ahead of time. They still aren't selling the software, just the service. If one is illegal copyright infringement... then both are. Best Buy better watch out...because those Geek Squad people do this ahead of time...all the time.
        condelirios
      • RE: Is UK retail giant Comet really a Windows pirate?

        [i]Just spit balling here, but perhaps the reason for the suit lies in your SLP quote? Maybe the copies Comet sold were not SLP enabled (for lack of a better term), and would install on any PC, provided they use the OEM product key?[/i]

        And I'm still not quite sure what's wrong with that, either. You still have to have a license key for it to work and it's one license key per machine [b]regardless[/b] of what DVD media or USB stick was used to recover the HD.

        In fact I see nothing wrong with using one DVD to recover, say for example, 12 machines, as long as there's 12 separate license key stickers with each one attached to each machine. I'll be dammed if I'm gonna pay $200+ for other license(s) just because of some ridiculous technicality over a previous license that I legally bought.
        ScorpioBlue
      • On the legalities, I think your right. But more important...

        @Ed Bott

        ...is why the disks themselves are not included.

        Its not a money saving issue. I actually wasn't aware that such a reason was being contended by the OEM's or MS, but if thats what they are saying its a bare faced lie. We know what the actual cost of supplying OS media is. next to nothing.

        What MS is doing is trying to remove temptation of doing bootleg installs on other systems when people have that wonderful genuine OS media sitting around. In years gone by Ive seen it over and over again. If you have a copy of a new OS sitting on your computer desk at home, everyone and their brother want to "borrow" it. Got a second or third machine around the house? Having that genuine copy of Windows brand X just sitting there shouting at you to install it on another machine is a constant burden you have to resist...according to the law.

        And a few years down the road when your original Windows machine is just about burned out? Gee, just get a shop to build you a tower, you already have a genuine copy of Windows sitting on your desk waiting to be installed in a brand new machine.

        Those are all the things MS is trying to put an end to. And that is a savings far far more significant then the couple of bucks worth of plastic that it would cost to include OS media with a new system. The bottom line is this; its an absolute fact that one of the leading concerns about illegal installs that MS has is multiple installs off of any single genuine copy floating around in the public. Its a no brainer. Its way way more tempting for Joe Average then having to illegally download some "suspect" unknown copy off the internet. Microsoft knows one of the best ways to combat illegal installs is to dramatically reduce the number of genuine copies floating around in the public domain. Thats why they are more then happy to have you sacrifice part of your hard drive to create a recovery partition in it. That doesn't create much of a temptation for an illegal install in any way does it?

        And while its to bad that MS has this problem to contend with, in my books it is a sadly insufficient reason to not include OS media with fully licenced OEM machines.
        Cayble
      • RE: Is UK retail giant Comet really a Windows pirate?

        @Ed Bott This makes a lot of sense, I can see that the lack of proper safe guards for Microsoft's IP changes both the legal and moral case.

        However, let's leave Apple out of this. The two are not comparable - they have quite different business models. Also Macs are always supplied with some kind of recovery solution that is independent of the hard drive (so it's not the same situation at all - there would be no benefit to the end customer of this "extra copy").

        I don't think this is "piracy" in the true sense, what it is has more to do with the removal of anti-piracy controls.

        However, I don't think this sounds "wilful", it seems Comet have unwittingly strayed into a legal grey area, I doubt very much that much profit was made given how little was charged.

        But at least now, I do understand Microsoft's stance a little better.

        Thanks :-)
        jeremychappell
      • RE: Is UK retail giant Comet really a Windows pirate?

        [i]What MS is doing is trying to remove temptation of doing bootleg installs on other systems when people have that wonderful genuine OS media sitting around. In years gone by Ive seen it over and over again. If you have a copy of a new OS sitting on your computer desk at home, everyone and their brother want to "borrow" it. Got a second or third machine around the house? Having that genuine copy of Windows brand X just sitting there shouting at you to install it on another machine is a constant burden you have to resist...according to the law.[/i]

        @Cayble

        That's a load of crap and you know it. You know as well as I do that you still need a valid license key to activate Windows and you have 30 days to do it before it goes into reduced functionality mode. If somebody tries to install the same key on multiple machines, Microsoft's authentication servers will reject it, so your temptation analogy doesn't cut it.

        This is pure unadulterated greed hidden behind claims of piracy. The honest citizen get the shaft while the pirates will continue to do what they do best. You know it and I know it so get real.
        ScorpioBlue
      • Oh, but of course

        @ScorpioBlue

        It is all about Microsoft, so it must automaticlly be about Microsoft's greed.

        this sentence pretty much tells us your [i]unbiased[/i] ( ;) ) stance on all of this.

        [i]This is pure unadulterated greed hidden behind claims of piracy. The honest citizen get the shaft while the pirates will continue to do what they do best. [/i]

        You know that you are trying to spin this into another anti Microsoft rant, even though in this case Microsoft is absolutelly in the right.

        You know it, and I know it, so get real.
        John Zern
      • RE: Is UK retail giant Comet really a Windows pirate?

        "Well if that's the case, then what right do I have to using 3rd party cloning software like Acronis or Ghost and storing that code on multiple spare HDs or multiple discs?"

        Theoretically, you probably don't have that right. However, it may fall under "fair use" clause which is probably the fuzziest part of copyright law.
        CobraA1
      • RE: Is UK retail giant Comet really a Windows pirate?

        [i]It is all about Microsoft, so it must automaticlly be about Microsoft's greed.[/i]<br><br>There ya go.<br><br>[i]this sentence pretty much tells us your unbiased ( wink ) stance on all of this.[/i]<br><br>Who says I'm supposed to be unbiased? I am totally biased just like you are. The difference is I'm willing to openly admit it and you don't.<br><br>[i]You know that you are trying to spin this into another anti Microsoft rant,[/i]<br><br>I'm not trying. I am. They are using a legal hammer to kill a technical fly and I doubt Comet is the only one doing this.<br><br>[i]even though in this case Microsoft is absolutelly in the right.[/i]<br><br>That will be up to the courts to decide. Since it's in the UK where the rules are different, the outcome [i]may[/i] not be what you think.
        ScorpioBlue