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Microsoft sues UK retailer for ‘counterfeiting Windows’ (updated-2)

By | January 4, 2012, 4:00am PST

Summary: Microsoft is taking one major UK technology retailer to court for “creating and selling” over 94,000 counterfeit copies of Windows.

Microsoft is taking UK retailer and popular ‘high-street’ store Comet to the High Court in London for allegedly “creating and selling” more than 94,000 counterfeit recovery CDs of its Windows operating system.

In a press release issued this morning, Microsoft explained that it today issued proceedings against the retailer for selling the Windows Vista and Windows XP recovery disks to customers buying PCs with Windows installed.

The complaint identifies a factory in Hampshire, UK where Comet “produced and sold thousands of counterfeit Windows CDs to unsuspecting customers in the United Kingdom”, adding that the company’s actions were “unfair to customers”.

Microsoft’s associate general counsel, David Finn, said that its “customers deserved better”.

Comet is owned by Kesa Electricals, a French company based in the UK. It is believed that the company is being sold to private equity firm OpCapita.

Many high street retailers sell Windows pre-installed on the computers and laptops they sell. Recovery CDs are often packaged along with the devices in case the operating system requires reinstalling.

Microsoft had stopped providing recovery CDs to some retailers, including Comet. As a cost saving measure, many PC manufacturers have stopped providing recovery CDs, and have turned to hard drive-based recovery options.

But Microsoft has been taking steps to reduce piracy in its latest versions of Windows, including copy-protection features. The next-generation operating system — dubbed Windows 8 — will include OEM BIOS activation allowing PC builders to pre-activate copies of Windows on the computers they sell.

Update 1: Comet did not deny the company produced the disks, but a statement said: “Comet has sought and received legal advice from leading counsel to support its view that the production of recovery discs did not infringe Microsoft’s intellectual property”.

The company added: “Comet firmly believes that it acted in the very best interests of its customers.  It believes its customers had been adversely affected by the decision to stop supplying recovery discs with each new Microsoft Operating System based computer”.

Update 2: Microsoft retorts with a further statement from David Finn, adding a seemingly different perspective on things.

“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 ($23)”.

“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”.

Finn then added: “We’ve often encouraged our customers to buy from a trusted retailer.  In this case, it is disappointing that a well-known retailer created so many unwitting victims of counterfeiting”, further criticising the UK retailer.

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Zack Whittaker, a criminologist who studied at the University of Kent, Canterbury, is a journalist, writer and broadcaster.

Disclosure

Zack Whittaker

I worked briefly with Microsoft UK in 2006 but no longer have any connection with the company. Regardless, I remain impartial and unbiased in my views.

I don't hold any stock or shares, investments or industrial secrets in any company, but have signed confidentiality agreements with a number of UK and U.S. organisations, whose names I am not at liberty to disclose.

I was involved with Kent Union, the University of Kent's student union, undertaking voluntary, non-salaried, elected positions between early 2009 and mid-2010.

No other company, body, government department, non-governmental organisation or third sector organisation employs me or pays me a salary in any capacity whatsoever.

As a freelance journalist, whenever expenses are given and taken by a company that is not CBS Interactive, these will be disclosed in each relevant post to ensure transparency.

I currently work with a UK law enforcement unit. Details of which are restricted, but this is an entirely separate position which bears no connection to other work.

(Updated: 23rd October 2011)

Biography

Zack Whittaker

Zack Whittaker, criminologist who studied at the University of Kent, UK, is a journalist, writer and broadcaster.

After studying criminology at university, though still in his early-20's, he has already had a series unconventional work and voluntary positions. He has worked with researchers studying neurological illnesses like Tourette's syndrome (which he suffers from), has given lectures on the nature of disabilities in the public community, and occasionally ends up speaking on television and radio discussing the events of the day.

He first had academic work published at the age of 22, then still an undergraduate, and has been cited by a wide range of publications: from the Huffington Post, Business Insider, AllThingsDigital, The Atlantic Wire and CBS News.

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RE: Microsoft sues UK retailer for 'counterfeiting Windows' (updated)
Rick_Kl 9th Jan
@ZenithY So you are upset because Apple does to support 1970s tech? the display tech is accurately reflected fot the year the machine was made. not some ancient analog technology from nearly 40 years ago...
Wow. Personally I don't see Comet did anything wrong here (assuming they are not making a profit from the recovery discs). Supplying a machine, and the means to recover it if it later develops a problem, seems utterly reasonable.

This kind of [expletive] from Microsoft must surely put anyone off buying a PC (doesn't it?). I don't like this.
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@jeremychappell This is going to turn into a Fair-Use nightmare for them.
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Unfair to the customer, my ass
ScorpioBlue Updated - 4th Jan
More like unfair to Microsoft. Can you say greed? Can you say patronizing?

They need to stop lying about that.
@ScorpioBlue - Agreed! This is pure greed on Microsoft's part.
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pete: Pure greed on MS's part?
toddybottom 4th Jan
So you would be okay if Todd Bottom Inc. sold iPod chargers without paying Apple a licensing fee? Guess what, Kensington, Monster, and dozens (hundreds) of other companies would have a major problem with that. Apple has sued companies for selling unlicensed iDevice accessories to licensed owners of iDevices because if they didn't, Kensington, Monster, and dozens (hundreds) of other companies would stop paying Apple for the right.
http://www.usatoday.com/tech/news/2010-07-29-appleknockoff29_ST_N.htm

Is that pure greed on Apple's part? Of course you don't believe so.
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@ScorpioBlue - Agreed! This is pure greed on Microsoft's part.

They need to just come out and say;

~

"We don't give a rat's ass about the customer. We only care about our greed and the bottom line by keeping our shareholders happy as fat pigs. We already have 90% of the desktop market so the 'customer' has no choice but to bend to our captive will and do what we say. Otherwise we cut them off and public opinion be dammed. They're already our suckers anyway"

~

Now that would be truthful. Unmitigated contempt for the buying public, OEMs and the retailers combined.
@Pete "athynz" Athens Agreed! This is pure greed on Microsoft's part

Unfortunately, with Update #2 comes this little tidbit....

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 ($23)

DOH....
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@happyharry_z

Comet was pretty crafty and they were turning a pretty darn good profit at 15 quid/disc. You have to figure they were mass produced at about 1 quid/disc so yea... Comet sold copied media for about 1 million in profit. Not much room for fair use in this one.
@Badgered if given a choice, as apparently Comets customers have chosen, I???ll take a recovery DVD, USB key, etc over a recovery partition every day. What do you do when the HDD fails? With the recovery partition you???re forced to but another Windows license. With the other two you simply reinstall, reactivate. Which is better for the consumer? And offering service is not piracy, Microsoft just want to steal more money from the consumers.
@jeremychappell
"This kind of [expletive] from Microsoft must surely put anyone off buying a PC (doesn't it?). I don't like this."

Yet you praise Apple when they sue a company (Psystar) into bankruptcy because they paid for OS X discs and then sold computer systems with the contents of those discs installed on them. Surely that kind of [expletive] from Apple put you off buying a Mac, didn't it? Surely you didn't like it.

Whatever happened to Comet having to abide by MS's licensing terms? Surely MS has the right to specify whatever licensing terms they want? Or would you uphold Apple's right to specify whatever licensing terms it wants but deny MS the same?
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Spirit of the law
ben.rattigan 4th Jan
@toddybottom Comet clearly hasn't intended on supply counterfeit copies of Windows. The disks where supplied with machines with legal pre-installed versions, they where simply supply a recovery disk. You don't think MS should reconsider this action in light of that fact?
@toddybottom Psystar's machines didn't have a license to run the software (these do). Psystar didn't supply "recovery discs", they supplied upgrades (where there was no qualifying product). So it's a completely different proposition.

What you end up with here is a system that if the primary drive fails you're screwed. Now if you want to try and spin that as better for customers than what Apple do - go ahead.

But in reality, where sane people live, this is not in the interests of customers.
"Psystar's machines didn't have a license to run the software (these do). "

Apple sued Psystar because when Psystar paid for an OS X license (by purchasing an OS X disk) they didn't have a license to install it on non Mac machines. Psystar breached the license they paid for.

MS is suing Comet because when Comet paid for a Windows license they didn't have a license to create physical media and pass it off as a Microsoft Windows recovery disk. Comet breached the license they paid for.

I never suggested Comet didn't have a license to install the OS on the hard drive but they did not have a license to create a physical restore disk and pass it off as a Microsoft Windows restore disk. Why is that so hard to understand?

In both cases, MS and Apple got paid for a license and the purchaser got a license. In both cases, the purchaser used what they purchased in violation of the license.

Yet you cheer it when Apple sues and you vilify MS. Hypocrite.
  • Flagged
@toddybottom: I never suggested Comet didn't have a license to install the OS on the hard drive but they did not have a license to create a physical restore disk and pass it off as a Microsoft Windows restore disk. Why is that so hard to understand?

At least not morally. There may be a legal reason what they're doing is wrong but I don't see anything wrong with providing physical media for a license which has already been paid for.

It's like going out to the Internet to grab a copy of software you have a license, but no media, for. The media isn't the license.
Comet isn't giving these copies away, they are charging customers for Microsoft copyrighted materials, materials that Comet is not licensed to resell.

Go ahead, try to resell 94,000 copies of OS X Leopard after you've installed Lion on your 94,000 Macs and see how quickly Apple slaps a lawsuit on you. Then see how quickly jeremychappell cheers for Apple.

When you aren't licensed to sell something, you can't do it. End of story.
  • Flagged
@ben.rattigan the case says that they sold the CDs to people who had purchased computers through them - Comet is probably equivalent to Best Buy in the US.

In which case, they should have been asking HP, Acer etc. for recovery discs for their customers (or pointing their customers to the relevant manufacturers support system).
@toddybottom Comet didn't have any licence to sell Windows (other than pre-packaged retail boxes). They are a retailer, not a manufacturer - more like Best Buy than HP or Dell.
@toddybottom
" I had no problem getting a recovery disc free of charge from CyberpowerPC."

"Although, I just bought my mother a DELL and they wanted $15 for the recovery disc?"

" Seriously, I prefer owning a retail version and avoid any down side. And hey anyone here should know that you can generate your own recovery disc from your oem computer. Or install the free version of Paragon Backup and Recovery from CNet and it will allow you to do this; the only draw back is you'll need a second hard drive for your backed up image and with todays prices for hard drives I would just buy a retail copy of Windows7 while they are still around for the next 14 months."
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The way I understand it is
ye Updated - 4th Jan
@toddybottom: Comet isn't giving these copies away, they are charging customers for Microsoft copyrighted materials, materials that Comet is not licensed to resell.

Comet is purchasing licenses for Windows and then pre-installing Windows on the systems they sell. Thus the system is properly licensed for Windows. In addition Comet is also making a copy of the licensed software onto media and including it in the systems they sell.

I don't see any copyright infringement going on here. The software on the media they're including is paid for and thus licensed.

Or am I misreading something?
@toddybottom

So Comet provided restore DVD's for their customers who purchased legal copies of Windows? And what's the first thing every OEM does after Windows is installed on their systems? That's right - create the restore DVD's. So they did this step for their customers and charged them for their time and the physical media to do this.... and Microsoft is suing them. This has all the makings of a PR nightmare.
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"When you aren't licensed to sell something, you can't do it. End of story."

It actually gets more interesting the more I look into it because it appears that Comet was never actually licensed to sell Windows at all. They sell HPs and Dells and Acers who would be the companies that actually paid MS for the Windows license. So this isn't even a case where Comet was licensed to install Windos and decided to include a recovery disc. Comet was licensed to sell Packard Bells, Acers, and HPs that already had Windows on them and decided to make a little extra profit selling DVDs with Windows on them without paying MS, Packard Bell, Acer, or HP anything at all.

Like I said in another post, if I sold 94,000 recovery thumbdrives with OS X Lion on them to licensed users of OS X Lion, Apple would bankrupt me within seconds. If I sold products containing GPL code without making that GPL code available to end users, FSF would bankrupt me within seconds.

I'm not sure how anyone can possibly defend Comet in this case.
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My apologies to wright_is for not reading your posts more carefully. You nailed it. Comet wasn't licensed to sell, install, or do anything with Windows at all.
  • Flagged
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@toddybottom

The machines that Psystar installed OSX on were not machines licenced for OSX installation, and as I understand it Apples policy on use of OSX is that it can only be installed on hardware licenced specifically for OSX, in other words only for hardware that Apple has put together. You may or may not approve of such a policy, but there you have it.

It appears from what I'm reading here that these machines in question were licenced for the Windows OS and what was being provided were recovery disks. Its not the same thing at all. The fact is that one of the most cheeseball things that MS could be doing is letting machines sell without proper copies of recovery disks included with the system.
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Cayble: the similarity is this
toddybottom 4th Jan
The similarity I was making was that Psystar paid Apple MSRP for copies of OS X and then tried to profit from those copies in an unlicensed way. Had Comet paid for a license to install Windows on a hard drive and then tried to profit from those copies in an unlicensed way (by selling physical media with Windows on it) then it would have been wrong for exactly the same reason. If you are licensed to do 1 thing with a product, you can't profit by using that product in a way that you were not licensed to.

As it turns out, it is even worse and is actually quite unlike the Psystar case because it turns out that Comet didn't pay anything to Microsoft at all. It is actually worse than the Psystar case because at least Psystar paid Apple for OS X licenses. So now it turns out that there is little similarity and that Comet is actually acting far worse than Psystar ever did.
  • Flagged
@toddybottom There is a difference between providing a restore CD/DVD for a licensed OS on a licensed system and using a restore CD/DVD to install an OS on an unlicensed system. Nice try with the strawman though - quite entertaining.
"There is a difference between providing a restore CD/DVD for a licensed OS on a licensed system and using a restore CD/DVD to install an OS on an unlicensed system"

I never said the way the license was infringed was the same. For the second time, the similarity was originally that buying a license to do one thing and profiting by selling that product in an unlicensed way is wrong whether Psystar does it or Comet does it. The way the license was infringed was different. The fact that a license was infringed was the similarity. As it turns out, it wasn't a good analogy anyway because unlike Psystar that very kindly paid Apple for an OS X license, Comet didn't even bother paying MS. Psystar actually ends up looking like the "good" guy here, relatively speaking.

Try selling Apple branded iPhone charger cables to licensed owners of iPhones without paying Apple for the right. Want to know what happens?
http://www.usatoday.com/tech/news/2010-07-29-appleknockoff29_ST_N.htm

Comet was selling Microsoft Window recovery disc knockoffs. For a profit. You hate it when people rip Apple off but you love it when people rip MS off in the exact same way. If customers want genuine Apple accessories, they should buy them from Apple or buy them from manufacturers who have paid Apple. Likewise, if customers want genuine recovery discs, they should buy them from MS or buy them from manufacturers who have paid MS.

This is so simple, so cut and dry.
  • Flagged
@toddybottom

"Apple sued Psystar because when Psystar paid for an OS X license (by purchasing an OS X disk) they didn't have a license to install it on non Mac machines. Psystar breached the license they paid for."

The disks contained no such license, they are upgrade disks. You ONLY get that license when you buy a Mac and it is non-transferable.

What Psystar did was more like selling PCs with only "Windows Anytime Upgrade" licenses and no qualifying product.

And yes, an OEM doing that would be wrong.

But honestly, this isn't about Apple is it? You're the fixated one. So instead of the misguided nonsense here, ask your mom if she'll buy you that iMac you so obviously crave (or save your allowance). Let the grown-ups talk in peace, there's a good boy.
Psystar actually paid Apple for a license (and yes, I agree, an upgrade license) before using the disc they received in an unlicensed fashion. We don't disagree there and I've never claimed otherwise.

What Comet did was actually worse. They never even bothered to pay MS for any license. At least Psystar paid Apple for the wrong license. Comet paid nothing at all.

For you to defend this would be the same as you saying:
"What Psystar did was wrong. They paid for an upgrade license and then used that license incorrectly. If Psystar had instead not paid for a license at all and simply copied the OS X install disc, similar to what Comet did, then that would be totally okay and I would accuse Apple of being greedy if they sued."

I was wrong to compare what Psystar did to what Comet did. What Comet did was actually far worse.

Nice ad hominems and straw men though. Please realize that by resorting to these tactics, you only make your argument weaker which is an impressive feat considering how weak your argument has been from the beginning.
  • Flagged
@ben.rattigan Comet clearly hasn't intended on supply counterfeit copies of Windows..... You don't think MS should reconsider this action in light of that fact?

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 ($23)

I certainly don't.
... this will turn into a PR nightmare for MS since the restore disks were of perfectly legal versions of MS Windows on perfectly legitimate computers released through *legal OEM channels*.

The only 'mis-step' i really see here by Comet is that they should really have re-directed the customers back through the official OEM channels for the recovery media - instead of "taking the initiative" and producing and providing them as they did.

If you think 14.99 quid ($23) is alot to fork out for a recovery disk - try producing one - accounting for actual time involved, labor and the cost of the physical media. That figure is a recoup amount - not a money grab / extortion amount. Considering it's an option Comet's customers obviously wanted (i.e. physical recovery disks - as opposed to drive images only), i'd say Comet were a little misguided - but NOT in any way attempting to be criminally negligent or devious.

If MS win this one, this case can only go down as an attack on Fair Usage. If anything, they should spend time trying to work through ways of getting themselves, OEM's and retailers involved in ways of doing this the "official way" - not suing the @$$es off legitimate businesses that "go the extra mile" for their customers.

Big thumbs down on this one MS ... Redmond, you really want to rethink the way you deal with legitimate, legal businesses in these grey-area situations.
@toddybottom Shyster (Psystar) infringed on Apple???s IP, as they did not buy a retail copy for every machine. Comet is offering the consumers a service. Which is wrong stealing OS X, as the court case proved was happening (100 licenses were purchased for over 1,200 machines), or offering a service (creating recovery media for the company???s customers)? I am sure Microsoft???s claim is bovine fecal matter, they just want the customer to buy a retail copy of Windows on top of the OEM copy that comes with the machine...
@ye it is no different than going to Best Buy and having the Geek Squad create physical recovery disks. Microsoft just want Comet to tell people to buy a new license to get the media. I hoe it blows up in Microsoft???s face and they are ordered to pay triple damages to Comet.
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What you can't do
ZenithY 4th Jan
@jeremychappell
Copy others software into your CD, and give away.
@ZenithY But the disc contains the same software as is already being sold on the system's hard drive. So it's hardly piracy is it?
Psystar sold computers with the same software on them that they purchased from Apple. So it's hardly wrong is it?
  • Flagged
@jeremychappell Yes, but they were allegedly selling the recovery CDs, which is wrong. If Comet had been giving them away to customers who had not received media and had had a disk crash, MS might have turned a blind eye.
@wright_is that is where you are wrong. Comet is charging 15 Quid ($23) for the service. They ,according to what I???ve read, creating DVDs from notebooks customers are purchasing. Go to Best Buy and ask how much they will charge to create recovery media? This lawsuit is just an abuse of monopoly-like power by Microsoft.
@jeremychappell The reports seem to indicate they were "selling" the CDs, which is wrong. If they had been providing them free of charge, then I would say MS are being over zealous.

That said, it shouldn't be Comet's responsibility to provide the CDs anyway, they don't make any PCs, they just sell PCs from HP, Acer etc. AFAIK. In which case, they shouldn't have been making the discs...
@wright_is Go look at the original comment. See, I already covered that.

Sure Comet COULD just sell the PC without worrying about the customer experience, but they wanted to do something BETTER.

I don't see how making a backup of the software supplied on behalf of the customer can be seen as piracy. Even if there is a small charge (to cover costs) I don't see it.

If your buddy asks you: "Hey I got this laptop but I filled the hard disk, I bought a bigger drive can you help me get it working?" and you make a duplicate of his drive on optical disk, and then use these to image his new drive - are you a pirate? What if he gives you a few bucks for your time?

It's stupid isn't it?

What about if you loan him your install disks (and he uses his license key)?

I mean, really?
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jeremy: you still don't get it
toddybottom 4th Jan
"Sure Comet COULD just sell the PC without worrying about the customer experience, but they wanted to do something BETTER."

Why didn't Comet direct the client to the company that was authorized to sell recovery discs like Acer or HP? Or why didn't Comet come to an arrangement with Acer or HP to provide genuine recovery discs for their clients? Instead, Comet cloned Acer and HP recovery discs and sold them as their own.

As for the rest of your drivel, I wonder why Apple hasn't sued every individual with a hackintosh? Every single one of them is individually stealing from Apple by installing an upgrade license on a PC that didn't come with an original license and I'm being generous by suggesting that every hackintosh install disc was paid for. Think about why Apple hasn't gone after those individuals. They aren't doing anything different than Psystar did. Psystar just wanted to be compensated for their time and for the hardware. Poor little Psystar. Oh wait, you hate Psystar. Right.
  • Flagged
@toddybottom - come on. be serious dude. we hate you!
@jeremychappell

Regardless of the EXCUSE, they broke the agreement they signed with MS. Guilty, pay up.
@jeremychappell

How about Comet sold you a TV License with every TV you bought from them. But yet they never gave ANY money they obtained from selling that license to the BBC, and worse, leaving you without a valid license.

What next, Ford selling driving licenses with every car, in the interest of the customer....
@Bozzer
A very poor analogy.

There is licenced Microsoft software on the hard disk, to make it function. You only receive TV broadcasts - a UK TV licence is effectively only a tax to fund the BBC - Which is stonking value for money for what you get - It is not required for normal operation.
@Bozzer Microsoft had the money for the license - the OEM already paid them.
We'll just ignore the fact that Psystar paid for the wrong license. Clearly you don't care about such trivialities.
  • Flagged
@toddybottom - seriously? wise up dude. we don't care about you!
@jeremychappell Only off buying a computer with Windows installed on it! Haven't used it in 5 years and don't miss it! No, I don't have an Apple machine either! Linux meets me needs just fine!
@jeremychappell -Uh they were offering to sell the fake recovery disks for $23 ea. to tens of thousands of users, so you are wrong, they were illegally making a huge profit.
@jeremychappell I think Microsoft has started to regularly step over the line again. Denying the OEM, or retailer, the ability to make the consumers life easier, is just plain abusive. So Microsoft it trying to regain its crown as the true abusive monopolist.
@ZenithY So you are upset because Apple does to support 1970s tech? the display tech is accurately reflected fot the year the machine was made. not some ancient analog technology from nearly 40 years ago...

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