News

Action Pack Abusers

• By Scott Bekker
• December 19, 2005

Seven lawsuits naming nine individuals are the first to be filed by Microsoft against members of its own partner community for alleged violations of the contracts the defendants agreed to in gaining access to the Microsoft Action Pack Subscription (MAPS) program. Microsoft filed the lawsuits Nov. 18 and made an announcement about them on Thursday.

MAPS is a fantastic deal for partners -- for a $299 annual subscription, a partner organization gets a quarterly bundle of Microsoft's latest software. Microsoft puts the retail value of the software at $50,000, and these are not merely evaluation versions. Partners can use the software to run their own businesses or to develop and test applications.

There are important caveats to MAPS, which helps Microsoft by giving partners an inexpensive way to become intimately familiar with -- and better at selling -- Microsoft's entire product family. In agreeing to a contract addendum for the Action Pack, each partner agrees to subscribe only once per year and never to resell or transfer software from the Action Pack.

In all, the program has been attractive enough to draw 60,000 subscribers in the United States, said John Ball, general manager for Microsoft's U.S. System Builders Partner Group. "For someone who is a little less scrupulous, it does create an opportunity to think, 'How can I utilize that in some other ways,'" Ball said.

According to the seven lawsuits filed by Microsoft in federal court in Seattle, nine named defendants and other unnamed defendants used fake names and other deceptive practices to register for numerous copies of the Action Packs, then resold the software at retail.

Named as defendants are Catherine Will and Philip Parana, both of Buffalo, N.Y.; James Baker of San Diego; Kenneth Ham of College Station, Texas; Benjamin Hesson of Leesburg, Va.; Charles Klosek of Glenn Dale, Md.; Jimmy Huh of Encinitas, Calif.; Eric Mitchell of Santa Ana, Calif.; and Lang Ngo of San Francisco.

Hesson and Klosek are lumped into one lawsuit that accuses the pair of receiving hundreds of bundles of software. Other defendants accused of obtaining bundles in the hundreds are Mitchell and Ngo. The other lawsuits accuse the rest of the named defendants of receiving "numerous bundles."

Although many subscribers apparently violated the Action Pack addendums limiting partners to one Action Pack subscription, only the most egregious cases wound up in court, said Mary Jo Schrade, senior attorney at Microsoft. "They were all getting large numbers. None of them were ones where people got two Action Packs," Schrade said.

Matt Lundy, an anti-piracy attorney at Microsoft, confirmed that Microsoft contacted more partners than those named in the lawsuits. "There are some other folks who were contacted regarding their behavior in the Partner Program that were not named in the lawsuits," he said.

It is unclear how much money the defendants might have been making from the schemes. Each of Microsoft's legal filings states that "the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between citizens of different States." However, that amount is included more to establish that the federal court has jurisdiction than as an estimate of profits.

Microsoft actually seems to have relatively little information about the defendants' business operations at this point. Lundy did say, "The defendants in the cases, in many occasions, attempted to sell software they received in the subscription on Internet and online auction sites."

Because Microsoft conducted the investigations on its own without the assistance of law enforcement, the company did not have access to law enforcement's investigative tools. However, Microsoft will be pressing at trial to find out those details, which would be important in the penalty phase. Microsoft seeks to have each defendant return the software, repay all the proceeds from the sales, pay triple damages, cover Microsoft's attorneys' fees and pay injunctive relief.

Obviously, Microsoft hates to see its own software pirated, which is a major motivating factor for the legal actions even if Microsoft isn't drawing attention to that fact. But Microsoft contends its main motivation in suing over Action Pack abuse is to help partners who play by the rules.

Schrade says fraudulent use of the Action Packs hurts rule-abiding partners by allowing unscrupulous competitors to undercut their prices and by creating a false impression of the lowest prices available for software. Meanwhile, customers who unwittingly buy the software are left without legitimate support avenues. "We are making the ecosystem one where the partners can actually do their job on a level playing field," Ball said.

Asked why Microsoft is pursuing violators now, both Microsoft attorneys cited "recognition of the problem" as the reason. Neither would comment on whether the problem has become more pronounced in recent years as Microsoft has aggressively added Registered Members to the Partner Program. Registered Members require little more than a name and some details about a business to sign up for the Microsoft Partner Program. The number of Registered Members swelled to 266,000 over the summer.

Schrade says Microsoft received complaints about alleged Action Pack sales. "That caused us both to test purchase and also to investigate through different ways of looking at the database of people who were participating in the program to see if we could ferret out abuse," she said.

Schrade said she thinks Microsoft has identified the most egregious cases. "We've done some significant work to try and find out what's happening because it's not fair to the other resellers who are having to compete against them selling software," Schrade said. "It's a shame that some people take advantage of the program at the expense of the rest of the channel."

Lundy said Microsoft will continue monitoring for abuse. "Microsoft is going to continue to use whatever legal means are necessary to protect its honest resellers and partners," he said.