Microsoft Sues To Block Gray Market Software Trade

Microsoft says there's a multimillion dollar market for gray market software operating in the United States and it's aiming to stop it -- or at least prevent its own products from being sold illegally.

On Tuesday, the company announced lawsuits in six states against companies it accuses of participating in the gray market software trade. The suits were filed in federal courts in California, New York, New Jersey, Florida, Nevada, and Montana.

Unlike software pirates -- who illegally create and sell counterfeit copies of commercial software -- gray marketers profit by selling software in ways that violate the manufacturer's licensing terms.

Microsoft said the companies named in the suits were importing low-cost, educational versions of its products from Jordan and other countries and reselling them at full commercial prices. Microsoft's educational licenses typically stipulate that the products can only be used in academic environments -- even though they usually contain all the features of the retail versions.

Microsoft said that one of the offenders -- Billings, Mont.-based EDirectSoftware.com -- has agreed to settle a case filed against it for $1 million. The company advertises software at "wholesale" prices on its Web site.

Microsoft's look at how gray market software finds its way into the United States from foreign countries was an international operation. The Jordanian government, among others, assisted with the investigation. "Companies that break Jordan's intellectual property laws will be prosecuted," said His Excellency Eng. Basem Rousan, Jordan's minister of information and communications technology, in a statement.

Microsoft said it also has sent 50 cease-and-desist letters to other retailers in the United States that it suspects of selling gray market copies of Windows, Office, and other products.

The company of late appears to be stepping up efforts to hunt down and haul into court companies and individuals it claims are violating its intellectual property rights. Last month, Microsoft announced a slew of lawsuits aimed at so-called cybersquatters.