From Mother Jones Magazine
on the MoJo Wire:
Overseas Invasion
Exclusive: Microsoft has discovered a way to bully foreign companies
into buying Microsoft -- and only Microsoft. Plus: Microstuff.
Like Coke, Nike, and the tobacco industry before it, Microsoft now has
to hook new consumers abroad. But the company has discovered a way to
bully foreign companies into buying Microsoft -- and only Microsoft.
by Rachel Burstein
In 1995 Antel, the national telephone company of Uruguay, was caught
pirating $100,000 worth of unlicensed software programs from
Microsoft, Novell, and Symantec. Antel was nabbed by the Business
Software Alliance, a trade association that partly acts as a global
bounty hunter for the software industry. The BSA's lawyers in Uruguay
quickly filed suit.
But instead of waiting for a ruling on the case, the BSA abruptly
dropped the suit in the fall of 1997. The BSA receives funding from
most of the top software companies but appears to be most heavily
funded by Microsoft. And, according to Antel's information technology
manager, Ricardo Tascenho, the company settled the matter by signing a
"special agreement" with Microsoft to replace all of its software with
Microsoft products.
The BSA's lawyer in Uruguay, Eduardo DeFreitas, supports Tascenho's
story: "Microsoft told me to stop working on the case because they
would write an agreement with Antel." DeFreitas says Microsoft's
Uruguay manager, Tomas Blatt, instructed him to drop the suit so that
Microsoft could "work out a deal for the future." Blatt refused to
answer questions about the settlement, claiming, "I don't have any
information about the Antel case.... You should call BSA in
Uruguay—Eduardo DeFreitas."
Antel's situation suggests that when the BSA cracks down on piracy
overseas, it's Bill Gates who turns out to be the pirate.
Representatives from rival firms complain that Microsoft is abusing
its power within the BSA to speed its global dominance.
Microsoft denies that the BSA acts solely on its behalf. "I am not
aware of any instance where that has happened," says Microsoft
attorney Brad Smith. And the BSA dismisses the charges; spokeswoman
Diane Smiroldo calls them "hard to believe." But officials at Novell
and Lotus confirm that by January, both companies will have stopped
actively participating in the BSA's programs in Asia and Latin
America. Novell says these allegations played a part in its decision;
Lotus refuses to comment. Such concerns are also among the reasons
Netscape is reluctant to join the BSA, says Netscape attorney Peter
Harter.
The accusations aren't just limited to Uruguay:
Felipe Yungman, Novell's manager of security for Argentina, says he
and another staffer at Novell discovered, while pursuing their own
investigation for the company, that the BSA was setting up sweetheart
deals for Microsoft. "Companies or government offices had to, as a
condition [that the BSA] forgive them of piracy, replace Novell
products with Microsoft products," he says.
Yungman would not divulge the names of the companies he believes were
bullied by Microsoft, saying that he is trying to convince them to
come forward. "Most of the companies don't want to get involved," he
explains. "They think they need Microsoft. You cannot oblige them to
testify."
Mario Tucci, Novell's country manager for Latin America, supports
Yungman's allegations. "If you call BSA, you will reach Microsoft," he
says. "They shield Microsoft's actions with the BSA name. It's bad for
us and [for] the software industry."
In 1996, when the BSA sued the Australian shipping company Toll
Holdings for piracy, BSA lawyer Charles Gonsalves, of the Sydney-based
firm of Mallesons Stephen Jaques, oversaw the case.
"I generally handle cases for both Microsoft and the BSA," Gonsalves
told Mother Jones.
But while the suit alleged that Toll illegally used copies of programs
made by Lotus, Novell, Symantec, and Microsoft, Martin Dunne, Toll's
chief information technology officer, says the company settled by
paying fines to only Symantec and Microsoft. And, Dunne says, other
than keeping Symantec's anti-virus software, the company has made a
significant change: Toll only buys Microsoft now.
According to a Novell official, Toll "offered to legalize on all
Microsoft products if [the BSA] dropped the suit." Both the BSA and
Toll deny any impropriety. While a written agreement between Toll and
Gonsalves does exist, neither party would reveal the terms of the
settlement. When Gonsalves was asked if Microsoft ever paid for his
handling of BSA cases, he chuckled and said, "That's a confidential
matter."
In Slovenia, where 96 percent of all software is pirated, the head
of the BSA office, Aaron Marko, is also Microsoft's country manager.
Marko says that because enforcement is difficult in the country's
court system, he offers discounted Microsoft software to companies
caught pirating by the BSA. Does Marko see this as a conflict of
interest, since he also supposedly represents other software firms?
"BSA is trying to find the pirate. Then it is a question of marketing
and product awareness to see who will get the legal market share," he
says. When asked which BSA members have local subsidiaries that do
local marketing, Marko says only Microsoft and Oracle, which is not a
direct Microsoft competitor.
These allegations "raise questions as to whether the BSA serves the
interest of its members or whether it serves its dominant member,"
says James Love, director of Ralph Nader's Consumer Project on
Technology. And for the foreign companies, he says, "these seem to be
stories of blackmail."
The BSA employs a team of more than 100 lawyers and investigators to
find cases of software piracy—a crime it says costs the industry
$11 billion a year. The BSA says it catches "thousands of cases a
year," many through its 55 piracy hotlines, the most famous of which
urges employees to "Nail Your Boss" by calling.
While the BSA won't release its funding details, it does say that
money comes from membership dues, which are based on each company's
software revenues. This is one way in which Microsoft dominates the
BSA: Microsoft's annual revenues, for example, are eight times that of
Novell, its largest rival.
In the future, Novell and Lotus say they will use their own in-house
resources for anti-piracy efforts in Asia and Latin America.
But other BSA members, while concerned about Microsoft's role in the
organization, aren't quite willing to go their own way. Greg Wrenn,
senior corporate counsel for Adobe, says his company has stayed with
the BSA despite having had some uneasy experiences with Microsoft. For
example, Wrenn says, the Microsoft attorneys who worked for the BSA
refrained from going after big Microsoft clients caught pirating Adobe
products—until Adobe prodded them.
Wrenn says Adobe will stay in the BSA, pressuring the organization to
play fair. But he acknowledges Microsoft's upper hand. "If an attorney
does Microsoft work and BSA work and never hears from another company
besides Microsoft, he's going to do the work for the guy who's in his
office every week," Wrenn says.
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