China's Public Security Bureau, acting with the FBI, have made a number of raids and arrests in the past couple of weeks with the aim of cracking an alleged software-counterfeiting ring.
Microsoft claims the alleged counterfeiting syndicate, based in the south China province of Guangdong, is responsible for manufacturing and distributing more than $2bn-worth (£970m) of counterfeit Microsoft software.
"We believe this is the largest software-counterfeiting ring in history," said Michala Alexander, head of anti-piracy for Microsoft UK. "It's certainly the largest anti-piracy operation we've been involved in to date. It's a big deal — a very big deal," Alexander told ZDNet.co.uk.
The Public Security Bureau (PSB), acting with the FBI in Los Angeles, targeted the alleged sources behind the unauthorised commercial production of Microsoft software, software components and certificates of authenticity, Microsoft said in a statement on Tuesday.
Microsoft customers and resellers provided the company with 55,000 examples of counterfeit software, which Microsoft said was less than one percent of the total number of copies allegedly produced by the gang. "[It would be fair to say that] between five and six million copies were produced," said Alexander.
Law-enforcement authorities and forensics specialists identified various replication plants involved in the CD production that were the source of counterfeit Microsoft products sold to business customers and consumers around the world, Microsoft said.
Most of the counterfeit copies were distributed in the US, but the second-largest recipient was the UK, which received 15 percent of the product, according to Alexander. The counterfeit software was distributed in 27 countries on five continents, including Australia, Canada, Singapore, the Czech Republic and Korea.
The software contained unauthorised versions of 13 Microsoft products, including Windows Vista, Microsoft Office 2003 and 2007, Windows XP and Windows Server. The counterfeits were produced in at least eight languages: Croatian, Dutch, English, German, Italian, Korean, Simplified Chinese and Spanish.
Alexander said that UK businesses were "at risk" due to the possibility of having purchased the counterfeit software. She said that several UK businesses had already been found to be using software allegedly supplied by the gang. "We're concerned that a number of business customers are putting the business at risk, as counterfeit software has been linked to viruses and spyware," said Alexander. "We've seen UK businesses affected [by this gang]. We're working on the resellers who sold it to them, to deal with [the situation] appropriately."
Alexander denied that UK business customers were at risk from Microsoft enforcing its intellectual property rights relating to counterfeit software through the courts. However, she said that the Business Software Alliance (BSA), which represents the interests of several major software vendors including Microsoft, would sue businesses found to be using unlicensed software. "We absolutely don't take [court] action — we will work in a software asset-management approach. We will conduct a review, but never take any additional action. Certainly it's different with other organisations like the BSA, which will sue. This is something customers should look out for," she said.
UK-produced counterfeit goods were of poorer quality than those originating from China, Alexander said, adding that the Chinese government is putting more effort into cracking down on counterfeiting. "The government is putting more effort into [enforcing] intellectual property laws as the economy in China has suffered. It's trying to turn around that reputation. China has one of the worst piracy rates around the world, and the government doesn't want them to be the worst in the world," she said.
The exact number of arrests and the names of the suspects in the alleged counterfeiting ring have not been made public.
