SEIZURE OF COUNTERFEIT MICROSOFT CERTIFICATES

UNCLAS SECTION 01 OF 02 TAIPEI 001907

SIPDIS

STATE PLEASE PASS TO AIT/W AND EAP/RSP/TC

STATE ALSO USTR FOR BURCKEY/ESPINEL/KI

E.O. 12958: N/A
TAGS: KIPR ECON ETRD TW IPR
SUBJECT: SEIZURE OF COUNTERFEIT MICROSOFT CERTIFICATES
OF AUTHENTICATION (COAS)

SUMMARY
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1. WORKING ON A TIP FROM MICROSOFT AND AFTER AN
INVESTIGATION LASTING SEVERAL MONTHS, TAIWAN'S CRIMINAL
INVESTIGATION BUREAU (CIB) RECENTLY RAIDED A MARKETING
FIRM AND AN OFFICE LOCATED IN TAIPEI CITY AND COUNTY,
SEIZING COUNTERFEIT MICROSOFT CERTIFICATES OF
AUTHENTICATION (COA). FOUR SUSPECTS WERE ARRESTED.
THE FOUR SUSPECTS ALLEGEDLY IMPORTED BOGUS MICROSOFT
COAS FROM MAINLAND CHINA AND THEN SOLD THEM TO LOCAL
USERS AND FOREIGN BUYERS. THE SUSPECTS HAVE BEEN
CHARGED WITH VIOLATION OF THE TRADEMARK LAW AND
FORGERY, CIB CONTINUES TO TRACK THE CASE FOR FURTHER
DEVELOPMENT. END SUMMARY

FAKE COA FOUND IN AUSTRALIA
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2. IN AUGUST 2004, AUSTRALIAN POLICE SEIZED OVER 1000
FAKE MICROSOFT COAS FROM AN IT SHOP RUN BY AN OVERSEAS
CHINESE WHO STUCK FAKE COAS ON COMPUTERS LOADED WITH
FAKE SOFTWARE. DURING THE INVESTIGATION, AUSTRALIAN
POLICE DETERMINED THAT THE COUNTERFEIT COAS WERE
IMPORTED FROM TAIWAN. MICROSOFT REPORTED INFORMATION
PROVIDED BY AUSTRALIAN POLICE TO TAIWAN'S CRIMINAL
INVESTIGATION BUREAU (CIB). AFTER SEVERAL MONTHS OF
INVESTIGATION, CIB RAIDED A MARKETING FIRM AND AN
OFFICE LOCATED IN TAIPEI CITY AND COUNTY AND ARRESTED
FOUR SUSPECTS. SUSPECTS LEE CHARNG AND CHE ZHI-LI,
OWNERS OF THE CHIANG YOU MARKET INTEGRATION OFFICE,
ALLEGEDLY PURCHASED FAKE COAS AT A PRICE OF NT$500
(US$15.80)/PER PIECE FROM THE PRC AND THEN SOLD THEM TO
CUSTOMERS FOR NT$900-2,500/PER PIECE. FOREIGN BUYERS
WERE REQUIRED TO PURCHASE AT LEAST 300 PIECES, WHICH
WERE SHIPPED BY AIR PARCEL. THE SUSPECTS ARE ESTIMATED
BY CIB TO HAVE NETTED OVER NT$1 MILLION FROM SALES OF
THE FAKE CERTIFICATES.

WEBSITE SELLER
--------------

3. IN ADDITION TO LEE CHARNG AND CHE ZHI-LI, CIB ALSO
ARRESTED WANG DONG-SHENG AND WANG DONG-CHENG, TWO
BROTHERS, WHO ARE ACCUSED OF USING THE YAHOO! AUCTION
WEBSITE TO SELL COUNTERFEIT MICROSOFT COAS. BOTH WANGS
ADMITTED TO CIB THAT THEY PURCHASED FAKE COAS FROM
MAINLAND CHINA. THE TWO RAIDS SEIZED ONLY 33
COUNTERFEIT MICROSOFT COAS. CIB BELIEVES THE SUSPECTS
WERE NOT COOPERATING WITH EACH OTHER AND DID NOT DEAL
DIRECTLY WITH A MAINLAND SUPPLIER BUT MIGHT HAVE
PURCHASED THE FAKE COAS FROM ANOTHER TAIWAN-BASED
SUPPLIER, WHO IN TURN BOUGHT THEM FROM THE MAINLAND.

WHY BUY A FAKE COA?
--------------

4. MICROSOFT INC. EXPLAINED TO CIB THAT MICROSOFT'S
GENUINE SOFTWARE CONTAINS A SERIAL NUMBER FOR INTERNET
REGISTRATION AND A COA TO BE PLACED ON THE COMPUTER TO
IDENTIFY IT AS CONTAINING LEGALLY PURCHASED SOFTWARE.
SOME LOCAL COMPUTER SELLERS AND ASSEMBLERS BUY FAKE
COAS IN ORDER TO DECEIVE CONSUMERS THAT THE COMPUTERS
THEY BUY ARE LOADED WITH LEGITIMATE SOFTWARE. THE
SELLER CAN CHARGE A HIGHER PRICE AND POCKET THE
SIZEABLE DIFFERENCE.


5. SOME CONSUMERS MAY NOT EVEN BE AWARE THAT THE
SOFTWARE ON THEIR COMPUTERS IS COUNTERFEIT. FOLLOWING
THE PUBLICITY GENERATED BY THE RAID, MICROSOFT
ANNOUNCED THAT IT WOULD CHECK ANY COAS FOR VALIDITY IF
CONSUMERS WOULD BRING THEM TO MICROSOFT'S TAIWAN
OFFICES. ACCORDING TO MICROSOFT, SEVERAL CONSUMERS
HAVE AVAILED OF THE OFFER AND TWO FAKE COAS HAVE BEEN
FOUND. VICTIMS OF THE FRAUD HAVE LIMITED LEGAL
RECOURSE AND MICROSOFT HAS BEEN ADVISING THEM TO
APPROACH THE SELLER TO ASK FOR A REFUND OR FOR
LEGITIMATE COPIES OF THE PURCHASED SOFTWARE.


6. MICROSOFT REPRESENTATIVES SPECULATED THAT SOME
SMALL AND MEDIUM SIZED BUSINESSES MIGHT ALSO BE
CUSTOMERS FOR COUNTERFEIT COAS. THESE COMPANIES MIGHT
ATTEMPT TO DISGUISE THEIR USE OF COUNTERFEIT SOFTWARE
BY PURCHASE OF FAKE COAS TO FOOL LAW ENFORCEMENT
OFFICIALS WHO MIGHT INSPECT THEIR PREMISES FOR
COUNTERFEIT PRODUCTS.

CIB CONTINUES TO TRACK CASE
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7. FAKE MICROSOFT COAS HAVE NO OTHER PURPOSE BUT TO
ALLOW USERS TO DISGUISE THEIR USE OF COUNTERFEIT
SOFTWARE. CIB HAS PROMISED TO CONTINUE INVESTIGATING
THE CASE TO TRACK DOWN THE SUPPLIERS AND THE BUYERS OF
THESE FAKES. CIB HOPES THAT THE RESULTS WILL LEAD THEM
TO OTHER COUNTERFEIT SOFTWARE PRODUCERS AND USERS,
PUTTING A DENT IN SALES OF COUNTERFEIT MICROSOFT
PRODUCTS.

RECOGNITION FROM MICROSOFT
--------------

8. DURING HER APRIL 19 VISIT TO MINISTRY OF JUSTICE,
PROSECUTORIAL AFFAIRS DEPARTMENT DIRECTOR TSAI CHING-
HSIANG, MICROSOFT'S NORTHERN ASIAN LEGAL AFFAIRS
DIRECTOR DIANE D'ARCANGELO THANKED TAIWAN'S MOJ FOR ITS
ASSISTANCE IN THE CASE AND PRAISED TAIWAN'S ENFORCEMENT
ON IP PROTECTION.
PAAL