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Software piracy doesn’t pay for repeat Quebec offender

Already facing $700,000 in damages for counterfeiting Microsoft software, a Quebec retailer pleads guilty to contempt charges for counterfeiting again

In what Microsoft Canada (NASDAQ: MSFT) is calling a landmark ruling, Quebec retailer Carmelo Cerrelli has plead guilty to contempt of court for continuing to counterfeit Microsoft software despite a previous court order that he cease such activities. Cerrelli has been fined $100,000 by the Federal Court of Canada for contempt, and could face up to 60 days in prison if the fine is not paid.

The recent ruling relates to a December 2006 Federal Court judgment that found Cerrelli and two corporations operating under the name Inter-Plus guilty of distributing counterfeit Microsoft software. The judgment awarded Microsoft $500,000 in statutory damages and $200,000 in punitive damages – the largest damages awarded in such a case at that time – and prohibited Cerrelli from counterfeiting software in the future.

Chris Tortorice, corporate counsel, anti-piracy with Microsoft Canada, said the investigation into Inter-Plus began as early as 2000, when Microsoft was made aware the business was selling counterfeit software by complaints from customers to its anti-piracy hotline. As part of the 2006 judgment, Cerrelli was prohibited by the court from selling counterfeit software, but Tortorice said in mid-2007 Microsoft began receiving reports he was again selling counterfeit software. A civil search and seizure authorized by order of the Federal Court netted several hundred more pieces of counterfeit software.

“This was in direct contravention of the order of (the court) a year ago. He’d been ordered to stop selling counterfeit software and he kept doing it,” said Tortorice.

As a result, he said Microsoft initiated contempt proceedings. Cerrelli pleaded guilty to two charges of contempt and has been ordered to pay a fine of $100,000 to the court. If he doesn’t, he could face up to 60 days in jail.

Tortorice notes that the $700,000 awarded to Microsoft Canada from Cerrelli by the courts is also still outstanding, adding that judgment by the court is now final. “Microsoft is pursuing that, and we’re hopeful we’ll be able to collect on the initial judgment,” said Tortorice.

The source of the counterfeit software Cerrelli was selling remains under investigation. Cerrelli said these cases often lead to multiple parties in different countries. For example, a recent counterfeiting source discovered in China was distributing software to 36 other countries, including Canada.

As to the impact such judgments by have on those engaging in the counterfeiting of software, Tortorice said while he believes there is an impact, recent IDC Global Piracy figures indicate that, while global rates are falling, in Canada piracy rates have remained stubbornly stable.

John Cotter, chair of the outreach committee of the Canadian Anti-Counterfeiting Network, said these court decisions show the courts are taking the problems of counterfeiting and piracy much more seriously.

“One would hope that it will have some deterrent effect. I think generally the problem of counterfeiting and piracy is starting to get more attention, and it’s certainly deserving of more attention,” said Cotter. “There’s a great need for legislative change and additional resources for law enforcement to deal with the problem.”