US embassy cable - 05TAIPEI1907

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 
--------------------------- 
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 
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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 
--------------------------- 
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