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Cyber Monday Sting Operation Nets 150 Rogue Websites

This week a federal task force seized 150 websites accused of selling counterfeit goods in a sting timed with the unofficial start to the online holiday shopping season: Cyber Monday. While the sites involved were purveyors of tangible goods like jerseys, handbags and boots, we picked up on some interesting parallels with the software distribution sites that we frequently discuss here on Code Confidential.

First and foremost, with all of the buzz in Washington lately around SOPA, it’s important to note that these sites fall under the category of rogue websites that are being targeted by the legislation. The accounts that we’ve read indicated that the seizures were limited to only the websites responsible for selling the goods, not a confiscation of the goods themselves (which would have been a possibility in this case). It leads me to believe that this raid will result in nothing more than a dog and pony show with new sites quickly emerging to continue selling the counterfeit goods. It’s the same game of Whac-a-Mole that we see in the software market: wasting resources on vast and decentralized online distribution channels while not making progress against the real issue.

Of note, however, is the fact that the domains were registered in the U.S. but run from foreign countries, particularly China. As we’ve seen and discussed from research, China is one of the worst offending countries when it comes to software piracy. It’s ingrained in the culture and presents steep compliance challenges for organizations doing business there. (Software vendors: we recently held a webinar on license compliance and recovery strategies for challenging geographies like China. Take a look at the on-demand version here for some useful tips and best practices.)

According to Immigration and Customs Director John Morton, the volume of sales for these sites is not tracked, but likely result in large sums of money that “fuel other criminal activity.” In an article last year on Microsoft’s anti-counterfeit unit, the New York Times uncovered a similar connection between counterfeit/pirated software and a major Mexican drug cartel.

At V.i. Labs, we don’t keep track of where the money from piracy is going, but we do encourage software providers to know where it’s coming from—and how much. Revenue lost as a result of unlicensed software adoption is a burden for ISVs, no matter what size. As we noted in a recent “Software Piracy Turkeys” post here on Code Confidential, too many ISVs are taking the ostrich approach and putting their heads in the sand when it comes to addressing their piracy problems. Now is the time to act and take control of the situation by quantifying the problem and laying out an appropriate response.

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Waltham License Compliance Panel 2012
May 1, 2012

V.i. Labs hosted a license compliance panel discussion on "Best Practices for Generating, Investigating and Converting License Compliance Opportunities" featuring guest speakers from Dassault Systèmes, Sullivan & Worcester, and Software Compliance Group.

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