November 4, 2000
Microsoft orders Va. Beach to prove software ownership
© 2000, The Virginian-Pilot

VIRGINIA BEACH -- Jack Averett was sifting through mail one September day when he read a one-page letter that would disrupt every city department and give some 50 employees new marching orders.

The letter from Microsoft Corp. was brief and to the point.

Basically, it demands that Virginia Beach, the state's most populous city, produce a list of all the Microsoft software it uses. The company also wants to see the city's software licenses -- paperwork that proves the software was purchased.

For an organization that's 99 percent reliant on Microsoft software, and has more than 5,900 employees and 3,500 computers, the letter was jolting.

Averett, a purchasing agent in the city's information technology department, quickly handed off the letter to the appropriate people.

``We certainly weren't expecting that,'' said David C. Sullivan, the Beach's chief information officer.

Nick Psyhogeos, a Washington, D.C.-based attorney for Microsoft, said the firm has found that government agencies sometimes inadvertently acquire counterfeit software because they generally work with companies that submit the lowest bid. Psyhogeos said Microsoft periodically asks all of its customers, private companies and government agencies, to inventory their computer products.

``If there is an issue, we try to narrow the field,'' he said. ``Maybe it's limited to one product or one vendor. But in the end, the responsibility for keeping records and licenses rests with the customer directly.''

Microsoft, like most software companies, includes contracts with its merchandise explaining that the company reserves the right to ask consumers at any time for proof of purchase and an inventory of what is being used. The rule applies not only to governments and privately owned companies but to individuals.

If the city can't verify that it bought all the Microsoft software in its inventory, it might have to pay for any programs that aren't accounted for. That could cost thousands of public dollars.

City leaders say they have gathered substantial documentation, but are uncertain of the final outcome.

``We have no sense of where we're going to come out,'' Sullivan said.

The city has until Nov. 27 to meet Microsoft's request, after getting a 30-day extension. Meanwhile, departments in need of new computers have had to cool their heels.

Sullivan said it is the first time Microsoft has asked the Beach to account for its software. In the past year, Microsoft has targeted Virginia in its software inquiries. Last year, the company sued two retailers in Northern Virginia and two more in West Virginia for software piracy.

The company settled a lawsuit in April with Compu-Link Inc., a Virginia Beach-based computer retailer, for selling 594 counterfeit copies of expensive office software. Details of the settlement were not disclosed.

To fulfill Microsoft's request, the Beach has pulled five members, or 25 percent, of its core technical staff away from their regular duties to focus on the pending deadline. As a result, staffers in line for new computers or replacement computers must now wait three to four weeks to receive them, said Gwen Cowart, director of communications and information technology.

City leaders said their first priority has been to inventory their Microsoft software. Cowart said the city is finishing that project now, double checking to make sure nothing was missed.

Technical staffers have also asked all city departments to provide receipts for any software they purchased. Sullivan said this has proven to be the most difficult task. And it's not just the city's computer experts who must assist.

Employees such as Karen Havekost, an administrative assistant in the technology division, are dedicating their time to inputting the inventory and receipts into a computer.

Sullivan said he's sure the city will get the work done in time. He also said that companies should be ready for Microsoft to ask them for the same data. The city has implemented new policies so that by next June, it will be easier to meet a similar request from any software company, he said.

For example, any staffer wanting to buy a new program must first get permission from the information technology division. That'll make it easier for the city to keep track of the software that departments use, as well as proof that the programs were purchased.

``It's the world we live in,'' Sullivan said. ``Microsoft has every right to ask us for the information.''

Reach Katrice Franklin at 222-5138 or

Last updated 2000/11/06