One Friday morning two weeks ago, outside the hills of Los Angeles, the FBI seized over $10 million worth of counterfeit Microsoft software and arrested four men. Much like a counterfeit money operation, the men had the dyes, decals, and packaging of Microsoft products down to a perfected science. But it's not just sophisticated, multimillion-dollar pirates Microsoft is going after these days: In Microsoft's eyes, you're just as dangerous as the high-tech counterfeiters in L.A. With the help of law enforcement and an industry anti-piracy group called the Business Software Alliance (BSA), Microsoft is targeting individuals and small businesses like never before.

Piracy is a huge concern to companies like Microsoft. According to Sherri Erickson, Microsoft's marketing manager for anti-piracy, one in four software applications in the U.S. is illegal. Here in Washington state, the 26.9 percent piracy rate among users is one of the highest in the country. According to the BSA, which lobbies on behalf of Microsoft and other major companies like Apple and IBM, the U.S. computer industry lost an astounding $2.6 billion last year due to piracy. (However, Microsoft still managed to make $9.4 billion last year.) With so much money at stake, and with the rise of music file-swapping programs like Napster, the infamous technology that turned pirating into populism, the Redmond software giant is awakening from its sleep. "We're doubling our efforts," says Erickson. Besides training and teaming up with law enforcement around the world to stop counterfeit operations, Microsoft has its eyes on two emerging threats--small businesses and the individual user (that means you, buddy!). Anti-piracy enforcement is nothing new to Microsoft, but there's been a fever of recent activity.

A few months ago here in Seattle, a slew of small businesses opened their mail one morning to find a letter from the BSA and Microsoft. The unexpected letter informed businesses that they had one month to clean up their anti-piracy act and get legit. Under the banner of the "Truce Campaign," Microsoft and the BSA sent out the letters randomly to Seattle businesses, whether they were pirating software or not. Meanwhile, radio spots on KING, KIRO, and KJR touted the same warning. "It was like a preemptive strike or something," remembers Lew McMurran, spokesperson for the Washington Software Alliance, a group of small local software companies. Currently in New York, a barrage of posters and billboards greet subway riders every day with slogans like "Ouch, New York software pirates can be fined up to $150,000" or the threatening "The BSA Targets New York. Get your software licensed before they target you." In addition to small businesses, individual users on the Internet are also in Microsoft's sights.

According to Erickson, over 90 percent of all Microsoft software sold or traded over the Internet is pirated. The downloading mania that Napster inspired is a good example of what scares Microsoft and other companies. Countless sites like Nutella and other Napster knockoffs already exist, and more sites allowing users to easily download cracked and pirated software appear online every day. "There was a time not that long ago when you had to be a very patient person to download software," says Bob Kruger, BSA's vice president of enforcement. "Now, the technology has progressed so rapidly that Internet piracy is one of our biggest concerns." Kruger, a former federal prosecutor, says a variety of new strategies are being used to deal with the rise in piracy.

For starters, Microsoft and other companies use automated programs that snoop on Internet sites and chat rooms by searching for key phrases like "free software" and "downloads here." Microsoft, as well as the BSA, also has a number of staff investigators who monitor sites and follow up leads. "It's like a cat-and-mouse game that we're playing here," says Erickson, referring to the pirates. In addition, Microsoft offers FBI agents classes to learn more about Microsoft products. Windows XP, Microsoft's newest and most controversial product, has a ton of anti-piracy measures. For example, all XP users must register online within a certain amount of time, and if the company suspects multiple computers are using the same product, XP will shut down automatically. XP also prevents most programs that are not approved by Microsoft from working at all. According to an August 13 article in Business Week, Microsoft is also developing an educational program for kids that teaches them about intellectual property.

All the efforts appear to be paying off. In addition to the big bust in L.A., three small businesses in New York were busted last Wednesday for using duplicate copies of Windows. Japs-Olson, a commercial printing company headquartered in Minnesota, was fined $260,000 three weeks ago for using illegal Microsoft software. Furthermore, constant lobbying by the software industry has strengthened intellectual property laws and increased individual pirating fines to $250,000 and five years of possible jail time. The new Department of Justice could also be of service. On February 7, the BSA, on behalf of CEOs of major software corporations like Microsoft and Adobe, sent President Bush a letter congratulating him on his presidency and expressing hope in the new administration. "As we previously discussed in our exchange of letters during your campaign," the letter states, "we also wanted to bring to your attention several issues... like the explosive growth of the Internet... on-line software theft... and Internet security. We share your views on the importance of these issues to our country." The most recent BSA lobbying expenditures total nearly $1 million.