Microsoft Cops.(Microsoft Corp.)(Statistical Data Included)

By the time the driver of the Ford Transit van realized he was being followed, it was too late. Three unmarked police cars were on his tail, speeding through the business district of Katowice, Poland. Cmdr. Michal Terlega and his team of a dozen cops were closing in. Suddenly a 4x4 carrying a man and woman accelerated toward one of the police cars, trying to force it into the path of an oncoming bus. In a frenzy of squealing tires and shouted expletives, Terlega's team blocked both the van and the four-wheel-drive. The three suspects were ordered out of their vehicles and arrested. "Thank God, there was no shooting," Terlega said later.

Just another wild chase in the gangland jungles of Eastern Europe? Hardly. The van was transporting the mob's favorite new target of opportunity: 1,250 shiny boxes of Polish-language Windows 98 software, labeled microsoft but allegedly made by pirates. Even more intriguing, Microsoft was in on the bust last summer--before the police were. In a campaign that has gone virtually unnoticed, Microsoft is building an unrivaled force of in-house police and prosecutorial muscle to combat a global pirate trade increasingly dominated by organized crime. Approved at the highest levels inside Microsoft, this deployment has boosted the size of its anti-piracy team from a couple of people in 1988 to about 250 today. About half are in marketing and communications, trying to win "mindshare" by convincing people and governments from Chicago to Beijing that stealing software is a real crime. The other half are in the Anti-Piracy Group, recruited mainly in the past two years from the FBI, the U.S. Drug Enforcement Administration (DEA), the U.S. Justice Department and other law-enforcement agencies around the world. "In some ways, we have a worldwide police force and a worldwide U.S. Attorney's Office," says a top Microsoft anti-piracy lawyer in Europe. This corporate battalion is engaged in a widening global war, in effect pitting Microsoft versus mafias and gangsters from Poland to Hong Kong.

Bill Gates saw it coming to this early on. The man who predicted the day when there would be a computer in every home and office also foresaw that software piracy would be a major menace to an industry built on ideas, easily copied to disks. In 1976, he was the 20-year-old head of a one-year-old software company when he banged out an "open letter to hobbyists." "Most of you steal your software," he fumed. He heaped scorn on the attitude that "hardware must be paid for, but software is something to share," and concluded with a plaintive appeal to "anyone who wants to pay up." "That letter really is the origin of the software industry's anti-piracy effort," says Microsoft deputy general counsel Brad Smith, who heads the Anti-Piracy Group. "What we have today is the natural evolution of that effort."

The letter to hobbyists is now a quaint opening chapter in software- piracy lore. Twenty-five years later, Bill Gates is the world's richest man and Microsoft is a $23 billion-a-year giant. Its software runs the operating systems in 91 percent of the world's desktop computers, yet pirates--not IBM or Oracle or Apple--are still its biggest competitors. Microsoft won't say how much money it loses to piracy. But with an 11 percent market share, it is the largest player in the packaged-software industry, which sells $175 billion globally each year. The industry loses by conservative estimates 36 percent of its business to pirates. Microsoft loses more than most, perhaps much more. It is easily the favorite target for pirates, precisely because Gates has been so successful in selling his programs.

Gates soon saw that enforcement would be tougher as his company expanded abroad. In 1988, Microsoft rallied American companies to band together in the Business Software Alliance, and hired former prosecutor Robert Krueger as its chief enforcer. "Back then, everywhere abroad was the Wild West," says Krueger. "We used to joke about one-disk countries: once you sold one disk, there goes the market [to pirate copies]."

Today, the BSA operates enforcement arms in 65 countries, and serves in a way as the industry front for Microsoft. Gate's company provides the greatest share of funding, and many of its agents overseas do double duty for the BSA. "I don't know of any company that has numbers near what Microsoft has," says Tim Trainer, president of the International AntiCounterfeiting Coalition, which represents industries as diverse as music, soap and software. "Microsoft, God bless 'em, simply has more muscle to go after these guys," says Sandy Boulton, director of piracy prevention for Autodesk and a founding leader of BSA. "They're doing the work for the rest of us."

Its increasingly dirty work. Pat Mueller, a former DEA agent who is now a Microsoft investigator in Los Angeles, says the pirate trade is developing the way the drug trade did. "We're now seeing production of pirated products in Latin America, then transportation by land through Mexico and into the southwest United States," says Mueller. A year and half ago he and a partner where staking out a Denny's restaurant in L.A, when two cars pulled into the parking lot and popped their trunks. The drivers started moving pirated software from one car to the other, a scene that reminded him of drug dealers in Detroit, circa 1985.