PC Max closes as Microsoft suit continues

PC Max, a local computer company embroiled in a lawsuit with Microsoft Corp., Nov. 1 closed its one remaining location at 1421 S. Enterprise. The company, which at one time employed 23 in five area locations, will not declare bankruptcy, owner Farris Robertson said.

Microsoft filed suit in federal court against PC Max and three other Missouri companies in February, alleging the companies distributed counterfeit software or software components to investigators and customers. Since news of the lawsuit broke in March, Robertson said business at PC Max declined dramatically and the company became insolvent.

"After the Microsoft lawsuit was heavily publicized by the local media, our business fell off 75 percent within 60 days," Robertson said. "We did $123,000 worth of business in February ... in April, we did $30,000 worth."

Robertson said he downsized PC Max to five employees and one location in the months following Microsoft filing suit. The company's remaining inventory was sold at auction Nov. 11. Calls to PC Max's telephone number are being rerouted to Millennium Computer Center, 1332 E. Republic.

"One of our primary concerns was to provide our customers with ongoing support, so we made an arrangement to share our customer database with Millennium in exchange for them taking good care of our customers," Robertson said.

Robertson said he has no plans to reopen PC Max or open another computer store when the lawsuit is finished.

"I'm writing on technology-related issues. I have a book coming out in January that I've ghostwritten," Robertson said.

He said Microsoft has come to the table with a settlement offer that he and his attorneys are considering.

"That's something that we're involved in ongoing negotiations about, and trying to determine what effect (settling) will have on us in terms of restraints," Robertson said.

Robertson has maintained that when he discovered Microsoft had a claim against PC Max for selling counterfeit merchandise, he tried to work with the software company to find out which of his vendors had sold him the merchandise.

"That allegation first came to my attention in August of last year their attorneys contacted us and told us to quit selling counterfeit software ... we asked them to tell us which software it was and where it came from. They refused to cooperate in that endeavor, and instead filed a lawsuit," Robertson said.

Microsoft corporate attorney Janice Block said Microsoft had notified PC Max of its counterfeit software problem as early as July 1998 and gave the company every opportunity to stop distributing the counterfeit software, which included Windows 98 and Office 97.

"It's very important for Microsoft to protect both consumers out there who are purchasing, installing and using software, as well as resellers who are distributing genuine software," Block said. "Missouri has a very large software piracy problem there is a lot of counterfeit software that unfortunately is changing hands."

Block said Missouri's software piracy rate is currently 25 percent one out of four copies of software in Missouri is illegal.

Robertson said because Microsoft was required to produce the evidence in court, he found out which of PC Max's vendors sold him the counterfeit software.

However, Robertson said that the vendor is nowhere to be found, and to his knowledge, is not being prosecuted or sued for distributing the counterfeit software.

"Microsoft doesn't pick on the vendors, because the vendors are not brick-and-mortar to the extent that we are, and are scattered all over the country," Robertson said. "We, as small computer companies, can't go out and research our vendors in depth. They won't share their information anyway," he added.

Robertson claims that with the lawsuit against PC Max and the three other Missouri computer businesses, Microsoft is attempting to eliminate the "gray market" in Microsoft software.

This occurs when small computer companies like PC Max purchase overstock software from vendors who have purchased it from computer hardware companies such as Dell, Hewlett Packard and Gateway.

"Big computer manufacturers have contracts with Microsoft to buy so many units, and what happens is a lot of those units get sold out of the back door of the manufacturers when they buy more units than they need and so they can make their quotas," Robertson said. "I've actually received merchandise with Dell stickers on it."

He said the presence of the gray market is a well-known fact in the computer industry, and is a way for small computer businesses like PC Max to purchase software for about half of what they would pay if they purchased directly from Microsoft.

" ... I'm not surprised that (Microsoft) didn't cooperate with us," Robertson said.

Block responded that Robertson's charge is unfounded.

She said the lawsuit against PC Max was Microsoft's last resort to stop PC Max from selling counterfeit software.

"We do not tell people from whom to purchase software. We do provide people with warning signs that they should look for when acquiring software from upstream vendors to then sell to consumers ... let's face it, the high-tech industry is so important, there are thousands upon thousands of software vendors out there, many of whom are selling genuine software at genuine prices. They're trying to make a living, but can't do so because there are counterfeit distributors out there who are selling software that is not genuine, and they're selling it at reduced prices," Block said.

PC Max got its start in 1994 as a mass merchandiser of low-cost, custom-built computers. Established by Robertson, the company had locations in Springfield, Lebanon, Hollister and Bolivar.

Before Microsoft filed its lawsuit early this year, Robertson said PC Max was expanding to become a more service-based computer company, and a year ago, the company refocused its business plan by turning its retail stores into wholesale computer centers, dropping prices an additional 20 percent.

The company was an authorized dealer for IBM, Microsoft, Compaq and Hewlett Packard.