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Microsoft exhumes Middle East grey market case

Microsoft still chasing damages from dealer in Middle East software re-export case

The UK reseller at the centre of a parallel importing storm three years ago when it dealt in Microsoft software purchased from an unofficial Middle East distributor broke the terms of a settlement with the vendor by continuing to trade unlawfully, it has emerged.

A non-disclosure agreement prevented Microsoft from discussing details of the February 2006 case involving software dealer ITAC. However, as ITAC breached the terms of the settlement by continuing to trade unlawfully the non-disclosure clause has become invalid.

According to at least one UK press report, the distributor that ITAC imported from after the settlement was again based in the Middle East, although it’s not clear if it was the same company that led to Microsoft taking legal action against the reseller initially.

At the time, ITAC launched a countersuit accusing Microsoft of libel, but the pair eventually struck an out-of-court deal that saw ITAC agree to pay damages of $1.8m and promise not to sell software sourced from the grey market again.

ITAC has still not paid the $1.8m in full and as a result Microsoft has forced the sale of ITAC boss Barry Omesuh’s assets to receive the damages it is owed.

The ITAC case caused a huge furore in the Middle East channel three years ago and put Microsoft’s local channel management policies under intense scrutiny. Despite the pressure on Microsoft to stamp down on grey market activity and address how the product ended up in the UK, the vendor’s Middle East operation stayed tight-lipped on the case.

Shortly after news of the legal proceedings against ITAC first surfaced, Microsoft carried out an audit of distribution partners in the Middle East. However, the company maintained that the audits were a common practice and had no connection to the ITAC case.

It is still not known if Microsoft identified the Middle East distributor that sold product to ITAC or if it took any form of action against them.

In a statement circulated to the UK channel press last week, Microsoft UK’s head of anti-piracy Michala Wardell, said: “Some people will probably be aware of the ITAC case, but won’t know the real story behind it. Now that we are able to talk about it, it’s great to see justice being done. As long as the likes of Omesuh and resellers such as ITAC remain in business, the profitability of honest resellers is under threat. This case against ITAC shows that Microsoft takes a zero tolerance approach to anyone who undermines the level playing field for our reseller community.”

Wardell continued: “We’re working hard, sometimes behind the scenes, to ensure the channel is a place where all partners can compete on an equal footing. We want to make sure resellers caught cheating the system are held to account for their damaging actions. We caught ITAC trading illegally more than once which shows how determined we are to protect genuine, honest businesses from being undercut by unscrupulous traders. In today’s climate, we believe this is more important than ever.”

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