Microsoft has settled a civil proceeding against Natcomp Technology Australia, ending its four-year pursuit of the company over the alleged supply of counterfeit software to several major retailers.

Although it has not admitted to any crime, Natcomp Technology and its director Fabio Grassia have agreed to pay Microsoft damages of AU$200,000 and accepted an injunction that prevents the company from supplying counterfeit copies of Microsoft Windows.

Natcomp has also given an undertaking that it will replace pirated software it is alleged to have sold to its customers with genuine Microsoft equivalents.

The settlement comes after the Australian Federal Court ordered Natcomp to disclose contents of documents seized by Australian Federal Police (AFP) in raids on company premises and Grassia's home in January last year.

However, Microsoft's pursuit of Natcomp Technology extends back to 1998 when it opted to investigate calls from concerned consumers. Later, Microsoft added Natcomp Technology to Federal Court proceedings against five other companies that allegedly involved infringement of Microsoft copyrights and trademarks.

While other companies involved in the proceedings chose to settle their disputes with Microsoft, Natcomp opted to enter a protracted court battle with the software giant.

According to Federal Court documents, Natcomp Technology's solicitors entered a motion to resist disclosing documents gathered by Australian Federal Police during raids on Fabio Grassia's home and the company's business premises in Perth, Brisbane and Sydney in January 2001.

The motion was entered on grounds that releasing the documents would be self-incriminating. Federal Court Justice Lindgren over-turned the motion and ordered Grassia to supply the documents to Microsoft's legal representatives.

In making his decision, Justice Lindgren said he could not conceive of how producing the documents could expose Grassia to any "additional" risk "of being prosecuted for the very offences by reference to which the AFP seized those documents and things".

"Any such peril already exists and will not be increased at all by the production of the record," said Lindgren.

Microsoft said it now knows of around 1,000 counterfeit reproductions of Windows following its investigation of Natcomp.

However, Microsoft said it cannot rule out the possibility that there might be more pirated copies in circulation than it originally estimated. Accordingly, the company has warned consumers to be on the look out for counterfeit copies of Windows 98 and Windows ME.

Microsoft said its investigators uncovered high quality Windows 98 counterfeits that consumers would have difficulty distinguishing from genuine products.

"[Counterfeiters] have invested money in trying to reproduce all of our security and packaging to a point that they're trying to shift this material at a price differential which is insignificant to the general [price]," said Microsoft corporate attorney, Vanessa Hutley.

Microsoft said its investigators made test purchases of Natcomp isystem PCs and discovered more evidence of piracy. Its investigations allegedly revealed that stolen Windows Millenium Edition authenticity stickers had been displayed on the isystems that were then bundled with counterfeit software.

Microsoft said it has spoken to retailers it believes purchased the counterfeit stock in good faith, but it has chosen not to name them. Instead, the company is encouraging consumers to be vigilant when purchasing PCs and software.

Hutley said consumers should look for more than one indication that the software they buy is genuine.

Microsoft has told consumers to be wary of unusually cheap software products, distributors claiming to have special deals with software publishers and PCs without quality assurance stickers.

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