Microsoft claims 'landmark victory' against defunct UK reseller

Microsoft has said it will go after the assets of the former MD of defunct IT distie ITAC UK Ltd in a long-running parallel importing dispute.

But lawyers for the reseller have slammed Microsoft for breaching an earlier confidentiality agreement between the two firms.

On Wednesday Microsoft claimed to have scored a “landmark victory” in an on-going parallel importing legal spat with ITAC UK, which went into administration on 3 March this year.

Microsoft had accused ITAC UK of parallel importing – bringing products into the UK which were originally destined for other markets – in January 2005, when it brought a $7m civil case against the distributor. It also accused the company of importing software from an unauthorised reseller in the Middle East.

The two companies reached a settlement agreement in February 2006 with ITAC UK agreeing to pay Microsoft £1m in damages, but MS has only now revealed details of the case.

The software giant's anti-piracy division revealed earlier this week that a non-disclosure clause in the original case against ITAC UK meant it had to keep schtum until now.

Microsoft claimed ITAC UK was guilty of “a flagrant breach of the settlement agreement” because the firm “continued to parallel import, and unlawfully deal in, Microsoft software”. All of which led MS to boast it had scored a “landmark victory for the channel”.

However, Redmond is yet to receive the full £1m in damages from ITAC UK because it is in administration.

KPMG joint administrators Paul Andrew Flint and Brian Green are currently "investigating the affairs of the business", according to Companies’ House records.

“The company’s cash position prior to [KPMG’s] appointment had deteriorated significantly, primarily due to the company having to make a large settlement payment in relation to a legal claim,” according to the administrator’s statement of proposals, dated 24 April 2008.

MS claimed this week it would “force the sale of Barry Omesuh’s [ITAC UK managing director] assets to receive the damages owed in full,” but it’s unclear at this stage how the firm might recover the money given that ITAC is now defunct and secured creditors are still waiting to be paid by the administrators.

Microsoft’s UK head of anti-piracy, Michala Wardell, reckoned that ITAC UK’s current status would have no effect on the outstanding payment.

She told The Register that “just because the company went into liquidation it doesn’t mean that the money they still owe, and any actions that they have taken, will simply disappear”.

Microsoft turns the screws

Indeed the firm's legal team swooped on ITAC UK's MD just one day after KPMG filed its administrator's statement of proposals about the company's demise.

Microsoft submitted an intellectual property infringement claim against Omesuh to the High Court on 25 April this year. Mr Justice Briggs ruled that Omesuh should pay MS £320,000 plus costs on 8 May.

Wardell, who bullishly said on Wednesday that "Microsoft takes a zero tolerance approach to anyone who undermines the level playing field for our reseller community" told us that the software giant was "in a position where we have the right to sell [Omesuh's] property."

She also told us that Microsoft was acting "purely out of citizenship for the channel".

Meanwhile, the solicitor who acted for ITAC UK and Omesuh in the original proceedings resulting in the settlement agreement of February 2006, has hit out at Microsoft's "dirty" tactics.

William Lister, a partner in Pannone LLP, told El Reg: "I am surprised that Microsoft has commented on this case given that the agreement was strictly confidential and both parties specifically agreed not to put out statements such as this." He also accused Wardell of "a serious breach of the settlement agreement".

Simon Ellis of Cooper Kenyon, who has acted for Omesuh personally following the liquidation of ITAC UK, claimed: "There is no landmark victory. There is no judgement whatsoever against Mr Omesuh in respect of the alledged subsequent parallel trading and the matter is still proceeding. The only judgement relates to a guarantee given by Mr Omesuh in the original agreement," he told The Reg.

Omesuh could not be reached for comment at time of writing. ®