Software Piracy Booming

This week, Microsoft will respond to the Justice Department's recommendation that it be split into two different entities. But an even greater threat may come from criminals who are eating away at Microsoft, piece by piece, reports CBS News Correspondent Drew Griffen.

Police believe there are dozens of bogus software operations scattered across Southern California, using million dollar machines to pump out thousands of copies every day .

"Every 4.2 seconds (these machines) will knock out a counterfeit CD, whether it's a software CD or movies," says Los Angeles Police Sgt. Tom Budds.

The copies, which even include these fake certificates of authenticity, are so exact, a counterfeiter-turned-informant says most people using fake Microsoft don't even know it -- because the copies are every bit as good as the real thing.

Though Microsoft won't say how much it's loosing, the company says one out of every four of its programs out there are probably fake.

The software industry says that worldwide, software piracy is a growing, $11-billion-a-year business.

It's that kind of money that has Microsoft scared, because those huge profits are attracting an old criminal foe. Organized crime is finding that dealing in counterfeit Microsoft is easier than dealing in drugs.

"In the last six months, we have begun to see high quality counterfeit software manufactured in Colombia, just outside of Bogota," says Brad Smith, who heads Microsoft's anti-piracy efforts. The company is hoping that new, harder-to-copy CDs with holographs will at least slow the problem. But only a worldwide law enforcement crackdown will stop it.

"Otherwise it is very easy to win some battles but lose the war against organized crime," says Smith.

And with more raids discovering even more sophisticated operations, indications are this new hi-tech war against organized crime is being lost.