Comet’s woes deepen as Microsoft sues over counterfeit CD claims

Britain’s second biggest electronics dealer, which is in the process of changing hands, yesterday launched a vigorous defence, saying it had acted in the interests of its customers.

The US software giant accused Comet of creating more than 94,000 sets of Windows Vista and XP recovery discs and selling them to people buying Windows-loaded PCs and laptops.

It alleges that the retailer produced the CDs at a plant in Hampshire and then sold them to customers from more than 200 stores across the UK.

David Finn, a lawyer for Microsoft, said: “As detailed in the complaint filed today, Comet produced and sold thousands of counterfeit Windows CDs to unsuspecting customers in the United Kingdom.

“Comet’s actions were unfair to customers. We expect better from retailers of Microsoft products – and our customers deserve better, too.”

The loss-making retailer is owned by Kesa Electricals but is being sold to private equity group OpCapita.

Under a deal struck in November, OpCapita will pay a nominal fee of just £2 for the chain. However, Kesa has agreed to pump a £50 million “dowry” into the business and retain its pension liabilities.

Comet said the group had provided the discs as a service to its customers. People buying computers pre-loaded with Windows could create their own recovery CDs but many did not, and faced problems when their computers failed. The recovery discs used to be provided by Microsoft or the PC maker but they stopped doing that in 2007, the group said.

A spokeswoman for the retailer said: “[Comet] believes its customers had been adversely affected by the decision to stop supplying recovery discs with each new Microsoft operating system based computer.

“We note that proceedings have been issued by Microsoft Corporation against Comet relating to the creation of recovery discs.

“Comet has sought and received legal advice from leading counsel to support its view that the production of recovery discs did not infringe Microsoft’s intellectual property. Accordingly, Comet is satisfied that it has a good defence to the claim and will defend its position vigorously.”

Comet provided the discs as a service to its customers between March 2008 and December 2009 but said it had stopped the practice when Microsoft raised objections.

Shares in Kesa fell 4.95p or 6.91 per cent to close at 66.65p.The trading slump which led to the chain being put up for sale was laid bare last month when it revealed losses of £22m for its half-year trading.

Revenues slid by more than 18 per cent on a same-store basis in the period to 31 October, dragging parent company Kesa into the red.

London-listed Kesa, which also runs French chain Darty, faces difficult trading conditions across its southern European heartland, where the sovereign debt crisis is forcing governments to slash spending.

Excluding the Comet business, the group posted retail profits of €16.5m (£14.1m) for the six months, down by more than half on a year earlier. Revenue was down slightly at just below €1.9bn.

Microsoft said in a statement that it “seeks to protect its customers from counterfeiting and piracy – and ensure people get what they pay for”.

It urged customers to report “suspicious software” via its howtotell.com website.