Microsoft will take a new approach toward mid-size companies it suspects of using unlicensed software, sending a series of letters culminating in a threat of legal action from the Business Software Alliance (BSA), a company official said today.

By involving the BSA, which is an advocate for copyright and intellectual property issues, Microsoft is hoping to "spark off the engagement" with its customers, said Ram Dhaliwal, Microsoft's licensing programs manager in the UK.

"If they are using our software, we are simply going to ask them to pay for it," said Dhaliwal, whose group runs the company's Software Asset Management (SAM) programme.

In the past, Microsoft contacted companies by phone or email and asked to come in and audit their software. Microsoft contends companies have an incentive to have legally licensed software, and its audit and asset management teams also can look for ways the company can save money, he said.

Most companies comply, but up to 3 percent don't. Under the new programme, if Microsoft doesn't receive a response after 14 days, the company will send a succession of three "escalation" letters over three weeks. The last two letters warn the case could be turned over the BSA, which could pursue legal action, Dhaliwal said.

Microsoft is targeting companies with around 250 PCs in the initiative. Companies of that size often have problems with using incorrectly licensed and counterfeit software, Dhaliwal said.

Microsoft keeps purchase records for volume-licence customers, and those lists can reveal usage inconsistencies, Dhaliwal said.

For example, a company with 250 PCs may be flagged if it bought several server licences but only two client-access licences, which are required to connect desktops to an Exchange email server.

"At that point, if the customer point blank is refusing and or telling us he doesn't want to talk with us and we are seeing this large discrepancy, that's when we will engage the BSA," Dhaliwal said.

The BSA has 100 piracy investigations ongoing against UK businesses, it said last month. Some 27 percent of the software used by UK businesses is illegal, the BSA said, citing statistics from market analyst IDC.

So far, Microsoft will use the new approach only in the UK, Dhaliwal said.