MICROSOFT officials have expressed outrage after discovering pirated CD-ROMs claiming to be Windows 97 on sale in several of the territory's notorious shopping arcades - months before the official international launch. Microsoft Hong Kong in-house lawyer Valerie Colbourn said she was appalled. 'Windows 97 is out in the arcades and consumers are completely confused because it hasn't been officially launched in Hong Kong or anywhere else. It's ridiculous,' Ms Colbourn said. This follows last week's move by the United States Trade Representative's Office to step up its action against Hong Kong for its worsening piracy record, placing the territory on its Special Watch list. A Microsoft employee, who bought a copy of a Chinese imitation of Windows 97 at the notorious 298 Hennessy Road arcade in Wan Chai for $30, said: 'It looks like it has been copied from a Beta, or test, version. We're not sure because we don't want to look at it. It will contain all sorts of viruses.' Windows 95, which was available in Hong Kong before the official local launch but after being released in the US, retails at about $1,400. The Microsoft employee said the pirates had produced their own packaging, which was 'quite sophisticated'. Microsoft does not yet have a launch date for Windows 97. Ms Colbourn, who is also vice-president of the Business Software Alliance (BSA), said Hong Kong still had the worst record in Asia for peddling pirated goods. 'There's nowhere else in Asia where you can find shops that trade continually in all these [pirated] products in terms of blatant retail sales, where any person can walk off the street without any sense of wrongdoing - there's nowhere worse.' Websites promote Hong Kong's piracy trade. One website on the Internet toasted Hong Kong as 'The Software Piracy Capital of the World - everything you want. Just come and get it'. Ms Colbourn said: 'One website rated the different arcades in terms of 'very crowded on a Saturday, bad air-conditioning, McDonald's nearby'. ' The number of shopping arcades selling illegal copies of software in Hong Kong had accelerated rapidly over the past 12 to 18 months. 'They may be subject to occasional raids by customs but as soon as customs are gone they can re-open,' Ms Colbourn said. She said the Government had been slow to respond to requests for the problem to be tackled, creating widespread apathy over intellectual property rights. Ms Colbourn said the BSA, backed by members of the software industry, was pushing the Government to include provisions in new copyright laws - to be implemented this year - to make landlords renting to the software pirates bear some responsibility. Landlords would, under the provision, be given notice that tenants were vending illegal merchandise and would be fined if they did not act upon the advice. 'The Hong Kong Government has been saying how much it wants a strong local software industry. It doesn't matter how much the Government puts into research and technology parks - technology will never be successful unless they cut out the piracy.' Ms Colbourn said she knew of software companies slow to invest in Hong Kong because they did not want their products sold illegally. She wondered how Hong Kong could be a successful hi-tech centre without stamping out blatant copyright abuse. 'If you can imagine that happening to a company like Microsoft, what is it going to do to a little Hong Kong software company? Hong Kong might be its only market. They're going to spend two years developing a product and they're going to sell one copy, two copies, legally,' she said.