BS Com in Sheffield paid damages to the computer giant after admitting unlawfully trading in Microsoft software and hard disk loading, which is when PCs are sold with unlicensed software pre-installed.

The store, on Abbey Lane, was one of 13 shops around the UK which admitted dealing in software piracy after customers complained to Microsoft.

Private investigators were sent in to try to buy the illegal goods and afterwards letters were sent offering stores the choice of paying damages or going to court.

Zafar Malik, from BS Com, said "We recognise we were dealing with Microsoft software incorrectly and have since worked co-operatively with Microsoft to ensure this does not happen again.

"It's good to see Microsoft working with small, local resellers like ourselves to ensure that we are fully educated about the rules of software usage and remain compliant at all times."

Microsoft UK's head of anti-piracy, Michala Wardell, said its investigations found that one in three computer programs installed on computers was counterfeit.

She added: "Illegal software is not just a top-level, national problem but very much a local issue.

"Microsoft is determined to protect customers from the pitfalls of unlawful software and is committed to working with local businesses to stress the importance of selling genuine computer programs."