Many sellers were offering fake versions of Windows XP
Microsoft has launched 63 separate lawsuits against people peddling counterfeit software on auction sites.
The legal action targets sellers in 12 nations including the US, UK, Germany and France.
Most of those Microsoft has targeted have been selling fake "Blue Edition" versions of Windows XP.
Microsoft said the operating system was proving popular on auction sites as it is reaching the end of its commercial sales cycle.
Windows XP stopped being installed on new PCs at the end of June 2008 to make way for the newest version of Windows, Vista.
While Microsoft has claimed strong sales for Vista many businesses and consumers have shunned it in favour of the older software.
In a statement David Finn, Microsoft's general counsel on worldwide anti-piracy and anti-counterfeiting, said auction sellers were taking advantage of unsuspecting customers.
"These dealers are peddling bogus products that can put customers and their personal information at serious risk," he said.
Research by Microsoft into the quality of fake software sold on auction sites found that 34% did not install properly and 43% contained tampered code that could expose buyers to identity theft or other attacks.
Many of the fake copies of Windows were being pushed with the help of a bogus marketing campaign based around a so-called Blue Edition of the software.
"Consumers should be aware that the so-called 'Blue Edition' software is nothing more than low-quality counterfeit software burned onto a CD," said Mr Finn.
Mr Finn said Microsoft provided tools and information to help customers spot fake software.
In pursuing auction sellers Microsoft has found that the trade in counterfeit software is now global. One of the cases it is handling spans four continents and involves peddlers in New Zealand selling Chinese copies of XP to customers in the Australia, North America, the Netherlands, New Zealand and the UK.