PA28; NON XPONDER IFR ACFT; TRANSITS THROUGH GRR AIRSPACE AND ENTERS AZO AIRSPACE AND HAS NMAC WITH AZO DEPARTING D328. GRR CTLR BLAMES ARTS IIE PROGRAM.

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I WAS WORKING WAR APCH AT GRR. WE RECEIVED A MANUAL HDOF ON A PRIMARY ONLY ACFT. WE HAVE ASR-9 AND HAVE THE ABILITY TO MANUALLY TAG AND IDENT PRIMARIES; WHICH WAS DONE. THERE WERE 3 ACFT WITH PRIMARY/ALPHA NUMERIC TRACKS ON THEM; SO I NOTIFIED THE OS/RAS OF THIS FACT. I ISSUED TFC TO ACFT X; WORKED DILIGENTLY TO KEEP HIS ALPHA NUMERIC TRACK ON THE SCOPE; AS IT WAS HAVING TROUBLE STAYING ON INITIALLY. APPROX 15 MINS LATER; I DEBRIEFED THE RELIEVING SPECIALIST VIA PHYSICALLY POINTING TO 3 ACFT AND 3 CORRESPONDING STRIPS ASSOCIATED WITH EACH ACFT. THE RELIEVING SPECIALIST DID NOT SEE THE ACFT'S TAG DROP; AND FOR SOME UNKNOWN REASON; THE TAG DID NOT STAY IN THE COAST LIST LIKE IT SHOULD HAVE. DUE TO EQUIP SOFTWARE FAILURE; ACFT X TRAVELED THROUGH OUR AIRSPACE AND INTO ADJACENT AIRSPACE; HAVING AN NMAC AT 7000 FT WITH A DEP OFF OF AZO. ACFT X RPTED THE NMAC FIRST ATTEMPTING TO CALL US 3 TIMES; THEN AZO WHILE AIRBORNE. I WAS NOT WORKING WAR AT THE TIME OF THE NMAC; BUT BASED ON THE PREVIOUS 15 MINS; I FIND THAT A SERIOUS GLITCH IN THE ARTS IIE SYS CAUSED THIS ACFT TO REMOVE ITSELF FROM OUR SCOPE; EFFECTIVELY CHANGING IT FROM AN IDENTED DISPLAYED ACFT TO A PRIMARY ONLY.