Archive for the ‘Innovation and IP’ Category

Giving patent trolls a downside

Thursday, March 7th, 2013

I live and work in Eugene, Oregon. We have a small but vibrant software industry here, and along with other software companies up in Portland we are collectively making an Oregonian dent in the universe.

A problem that costs real jobs
Two years ago our local congressman, Peter DeFazio, visited a software company in Eugene, Oregon and learned the company had been attacked by a patent troll. Patent trolls are entities that abuse the patent system by threatening hundreds of small businesses with legal action without even checking if products truly infringe on a patent. Most of the target companies end up paying the “license” fee rather than going through a lengthy and expensive litigation process, even if the patent doesn’t even remotely apply to their products.

The company visited by Rep. DeFazio wanted to hire more developers but concerns about potential patent litigation forced them postpone the hiring process. It became painfully obvious that patent trolls are not just a problem for big companies but that small businesses are especially vulnerable too. In this case the problem of patent trolls was costing real jobs.

The solution: give patent trolls a downside
DeFazio went back to DC and came up with a very simple, surgical solution to minimize the havoc caused by these abusers of the patent system: Disincentivize trolls by empowering judges to make plaintiffs liable for the legal expenses of the defendants if the suit had no realistic chance of winning.

That will make a patent troll will think twice before adding a company to the list of parties to sue: if the court finds the developer did not infringe, the court can order the troll to pay for the legal expenses of the developer. OR if a court finds the plaintiff is a troll, they can require them to pay a bond that will be used to pay for the legal expenses of the developer if the developer wins.

Proud to be part of the solution
In May of last year, ACT Members — app developers and software entrepreneurs from all over the country — were flying into Washington DC for our annual ACT Policy Summit. We spent the first day on policy discussions and explorations. The next day we shared our real-world experience with tech policy in over one hundred meetings with policy makers on Capitol Hill.

During one of these meetings I met with Rep. DeFazio along with two of my friends and colleagues: one was part of a brand new, fast growing software company in Eugene, and another had just received a threat by a patent troll. Needless to say, it was a very productive meeting with lots of sharing of both specifics and personal experiences. We were all very encouraged and proud that Rep. DeFazio had decided to tackle a problem that was important to us.

The initial version of the SHIELD Act was introduced a few months later, in August 2012 as a bipartisan bill that was co-sponsored by Rep. Jason Chaffetz. The legislative process often moves in slow and mysterious ways: while the bill didn’t get an immediate vote, we were optimistic that Congress would eventually address the patent troll problem. I met with Congressman DeFazio again in Eugene during the congressional recess and shared (overwhelmingly positive) feedback on the bill from ACT members. Over time, the SHIELD Act was fine-tuned and support for the bill has grown across the industry.

Almost There
A few days ago, Rep. Peter DeFazio and Rep. Jason Chaffetz introduced the new version of the SHIELD Act. The bill is receiving widespread industry support and positive reactions. We’re excited about this simple and creative approach to address a complex problem that too many of ACT member companies have faced first-hand. Please let your member of Congress know that you support this bill.

Apple Patent Victory is a Good Thing for the Tech Industry

Saturday, August 25th, 2012

Apple patents being upheld will force industry toward innovation and differentiation. That’s a good thing. Patents not only protect the investments of innovators, they create incentives for the rest of the industry to innovate instead of copying the work of others. Apple’s win today reaffirms the importance of patents to the future of innovation. Today’s ruling is a clear message to the rest of the industry to get busy licensing or get busy innovating.

Patents are essential for the enormous investment needed to make innovative products like iPhones and iPads:

Patents are protected by over 200 years of US law and by Article 27(2) of the United Nation’s Universal Declaration on Human Rights. Patents grant exclusive rights in order to encourage companies like Apple to make the risky, long-term investments needed to invent, perfect, and market new innovations. The jury in Apple v. Samsung found that Samsung violated valid Apple patents on iOS, and we applaud the jury for deterring further violations of Apple’s federal civil rights.

On claims that Apple’s patents shelter it from competition:

Apple’s patents don’t shelter it from competition, they create incentives for the rest of the industry to innovate instead of copying. Apple has proven willing to license its patents to competitors like Microsoft and others, but it is not willing to let Samsung simply use Apple as its own R&D lab without paying anything for it.

On the ridiculous argument that Apple v Samsung is driving innovation:

In the world of smartphones and tablets, Apple’s only real competition is Apple. Anyone suggesting we need to let Samsung keep ripping off Apple’s designs to ensure Apple keeps innovating has no idea what is actually going on in the mobile industry. Each time Apple rolls out a new iPhone or iPad its chief competition is the previous iPhone or iPad. Because of rapid equipment upgrade cycle in the mobile industry, Apple needs to keep innovating regardless of what Samsung copies.

ACT emphasises the need for an EU Patent

Thursday, July 26th, 2012

Jonathan Zuck highlights today in Science Business that while recent progress has been encouraging, the MEPs’ decision not to vote on the single European Patent leaves innovative businesses without the historic breakthrough they so desperately need.

The EU patent is a critical step towards a more innovation-friendly business environment that realises the European Union’s true potential.Without a deal we will not realise that potential. European innovative businesses will continue to be burdened with unnecessary costs and unpredictability, undermining their ability to generate growth and employment.

Read the full article

2011: Washington Discovers Apps!

Wednesday, January 4th, 2012

Almost exactly a year ago we went to CES in Las Vegas and met up with many of our app developer members to look at the year ahead. It felt like 2011 was gearing up to be an exciting year of growth, but also when app developers would attract the attention of policy makers. We feared a storm may be brewing in Washington and this turned out to be bigger than we imagined.

In March, a group of Senators tried to compel app stores to remove their traffic apps holding a press conference outside Apple’s Madison Avenue store. ACT took a public stand against this intervention, warning that arbitrary government interference in the iPhone, Android, RIM and Windows mobile application stores would severely constrain the app marketplace.

April was the start of a huge policy debate around apps and privacy. ACT applauded the actions taken by Apple to encrypt location data and encouraged other companies like Google to take consumer privacy seriously. Calls in Washington to regulate apps were growing louder and we strongly felt it was time for app developers to join the conversation.

The Wall Street Journal’s attack on mobile apps and privacy really set the tone for the rest of the year. At every level of government, policy makers were asking questions about app developers, and how they should be regulated. From the House and Senate to federal agencies like the FTC, ACT and our developer members were grilled about how we were protecting consumer information. While it has certainly been rocky, there were bright spots:

We brought 30 developers from across the country to Washington, DC to meet with their elected representatives. Our rock star developers wore out their shoes trekking from office to office taking their message of regulatory restraint to more than 50 Capitol Hill offices.

ACT President Jonathan Zuck and Executive Director Morgan Reed both testified in front of the United States Senate in support of mobile developers. The only voice for app makers at these hearings, ACT was well received and elected officials from around the world continue to seek our guidance on issues facing small business technology companies.

We testified in front of the House Commerce Committee, and helped to remind Members of Congress that mobile developers aren’t built by some secretive large company, but instead are developed by small businesses spread throughout the world and in every Congressional District. Our stories – our members’ stories – had a huge impact. The Commerce Committee took Morgan’s opening remarks and made it the video centerpiece on their website discussing the hearing.

The Apple World Wide Developer Conference in San Francisco in June was a great time to reconnect with existing ACT supporters and app developers including My Busy Kit, iHomeEducator, iStoryTime, and NSC Partners. We discussed policy at iOS DevCamp and sponsored the “Just Crazy Enough It Might Work” category in a multi-day hackathon. Superstar developer team Cindy Pavlinac and Martin Gregory produced an app entitled “Dog Play Date,” a social networking app for dogs. We’re excited to see where this beta app may go!

August is usually a slow month in Washington DC, but not this past year. The Federal Trade Commission fined the developer of Emily’s Girls mobile apps $50,000 for violating children’s online privacy laws. The FTC then turned its attention to rewriting privacy regulations affecting all developers. Other federal agencies began work on broad new rules that could close revenue streams by curtailing developers’ ability to serve ads and track performance. ACT offered its support for protecting children online but cautioned regulators against overreaching in a way that would punish the whole industry.

In November, Morgan Reed spoke at DC WEEK highlighting app developers’ need for more spectrum. Reprising issues raised with the FCC and in congressional meetings, Morgan addressed the looming spectrum crisis urging the government to increase availability so developers may continue to meet customers’ increasing demand for bandwidth-intensive apps. You can read more about apps and the spectrum crunch on Morgan’s Huffington Post page.

During the last month of 2011, ACT’s Morgan Reed addressed the MoDevEast Developer conference calling on app makers to “check yourself before you wreck yourself.” Discussing the importance of privacy and security, Morgan alerted attendees about pending regulatory actions and offered suggestions on how to best serve customers’ privacy needs.

What will 2012 look like for app developers? As the impact of apps on people’s every day lives increases, so will Washington’s interest in regulating this space. It’s important for app developers to be responsible and hold the trust that consumers give with their private information. It’s equally important for policy makers to be mindful of how the policies they craft will impact small app developers like so many of our members. We will continue to speak on behalf our members and look forward to another great (busy!) year.

ACT Identifies Changes for SOPA/OPEDTA

Wednesday, December 14th, 2011

ACT reached out to Capitol Hill today to highlight improvements in the latest version of Rogue Website legislation while outlining the remaining concerns we have with the existing draft scheduled for a vote in the House Judiciary Committee tomorrow. ACT also addressed the Wyden/Issa plan in separate correspondence. The letters:

Chairman Lamar Smith
Senator Ron Wyden
Congressman Darrell Issa

ACT Calls for Changes to SOPA

Monday, December 12th, 2011

The Association for Competitive Technology has long supported the protection of intellectual property as a critical element of small business. Representing over 4,000 small business software developers we understand the damage that piracy poses to the innovation economy and recognize the role that government and industry must play in stopping it.  However, ACT’s membership of tech startups is concerned that proposed remedies could create uncertainty that will limit their ability to attract funding and create jobs.  Therefore, ACT calls upon Congress to adopt five changes to SOPA to clarify the intent of the legislation and provide needed safeguards to protect innovation and free speech.

ACT also acknowledges the contribution of Senator Wyden and Congressman Issa to this debate.  Their draft proposal provides a novel approach to the problem of rogue websites and we look forward to seeing how it evolves.  Currently, however, this is an incomplete product which also raises significant concerns in its present form.

Protecting our nation’s consumers from foreign rogue websites does not have to come at the expense of the innovative tech firms that drive economic growth. We at the Association for Competitive Technology and the thousands of companies we represent look forward to working with Congress to find focused and effective solutions.

The full text of the letter below.

Dear Chairman Smith:

I write on behalf of ACT’s 4,000 small business software developers who rely upon intellectual property.  Like you, our members understand the damage that piracy poses to small businesses in the innovation economy, and we understand the role that government and industry plays in stopping this destructive force.

ACT’s membership of tech startups is also concerned that proposed remedies could create uncertainty that will limit their ability to attract funding and create jobs.  Therefore, with the pending markup in mind, ACT urges you to adopt five changes to the H.R. 3261 that will clarify the intent of the legislation and provide needed safeguards to protect innovation and free speech.

1.     Protect Due Process: Allow intermediaries to ignore notices pending adjudication rather than mandating that websites should be blocked without a hearing.
2.     Prevent Tech Mandates: Clarify the law to prevent a judicial mandate of specific technological measures to block internet access.
3.  Preserve Sub-domains: Clarify that intermediaries should be able to block at subdomain level, but only when absolutely necessary.
4.     Protect Internet Security & Stability: Ensure that any consumer messages resulting from blocking websites preserve security mechanisms of DNSSEC.
5.     Eliminate Uncertainty for Startups: Ensure that existing DMCA safe harbors are not impacted.

While we are seeking these changes from Congress, we recognize that the tech community also bears significant responsibility to fix this problem.  Accordingly, ACT calls on industry leaders to undertake additional measures to stop the flow of foreign counterfeit goods endangering our children, compromising our safety and costing American jobs.

The Association for Competitive Technology and the thousands of companies we represent look forward to working with your office to find focused and effective solutions to the problem of online piracy while protecting free speech and innovation.

Sincerely:

Jonathan Zuck

UPDATE:

The Committee has just released the text of the Manager’s Amendment.  ACT is currently reviewing the document and will soon provide updated analysis.

Anti-Copyright Group “Fight for the Future” Ignores Its Own Histrionics (And So Should You and Justin Bieber)

Monday, November 21st, 2011

In my last post, Hillicon Valley Gets Duped by Anti-IPR “Activists,” I noted that a group called “Fight for the Future” was dead wrong about the effects of S. 978, a bill proposing that the criminal penalties for high-volume, intentional, for-profit mass piracy should be similar, regardless of whether they involve illegal streaming, copying, or distribution of copies. Fight for the Future claimed that if S. 978 was enacted, teen singer Justin Bieber would be imprisoned for felony criminal copyright infringement.

To see this yourself, go to FreeBieber.org, a site where adults try to terrify Justin Bieber’s many teen-and-tween fans with claims like this, “Justin Faces Five Brutal Years in Prison.” A visitor to FreeBieber.org can also learn that not even Fight for the Future (“FoF”) can pretend to take seriously the premise of this site and its “campaign” against S.978.

S. 978 proposes that for purposes of imposing felony—rather than misdemeanor—criminal liability for copyright infringement, streaming should be treated about the same as copying, or distributing copies. When Justin Bieber was about 13, FoF claims that he posted to a streaming site like YouTube some videos of himself singing some popular songs without obtaining performance licenses from the writers of those songs. From this, FoF leaps to the conclusion that enacting S. 978 would result in the felony prosecution of Justin Bieber.

But that is ridiculous: young Justin would be innocent of criminal copyright infringement under then-existing law or S. 978 for at least two reasons. First, S. 978 would modify the potential criminal penalties for illegal streaming. But Bieber himself did not engage in streaming—he copied and distributed—acts that were already potential felonies under then-existing law. Second, even if Justin’s videos were unlicensed, and thus infringing, (and they probably were not), then he would still obviously lack the scienter required for criminal liability under then-existing law or S. 978. No thirteen-year-old boy becomes a criminal just because he does not know all the nuances of Internet music-licensing.

Nevertheless, if Justin’s early videos were willfully infringing, (as FoF claims) then prosecutorial discretion would be all that stood between criminal prosecution and adults who willfully streamed Justin’s “illegal” videos—knowing that they were infringing. Nevertheless, Fight for the Future is doing just that at FreeBieber.org. In other words, they actually are willfully performing the acts that they claim would get you or Justin Bieber prosecuted—and without a hint of concern. Others should thus take the claims of Fight for the Future and FreeBieber.org with a few million grains of salt.

Worse yet, not only is Frighten the Future’s campaign against S. 978 histrionically dishonest, it is also an unwitting attack on proportionality—the idea that punishment should fit the crime. Fight for the Future treats S. 978 as if it were a bill that would increase penalties for repeated criminal streaming. Wrong: S. 978 would not change the existing maximum criminal penalty for repeated streaming piracy.

What it would do is ensure that prosecutors can bring charges proportional to the more serious and commercially threatening forms of streaming piracy that should be prosecuted criminally. Today, they must choose between extremes: streaming piracy must be prosecuted as either a misdemeanor, the most minor of federal crimes, or as one of the most serious economic felonies—as racketeering under the Racketeer Influenced and Corrupt Organizations Act (RICO). 18 U.S.C. §§ 1961, 1963.

Most criminal-streaming cases that would actually be prosecuted should fall between these extremes. S. 978 would ensure that—just as they can in cases involving criminal copying or distribution—prosecutors could charge streaming-piracy defendants appropriately, without having to choose between the under-deterrence of a misdemeanor or the overkill of RICO. This proportionality is the common-sense notion opposed by the vacuous anti-S.978 “activists” at Fight for the Future or Demand Progress.

The raw inanity of FreeBieber.org thus raises some questions. Who is behind Fight for the Future? And how could they get basic realities this wrong?

Fight for the Future has “re-launched” the file-sharing piracy fansite Downhill Battle.

According to Hillicon Valley, Fight for the Future was co-founded by “Holmes Wilson.” He also “co-founded” the inaptly named KaZaA/Grokster/LimeWire fansite Downhill Battle, a site that waged an increasingly “uphill battle” to have its love of commercial piracy taken seriously. From August 2003 through August 2005, (the “preGrokster era), Downhill Battle posted an average of 16.4 rants per month. Afterwards, Downhill Battle posted an average of 1.2 rants per month, until it expired in 2009 with its last words, “Downhill Battle’s back. More soon….”

And while Downhill Battle never became “famous” for anything, the organization spent a lot of its time and energy berating people who buy online music legally—and the hard work of everyone who made that possible, including songwriters, recording artists, music publishers, performing-rights organizations, record labels, Apple, and the late Steve Jobs.

Predictably, Holmes Wilson thus concealed his past and described his re-launched, re-co-founded anti-copyright group Fight for the Future as if it were not just Downhill Battle Mach II:

We are a brand-new activist org aiming to improve the laws shaping tech (e.g. copyright) by shifting the public opinion that shapes these laws.  Think the EFF… or [Public Knowledge]…  but more campaign-focused (also more viral and fun).

But Fight for the Future is just Downhill Battle Mach II. For example, here is its description of the booty amassed by commercial copyright-piracy syndicates like Grokster, KaZaA, LimeWire, and Isohunt:

After spending thousands of years building libraries of donated books, why do governments try to tear them down when they happen spontaneously online?

It is absurd to describe the contents of FastTrack, Gnutella, or BitTorrent-based file-sharing networks as “libraries of donated books.” Even Free-Culture-Movement founder Charles Nesson described the contents of file-sharing networks as “porn and petty crime.” Nesson’s protégé, Professor Lawrence Lessig, has admitted, “I have given literally hundreds of speeches where I expressly say p2p filesharing is wrong, and kids shouldn’t do it. I think FREE CULTURE says that more than a dozen times.”

Nevertheless, Fight for the Future still pretends that file-sharing is really about donating “books” to LimeWire’s “libraries.” Meanwhile, back on Earth, actual grown-ups at the Consumer Protection Bureau of the Federal Trade Commission have sued one of Fight for the Future’s beloved “librarians” for duping consumers into “donating” their music, video, and personal files involuntarily—a pervasive, dangerous behavior noticed years ago by students of file-sharing less oblivious than the founders of Downhill Battle and Fight for the Future, a.k.a., Downhill Battle Mach II.

Hillicon Valley Gets Duped by Anti-IPR “Activists”

Friday, October 21st, 2011

The Hill’s technology blog, Hillicon Valley just posted Brendan Sasso’s story, Bill would send Justin Bieber to prison, group says. As the father of a fourth-grade girl, I assumed that that the bill mentioned must expand criminal-nuisance laws. But the whole story was just nonsense: It just recorded gibberish spouted by anti-copyright “activists” with a grip on neither copyright law, nor technology, nor reality.

The alleged Jail-Justin “bill” turned out to be S. 978, and it will do nothing to protect parents of tweens or teens from either Justin Beiber or the next teen-dream-boy singer. Instead, S. 978 would merely fix a minor inequity in our existing criminal-copyright laws. Today, any infringement, including illegal streaming, is already a federal crime if perpetrated intentionally and for “financial gain.” See 17 U.S.C. § 506(a)(1). Nevertheless, higher criminal penalties can apply to the willful infringement of works with a total retail value of over $1,000—but only if they were copied or distributed, not streamed. That makes no sense, so S. 978 proposes to treat $1000+ of intentional, criminal streaming just like $1,000+ of intentional criminal copying or distribution. Here is how Sasso’s post describes this proposal:

Justin Bieber first gained fame by posting videos of himself singing famous pop songs. According to the group Fight for the Future, those videos could land the 17-year-old pop star in prison under the proposed legislation.

“Those videos are still on the Internet, so if Bieber doesn’t pull them all down right away, he could be prosecuted and sent to the slammer for five years on felony charges,” Fight for the Future claimed in a press release.

To understand why this is all wrong, you need only know a bit about copyrights and technology. When young Justin Bieber posted videos of himself singing famous songs written by others, he did not engage in streaming, (which copyright law would call a “public performance”): Instead, he made a copy of a video file and then distributed that copy to the servers of YouTube or some other social-networking site. In other words, a streaming-related bill like S. 978 is irrelevant to uploaders like the young Bieber because they already perform the copying-and-distribution that could—if scienter and profit requirements were met—trigger the higher felony penalties that the law already imposed. And yet—somehow—Bieber’s music videos failed to trigger (1) a criminal prosecution for felony infringement; 2) a criminal prosecution for misdemeanor infringement; 3) a civil copyright-infringement lawsuit; or even 4) a simple DMCA take-down notice.

To those less histrionic than Fright for the Future, these glaring clues should indicate that (1) Bieber’s videos were almost surely legal, (2) Beiber’s acts were not even arguably criminal, and (3) even were there some technical infringement, it was so inconsequential that no one cared about it. Consequently, enacting S. 978 would result in the prosecution of neither Justin Beiber nor some modern teen who uploads videos of himself singing hit songs to YouTube or Facebook. Here are a three of the many reasons why this is so.

Neither existing law nor S. 978 criminalizes the act of being a kid or consumer who does not understand the nuances of performance-right licensing: Copyhate “activists” love to forget this: To commit any form of criminal infringement, (under existing law or S. 978), you must act willfully (you must intend to infringe someone else’s copyrights) and you must willfully infringe for the purpose of “commercial advantage” or “private financial gain.” See 17 U.S.C.§ 506(a)(2). Lest anyone literate miss this point, the criminal copyright statute actually says it twice. See 17 U.S.C.§ 506(a)(2).

Fright for the Future’s argument presumes, (correctly, I would guess), that young Justin Bieber did not know that persons publicly performing a hit song written by someone else need to get a public-performance license from the songwriter. Failing to understand what conduct might constitute infringement or require a license cannot trigger intent-and-profit-based criminal infringement liability. S. 978 will not change that.

Even if posted years ago, Bieber’s videos were probably licensed: Bieber could not have “gained fame” from his videos if they were quickly taken down. Since they apparently were not, they must have been either utterly unobjectionable or they were licensed—even if Bieber himself did not know that.

One aspect of online music licensing is so simple that most UGC and social networking sites did it years ago: Getting a valid license to publicly sing hit songs written by others. Thanks to two antitrust settlements in the 1940s, such licenses are standardized, simple, and relatively inexpensive because prices are fixed by a federal “rate court” at sub-market rates. It makes no sense for hosting-site operators to fail to get these licenses. Even if young Bieber once knew nothing about performance-right licensing, he was probably licensed. Today, the licensing situation is much better.

Federal prosecutors have never, nor will they ever, prosecute ordinary consumers for technical infringements unworthy of even a takedown notice: This is the critical flaw in the Fright-for-the-Future histrionics. Criminal copyright prosecutions are a scarce, valuable resource—and copyright owners would complain loudly were those scarce resources squandered on YouTube karaoke videos.

Criminal copyright prosecutions must target large-scale, deliberate piracy that threatens the economic incentives that copyrights are supposed to create—not consumer-scale infringement. Consider Joel Tenenbaum: He admittedly willfully infringed many hundreds of copyrights while acting as a paid-in-kind distributor for a global, commercial piracy syndicate; he lied under oath; he destroyed evidence; and he falsely blamed his own deliberate acts on other members of his own family AND THEN he annoyed the U.S. Department of Justice by forcing it to intervene in his case to defend the constitutionality of the Copyright Act. Still, no criminal prosecution.

So Justin Beiber can rest very easy—and so can my kids—even after S. 978 is enacted.

Finally, I want to reassure my daughter: No, sweetie, Daddy does not go to work to try to imprison the next Justin Bieber—even though he is really glad that you still prefer Taylor Swift. In fact, that’s kind of the opposite of what copyright owners want to do with the next teenage boy who might inspire you and your pals to spend lots of money. If the Hillicon Valley post Bill would send Justin Bieber to prison, group says, suggested otherwise, that is because some anti-copyright nuts blithered easily detectable nonsense to a blogger. Daddy’s real job is to help correct such errors.

DOJ’s $500 Million Google Forfeiture in Drug Counterfeiting Case Will Help U.S. Businesses

Wednesday, August 24th, 2011

In one of the biggest forfeitures ever, the Department of Justice punished Google for consistently violating the Controlled Substances Act to profit from advertisements of counterfeit drug sales.  It says a lot about a company’s unwillingness to act in the public interest when it takes a half-billion-dollar fine to stop it from facilitating illicit drug sales to children and seniors.

Google found itself in the middle of a multimillion dollar financial fraud investigation when a captured fugitive assisted an undercover operation revealing the search giant’s role in the “unlawful sale of drugs through Google’s AdWords program.” The Justice Department found that Google was aware of the problem for years and its involvement was not merely that of an innocent bystander — Google representatives consistently provided assistance to drug counterfeiters helping to improve their ad campaigns.

Google has long pretended to be unaware of the mass piracy it facilitates and profits from through its dominant position in the online search and search advertising business.  Its pattern of encouraging piracy and counterfeiting has resulted in sizable lost revenue in the entertainment industry and in online educational products like Rosetta Stone.  Small business entrepreneurs find it particularly difficult to protect their products and combat piracy when Google allows counterfeiters to advertise stolen versions.

It’s about time that Google was taken to task for facilitating this criminal behavior.  American businesses will fare much better if the Justice Department continues to crack down on widespread piracy as it did in today’s Google settlement.

Supporting Trade Fairness: Foreign Trading Partners Should Not Profit in the American Marketplace Using Stolen IP

Tuesday, August 23rd, 2011

ACT has been a leading proponent of legislation that helps protect manufacturers from companies who use stolen software to compete unfairly. These are known broadly as unfair competition or unfair trade practices laws.  These laws empower manufacturers to seek damages against foreign competitors that use unlicensed, or pirated, products in the creation of exports to the United States.

With such on the books in Louisiana and Washington State and similar bills under consideration in several others, we wanted to put together a quick guide to understanding what the Washington State law does to protect U.S. business, and what safeguards are in place to prevent unintended consequences.  It’s important to remember that many countries that are our biggest foreign competitors have very poor records of respecting intellectual property. Most small and medium-sized software companies will not even try to enter those markets for fear that piracy will destroy any chance of making a profit.  This problem is compounded when foreign competitors steal our software or other intellectual property used in the production of a wide variety of exports to the United States.

While we believe all IP should be respected, it is particularly egregious for U.S. producers to operate at a competitive disadvantage when they pay for software and IP-protected materials while their competitors do not.  In many instances the IP or software in question is integral to production, and illegally using it without a license saves the foreign manufacturers money it can then use to undercut its U.S. competitors. 

The U.S. needs to ensure that imported goods are made without use of stolen property, not only to protect the software industry, but to protect the equally important manufacturing jobs that are critical to our economic recovery.  Where we are able, we should be provide a level playing field to American businesses so that intellectual property thieves are not rewarded with favorable access to our marketplace.

Washington’s new unfair competition law will help make that a reality.

We hope that the one-page guideline below will help clarify how the law works, and how to work within the rules.

Proper Management of Information Technology Assets
Avoiding Liability under Washington State’s New Unfair Competition Law

As most companies recognize, information technology (IT) is a critical business asset that needs to be managed effectively.  Poor IT management can make organizations vulnerable to malware or viruses, create unnecessary spending, drain resources, and expose the organization to legal risks associated with the use of stolen IT.  These threats, among others, can result in serious harm to companies’ technology infrastructure, business, and reputation.

One such legal risk is the possibility of liability under a new Washington State law (HB 1495, Chapter 98, 2011 Laws).  In April of 2011, the Washington Legislature passed a law making it unlawful to sell products in Washington State that were made by a manufacturer, located anywhere in the world, that uses stolen IT in its business operations, where those products are sold in the State in competition with products made without the use of stolen IT.  Stolen IT includes hardware or software acquired or used in violation of applicable law and without the IT owner’s authorization.

A case may be brought under this new Washington law by either the Washington Attorney General or a competing manufacturer who uses legal information technology in its business operations and who has been injured by the unfair competition as defined in the statute.  Remedies against a manufacturer using stolen IT may include damages and injunctive relief, including an injunction against the sale of the manufacturer’s products in Washington State.  Products offered for sale in Washington also may be subject to attachment if the court does not have personal jurisdiction over the manufacturer.

The new law requires that a written notice must first be sent to the manufacturer by the owner of the information technology before a case may be brought.  As described in Section 5 of the law, the recipient of this notice has 90 days to cure the use of stolen IT described in the attached notice or to establish that the IT identified in the notice is in fact being used legally.  This initial 90-day period may be extended for an additional 90 days in certain circumstances.

Many organizations have extensive experience helping companies implement software asset management (SAM) processes to ensure that their software use complies with applicable laws.  In addition, an effective SAM program can help companies manage security risks and profit from the productivity and financial benefits associated with an efficient and well-managed software environment.  As a start, we encourage companies to review the SAM resources available at http://samadvantage.bsa.org/home.aspx for more information on how they can avoid the legal and business risks associated with using stolen IT.