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.