Microsoft, the state of Washington, and IP law


Why Is Microsoft Seeking New State Laws That Allow it to Sue Competitors For Piracy by Overseas Suppliers?

Microsoft seems to be trying to get its own personal unfair competition laws passed state by state, so it can sue US companies who get parts from overseas companies who used pirated Microsoft software anywhere in their business. The laws allow Microsoft to block the US company from selling the finished product in the state and compel them to pay damages for what the overseas supplier did.

You heard me right. If a company overseas uses a pirated version of Excel, let’s say, keeping track of how many parts it has shipped or whatever, and then sends some parts to General Motors or any large company to incorporate into the finished product, Microsoft can sue not the overseas supplier but General Motors, for unfair competition. So can the state’s Attorney General. I kid you not. For piracy that was done by someone else, overseas. The product could be T shirts. It doesn’t matter what it is, so long as it’s manufactured with contributions from an overseas supplier, like in China, who didn’t pay Microsoft for software that it uses somewhere in the business. It’s the US company that has to pay damages, not the overseas supplier.


As to the argument I’ve seen Microsoft offer that this will get the attention of the overseas infringers and they’ll shape up in no time, I find that a little laughable. It’s the US company that pays, not them. And the booming market currently isn’t the US. It’s China. Do you really think they’ll care?

Meanwhile, back in the US, Microsoft will be able to tie up competitors with civil litigation in Washington State, blocking them from selling in the state while the litigation this bill authorizes proceeds – and you know how long that can take from watching the SCO saga – but a company that sees Microsoft’s overseas partners violating the GPL or the Apache license, for example, can’t sue Microsoft under this new law. Talk about unfair competition. It’s a law that benefits only Microsoft, while disadvantaging its chief competition.


Of course, Microsoft pushes the bills, saying they’ll help create jobs in the US. Dell, Intel, IBM, General Motors, Wal-Mart, and HP disagree, among others, and the tech firms sent a joint letter to the WA legislators, which was ignored, I guess. “These bills would create a new and unjustified cause of action against many American employers, fueling business uncertainty, disrupting our supply chains and undermining the competitiveness of U.S. firms,” the companies’ letter said.


Now think about the laws Microsoft is lobbying to get passed. The law would make it possible for Microsoft to block Android sales in whatever state passed such laws if it could find some tie between the Android product and some manufacturer of a contracted part in China or wherever who happened to use a pirated version of Microsoft Word – not to make the part but to write up an ad for it. Ephemeral, much? But can you imagine how much litigation could spring from a law like this? How little it would take to keep litigation in the air forevermore? And you don’t have to even prove infringement in China, just allege it to initiate proceedings.

The law works with any proprietary software, though, not just Microsoft’s. UNIX is proprietary software, is it not? So once unXis owns the UNIX software assets, it could sue anyone using UNIX “inappropriately” in their view under this law just like Microsoft can sue over pirated Word or Excel. Remember Wayne Gray’s big dream of providing an operating system to compete with all current operating systems, a dream that meant he needed to try to get the UNIX trademarks?

I know. But it’s no more far-fetched than what SCO did. If your goal is really FUD litigation, what do you care? How hard would it be to find someone using pirated software in China? Meanwhile, Motorola or Barnes & Noble might see a GPL violation in a Nokia-Microsoft phone and be unable to do a thing under the new Microsoft laws.

Of course it would work just as well to block sales of supercomputer hardware running GNU/Linux instead of Microsoft software. Microsoft is already behind a number of companies nipping at IBM’s heels over high end computers, is it not? How handy would such a law be to tie up sales for years and years, so Microsoft could get folks to buy its own products instead in the interim?

Other good stuff in the article includes Microsoft pulling ideas from the GOP’s playbook and introducing these bills at the last minute without much discussion near the end legislative sessions. Would love to hear the logic of how such a bill “creates jobs”, even in a best case scenario.

Couldn’t this backfire against Microsoft? Are they 100% sure that everyone in their supply chain has no illegal software? I’m assuming this law applies to any pirated software and not just Microsoft software. And couldn’t the logic behind this proposed law be extended to other illegal practices by one of the supplying companies?

I don’t view it as purely evil. If it were actually effective, it doesn’t only benefit Microsoft, it would actually decrease the cost-effectiveness of some outsourcing solutions.

Or, to frame it in another context, if I’m running an art outsourcing company in the US, and I’m competing with a company in China running 100 pirated seats of Max (or, in a different scenario, 100 pirated seats of my plug-in) and say, EA is liable for the infringement of their overseas outsourced contractor, something with teeth benefits me, not just Microsoft. Although less so at a Washington State versus Federal level, obviously.

Anything that makes US companies leery of using foreign labor/parts is a good thing as far as I’m concerned.

It seems like it could be very difficult to ensure your business partners are using legal software across every operation. I wouldn’t even know how you would go about doing that? Is Microsoft willing to work with them such that they can ask for a list of licenses from their business partners and then verify them? Then how are they supposed to do that for all potential proprietary software their partners could use?

I’ll avoid the substance of this issue, but this point is just plain wrong

As to the argument I’ve seen Microsoft offer that this will get the attention of the overseas infringers and they’ll shape up in no time, I find that a little laughable. It’s the US company that pays, not them. And the booming market currently isn’t the US. It’s China. Do you really think they’ll care?

They’re growing because America is buying stuff from them - the Chinese economy doesn’t exist in a vacuum. We need them, but they need us as well.

You’ve got a key fact wrong. Microsoft can’t sue anyone. Under the new law a competing manufacturer can sue the manufacturer who is using pirated software arguing that they are competing unfairly by using stolen IT. So if a shoe manufacturer whose shoes are sold in Washington uses pirated software, a competing shoe manufacturer can sue. That is why this is an ‘unfair competition’ law.

In the end, everyone should play in a fair sandbox. When I’m an American small business woman who buys legal licenses for her IT business and I’m competing against a Chinese business who is using all pirated software, I’m at a significant competitive disadvantage.

So explain to me again what’s wrong with Microsoft pushing this? Or is this the ‘copyrights shouldn’t exist har har’ thread?

Burden of proof with regards to your business partners, Lorini. That’s the primary functional objection.

As a software engineer, I support protecting ip. If you make something, you deserve to get paid for it.

However, due to how intertwined our economy is, it seems like microsoft could sure anyone, since someone somewhere produced something that went into any product using pirated

Or does this only apply to companies you directly deal with? Even in that case, it seems you should only be bound by the same rules as accepting stolen goods. If you aren’t aware of the piracy in the other company, then you aren’t liable.

Right which I honestly don’t have an issue with. In the end it’s not fair. Now if what you are saying is that it’s assumed a company is using pirated software until they prove otherwise, I wouldn’t support that. But if companies have to do due diligence to be sure that the companies they are dealing with aren’t thieves, I don’t see a problem.

I know that at Flea Markets for example, if a vendor is selling illegal knockoffs, the people who run the Flea Market can be held responsible. How is this really different?

I don’t see how that analogy is relevant at all to the situation at hand.

As the law stands (as I read it, at least), if I’m a company, and some company I deal with pirates their copies of Windows for their internal computers, I could be held liable.

That’s kinda ridiculous. Due diligence doesn’t mean doing a microscopic audit on companies that you buy office supplies from, or the company you hire to move your shit from one office to another.

Yep it does. You couldn’t use an American company that pirated software as a way to gain a competitve edge, why should American companies be able to use foreign companies to do the same thing? Doing this kind of audit is not a big deal for the companies who are gaining a significant competitive advantage by outsourcing to companies who steal. And in fact when these American companies make a decision as to whether or not to outsource, the fact that they can use pirated software is a huge reason to do so.

Can you see that? Can you see that these companies are eliminating their software costs by outsourcing to companies that pirate?

On the other hand, requiring me (if, say, I’m a company) to verify that all of the software companies I work with is not pirated is a massive burden.

The question to me is this: What determines whether I’ve done due diligence? Do I need to physically verify that every piece of software they use is legitimate? A cursory reading of the statute in question seems to imply that yes, I would.

I don’t think companies would even let other companies do that, even if it weren’t expensive to do in the first place.

On the other hand, if a company can simply offer a signed document stating “We don’t use any pirated software”, and then said company is liable for any damages that occur due to that not being true, that’d be different. But I don’t know if a plaintiff would have jurisdiction to sue the actual pirating company in a US court, so that provision might not even be legal.

And then all of the sophisticated companies would just get that warranty as a provision in their agreements as a matter of course, the oversees vendors would agree to it as a matter of course (they’re engaging in illegal acts, why would they suddenly decide not to give a warranty saying everything is fine), and make the law pointless (but still burdensome). Unsophisticated companies would not know to do get such a certificate or warranty (because they are trying to run their business, not keep up with each new ridiculous legal trap that gets made, they wouldn’t be hiring legal counsel at $800 per hour to tell them things like this) and unfortunately would be stung because they forgot to include the clause that all the big boys know to include.

That’s the trouble with laws that get started like this - they just become traps for the unwary, while really adding little positive benefit. It’s almost the definition of what I think of when I think of legislative bloat. Someone’s pet project gets enacted, the intelligent know how to easily avoid it, and the humble and unsophisticated get stuck.

Or you could require things like actual audits of the third party vendor’s IT systems, and end up costing every other business millions of dollars in order to protect Microsoft’s IP. (In essence, helping Microsoft shift the costs of compliance enforcement on to other businesses - yay!)

Microsoft would be ecstatic to do the audit for a company. They have standard software that verifies the legitimacy of the ownership of their software, this is no big deal to them.

20 years ago this would have been the massive burden you are talking about. But not now.

What about Adobe? Norton? DS2? Autodesk? Altyr? Third Wave Systems?

Imagine if you’re Amazon; you have to have every single one of your corporate clients and sellers, not to mention more traditional business partners, verify every piece of software. That’d be quite the expense.

Um, Aaron, they have to do that now for their American installations. No company can afford to be found running their American business with pirated software, particularly big incorporated companies. It’s a simple audit program that Microsoft already has developed for all of its software. And it’s the big incorporated companies that Microsoft is going after, as they have the resources to afford to be able to outsource large IT installations. Most small businesses don’t have the resources to take advantage of the software cost savings that are involved in moving their IT to China because moving their IT to China is too expensive for them in the first place.

The audit part of this is just a non-issue. I wish Coca Cola Zero was around, you could ask him or stusser if you like.

I think the bigger issue is how far will the US go in enforcing US laws in foreign countries. Now in this case, China is a signatory to the 1988 Berne convention which basically states that they will enforce copyrights of other countries, so the US/Microsoft can argue that they have already agreed to do this anyway and just aren’t doing it. That neatly gets around the “well if we are going to do this for copyrights, why aren’t we doing it for working conditions?” question although I’m sure it will eventually come up anyway.

*PS this also is similar to the illegal immigrant issue…companies in fact are held responsible for using illegal immigrants even when those illegal immigrants weren’t directly employed by the company. Walmart got a big fine for doing so.

You’re still talking about just Microsoft. I was under the impression that this applies to everyone, so not only do you have to verify their Microsoft software, you have to verify every other piece of software that they’re using, too, right?

And some of these companies don’t have automated verification systems like Microsoft’s…

For my company, we’re small. It’s totally infeasible for us to conduct a software audit on other companies we do business with. Most of them are much larger than we are.