Tech Companies Concerned Over Washington State Software Legislation
On April 4, the Washington state legislature passed a bill making it a violation of the state’s unfair competition laws for a business to sell products in Washington “while using stolen or misappropriated information technology in its business operations,” provided that the business first receives notice of the alleged misappropriation. The law applies regardless of whether the theft or misappropriation takes place inside the state or even inside the USA – if a company based in China engages in software piracy in China, the Washington law still affects the sale of goods inside the state.
The measure results in potential civil liability for affected companies doing business in the state, and it also enables the state attorney general to pursue civil damages and injunctive relief against violators. Unsurprisingly, the bill was heavily favored by Microsoft, one of Washington’s largest private employers, which gains a significant new remedy for the unlicensed use of its software products. However, tech companies like Apple, Dell and Motorola lobbied hard against the bill, since it effectively forces them to conduct costly due diligence into their suppliers’ IP and software-licensing practices.
Washington is not the first state to consider this kind of legislation – Louisiana passed a similar measure last year, and Microsoft is actively pursuing a state-by-state campaign to pass similar laws. However, Washington probably is the most economically significant state to pass this kind of measure. Negatively affected businesses can expect to find themselves hauled into Washington state court in the event of a violation or, if they are outside its jurisdiction, might find their product inventory located in Washington being impounded and subject to forfeiture. It also would not be surprising to see this kind of measure used as leverage against businesses in software audit-related matters.