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Microsoft Wants To Make It Illegal To Buy From An Overseas Company That Uses Unauthorized Software

from the overreach-much dept

Microsoft’s latest strategy against overseas infringement (something the company used to admit helped its bottom line in the long run) is to run around lobbying various state governments to pass ridiculous and likely unconstitutional laws that put liability on the buyers of any products from an overseas company that uses unauthorized software.

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.

That seems like a pretty serious case of misplaced liability. However as Groklaw notes, Louisiana has already passed such a law, and it looks like Microsoft’s home state (of course) of Washington is passing a similar law.

Thankfully, many businesses are realizing the incredible liability this could put on them, and are speaking out against the bill:

Regardless, piracy is Microsoft?s problem to solve as it has been trying to do for several years. It is a problem akin to what retailers call “shrink,” or the loss of income from merchandise stolen either by outsiders or employees. Unfortunately, shrink is a painful cost of doing business. But retailers no more would seek Microsoft?s help with this problem than Microsoft should be asking retailers to help pay for solving its challenges with software piracy….

The bills under consideration are so sweeping in their scope they represent an invitation to a legal challenge on their constitutionality in light of federal copyright and trade authority. Even if this never became a U.S. constitutional debate, retailers are hardly capable of finding the means to assist Microsoft in becoming a worldwide police force to protect against software piracy.

This seems like a massive overreach by Microsoft, going even further than the entertainment industry’s attempts to get ISPs to act as their copyright cops. In this case, Microsoft is trying to get any US company to be required to act as copyright cops for overseas suppliers, or face huge fines.

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Comments on “Microsoft Wants To Make It Illegal To Buy From An Overseas Company That Uses Unauthorized Software”

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61 Comments
Anonymous Coward says:

In other news, there has been a mass exodus from Microsoft software in foreign countries do to the liability of having to prove each employees actions. Most companies are turning to open source software. Microsoft is now claiming that all open source violates its patents and is an unfair business practice. They are claiming they own the trademark on slide shows, spread sheets, databases and word processing. Story at 11. Back to you Bill

Steve (profile) says:

Re: Is Microsoft going to block itself?

That is AWESOME.. I guess that means any LEGITIMATE windows owner is responsible for the pirating that Microsoft did in the production of the product, and to protect yourself from being charged with their pirating, we should just not buy Microsoft stuff..

What’s next? Is CHEVY going to have to pay my parking tickets because I used their product to break the law? Yeah.. that makes sense..

Christopher Gizzi (profile) says:

They know they're trouble.

This kind of over reaction smacks of fear.

Microsoft hasn’t been a growth company for a long while and I’m sure they know their cash cow is dying. They, themselves, can be a target of this law. It’s stupid of them to think they wouldn’t.

It’s the next IP arms race. Get your products out there in the hands of your competitors as quickly as you can so you can “allege” they didn’t pay for it and bar the sale of their product.

Just wait until this starts being enforced and you’ll see how dumb this idea really is.

And I, for what its worth, would love it if someone claimed all of Microsoft’s X-Box or boxed software cannot be sold because AutoCAD wasn’t paid for by the molding companies that make the hardware or packaging.

Onnala (profile) says:

Re: They know they're trouble.

Now thats the thing, when Microsoft puts out a request for quote one of things they require is that the service provider used all licensed software. It’s not always 100% effective, but the policies are there, and they do get a list of all licensed software used during production.

So they already do a lot of due vigilance when it comes to this. So its very unlikely that anything they sell will ever be stopped under this law. Even if you sued them they would just turn around and demand their their suppliers license the software that they were contractually required to buy in the first place.

Michael (profile) says:

Crazy?

MS is huge and they get parts supplied to them from all over the world. Laws like this would open them up to liability for the exact same thing. It’s hard to believe they do not have some code being written by a consultant in another country on a computer with a pirated copy of photoshop on it.

They are involved in way too much overseas commerce to want something like this passed into law. It will be interesting to see how long it takes someone to sue them over this.

Onnala (profile) says:

Re: Crazy?

The law does call out that it has to be used for the production of the widget.

An example, some guy in India is hired to build a driver for Widget, uses a licensed copy of Windows 7 and a licensed copy of MS Driver Builder software. Those would be the programs used in the production of final good. The Driver for the Widget.

If the guy in India also had a pirated copy of PhotoShop on the computer it wouldn’t come under the purview of this law. As it wasn’t used in the production of widget.

IANAL but this is how I understand how its writen.

Anonymous Coward says:

Re: Re:

I have to wonder about your level of intelligence since the Groklaw post have the law in question posted

Quote:

Summary of Bill: The bill as referred to committee not considered. Summary of Bill (Recommended Amendments): A business that manufactures a product while using stolen or misappropriated information technology (stolen IT) in its business operations engages in unfair competition when the product is sold in Washington, either separately or as a component of another product, in competition with a product made without use of stolen IT. A new cause of action allows private plaintiffs or the Attorney General to sue businesses that engage in these unfair acts.

And it also point to where the law is and where you can find the others and the article form the Seatles Time that states in no uncertain terms the following:

Quote

The proposed legislation would create a legal cause of action by making manufacturing companies liable for damages, and it would give the state attorney general and companies the right to pursue injunctions in civil court to stop the manufacturers’ goods from being sold.

Given all that I must assume you are an idiot or paid astroturfer.

Joe (profile) says:

Re: Another reason

The problem is, that won’t solve the problem. You don’t have to use Microsoft programs/hardware/etc. to be sued. You can have zero Microsoft products in use at your shop and STILL be sued because you bought something to use in your business from someone who used pirated Microsoft software. Your hands can be completely clean of any piracy but you can still be sued and have to pay Microsoft.

CommonSense (profile) says:

Re: Re: Another reason

Yeah, I got that part. I wasn’t saying a Microsoft boycott would prevent you from getting sued if these laws were passed in your state. But if enough people stop giving Microsoft their money, then Microsoft wouldn’t have enough money to spend on government officials to get garbage like this passed. It’s not an overnight solution, none of the good ones are.

darryl says:

your 20 years too late mike !!!

that occures in most industries allready, so its not unusual that it should also be done with software.

As it has allready been done with software for years and years and years……

again, i guess you dont like Microsoft do you Mike.

then again, you dont like anyone who is honest and operates within the law.

Jeremy7600 (profile) says:

Re: your 20 years too late mike !!!

What occurs in what industries “allready”?

What has “allready” been with software?

What’s it to you who mike likes or doesn’t?

Turnabout is fair play: again, I guess you don’t like Mike do you darryl?

Then again you don’t like anyone who questions the fairness or constitutionality of a law.

Anonymous Coward says:

The biggest issue is how in the world would you ever prove that the oversees supplier used pirated software. They’re not going to cooperate with US supeonas, as it’s outside jurisdiction.

Evidence collected overseas is not going to hold much credibility in a US court, especially since credible witnesses are going to be hard to find that will travel 1/2 way across the world.

And as a US company, I have absolutely no way of knowing if they do or don’t. If I’m buying screws from China, do I really have the time to ask the original manufacturer if they’re using pirated software, especially since there is often a middleman?

Onnala (profile) says:

Re: Re:

There are lots of ways to show that someone is using pirated software.

Lets say your Company A. Your a maker of visual effects for peoples wedding movies. You spent 10k on the latest copy of Video Toaster so that you can do professional work. Then along comes company B doing the same thing as you are, but charging only 1/10th of what you are and still using the same effects.

So you report it to the Video Toaster company and they find look it up and Company B isn’t a customer of theirs. So they try to do an Audit. What they find out is that Company B contracts out to some firm in China to do the work and only resells the wedding movies.

Under current law there isn’t anything they can do about it.

Under the new law they ask Company B to do due Vigilance and confirm that their overseas suppler is in compliance with Video Toasters License.

If Company B’s suppler doesn’t get back to them, or just tells them nope… we don’t… Company B’s choices get a lot more limited. One thing for sure is that they probable can’t offer the service for 1/10th the cost of Company A.

btr1701 (profile) says:

Re: Re: Re:

> Under the new law they ask Company B to do
> due Vigilance and confirm that their overseas
> suppler is in compliance with Video Toasters
> License.

All of this assumes that the overseas company is using Video Toaster. It’s possible to do FX work without using that particular piece of software. What if they’re using their own software that they wrote themselves?

And how do you port this system over to a other types of software, for which there are literally hundreds of options to do the same work?

Se Habla Espol says:

Re: It's worse than you think

I’ve read some of the source material that PJ provides on/via Groklaw. It’s worse than either PJ or Mike have explained.
The Washington version, at least, shows signs of being a joint purchase by Microsoft, MPAA, and some theme park or theme park supplier. Since Washington is not big in the theme park biz, this suggests that the WA law has some vestigial provisions from a LA, CA, TX, or FL draft.
Microsoft has protected itself ? this law may not be used to protect against anyone who has a ‘Code of Conduct’
in force. It was noted above that Microsoft meets that exemption.
Microsoft, being solely afraid of open-source software, has a provision that forbids use of this law to protect open-source software.
The law also has an MPAA provision ? it does not apply if the offending goods are primarily protected by copyright, like a movie created by ‘pirated’ software.
Other issues are cleverly taken care of. Microsoft can buy good legislative drafting.

The biggest issue is how in the world would you ever prove that the oversees supplier used pirated software. They’re not going to cooperate with US supeonas, as it’s outside jurisdiction.

I don’t have to prove it. This is an in rem action, where the jurisdiction comes from the item on sale. I can determine that the seller bought something from someone I want to attack ? preferably a small someone. I file suit in WA for IT infringement. The defendant can’t afford to show up and defend; I win by default; the default judgment means I WIN and can proceed against everyone in sight. Since I won in the original suit, I also win in the derivative actions.

Evidence collected overseas is not going to hold much credibility in a US court, especially since credible witnesses are going to be hard to find that will travel 1/2 way across the world.

See above ? no evidence from overseas is needed.

And as a US company, I have absolutely no way of knowing if they do or don’t. If I’m buying screws from China, do I really have the time to ask the original manufacturer if they’re using pirated software, especially since there is often a middleman?

You’d best make the time, if you want to sell your widgets containing these screws in WA, OR, or LA. If it’s ok with you to restrict your market, you can sell them in UT and maybe some other states (at least until the next legislative session).
The best (only?) self-protection would be a recursive code of conduct on your suppliers (with a requirement to impose it on their suppliers), requiring that they provide certification of licensing (copies of license at first level; audit certification at lower levels) of all non-open-source software. They don’t have to accept your code of conduct ? you just have to make good-faith effort to have them accept it. At least, that’s how I read the law, but IANAL.

ASTROBOI says:

re:

Does anyone think that one cause of the recession/business slowdown/unemployment crisis is this: it’s so difficult to be in business anymore without getting sued, arrested, beaten, disgraced or murdered that only big, big companies even try. A small businessman has too many reasons to forget the whole thing. The business of America is suing existing businesses.

JeroenW (profile) says:

Certain to happen

This is so insane, so clearly a way to protect a single company that it’s almost certain to get passed.

Going to be nice though.
1. How on earth to check/prove?
2. Serious enforcement of this law will quickly get the entire country to run low on things like affordable clothes or cheap electronics.

I’ll be watching from Europe, popcorn on standby, ready to laugh myself silly.

Anonymous Coward says:

The court just wants to feel that it’s in control of information flow. At its decision, the world will suddenly delete all copies of the information and the future will act like the information has never been released. and, at a judges decision, the dead will rise too. The judge just wants to show off its power, power to the judges.

Of course that’s not how it really works.

Anonymous Coward says:

Sweet like saccharin, with the same bitter aftertaste

I’m surprised nobody in the above comments mentioned the infamous English “Saccharin Doctrine” –

http://www.ipmall.org/hosted_resources/IDEA/pdf/9_IDEA_1965_43.pdf

That relates to patent law instead of copyright, but it covers exactly the same ground. It may be English case law but it’s attracted some attention in Canada, and clearly must be an attractive lobbying prospect for US companies. If such a doctrine becomes part of copyright law it would be extremely damaging, given the apparently infinite duration of copyright.

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