California Attorney General Claims Foreign Companies Using 'Pirated' Software Represent Unfair Competition
from the what? dept
Two years ago, Techdirt wrote about the major report “Media Piracy in Emerging Economies”, which explored how media and software piracy in emerging countries is largely a question of economics: people and companies there simply cannot afford Western-style pricing, and resort to alternative sourcing. That hasn’t stopped media and computer companies from demanding that governments around the world should inflict ever-more harsh punishments on their own people.
Against that background, it’s perhaps no wonder that people have been looking for new ways to “encourage” foreign users to buy those high-priced goods. Back in 2011, we wrote about one crazy proposal from Microsoft: to make the purchasers of any product from an overseas company that uses unauthorized software liable in the US. Things went quiet after that, and it seemed that this idea had been dropped. No such luck: judging by this story found via @teirdes, it’s back, albeit in a modified form:
California’s Attorney General Kamala Harris has filed a lawsuit against two Indian and Chinese apparel companies for allegedly using pirated softwares in the production of their cloths for exports and to be sold in the state.
You might wonder what the software used by textile companies in India or China has to do with California; here’s the answer according to the Attorney General:
The complaints allege that the foreign apparel makers who have not paid software licensing fees have a significant cost advantage in the low-margin business of apparel manufacturing, shipment and sales.
That seems a pretty big stretch. After all, any savings gained by using pirated copies will be spread over huge numbers of items, and will probably amount to fractions of a cent for each. That difference will be swamped by other factors — for example, the fact that most fixed and variable costs in India and China are much lower than in California.
But there’s a larger issue here: the attempted extra-territorial enforcement of US laws. As an excellent analysis of this case at Spicy IP points out:
American software companies have the right to file copyright infringement lawsuits against Indian companies in India under the Copyright Act, 1957 and they have been exercising this right for the last 10 years with a high rate of success.
If there’s a problem with piracy in India, there are Indian laws and courts there that can and do deal with it. Attempting to enforce US laws in India jeopardizes the existing global legal framework that seems to work reasonably well. Does America really want other governments claiming that actions on US soil have broken foreign laws, and should be tried abroad?
For an Indian manufacturer, fighting a lawsuit in Delhi itself can be expensive but defending a lawsuit in California will be at least 20 to 30 times more expensive. It is very likely that just the pre-trial expenses will outstrip the entire cost of the export consignment. The cheaper option is to buy the software licences and this is exactly what the Americans are counting on. They hope to create enough fear amongst Indian exporters that they flock to the closest American software company and stock up on software.
This is exactly how copyright and patent trolls work: make the process of dealing with them so expensive and inconvenient it’s simpler and cheaper just to pay them off regardless of whether they are in the right. However, this is not how government lawyers are supposed to operate.
The more significant fear now is that American software companies operating in India will use such lawsuits to extract not only future licence fees but extortionist damages for prior use of software.
If companies start paying up, a precedent will have been created. The model will spread, and the demands for retrospective payments will probably follow, which would lead to considerable capital outflows.
Of course, there is one obvious way to solve this problem: encourage local companies to move to open source software, which can be freely copied as many times as desired. It would be rather ironic if the Attorney General’s attempt to put pressure on Indian and Chinese exporters backfired in this way, and resulted in less income for traditional software companies in Silicon Valley, not more.
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Filed Under: california, copyright, software piracy, state laws, textiles
Comments on “California Attorney General Claims Foreign Companies Using 'Pirated' Software Represent Unfair Competition”
Copyright is really nothing more than censorship, isn’t it?
It used to be good, but as it is now…
The other huge problem with this is that now any US company doing business overseas will have a huge bull’s eye on them as other governments use this same practice to enforce their laws globally.
I’d love to see the Attorney General face when the raw materials from China and India start costing 10x the amount because of trade embargoes enforced against US companies due to her bypassing of local jurisdiction…
Re: Re: Also...
That would also have unintended consequences.
Suddenly, it would no longer be cheaper to send jobs and manufacturing overseas. We might become a major manufacturing power again.
Re: Re: Re: Also...
Or the jobs would move to Mongolia, Ghana, Nigeria or Indonesia…
Again international trade considerations more than copyright.
A proper concern for state assembly and Attorney General.
There’s an even more obvious fix than the one Minion Moody suggests: for Indian companies to pay for the US software that they use up front. — If it’s that low per article, they should pay it.
Besides, software being what Mike would call a “sunk (or fixed) cost”, according to him, it doesn’t matter at all for pricing:
“(1) I am not ignoring the fixed costs. I am pointing out that they do not matter in *pricing*. That’s factual. You cannot debate that unless you want to be wrong.”
Re: Again international trade considerations more than copyright.
Yes Blue, giving into the extortionist is the most obvious quick way out. The best long term solution is free/open software.
Re: Again international trade considerations more than copyright.
Or they could just dump the American software altogether and start using free software.
“The more significant fear now is that American software companies operating in India will use such lawsuits to extract not only future licence fees but extortionist damages for prior use of software.”
There is a cheap solution to this for some software called Linux and open source. For other software, such as AutoCad:, there is only one solution piracy as even small American companies can not afford such programs.
FOSS is good when it works, the real problem is, much of the time it dosnt just work, the amount of time spent supporting foss is a business environment is higher then that of using commercial solutions.
I say this having been there, and also speaking from what a friend who works in IT at google has said.
many insisted going linux would drop costs and mean less support issues for google internally, this isnt true, they have been tracking it for years, they actually more then quadrupled their support calls and need to send a tech out, mostly due to the fact that some of the software they switched to has bugs, and the users cant reinstall/update them when somethings broken(they have them to locked down)
Linux is not really ready for prime on the desktop, BSD is better but still isnt really “ready for prime” as a desktop OS, its great for a server or appliance but, its really at this point not a desktop os.
solaris is decent on the desktop but its also very weird to use for a normal pc user, again not really ready for prime as a desktop OS.
so that leaves mac and windows…..mac costs to much and has far less software to choose from to do a specific job then windows, so many companies dont want to sink money into the apple eco system…
also having worked for a company that was 75% Apple Mac use when I started, I can tell you, Apple support was and I hear still is HORRIBLE, business support contracts that state you will get a problem resolved in 24hrs…..more like a week or 2 to get somebody from apple out to on site repair when the contract clearly states 24hrs…..
also getting apple specific software problems dealt with……takes MONTHS, on the other hand, we would put a ticket in with ms, and have somebody calling us within 20min, and normally a beta fix to test within a few days(sometimes same day), yeah MS arent the best company, and they do alot of dickheadish things, but, their support for corporate is far and above any other company i have dealt with……(dont get me started on adobe and autodesk……they SUCK DONKY DONG!!!)
the way i see it, MS is going to be foreced to do more deals on their os and keep dropping the price, and eventually they will drop the price of their office suit as well…
till then for home users/geeks theres always technet 🙂
Re: Re: Re:
Everything sucks but Microsoft, they are so awesome in every way. BWWWAAAAA HHAAAAAA HAAAAAAA LOL LOL
Re: Re: Re:
You are talking about generalizations. Specific jobs have specific needs, some are best suited for MS, some Apple, and some are OSS. I personally would not want to touch an anycast DNS system running on Microsoft (either the OS or the application server) and I’m almost positive not one CDN would even look to think of implementing it. For desktop users I’ll agree that MS is a good choice many times, since that it what the users are generally used to. Even then there are a lot of cases especially in mathematics and sciences where alternatives are necessary to use the most up to date tools.
Re: Re: Re:
No, thank you, open source has been kind to me, I don’t know why, it just works, despite what you said there.
For people needing CAD programs.
They work like a charm.
Re: Re: Re:
Linux is not really ready for prime on the desktop
Uhoh, better not tell my work Desktop that…
$ uname -a
Linux localhost 2.6.32-5-amd64 #1 SMP Mon Feb 25 00:26:11 UTC 2013 x86_64 GNU/Linux
Windows actually won’t run on this machine (except as a virtual)…it has 2 8-core processors, 16 cores total, and 24 GB worth of memory, and in order to run Windows on it, I have to run Windows 2008/2012 server…no way for what I use it for.
I’ve been using MintBoxes at home, and so far I’ve not had any problems with people familiar with Windows switching to Linux Mint (after all, web works the same way.)
Re: Re: Re: Re:
Not sure why you think you couldn’t run Windows on that box. It should be able to run Windows 7 Pro/Ent/Ult just fine. 2 physical processors is not that big of an issue, and 64-bit supports up to 256 logical processors and 192GB RAM.
Re: Re: Re:2 Re:
Not sure why you think you couldn’t run Windows on that box.
But why install Windows 7 on the box and spend the money when Linux works and does what I need it to do?
Re: Re: Re:
So, vague generalisations, no actual timescales for you to base your opinion on (are you talking about now, or 5-10 years ago? There’s a huge difference), some complaining about needing specific applications (lack of support for Adobe/Autodesk is down to Adobe/Autodesk, not a problem with Linux/FOSS, you’re mixing your metaphors here). Solaris? That suggests you’re going way, way back unless you’re in niche markets – and the desktop managers are often identical for OpenSolaris at the very least!
Sadly fairly typical of people who complain about Linux/FOSS vs. Windows. If you want to argue, argue specifics and facts, not opinions without context and vague generalisations. I suspect that you’re either going way back (in which case your criticisms are as valid as me slamming Windows 8 because I didn’t like Windows Me), or you have a lot more information you’re not communicating. Feel free to do so.
“the users cant reinstall/update them when somethings broken(they have them to locked down)”
How, exactly does this differ from Windows, and why would a user’s ability to install random packages affect supportability (except negatively if they can install any random package). I can’t think of any reason why a sane tech support department would let people install any random crap they want on Windows but force Linux users to be locked down further than the defaults. Plus, how is using the distro’s software manager to manage apps any more difficult than using Windows?
“Linux is not really ready for prime on the desktop,”
Explain why, and apply that assertion to recent versions of Ubuntu and Mint. It also depends on what you mean by “desktop” – is Chrome OS applicable, for example? If not, why not?
“BSD is better but still isnt really “ready for prime” as a desktop OS”
Mac OSX isn’t ready for the desktop? Really? Unless by desktop you mean “run Windows software”, that’s another strange assertion, and even then it can be done relatively painlessly for many apps. I can understand you not having a solid opinion of it due to some Apple business support problems you’ve had, but that’s nothing to do with the OS. In my (admittedly quite small – 25 or so desktops + 30 servers), it’s the Linux and OSX machines that never need support.
“the way i see it, MS is going to be foreced to do more deals on their os and keep dropping the price, and eventually they will drop the price of their office suit as well..”
You think that Microsoft will compete by making the 2 of only 4 profitable areas of their business free of charge (the others being XBox and server OSes)? Unless I’ve missed some figures somewhere about how they’ve been doing recently, that’s a very… interesting statement.
Re: Re: Re:
“FOSS is good when it works, the real problem is, much of the time it dosnt just work”
You can give us a list of crap FOSS software and get back an even bigger list of crap commercial software. At least FOSS Free (Libre’) and Open Source Software means you have the source and can fix what you dislike. If you don’t have the skills you can hire it done. Many programmers working on FOSS get paid this way.
“I say this having been there”
What does that mean? I personally though with a lot of scripting did the IT and network administration for a large WAN with approx 30 severs, 300 workstations (Mix Windows/Mac/Linux), 6 routers, 100 switches, with misc. equipment VoIP solutions, IP cameras, IP Video/Audio conferencing solutions, etc. In my spare time I fixed everybody and their dog’s computers. Have I been there?
“and also speaking from what a friend who works in IT at google has said. many insisted going linux would drop costs and mean less support issues for google internally, this isnt true, they have been tracking it for years, they actually more then quadrupled their support calls and need to send a tech out”
So your IT friend at Google claims: Google’s move to exclusively use Linux in their organization was a support mistake, is that what we’re supposed to take away from that?
“mostly due to the fact that some of the software they switched to has bugs, and the users cant reinstall/update them when somethings broken(they have them to locked down)”
If your IT friend has the user’s machines too locked down that is an IT problem not an OS problem.
I suppose that you can make the claim that Linux or BSD are not “ready for prime on the desktop” if you cherry pick the distro/desktop. The best desktop experience I can get is on Linux which is why Linux became my exclusive desktop OS three years ago.
“solaris is decent on the desktop but its also very weird to use for a normal pc user, again not really ready for prime as a desktop OS.”
Who’s desktop have you seen Solaris on lately, the MRI technician at the medical center?
“mac costs to much and has far less software to choose from to do a specific job then windows”
Fist Part: If you compare Spec-for-spec and leave out none, there is almost no cost difference between Macs and PCs.
Second Part: How many word processors do you need to get anyway? the fact that their are fewer unconsidered choices is irrelevant.
“Apple support was and I hear still is HORRIBLE, business support contracts that state you will get a problem resolved in 24hrs…..more like a week or 2 to get somebody from apple out to on site repair when the contract clearly states 24hrs…..”
We have no knowledge of the support experience you/your co-workers may have experienced. My support experience with Apple has been local reps- awesome, phone support- mediocre (which in the tech industry means kind of suckish)
“yeah MS arent the best company, and they do alot of dickheadish things”
Yes and yes.
“but, their support for corporate is far and above any other company i have dealt with”
Wow, I have found their support to be less than mediocre. Reference mediocre above.
“the way i see it, MS is going to be foreced to do more deals on their os and keep dropping the price, and eventually they will drop the price of their office suit as well…”
The way I see it they will try harder with various vendor lock-in schemes and then strong arm the customer. Its kind of the Microsoft MO.
“till then for home users/geeks theres always technet :)”
And the many other computer/OS forums on the Internet. 🙂
“Attempting to enforce US laws in India jeopardizes the existing global legal framework that seems to work reasonably well.”
Don’t give them any ideas Glyn, IP proponents will start using the same thing to get around pesky Fair Use laws in America. Just file the lawsuits in countries without Fair Use laws.
Also, while we’re at using this same logic of enforcing your laws in other countries, I don’t like the president. I also hear that he drinks lots of tea, and that Tea is an illegal product in some nations, so lets go to one of those nations and charge the president with illegally smuggling and consuming tea!
..freeware be considered an unfair competitive advantage?
..smart people be considered an unfair competitive advantage?
..underpaid workers be considered an unfair competitive advantage?
..basing your factory in a country with lax environmental regulations be considered an unfair competitive advantage?
Re: Would using...
The only unfair tactic is the one that is used successfully against you.
Suing China for doing something with IP that the US doesn’t like? Oh, right, that’ll work wonders. Nothing could possibly go wrong, just like all the times it happened before!
The US is just asking to see every American jailed abroad.
Bypassing territorial jurisdiction is a scary thing.
It could open the doors for other countries to make all kinds of crazy statements to make it possible to jail somebody somewhere else.
In the middle east American companies could be hold accountable for things they did anywhere else.
Sure a lot of Latin American countries would love to use abuses done elsewhere to jail some Americans there too.
What happens when they start making Americans criminals too?
“”Does America really want other governments claiming that actions on US soil have broken foreign laws, and should be tried abroad?””
If its good enough for US to extradite people from a foreign country to the US for breaking a US law when the person hasn’t set foot on US soil then other foriegn countries should be allowed to extradite people from the US for being in breech of their countries law even though the person hasn’t set foot on that countries soil but of course the US will never extradite someone from the US and yet the US will bully, threaten etc. other countries to have someone extradited to the US even though the person has never set foot on US soil.
Is this a global precedent to finally make Bush and Co. plaintiffs around the world?
So if anybody breaks some law in their country and others don’t like it they can now sue anybody including politicians of others countries in their own?
Oh this will be priceless.
Aside from that I will call this one and say exactly what is going to happen.
Other governments will not defy the US immediately, not right away, what they will do is look for alternatives and they will find a lot of open source ones, which will be used instead, and sales of American software will decline slowly, with emerging software producers in those countries rising quickly, creating more competition for American software developers companies, which will do nothing and in 10 years will complain about how cheap labor from India and China are killing them.
The US have some points in its favor, India and China suffer from censorship, corruption and tremendous bureaucracies, if that ever changes the US is fucked.
she could also try getting the various software makers to sell their products at prices that were in line with the local economies. if she thinks that suing people in other countries for using something that gives them an advantage over others, she is as stupid as the rest of those in positions of power in the USA. she needs to wake up and ask herself what would USA companies do in the same situation? then she needs to think of what those countries would be telling district attorneys to do and where to go.
If these foreign countries are comiting copyright infringement because they are using pirated software then why doesn’t the US seize and shutdown their web domain and then seize all the company assets after all it worked so well with Megaupload didn’t it.
That should have read “If these foreign companies” not foreign countries.
Sometimes I think the US government is actively trying to start World War 3.
There has been some consistent effort in Brazil to move to open source in the Govt sectors. The main problem with it is that sometimes there aren’t open source alternatives or they are too crude. Then it cascades since closed programs make using Windows mandatory…
In any case this will backfire in other ways as the local industry starts lobbying to weaken copyrights for foreign content (hello US!). It happened with big pharma, their patents got simply broken. If your grip is too tight it’ll ooze right through your fingers and you’ll end up with nothing. If US companies are smart they’ll start charging WAY less in nations under development. Better get less money from individual licenses to get more from the whole. The way it is now they are leaving money on the table.
The US and world legal environment is already way too convoluted. It’s become too burdensome for any small business owner to navigate.
Next they’ll claim that using free/open-source software is “unfair competition”…
Oh wait, they already did – the 301 watchlist.
“Foreign companies using pirated software” represent the fact that said software is so expensive that very few companies can actually afford it…
Dear US government,
Please GTFO of my country.
The Rest of The World.
is it a pre-requesit to have the common sense of a pea before being able to progress to the position of Attorney General? she seems to be as brainless as Holder in New York
if you restrict/put a massive mark-up the export of an item THAT IS GOOD that they want/need it.
The foreign people will look on other means on having it… even goes to pirates.
too bad the system is as broken as a rigged slot machine… only the owner of the slot machine wins… not the one who’s using it…
“My Eyes! The goggles do nothing!”
Ahh yes competing on merits on the products merits…
So does this AG actually know they’re using pirated software?
I mean I would think they caould be using linux or other freeware… and even if they are not, they could be which means there’s no unfair advantage, and local companies could use GPL software themselves and not pay licencing…
Sounds like something the BSA cooked up in some smoky back room of special interest power brokers. They were not mentioned specifically but my guess is they are just behind the curtain nearby. If the BSA is involved it could bring up much suspicion about any figures and statistics submitted to the CA legislators. This might be another excuse to bring in more protectionist law.
The software mentioned ?,Adobe, Microsoft, Symantec and others,? (indianexpress.com) Any of these (don’t know about ?others?) can be substituted with open source software and expect a huge migration from the spiteful (and now hated by India firms as to risky to use?) US software makers. Who in their right minds would want to use software that requires a large yearly, per computer, license fee? This well surely backfire like spitting into the wind it will be ugly and messy. (to late for that is my guess.)
Open source usually does require extra skilled in house tech personnel but that has many in house software customization advantages if they really are capable programmers and net experts. The problem is that most firms think they can skip the higher pay grade skilled workers thus costing more right off the bat. (Job opportunities or FOSS Linux/Unix) I agree that Linux software is not as developed as some MS software but few tasks actually use or need this level.
The fact that the California State Attorney (CA SA) used the term pirate seems unbecoming of the position. The term pirate has lately been used as propaganda by copyright industry special interest groups very effectively to paint a dark picture of which should be a bright cultural future for the average person. The word pirate presupposes guilt and creates a false image relating to a persons character possibly poisoning the jury pool before a trial. The correct words are accused/suspect/alleged/defendant or others but ?pirate? is a no-no.
It is so weird that the suit is filed in CA and not India where the violation supposedly happened. I cannot see any reason US domestic copyright law can be used in this way. This must be under the title of ‘interpretation of the law doctrine’ commonly in style these days. (as if the written law was not clear enough) Sounds like extortion by the way its filed. It does set dangerous precedent which could cut both ways.
Why does our administration condone such antagonistic behavior? Are they really trying to alienate the entire world from us?? And they say we are wearing the tin hats??? Is the CA SA related to Prenda in any way???? (Seriously. The methods sound similar.)
Why again does the justice branch even allow such cases to be filed in the first place? This surely is not the first time my faith has been dashed but my hopes are still there.
I hope India will be able to recover lost sovereignty. Hint to India firms; higher local CA attorneys its way much cheaper than hauling in your own. If this is a recurring national problem maybe the India consulate might bring on some local legal staff.
Disclaimer: some of this was inspired by above comments. Thanks. (mostly the FOSS stuff)
It?s about property rights. Show me a country with weak or ineffective property rights and I?ll show you a weak economy with high unemployment.
Do you know how to make a Stradivarius violin? Neither does anyone else. Why? There was no protection for creations in his day so he like everyone else protected their creations by keeping them secret. Civilization has lost countless creations and discoveries over the ages for the same reason. Think we should get rid of patents? Think again…or just think!
Masnick and his monkeys have an unreported conflict of interest-
They sell blog filler and “insights” to major corporations including MS, HP, IBM etc. who just happen to be some of the world?s most frequent patent suit defendants. Obviously, he has failed to report his conflicts as any reputable reporter would. But then Masnick and his monkeys are not reporters. They are hacks representing themselves as legitimate journalists receiving funding from huge corporate infringers. They cannot be trusted and have no credibility. All they know about patents is they don?t have any.
The idea is not to totally remove original-works producers but to destroy a corrupt bureaucratic special-interest infested system. Both for Copyrights and Patents (dumping software patents too)
If Copyrights and Patents are issued for breathing, reading and programming which is so much more than a process or design patent would ever encompass. Term limits must also serve some cultural function of society otherwise its meaningless and benefits the public in no way at all. Only the one monopoly benefits. (the ring foundry located in the volcano for sure.)
There is no viable invention without people who wanna use it and think its cool. There is no book if nobody can or wants to read. There is no author without an audience. There would be no Stradivarius without a public that did not appreciate and afford violin music.
Upon the shoulders giants we stand. (somebody said that before) Even Stradivarius. What we are saying is that we want to stand on top of the shoulders of the greats by making the scope and term limits of Copyright and Patent reasonable. (to expire well within our lifetimes)
If an author does not want to contribute to the public domain then they should not publish. And good riddance to them. If any firm wants a perpetual monopoly then good riddance to them also.