BILL REQ. #: H-1690.3
State of Washington | 62nd Legislature | 2011 Regular Session |
READ FIRST TIME 02/17/11.
AN ACT Relating to the unfair competition that occurs when stolen or misappropriated information technology is used to manufacture products sold or offered for sale in this state; adding a new chapter to Title 19 RCW; and prescribing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1 The definitions in this section apply
throughout this chapter unless the context clearly requires otherwise.
(1) "Article or product" means an article or product, but excludes
food and beverages and any services sold, offered for sale, or made
available in this state, including restaurant services.
(2) "Copyrightable end product" means a work within the subject
matter of copyright as specified by section 102 of the United States
copyright act.
(3) "Manufacture" means to manufacture, produce, or assemble an
article or product subject to section 2 of this act, in whole or
substantial part, but does not include contracting with or otherwise
engaging another person, or that person engaging another person, to
develop, manufacture, produce, or assemble an article or product
subject to section 2 of this act.
(4) "Material competitive injury" means a three percent price
difference between the article or product made in violation of section
2 of this act designed to harm competition and an article or product
that was manufactured without the use of stolen or misappropriated
information technology, with such a price difference occurring over a
four-month period of time.
(5) "Retail price" means the retail price of stolen or
misappropriated information technology charged at the time of, and in
the jurisdiction where, the alleged theft or misappropriation occurred,
multiplied by the number of stolen or misappropriated items used in the
business operations of the person alleged to have violated section 2 of
this act.
(6)(a) "Stolen or misappropriated information technology" means
hardware or software that the person referred to in section 2 of this
act acquired, appropriated, or used in violation of applicable law, but
does not include situations in which the hardware or software alleged
to have been stolen or misappropriated was not available for retail
purchase on a stand-alone basis at or before the time it was acquired,
appropriated, or used by such a person.
(b) Information technology is considered to be used in a person's
business operations if the person uses the technology in the
manufacture, distribution, marketing, or sales of the articles or
products subject to section 2 of this act.
NEW SECTION. Sec. 2 Any person who manufactures an article or
product while using stolen or misappropriated information technology in
its business operations after notice and opportunity to cure as
provided in section 5 of this act and, with respect to remedies sought
under section 6(5) or 7 of this act, causes a material competitive
injury as a result of such use of stolen or misappropriated information
technology, is deemed to engage in an unfair act where such an article
or product is sold or offered for sale in this state, either separately
or as a component of another article or product, and in competition
with an article or product that was manufactured without violating this
section. A person who engages in such an unfair act, and any articles
or products manufactured by the person in violation of this section, is
subject to the liabilities and remedial provisions of this chapter in
an action by the attorney general or any person described in section
6(4) of this act, except as provided in sections 3, 4, 5, and 8 of this
act.
NEW SECTION. Sec. 3 No action may be brought under this chapter,
and no liability results, where:
(1) The end article or end product sold or offered for sale in this
state and alleged to violate section 2 of this act is:
(a) A copyrightable end product;
(b) Merchandise manufactured by or on behalf of, or pursuant to a
license from, a copyright owner and which displays or embodies a name,
character, artwork, or other indicia of or from a work that falls
within (a) of this subsection, or merchandise manufactured by or on
behalf of, or pursuant to a license from, a copyright or trademark
owner and that displays or embodies a name, character, artwork, or
other indicia of or from a theme park, theme park attraction, or other
facility associated with a theme park; or
(c) Packaging, carrier media, or promotional or advertising
materials for any end article, end product, or merchandise that falls
within (a) or (b) of this subsection;
(2) The allegation that the information technology is stolen or
misappropriated is based on a claim that the use of the information
technology infringes a patent or misappropriates a trade secret under
applicable law or that could be brought under any provision of Title 35
of the United States Code; or
(3) The allegation that the information technology is stolen or
misappropriated is based on a claim that the defendant's use of the
information technology violates the terms of a license that allows
users to modify and redistribute any source code associated with the
technology free of charge.
NEW SECTION. Sec. 4 No injunction may issue against a person
other than the person alleged to violate section 2 of this act, and no
attachment order may issue against articles or products other than
articles or products in which the person alleged to violate section 2
of this act holds title. A person other than the person alleged to
violate section 2 of this act includes any person who contracts with or
otherwise engages another person to develop, manufacture, produce,
market, distribute, or assemble an article or product alleged to
violate section 2 of this act.
NEW SECTION. Sec. 5 (1) No action may be brought under section
2 of this act unless the person subject to section 2 of this act
received written notice of the alleged use of the stolen or
misappropriated information technology from the owner or exclusive
licensee of the information technology or the owner's authorized
representative and the person: (a) Failed to establish that its use of
the information technology in question did not violate section 2 of
this act; or (b) failed, within ninety days after receiving such a
notice, to cease use of the owner's stolen or misappropriated
information technology. However, that if the person commences and
thereafter proceeds diligently to replace the information technology
with information technology whose use would not violate section 2 of
this act, such a period must be extended for an additional period not
to exceed one hundred eighty days total. The information technology
owner or the owner's authorized representative may extend any period
described in this section.
(2) To satisfy the requirements of this section, written notice
must: (a) Identify the stolen or misappropriated information
technology; (b) identify the lawful owner or exclusive licensee of the
information technology; (c) identify the applicable law the person is
alleged to be violating and state that the notifier has a reasonable
belief that the person has acquired, appropriated, or used the
information technology in question in violation of such applicable law;
(d) if known by the notifier, state the manner in which the information
technology is being used by the defendant; (e) state the articles or
products to which the information technology relates; and (f) state the
basis and evidence supporting such an allegation.
NEW SECTION. Sec. 6 (1) No earlier than ninety days after the
provision of notice in accordance with section 5 of this act, the
attorney general, or any person described in subsection (4) of this
section, may bring an action against any person that is subject to
section 2 of this act:
(a) To enjoin violation of section 2 of this act, including by
enjoining the person from selling or offering to sell in this state
articles or products that are subject to section 2 of this act.
(b) Only after a determination by the court that the person has
violated section 2 of this act, to recover the greater of:
(i) Actual damages, which may be imposed only against the person
who violated section 2 of this act; or
(ii) Statutory damages of no more than three times the retail price
of the stolen or misappropriated information technology, which may be
imposed only against the person who violated section 2 of this act.
(2)(a) After determination by the court that a person has violated
section 2 of this act and entry of a judgment against the person for
violating section 2 of this act, the attorney general, or a person
described in subsection (4) of this section, may add to the action a
claim for actual damages against a third party who sells or offers to
sell in this state products made by that person in violation of section
2 of this act, subject to the provisions of section 8 of this act.
However, damages may be imposed against a third party only if:
(i) The third party was provided a copy of a written notice that
satisfies the requirements of section 5 of this act at least ninety
days prior to the entry of the judgment;
(ii) The person who violated section 2 of this act did not make an
appearance or does not have sufficient attachable assets to satisfy a
judgment against the person;
(iii) Such a person either manufactured the final product or
produced a component equal to thirty percent or more of the value of
the final product; and
(iv) Such a person has a direct contractual relationship with the
third party respecting the manufacture of the final product or
component.
(b) An award of damages against such a third party pursuant to this
subsection (2) must be the lesser of the retail price of the stolen or
misappropriated information technology at issue or two hundred fifty
thousand dollars.
(3) In an action under this chapter, a court may:
(a) Against the person found to have violated section 2 of this
act, increase the damages up to three times the damages authorized by
subsection (1)(b) of this section where the court finds that the
person's use of the stolen or misappropriated information technology
was willful; and
(b) With respect to an award under subsection (1)(b) of this
section only, award costs and reasonable attorneys' fees to: (i) A
prevailing plaintiff in actions brought by an injured person under
section 2 of this act; or (ii) a prevailing defendant in actions
brought by an injured person.
(4) A person is deemed to have been injured by the sale or offer
for sale of an article or product subject to section 2 of this act if
the person establishes by a preponderance of the evidence that:
(a) The person manufactures articles or products that are sold or
offered for sale in this state in competition with articles or products
that are subject to section 2 of this act;
(b) The person's articles or products were not manufactured using
stolen or misappropriated information technology in violation of
section 2 of this act; and
(c) The person suffered economic harm, which may be shown by
evidence that the retail price of the stolen or misappropriated
information technology was twenty thousand dollars or more.
(5) If the court determines that a person found to have violated
section 2 of this act lacks sufficient attachable assets in this state
to satisfy a judgment rendered against it, the court may enjoin the
sale or offering for sale in this state of any articles or products
subject to section 2 of this act, except as provided in section 4 of
this act.
(6) The court shall determine whether a cure period longer than the
period reflected in section 5 of this act would be reasonable given the
nature of the use of the information technology that is the subject of
the action and the time reasonably necessary either to bring such use
into compliance with applicable law or to replace the information
technology with information technology that would not violate section
2 of this act. If the court deems that a longer cure period would be
reasonable, then the action shall be stayed until the end of that
longer cure period. If by the end of that longer cure period, the
defendant has established that its use of the information technology in
question did not violate section 2 of this act, or the defendant ceased
use of the stolen or misappropriated information technology, then the
action must be dismissed.
NEW SECTION. Sec. 7 In a case in which the court is unable to
obtain personal jurisdiction over a person subject to section 2 of this
act, the court may proceed in rem against any articles or products
alleged to be subject to section 2 of this act, including any articles
or products sold or offered for sale in this state. Except as provided
in section 4 of this act, all such articles or products are subject to
attachment at or after the time of filing a complaint, regardless of
the availability or amount of any monetary judgment.
NEW SECTION. Sec. 8 (1) A court may not award damages against
any third party pursuant to section 6(2) of this act where that party,
after having been afforded reasonable notice of at least ninety days
and opportunity to plead any of the affirmative defenses set forth in
this subsection, establishes by a preponderance of the evidence that:
(a) Such a person is the end consumer or end user of an article or
product subject to section 2 of this act, or acquired the article or
product after its sale to an end consumer or end user;
(b) Such a person is a business with annual revenues not in excess
of fifty million dollars;
(c) The person acquired the articles or products:
(i) In good faith reliance on either: (A) A code of conduct or
similar written document that governs the person's commercial
relationships with the manufacturer alleged to have violated section 2
of this act and which includes commitments that prohibit use of the
stolen or misappropriated information technology by such manufacturer;
or (B) written assurances from the manufacturer of the articles or
products that the articles or products, to the manufacturer's
knowledge, were manufactured without the use of stolen or
misappropriated information technology in the manufacturer's business
operations. However, with respect to both (c)(i)(A) and (B) of this
subsection, that within one hundred eighty days of receiving written
notice of the judgment against the manufacturer for a violation of
section 2 of this act and a copy of a written notice that satisfies the
requirements of section 5 of this act, the person undertakes
commercially reasonable efforts to: (I) Confirm that such a
manufacturer is not using the stolen or misappropriated information
technology in violation of section 2 of this act; (II) require such a
manufacturer to cease the theft or misappropriation; or (III) in a case
in which the manufacturer has failed to cease such a theft or
misappropriation within the one hundred eighty-day period, prevent the
future acquisition of the articles or products from the manufacturer
during the period that the manufacturer continues to engage in theft or
misappropriation subject to section 2 of this act where doing so would
not constitute a breach of an agreement between the person and the
manufacturer for the manufacture of the articles or products in
question that was entered into no later than one hundred eighty days
after the effective date of this section;
(ii) Pursuant to an agreement between the person and a manufacturer
for the manufacture of the articles or products in question that was
entered into no later than one hundred eighty days after the effective
date of this section. However, that within one hundred eighty days of
receiving written notice of the judgment against the manufacturer for
a violation of section 2 of this act and a copy of a written notice
that satisfies the requirements of section 5 of this act, the person
undertakes commercially reasonable efforts to: (A) Confirm that such
a manufacturer is not using the stolen or misappropriated information
technology in violation of section 2 of this act; (B) require the
manufacturer to cease the theft or misappropriation; or (C) in a case
in which the manufacturer has failed to cease the theft or
misappropriation within the one hundred eighty-day period, prevent the
future acquisition of articles or products from the manufacturer during
the period that the manufacturer continues to engage in the theft or
misappropriation subject to section 2 of this act where doing so would
not constitute a breach of such agreement;
(d) The person has made commercially reasonable efforts to
implement practices and procedures to require its direct manufacturers,
in manufacturing articles or products for such person, not to use
stolen or misappropriated information technology in violation of
section 2 of this act. A person may satisfy this subsection (1)(d) by:
(i) Adopting and undertaking commercially reasonable efforts to
implement a code of conduct or similar written requirements, which are
applicable to the person's direct manufacturers, that prohibit the use
of stolen or misappropriated information technology by such a
manufacturer, subject to a right of audit, and the person either: (A)
Has a practice of auditing its direct manufacturers on a periodic basis
in accordance with generally accepted industry standards; or (B)
requires in its agreements with its direct manufacturers that they
submit to audits by a third party, which may include a third-party
association of businesses representing the owner of the stolen or
misappropriated intellectual property, and further provides that a
failure to remedy any deficiencies found in such an audit that
constitute a violation of the applicable law of the jurisdiction where
the deficiency occurred constitutes a breach of the contract, subject
to cure within a reasonable period of time; or
(ii) Adopting and undertaking commercially reasonable efforts to
implement a code of conduct or similar written requirements, which are
applicable to the person's direct manufacturers, that prohibit use of
stolen or misappropriated information technology by such a
manufacturer, and the person undertakes practices and procedures to
address compliance with the prohibition against the use of the stolen
or misappropriated information technology in accordance with the
applicable code of conduct or written requirements; or
(e) The person does not have a contractual relationship with the
person alleged to have violated section 2 of this act respecting the
manufacture of the articles or products alleged to have been
manufactured in violation of section 2 of this act.
(2) The court may not enforce any award for damages against such a
third party until after the court has ruled on that party's claim of
eligibility for any of the affirmative defenses set out in this
section.
NEW SECTION. Sec. 9 A court may not enforce an award of damages
against a third party pursuant to section 6(2) of this act for a period
of eighteen months from the effective date of this section.
NEW SECTION. Sec. 10 A violation of this chapter may not be
considered a violation of the state consumer protection act, and
chapter 19.86 RCW does not apply to this chapter. The remedies
provided under this chapter are the exclusive remedies for the parties.
NEW SECTION. Sec. 11 If any provision of this act or its
application to any person or circumstance is held invalid, the
remainder of the act or the application of the provision to other
persons or circumstances is not affected.
NEW SECTION. Sec. 12 Sections 1 through 10 of this act
constitute a new chapter in Title