BILL REQ. #:  S-0255.2 

Read first time 01/26/11.   Referred to Committee on Labor, Commerce & Consumer Protection.

     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) "Manufacture" means to develop, manufacture, produce, or assemble an article or product, in whole or substantial part.
     (2) "Stolen or misappropriated information technology" means hardware or software that a person acquired, appropriated, or used in violation of applicable law.
     (3) "Using information technology in business operations" means to use such technology to support in any way the design, manufacture, distribution, marketing, or sales of the articles or products subject to section 2 of this act.

NEW SECTION.  Sec. 2   (1) A person who manufactures an article or product while using stolen or misappropriated information technology in its business operations is deemed to engage in unfair competition 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 the use of the stolen or misappropriated information technology in violation of this section. Any person who engages in this unfair competition, and any articles or products manufactured by the person in violation of this chapter, are subject to the liabilities and remedial provisions of this chapter, except as otherwise provided in sections 3, 4, and 8 of this act.
     (2) In an action under this chapter, the use of stolen or misappropriated information technology may be established from the business records of a person subject to this section, by evidence derived from techniques used by the information technology owner to establish use of stolen or misappropriated information technology, or by other competent evidence.
     (3) No action may be brought under this chapter where:
     (a) The end product or article sold or offered for sale in this state and alleged to violate subsection (1) of this section is a copyrightable work under the United States copyright act;
     (b) The allegation that the information technology is stolen or misappropriated is based on a claim that the information technology infringes a patent or trade secret under applicable law or that could be brought under any provision of Title 35 of the United States Code; or
     (c) 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. 3   (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 its alleged use of the stolen or misappropriated information technology from the owner of the information technology or the owner's authorized representative and the person failed to cease use of the owner's stolen or misappropriated information technology within ninety days after receiving such a notice, subject to any extension approved in writing by the information technology owner or its authorized representative.
     (2) To satisfy the requirements of this section, a written notice must: (a) Identify the stolen or misappropriated information technology; (b) identify the lawful owner of the information technology; (c) state that the notifier has a reasonable belief that the person has acquired, appropriated, or used the information technology in question in violation of applicable law; and (d) if known by the notifier, state the manner in which the information technology is being used by the defendant.

NEW SECTION.  Sec. 4   In an action under section 2 of this act, a defendant may avoid liability by proving by a preponderance of the evidence that: (1) The aggregate retail value of the stolen or misappropriated information technology at the time of the alleged violation is less than ten thousand dollars; or (2) the stolen or misappropriated information technology constitutes a de minimis integrated component of a separate information technology product, and the component was not available for retail purchase on a stand-alone basis at the time it was acquired by the defendant. The retail value of stolen or misappropriated information technology is the retail price of the information technology in this state, 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.

NEW SECTION.  Sec. 5   In any action under this chapter, the court shall, pursuant to applicable rules of discovery, permit the plaintiff or its representative or, where appropriate, a judicially appointed designee, to enter onto the defendant's business premises to inspect any information technology, records, files, or other evidence relevant to the alleged use of stolen or misappropriated information technology in violation of section 2 of this act. Any discovery taken pursuant to this section is in addition to, and does not limit, any other discovery permitted under the applicable rules, including rules providing for entry onto land or other property for inspection and other purposes.

NEW SECTION.  Sec. 6   (1)(a) At least ninety days after the provision of notice in accordance with section 3 of this act, the attorney general, or any person injured by reason of a violation of section 2 of this act, or any association of businesses representing such a person may bring an action against any person, article, or product that is subject to section 2 of this act for the following:
     (i) To enjoin violation of section 2 of this act, including by enjoining such a person from selling or offering to sell in this state articles or products that are subject to section 2 of this act.
     (ii) To recover the greater of:
     (A) Actual damages; or
     (B) For each product sold or offered for sale in violation of section 2 of this act, an amount of up to twenty percent of the retail price in this state of such an article or product.
     (b) In any action for injunctive relief under this chapter, irreparable harm and interim harm to the plaintiff shall be presumed where the court finds that articles or products subject to section 2 of this act are being sold or offered for sale in this state.
     (2) In an action under this chapter, a court may:
     (a) Increase the damages up to three times the damages authorized by subsection (1)(a)(ii) of this section where the court finds that the defendant's use of the stolen or misappropriated information technology was willful; and
     (b) Award costs and reasonable attorneys' fees to: (i) A prevailing plaintiff in all actions brought under section 2 of this act; or (ii) a prevailing defendant in actions brought by an injured person.
     (3) 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; and
     (b) The person's articles or products were not manufactured using the stolen or misappropriated information technology in violation of section 2 of this act.
     (4) 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 shall 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 8 of this act. Any person who is served with or otherwise subject to an order for injunctive relief issued under this section must be afforded reasonable notice and opportunity to be heard.

NEW SECTION.  Sec. 7   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 8 of this act, all such articles or products are subject to attachment at or after the time of filing a complaint, regardless of: (1) The availability or amount of any monetary judgment; (2) who has title to the articles or products; and (3) the existence of the grounds specified in RCW 6.25.030. If the court determines that any of the articles or products violate section 2 of this act, the court shall, acting in rem, enjoin the sale or offering for sale in this state of the articles or products, except as provided in section 8 of this act. Any third party who is served with or otherwise subject to an order for attachment or an injunction acting in rem must be afforded reasonable notice and opportunity to be heard.

NEW SECTION.  Sec. 8   A court may not enforce an order for attachment or injunctive relief under section 6(4) or 7 of this act against a person, other than the manufacturer of the articles or products, who has an interest in an article or product subject to section 2 of this act where such a person establishes by a preponderance of the evidence that:
     (1) Such a person is the end consumer of an article or product subject to such an order, or acquired the article or product after its sale to an end consumer;
     (2) Such a person is a business with annual revenues not in excess of fifty million dollars;
     (3) The person acquired the articles or products in good faith reliance on written assurances from the manufacturer or supplier of the articles or products that the articles or products were manufactured without the use of stolen or misappropriated information technology, provided that within one hundred eighty days of receiving a written notice that satisfies the requirements of section 3(2) of this act, the person implements commercially reasonable practices and procedures to: (a) Cause such a manufacturer or supplier to cease such a theft or misappropriation; or (b) prevent future acquisition of articles or products from such a manufacturer or supplier subject to section 2 of this act; or
     (4) The person has made commercially reasonable efforts to prevent the acquisition of articles or products subject to section 2 of this act and has acted in good faith to ensure compliance with these practices and procedures to prevent acquisition of these articles and products. A person may satisfy this subsection by proving that its contracts with the manufacturer or supplier of an article or product subject to section 2 of this act prohibits the use of stolen or misappropriated information technology, subject to a right of audit, and such a person has an established practice of auditing its manufacturers and has made good faith efforts to verify compliance with the prohibition during the course of the audits.

NEW SECTION.  Sec. 9   (1) The legislature finds that the practices covered by this chapter are matters vitally affecting the public interest for the purpose of applying the consumer protection act, chapter 19.86 RCW. A violation of this chapter is not reasonable in relation to the development and preservation of business and is an unfair or deceptive act in trade or commerce and an unfair method of competition for the purpose of applying the consumer protection act, chapter 19.86 RCW.
     (2) The penalties, remedies, and procedures provided by chapter 19.86 RCW may not be construed to limit the liabilities and remedial provision of this chapter.

NEW SECTION.  Sec. 10   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. 11   Sections 1 through 10 of this act constitute a new chapter in Title 19 RCW.