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

from the overreach-much dept

Fri, Mar 25th 2011 10:30am — Mike Masnick

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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Filed Under: copyright, piracy, secondary liability, state laws
Companies: microsoft

61 Comments

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Anonymous Coward, 25 Mar 2011 @ 10:42am

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
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Anonymous Coward, 25 Mar 2011 @ 10:43am

Is Microsoft going to block itself?
http://www.techpavan.com/2009/05/24/microsoft-deepz0ne-pirated-cracked-sound-forge-windows-xp-audio/
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hmm (profile), 25 Mar 2011 @ 10:47am

poor microsoft
This is the equivalent of saying no-one is a vegan because they fraternize with people or have services/goods made by people who eat meat, therefore indirectly benefitting from the energy supplied by the juicy tasty animal murder....
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Christopher Gizzi (profile), 25 Mar 2011 @ 10:48am

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.
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Grey Ferret, 25 Mar 2011 @ 10:54am

Well, that's one way to discourage outsourcing and bring jobs back to the US.
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Lesath (profile), 25 Mar 2011 @ 10:57am

Two words: Google Docs. Free and teh same thing. Heck, if you don't trust Google you can try Open Office.
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Killer_Tofu (profile), 25 Mar 2011 @ 10:59am

Call ICE
Why doesn't Microsoft just call ICE? They seem perfectly willing to waste our taxpayer dollars doing enforcement for private business, corporations, and lobbying groups.
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Hephaestus (profile), 25 Mar 2011 @ 11:02am

Whats next? Oh I know ... making it illegal to buy from and overseas company that uses open source software
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Designerfx (profile), 25 Mar 2011 @ 11:03am

well, don't overreact yet
it's been noted by groklaw that this law could be used against them due to the I4I case.
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Michael, 25 Mar 2011 @ 11:04am

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.
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Anonymous Coward, 25 Mar 2011 @ 11:05am

I have to wonder about the veracity of the person who wrote the article from which quotes are taken given that the person apparently received her information from a Seattle newspaper that said something quite different.
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Christopher Gizzi (profile), 25 Mar 2011 @ 11:05am

Re:
Try convincing China to adopt Google Docs.
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CommonSense (profile), 25 Mar 2011 @ 11:05am

Another reason
To avoid any and all Microsoft products.

I'm glad I've been doing so for about 3 years now on a personal level. If I had the pull at work, I'd get rid of Windows there too.
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Steven (profile), 25 Mar 2011 @ 11:08am

Re: well, don't overreact yet
I don't think that's correct. The law (at least the washington one) specifically calls out copyright and specifically excludes patents.
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darryl, 25 Mar 2011 @ 11:08am

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.
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Anonymous Coward, 25 Mar 2011 @ 11:13am

That just means they'll switch to opensource software. Unless MS somehow convinces people that opensource software is illegal.

You know what, I think they would be able to convince people of that.
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Anonymous Coward, 25 Mar 2011 @ 11:13am

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?
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NullOp, 25 Mar 2011 @ 11:15am

Illegal?
Face it, Microsoft wants to make it illegal for you to buy from ANYONE but Microsoft! AntiTrust law was handmade for companies like this.
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Anonymous Coward, 25 Mar 2011 @ 11:15am

Re:
I assume this is only targeted at overseas entities to avoid the interstate commerce clause that would easily invalidate any law that applied to US companies with other US companies.
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cc (profile), 25 Mar 2011 @ 11:15am

Re:
The linked article is from Groklaw, and not all information came from a Seattle newspaper, as you would have discovered if you read beyond line three...
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wheels4me2 (profile), 25 Mar 2011 @ 11:16am

Re:
Open Office was forked to Libre Office after Oracle (nee Sun) fell out with the original OO people.

http://www.libreoffice.org/
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Steve (profile), 25 Mar 2011 @ 11:28am

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..
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ASTROBOI, 25 Mar 2011 @ 11:47am

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.
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Joe (profile), 25 Mar 2011 @ 11:53am

Re: your 20 years too late mike !!!
You might want to include some sarcasm tags next time so people know you're joking. I almost thought you were serious until I realized nobody could be that deranged. ;)
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Jeremy7600 (profile), 25 Mar 2011 @ 11:54am

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.
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Joe (profile), 25 Mar 2011 @ 11:57am

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.
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Anonymous Coward, 25 Mar 2011 @ 12:03pm

Re: Re: Is Microsoft going to block itself?
Is CHEVY going to have to pay my parking tickets because I used their product to break the law?

My name is Anonymous Coward, and I support this advertisement.
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Joe (profile), 25 Mar 2011 @ 12:08pm

Re:
If you think about it, it doesn't really matter if they can prove it. They can drag you into court and make it last years, costing you a lot more than a settlement would. Guess what most smaller companies would probably opt for?
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Anonymous Coward, 25 Mar 2011 @ 12:09pm

Re: Re:
Perhaps you should read what the Seattle Times had to say, since it was the Seattle Times article that the person at Groklaw relied upon.
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JeroenW (profile), 25 Mar 2011 @ 12:11pm

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.
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Anonymous Coward, 25 Mar 2011 @ 12:14pm

Re:
Use the fork instead.

LibreOffice
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Onnala (profile), 25 Mar 2011 @ 12:21pm

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.
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Anonymous Coward, 25 Mar 2011 @ 12:29pm

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.
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Onnala (profile), 25 Mar 2011 @ 12:30pm

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.
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Anonymous Coward, 25 Mar 2011 @ 12:34pm

Re: Re: Re: Is Microsoft going to block itself?
ABC is not pressing charges against Chris Brown for smashing a window in his dressing room.

Unfortunately, Microsoft is suing him for violating their patent on crashing Windows.

- Jimmy Fallon
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Anonymous Coward, 25 Mar 2011 @ 12:36pm

Re:
This is copycrime in action like the ICE actions, they don't think they need to prove anything, they will just do it and consequences be damned.
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Anonymous Coward, 25 Mar 2011 @ 12:38pm

And there are people who say that copyright is good, yah right.
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DH's Love Child (profile), 25 Mar 2011 @ 12:40pm

Re: Re: your 20 years too late mike !!!
Um, unfortunately, he was serious. We haven't seen the likes of darryl for a while, but he's one of the chorus of trolls.
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velox (profile), 25 Mar 2011 @ 12:43pm

Re:
This has been reported in Washington state newspapers for a couple of weeks now.

I don't see anything contradictory to the Groklaw report there.

This should be interesting, since it pits Microsoft, the BSA and the MPAA on one side versus Amazon, Dell, Intel, Motorola, IBM and Walmart among others on the opposite side.
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DH's Love Child (profile), 25 Mar 2011 @ 12:44pm

Re: Re:
IANAL, nor do I play one in the blogosphere (like some epople who will remain unnamed...), but would the end result of this law be that less products would be available in Washington? They couldn't force other states to play by Washington's stupid law, right?
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Joe (profile), 25 Mar 2011 @ 12:46pm

Re: Re: Re: your 20 years too late mike !!!
Surely you jest... Nobody could be that far removed from reality and be able to operate a browser. I hope.
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Onnala (profile), 25 Mar 2011 @ 12:58pm

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.
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Onnala (profile), 25 Mar 2011 @ 1:01pm

Re: Certain to happen
So your saying that the only way to get Cheap Electronics is to pirate the design software from Major EDA companies so that you can make said Cheap Electronics?
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Killer_Tofu (profile), 25 Mar 2011 @ 1:16pm

Re: Re: Re: Re: your 20 years too late mike !!!
I can assure you Joe, DHLC does not jest at this moment. darryl was indeed serious. Unless it is somebody new posting under the name we haven't seen in awhile that we knew to never take anything seriously from.
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CommonSense (profile), 25 Mar 2011 @ 1:25pm

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.
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weneedhelp (profile), 25 Mar 2011 @ 1:37pm

I want some of what they are smoking at Microsoft, because it appears that it is some bad ass stuff.

We WILL see in our lifetimes innovation come to a grinding halt. No one will be able to invent anything without being sued out of existence. Yeah, that is what copyright was intended to do.
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Andrew, 25 Mar 2011 @ 1:41pm

Ripple effects?
Would Microsoft be able to sue multiple times for the same copy of Excel? If, for example, GM, Ford and 50 other people were buying screws from the same overseas company, and that company happened to use a pirated copy of Excel, could they claim damages for that copy of Excel from each US business?
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Richard (profile), 25 Mar 2011 @ 2:21pm

Re: Re:
If B's supplier simply says "we use our own in house s/w which is a trade secret" then surely it stops right there - there is nothing you can do.
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Richard (profile), 25 Mar 2011 @ 2:24pm

Re: Illegal?
No - they actually want it to be illegal NOT to buy MS s/w.
It's the Microsoft Poll tax!
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Richard (profile), 25 Mar 2011 @ 2:26pm

Re: Re: Certain to happen
No - just that you won't be able to prove that you didn't.
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Bruce Ediger (profile), 25 Mar 2011 @ 2:42pm

Re: your 20 years too late mike !!!
Time to update the "persona management software", "darryl".

The your/you're confusion is a bit heavy-handed. It went out with version 3.17.5-6a, for sure. You should upgrade to the latest version of the 4.19.3-x series.
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Any Mouse (profile), 25 Mar 2011 @ 6:40pm

Re: poor microsoft
Gotta love the taste of charred murder on a summer day.
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Anonymous Coward, 25 Mar 2011 @ 9:43pm

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.
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Se Habla Espol, 26 Mar 2011 @ 12:07am

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.
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Anonymous Coward, 26 Mar 2011 @ 12:15am

Re:
Oops, sorry, wrong thread.
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Alan Scrivener, 26 Mar 2011 @ 8:45am

liability is for MS customers, not MS
I find it ironic that MS is lobbying for this kind of rent-seeking law when they have pioneered the EULAs that make them completely non-liable for any failings in the products they want you to pay them money for.
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btr1701, 26 Mar 2011 @ 3:39pm

Re: Re:
> they ask Company B to do due Vigilance

LOL! That's "due diligence".
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btr1701 (profile), 26 Mar 2011 @ 3:43pm

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?
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Anonymous Coward, 27 Mar 2011 @ 8:49am

Sounds like the time for everyone to switch to Linux and open source software.
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chris, 28 Mar 2011 @ 12:31am

Re:
Sadly, I wouldn't put it past any legislator who passed this law. After all, it would help a US company and you know how it goes: But... but... the economy... jobs... etc.
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Anonymous Coward, 28 Mar 2011 @ 11:53am

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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