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US steps up crackdown on software piracy

Move afoot against 2 Chinese producers for dodging licence fees, unfair competitive edge

Two more US state attorneys-general have taken action against major Chinese manufacturers for using pirated or unlicensed software to gain a competitive advantage over manufacturers in the United States.

Attorneys-general in Louisiana and Oklahoma have accused the companies of dodging software licensing fees. They claim software piracy provides an unfair cost advantage that is punishable under state laws designed to promote fair competition.

These actions follow other enforcement actions that have been taken or threatened to be taken by California, Massachusetts, Washington and Tennessee against foreign manufacturers in Thailand, India, China and Brazil that allegedly used stolen technology to undermine law-abiding US companies in those states.

In Louisiana, Attorney-General James Caldwell said his state was "blazing the trail against corporate software piracy with the nation's toughest law".

In Oklahoma, Attorney-General Scott Pruitt said: "Any company that seeks a market advantage through piracy should be held accountable."

Louisiana took action against Chinese manufacturer Guangdong Canbo Electrical Appliance Company, a manufacturer of barbecue grills, for using unlicensed software.

The company paid more than US$250,000 (Bt8 million) in settlement and also agreed to an audit next year to prove it remains compliant.

The attorney-general's office said the company had functioned for years using stolen business software and when company officials were caught, they insisted they would only "partially legalise" their software.

"We told Canbo we could ban their products from Louisiana, and they quickly came to the table and agreed to pay to fully legalise their software 100 per cent," Caldwell said.

In Oklahoma, Pruitt filed a lawsuit against a Chinese oil-equipment supplier. The complaint claims Neway Valve Company stole manufacturing-process-related software to produce and sell its competing equipment in Oklahoma at a lower price.

Oklahoma's lawsuit seeks penalties and an injunction against Neway Valve for creating an unfair market and violating the state's Antitrust Reform Act and Oklahoma common law.

Peter Fowler, the regional intellectual-property attache at the US Embassy in Bangkok, said: "All export markets, including those in Southeast Asia, are under scrutiny for software piracy.

The use of unfair competition laws to enforce IP laws is the strongest incentive yet for companies to comply with copyright laws by using only licensed software."

Chainarong Charoenchainao, deputy commander of Thailand's Economic Crime Division, said it was the responsibility of information-technology staff and company directors to know their obligations.

"This is critical at a time when there is a requirement for manufacturing companies in export countries to show they are part of a transparent supply chain," he said.

"We encourage Thai companies to be proactive in making sure they are not using unlicensed software and have a good practice of managing software licences and compliance." According to a report by the Harvard Business School and the US National Association of Manufacturers, the violation of software copyright laws in export economies has led to the loss of 42,000 jobs in the US and billions of dollars in lost revenues.

Given these losses, US manufacturers are urging attorneys-general to crack down against foreign competitors that use pirated software to reduce costs and compete unfairly with them in US markets.

Thirty-nine US state attorneys-general have said they will step up enforcement against manufacturers that use stolen IT.

"The PC software piracy rate in Asia-Pacific is upwards of 60 per cent, according to IDC's latest study," said Michael Mudd, Asia-Pacific secretary-general of the Open Computing Alliance, referring to US-based International Data Corp.

"US manufacturing companies who pay for their software look at this and see that this is clearly unfair. Complex technical software can cost upwards of a million baht per licence, and some companies may need a half-dozen or more licences.

"Surely, any company that can get away with using a pirated version of this type of software is gaining a big advantage in [its] operational costs."

Open Computing Alliance works through seminars to advise manufacturing companies in Thailand about US unfair-competition laws, and how proper software management practices can help companies avoid legal issues.

Manufacturers and exporters were strongly urged to immediately undergo the proper checks to avoid the lawsuits, Mudd said.

The US industry-backed Open Computing Alliance claims to promote the security and protection of data from all threats, while respecting the rule of law and relevant intellectual-property rights.


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