Turning a blind eye to 'stolen IT' is not legally acceptable: American Chambers of Commerce

Unfair Competition Bill that has passed in the two US states is aimed to curb unfair trade practices through the prevention of illegal or stolen IT (hardware and oftware) across verticals worldwide. Should the small-and-mid sized exporters and businesses in developing economies such as India worry? Executive Director of the American Chambers of Commerce Ajay Singha speaks to CIOL's Muntazir Abbas on its provisions and imperatives.

Please give brief insight into Unfair Competition enforcement law with key takeaways?

This Bill aims to combat unfair trade practices in manufacturing by preventing usage of illegal or stolen IT (hardware & software) which in turn provides an unfair economic advantage in the market place. While the Unfair Competition Law has been passed in two states- Louisiana and Washington, the other 36 states are seeking ways to use the traditional powers of their office to address the unfair competition advantage and taking actions under existing Fair Competition acts.

That there will be impact to US companies by the use of non genuine IT found anywhere in the value chain is a strong signal not just to their direct suppliers, but also to suppliers' suppliers. It is also a signal that Indian exporters of finished leather goods such as bags and shoes should also exact care when procuring raw material either from the domestic market or from other exporting countries.

Following this Bill, the California Attorney General filed a lawsuit against the Indian apparel company- Pratibha Syntex and its sister companies. This means that failure to comply could result in loss of access to the lucrative US markets and injunctions against sales. This is an important move in international trade - and one that provides immense opportunity to Indian manufacturers.

Does this mean that an Indian enterprise willing to do business with the US should use legitimate software/hardware?

US companies increasingly will prefer to engage suppliers who use legitimate IT. It follows that they will also choose to trade with countries where usage of pirated software is minimum. India's software piracy rates are at 61 per cent compared to 77 per cent in China and 90 per cent in Bangladesh. In the aftermath of the UCA India clearly has the potential to become a preferred trading partner.

Is it WTO complaint?

Regarding measures related to trade in manufactured goods, the key WTO provisions are set forth in the General Agreement on Tariffs and Trade (GATT). Specifically, Article III:4 of the GATT provides that products imported from another WTO Member shall be accorded treatment no less favorable than that accorded to like products of origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.

Therefore, as long as a law or regulation treats 'like' foreign and domestic products similarly-that is, it does not discriminate against foreign products as compared to similar domestic products-it will not run afoul of GATT Article III.

None of the laws that U.S. regulators would enforce in pursuing manufacturers who gain an unfair advantage through IT theft make any distinction between domestic and foreign products.

Enforcement of these laws against a foreign manufacturer whose products are sold in the U.S. would have a nondiscriminatory purpose and effect- to protect all law-abiding businesses operating in the US -including foreign firms-against the harmful effects of unfair business practices. Thus, enforcement of these laws would be consistent with the U.S.s' international trade obligations regardless of whether the underlying IT theft occurred abroad.

So, considering it as movement rather than full-fledged law, what is the response globally? How has been response from the Indian government so far?

Software piracy and IT theft are criminal offenses and given the magnitude of the problem initiatives have been taken by different states to curb piracy. There is enough momentum between state and federal legislators, as well as in-country law enforcement and IP-protection agencies - suggesting it is a good idea to ensure your software is compliant. The letter from a bi-partisan group of 36 state and three U.S. territory attorneys clearly demonstrates how seriously governments in the U.S. take this issue and their strong resolve to take action. As the letter states, it's important for both the states to enforce existing state laws aimed at ensuring a level playing field and for the FTC to bring more weight to bear against the problem at the federal level.

Support for addressing the issue of IT theft is not only a concern in the U.S., it is also gaining significant momentum in the emerging markets like India, especially as local manufacturers and other industry businesses seek to remain competitive in this globalized economy. Evidence has shown that reducing piracy will create jobs, encourage innovation, and spur economic growth around the world. In addition to that there is a realization among the governing bodies that with this bill India stands a chance to score better on a global scale. The government and business leaders understand that in order to build robust local innovation economies and gain a competitive advantage, they must ensure that their businesses uphold responsible business practices. There have been initiatives around organizing programs and talking to manufacturers and exporters with a focus to educate them, however, considering the rampant piracy that exists in the country and the way it is hurting the economy a lot more needs to be done.

What are the challenges including legal implications?

The two mostly heard arguments to legalizing ‘stolen IT', "I buying legal software is expensive - compared to resorting to pirated versions", and that the users were just not aware that they were using stolen IT. However, both of these challenges don't turn out to be strong enough when examined closely.

The argument that the users were not aware that they were using "stolen IT" is plausible, however not legally acceptable. It is illegal in India to use stolen IT under the existing laws as well. Violation of Copyright and Trademark Act invites civil penalties and criminal punishment. Therefore, an argument around lack of knowledge of the law cannot be a defense for crime. The economic reasons over weigh and its compliance is compelling enough.

What is the response from IT/software vendors worldwide?

There has been support from the entire IT ecosystem worldwide to this movement. The issue of piracy has a clear negative impact on the publisher who incurs loses, in addition to that there is a larger socio economic impact in terms of loss of taxes to the govt. and lack of job creation in the economy. The IT vendors, along with support from the state and the federal govt. globally, are coming together to build capacity and counter this negative element. There is strong impetus and it will only get stronger.

How would it facilitate IP creation and innovation?

Respect for intellectual property is one of the most valuable assets of every country and every businessman, and it is the only way to foster creativity, innovation and research. Evidence has shown that protection of IPR and reducing piracy will create jobs, encourage innovation, and spur economic growth around the world. According to a recent global piracy study by the Business Software Alliance, worldwide software piracy losses in 2011 totaled $63.4 billion. In 2010, the organization found that reducing the worldwide piracy rate for PC software by 10 percentage points would bring $142 billion in new global economic activity, 500,000 new high-tech global jobs, $32 billion in new global tax revenues.