Microsoft presses state to tackle software piracy

Microsoft is pushing Washington legislators to pass a law making it illegal for manufacturers that use pirated software to sell goods in the state.

The company is on a state-by-state campaign to force foreign companies to start paying for software.

While this would cover companies everywhere, the bill appears targeted at Chinese manufacturers. China is expected to become the largest PC market in the world this year.

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.

For example, if a large Washington store sold T-shirts made from a company in China and the Chinese company uses pirated copies of Excel at an office in Shenzhen, Microsoft could seek an injunction to prevent the manufacturer from supplying T-shirts to be sold in Washington state.

"We have a problem internationally with stolen and counterfeited software," said state Rep. Deb Eddy, D-Kirkland, one of the bill's sponsors.

The measure appears likely to win final approval. The state House and Senate have approved versions of the bill by large margins. The House passed HB 1495 in a 90-4 vote Feb. 22, and the Senate passed SB 5449 in a 39-7 vote March 4.

Lawmakers are negotiating to bring the two versions together, and the Senate will hold a hearing on the matter Monday.

The bill would affect retailers that make $50 million or more in annual sales and that have a direct contract with the manufacturer. Retailers would have 18 months to change manufacturers or persuade their manufacturers to pay for software.

Microsoft General Counsel Brad Smith said the issue is about creating jobs in Washington state.

"Right now, theft of American technology is robbing the economy of tens of thousands of jobs in Washington state," Smith said. "This is far and away the most important step the Legislature can take to help us create more jobs in Washington state over the next three years."

Boeing and Weyerhaeuser support the bill, according to Microsoft.

On Friday, several large computer-hardware corporations sent a joint letter urging legislators to vote no on the bill. Many are Microsoft's partners — Dell, IBM, Intel and Hewlett-Packard.

"These bills would create a new and unjustified cause of action against many American employers, fueling business uncertainty, disrupting our supply chains and undermining the competitiveness of U.S. firms," the companies wrote in the letter.

The Washington Retail Association also says it has concerns about how the bill would affect store owners.

"The bottom line is, it draws us into an action we are not responsible for," said Jan Teague, president and chief executive of the association, which represents 2,400 storefronts. The association would prefer a federal resolution from Congress over state action.

Smith said companies in countries with lax intellectual-property protections laugh at Microsoft when it asks them to pay for software. "They tell us they have no intention of paying for something they can steal with immunity," he said.

Louisiana passed a similar law a year ago. Microsoft hopes to get other states to impose similar laws.

Sharon Pian Chan: 206-464-2958 or schan@seattletimes.com