Beneficiaries of Misconduct: A Direct Approach to IT Theft

Article excerpt

   I. INTRODUCTION: THE IMPACT OF STOLEN IT ON COMPETITION    II. ADDRESSING IT THEFT UNDER EXISTING LEGAL REGIMES       A. Federal Trade Commission Act       B. State Unfair Competition Laws       C. National Trade Laws    III. The Washington and Louisiana Statutes       A. Notice and Opportunity to Cure       B. Limited Monetary and Injunctive Relief       C. Recourse Against Hiring Firms       D. In Rem Proceedings    IV. PRECEDENT FOR THE WASHINGTON STATUTE       A. Enacting a State Statute to Address a Specific Method of       Unfair Competition: Trade Secrets          1. Restatement of Torts, [section] 39 and the Uniform Trade             Secret Act          2. Federalizing Trade Secret Law       B. Dual-Track Enforcement by State Regulators and Private          Attorneys General       C. Gatekeeper Liability    V. LEGAL AND ECONOMIC OBJECTIONS TO THE WASHINGTON STATUTE       A. Preemption       B. Fairness in Price Competition    VI. CONCLUSION 


Almost a century ago, the United States Supreme Court declared that the prohibition against unfair competition serves to protect fundamental values and important rights. "[T]he right to acquire property by honest labor or the conduct of a lawful business is as much entitled to protection as the right to guard property already acquired. It is this right that furnishes the basis of the jurisdiction ... of unfair competition." (1) The idea is simple: it is unfair to competitors and inconsistent with basic notions of market competition to allow market actors to steal the work or property of another and use that asset to obtain a competitive advantage over companies that play by the rules. (2) There are a number of settings, however, where current legal recourse is insufficient (3) to address such misconduct; particularly when the item taken is information technology (IT).

The idea that a competitor can steal and benefit from the property of a rival or other company for commercial gain is at odds with basic notions of efficiency and fair play. (4) Professor Glen Robinson states the matter precisely: "Our concept of competition is based on a regime of exclusive property rights ... Competitors are supposed to compete with their own property, not with the assets of their competitors." (5) Robinson cites the "common law doctrine of 'unfair competition,' which prohibits firms from helping themselves to a competitor's property." (6) Although Robinson focuses on a company's theft of a competitor's property, the competitive harm is similar even where the stolen property belongs to a third party, since the recipient of the stolen property still obtains an advantage over its competitors by means of an illegal act. This is as true with IT as it is with any other valuable asset, and raises the basic question that is the focus of the research: What are the benefits and challenges of the legal remedies designed to address the significant problem of IT theft?

One approach to IT theft might, in appropriate circumstances, be to consider such misconduct a form of unfair competition or an unfair trade practice. (7) In the common sense understanding of the phrase, such practices are misappropriations (8) that might not always be actionable under conventional intellectual property regimes, particularly when the misappropriation occurs outside the territory of the regulating jurisdiction. (9) Moreover, intellectual property laws are designed to protect intellectual property owners; for the most part, no redress is provided for third parties suffering an independent competitive harm. To be blunt, beneficiaries of the theft of IT secure an unjustified cost savings over their competitors and are unjustly enriched. (10)

If a manufacturer steals software or other IT instead of paying for it, its input costs are reduced as compared to its competitors that pay for their IT. In cases where the company using stolen IT is a contract manufacturer, that cost advantage may accrue, at least in part, to the firm that hired the company to manufacture the goods on its behalf (i. …


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