Ajay Singha, Chairman, American Chamber of Commerce, in conversation with Pankaj Maru, talks about the new Unfair Competition law in the US, its impact on Indian busniesses, the need of license software for businesses and how companies need to adher to this law. Excerpts…
How is Amcham involved with Indian businesses in context to the new bill?
Amcham drives many awareness programs in educating businesses on the advantages of a compliant business scenario. We inform members on the compliance benefits and urge that their suppliers and vendors use genunine software. Investment in software license is small compared to the overall capital put by a supplier in its business. If Indian SMEs complies to various norms like tax, FCPA, labour and environment laws, then why not be IT compliant?
Brief us about the new US Unfair Competition Law. What it means for Indian businesses?
In early 2011, the State of Washington, US passed a bill related to the unfair competition that occurs when a stolen or misappropriated IT is used to manufacture products that are sold or offered in the state. The law implies that a US company selling within the Washington State is responsible for the behaviour (related to law) of its suppliers, wherever located in the world. It applies to all manufactured products, suppliers from any country and allows the government to block the US company from selling those finished products in the state and compel them to pay damages for what either the company themselves or their overseas supplier(s) did.
US traditionally has been India’s key market with exports across sectors. Now, this law becomes decisive of the overall export performance and in turn a major determinant in India’s economic growth. There will be an impact to US companies by the use of pirated software/ IT found anywhere in the value chain. This is a strong signal to their direct suppliers and to suppliers’ suppliers. It’s a signal that Indian exporters should strictly care while procuring raw material either in the domestic market or from abroad.
Subsequently, the California Attorney General had sued an Indian apparel company Pratibha Syntex Ltd and its sister firms. There’s a crucial lesson for Indian exporters across verticals that they can now legitimately be barred from accessing the US marketplace. US firms will increasingly prefer suppliers with legitimate IT, they will choose to trade with countries where software piracy is low. Hence, this law puts forward a compelling opportunity for Indian business to become a preferred trading partner of the US.
What’s the key objective of this bill and how will it address unfair business practices?
Stolen IT has been a contentious issue in the global economy for years, despite global attention on the subject. If scrutinized from an economic growth point, this trend tends to skew the playing field in the defaulters’ favor, giving them unfair business advantage. This makes difficult for businesses using legal IT to compete fairly. In the long run, this situation can translate into greater economic problems such as the revenue and jobs loss – for an industry or country that is playing by the IT rules. As per BSA Global Software Piracy study, IT theft exceeds $63 billion worldwide.
The US 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. This act makes manufacturer liable for using pirated software in business operations even when those are outside the US and are not used directly in product making. It asks manufacturers and exporters to the US to ensure their software assets are licensed and their supply chain is compliant. Though this bill will add license costs, it benefits players within the value chain. Ideally, businesses should treat such costs as investments to realize potential long-term benefits like business ease, time savings, enhanced security, competitive edge and financial benefits.
Though the bill has been passed in few states of US, how much is the chance of it being adopted across other states? What should Indian businesses do to adhere to this bill?
While the bill has been passed in 2 states – Louisiana and Washington, the other 36 states are seeking ways to use their traditional office powers to address the unfair competition advantage and take actions under existing Fair Competition laws. There’s enough momentum between state and federal legislators as well as in-country law enforcement and IP-protection agencies – suggesting it as a good idea to ensure software is compliant. Indian manufacturers need to be vigilant on managing their IT assets and stay fully compliant. Immediately, they should monitor their software deployments for compliance and in future ensure the use of only genuine license software.
