As Widespread IT Theft Undercuts Competition, ACS Issue Brief Calls for Ramped-Up Enforcement

by Nicole Flatow

Large-scale theft of information technology and intellectual property is becoming an increasingly serious problem for U.S. manufacturers competing in the global market, requiring new and better mechanisms for enforcement, according to a new ACS Issue Brief.

In 2009, for every $100 worth of legitimate software sold, an additional $75 of unlicensed software “also made its way into the market.” And in 2010, the estimated value of stolen software spiked 14 percent.

This rate of theft has a debilitating impact on businesses operating legally and seriously hampers competition, American University law professor Andrew F. Popper explains in his Issue Brief, “Beneficiaries of Misconduct: A Direct Approach to IT Theft.”

“Companies profiting from stolen IT are not just free-riding on the successes of those who design and produce the products and ideas that drive the U.S. economy—they are destabilizing the pricing market and distorting lawful competition,” Popper writes.

To tackle this problem, enforcement should directly address the harms this theft imposes on the competitive market through both state and federal unfair competition mechanisms, Popper asserts.

The Federal Trade Commission Act, for example, gives the FTC “broad and flexible” power to address “unfair methods of competition,” and similar statutes exist in many states. In the past year, both the National Association of Attorneys General and a bipartisan group of senators have called on the FTC to use this power and “all tools at your disposal” to combat piracy.

Other mechanisms include national trade laws such as the U.S. Tariff Act of 1930 and common law unfair competition torts that in some states.

But one of the most direct ways of addressing this problem are two new state laws in Washington and Louisiana that specifically target the competitive harms caused by IT theft. The Washington statute is particularly powerful, because it authorizes enforcement by both private parties and the state attorney general.

“[S]tatutes along the lines of the recently passed Washington law hold out the hope of accountability for significant misconduct, fairness in pricing, and a level competitive playing field,” Popper writes.

He concludes: “Regulatory and legislative initiatives are needed not just to stimulate creation and invention but to insure a level and vibrant competitive playing field and some modicum of justice for those whose work has been stolen.”

Read the full Issue Brief here.