Copyright

The role played by Microsoft in getting California to sue Indian textile manufacturers for unfair competition: Is it losing faith in the Delhi High Court?


Carrying on from my earlier post on California’s outrageous attempt to sue an Indian textile manufacturer for allegedly using pirated software back in India, I have finally found a copy of the complaint filed by the California’s Attorney General in Los Angeles. The complaint can be accessed over here and I think it should receive an award for being the most vague piece of legal drafting and I’ll explain why. 
Image from here
The root of this litigation, as mentioned in the complaint, is a copyright infringement lawsuit filed by Microsoft before the Delhi High Court against Pratibha Syntex Ltd., the Indian textile manufacturer named before the Californian court. The lawsuit filed by Microsoft appears to have been your standard Microsoft lawsuit, which a ghost post has described so eloquently over here. On the basis of an investigator’s report, the Delhi High Court granted Microsoft an ex-parte discovery order allowing Microsoft to carry out an inspection of Pratibha Syntex’s computers. Apparently, during the inspection Microsoft discovered that the defendant’s computers were running several pirated computer programs belonging to Microsoft. The software programs mentioned in the complaint are: Windows OS, Windows Server Enterprise, SQL Server Enterprise Processor, Office Professional, Project Professional, Windows Server CAL, and Visual Studio Premium w/MSDN. The complaint mentions that the software was valued at $389,098 which converts into Rs. 2.1 crore. There is no mention in the complaint on, who reached this glorious figure. 
After providing these details the complaint goes absolutely silent on the outcome of the Indian case. If the case is sub-judice before the Delhi High Court and Microsoft is pushing for an alternate remedy in California, it would simply indicate that Microsoft has no faith in the Delhi High Court. If the case has been concluded and Pratibha Syntex has paid Microsoft the damages, why is Microsoft now pushing for this legal action in California? The complaint maintains a deathly silence on this aspect. Why? 
The vagueness in the complaint doesn’t end with the above. The logic provided by the esteemed law officers of California to establish a cause of action that flows from the Microsoft lawsuit is equally vague. According to the complaint, “by illegally using pirated software programs, Defendant Pratibha gained or attempted to gain an unfair competitive advantage over apparel industry competitors doing business in California who used properly licensed software programs.” 
There is no mention of whether any Californian textile manufacturer has actually complained of such a cost disadvantage. How in god’s name does the Californian state come to such a conclusion if none of the textile manufacturers are complaining about this supposedly unfair competition? 
It continues: “Although the manufacturing component in the apparel industry has increasingly moved to foreign countries, product design and manufacturing specialty software have created efficiencies that help California competitors remain in California.” 
And further “If companies such as Defendant Pratibha continue to illegally use copyrighted software in connection with the production or manufacture of goods sold or transported in or delivered to California, competition in the California apparel industry will be substantially harmed. California apparel manufacturers will face a cost disadvantage, and jobs in the industry may, as a result, continue the trend in the industry of migrating overseas. Software companies innovating and producing software for the apparel industry, facing piracy of such software and the consequent reduced returns for investing in such software, will reduce their investment and innovation in such software. As a result, apparel manufacturers will have reduced access to efficiency-enhancing software that enables them to continue doing business in California in the face of lesser labor and other costs overseas.” 
If this is a question of incentives for innovation in software, American law protects the same through copyright and patent law. Why is California attempting to enforce state competition law? If it is an issue of textile manufacturers, the State should mention at least one textile manufacturer who has actually complained because the lawsuit is being filed to protect textile manufacturers. 
In conclusion the lawsuit asks for the following reliefs: 

(i) An injunction restraining the defendant “from distributing or receiving any of Defendants’ products in the State of California until such time as the Defendants certify to the Court that they are in compliance with the licensing requirements of all software programs that are used in connection with the production or manufacture of goods sold or transported in or delivered to California” 
“That the Defendants provide to the Office of the California Attorney General, Antitrust Law Section, a certified inventory under penalty of perjury of all software titles used in the operations of their business every six months for a period of five (5) years; 
59. That the Court appoint a Trustee with the power to verify Defendants’ compliance with the Court’s orders. The cost associated with such Trustee shall be charged to the Defendants; 
60. That upon application to the Court by the California Attorney General, a court approved trustee, shall be granted full access to Defendants’ computer systems in order to verify the Defendants’ software licensing certifications.” 
Going by the prayers in the complaint it is quite obvious that this case is not about some Californian textile manufacturers. This case is about Microsoft and its attempt to enforce its copyright in software by threatening potential infringers with a completely disproportionate response. Like I mentioned earlier, this is nothing but a brazen, outrageous attempt by California to make life hell for Indian businesses who have already been sued by Microsoft before the Delhi High Court. There is absolutely no proof that even a single Californian textile manufacturer has an issue with Pratibha Syntex. Like I said earlier, if this is about the IP of Microsoft, these rights are supposed to enforced in India as per TRIPs. By forcing Indian businesses to spend sky high amounts on their legal defence in the U.S., Microsoft is acting like a big bully. 
At the very least, the Delhi High Court should have better sense than to give Microsoft a free pass to raid Indian businesses in India and then use such evidence to make California sue Indian businesses. PIL before the Delhi High Court anybody?

Prashant Reddy

T. Prashant Reddy graduated from the National Law School of India University, Bangalore, with a B.A.LLB (Hons.) degree in 2008. He later graduated with a LLM degree (Law, Science & Technology) from the Stanford Law School in 2013. Prashant has worked with law firms in Delhi and in academia in India and Singapore. He is also co-author of the book Create, Copy, Disrupt: India's Intellectual Property Dilemmas (OUP).

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