Unfair competition laws adopted by the state of Washington and
Louisiana in the U.S., are the first in a growing trend of
legislation meant to penalize manufacturers or related third
parties for using stolen or misappropriated information technology
in any part of the sales process; the laws will have cross border
implications for offenders.
The general grounds for regulating unfair competition are
provided for by international law. The Paris Convention for the
Protection of Industrial Property of 1883 (Paris Convention),
established the first set of regulations for unfair competition,
defining unfair competition as an act of competition contrary to
honest practices in industrial or commercial matters (Article
10.bis). This notion was further developed in different legal
systems. In Russia, unfair competition is regulated by the Federal
Law On Protection of Competition (the Competition Law).
The Competition Law defines unfair competition as any illegal
act by a business entity (groups of entities) that is aimed at
obtaining a competitive advantage in the course of doing business,
contradicting usual business practices, principles of integrity,
reason and fairness, having caused or which may cause damages to
competitors or having caused or which may cause damage to a
The definition of unfair competition covers production, sale,
exchange, or marketing involving the illegal use of information
technology. However, not all acts of misusing information
technology result in unfair competition, only cases of production,
sale, exchange, or marketing involving the use of stolen or
misappropriated information technology, resulting in a competitive
advantage for the infringer, while the owner of the exclusive
rights or a party legally using exclusive rights suffers damages.
The goods must be introduced into circulation for the act of
information technology infringement to be qualified as unfair
As a rule, regulation of unfair competition has extraterritorial
application, thus affecting foreign relations. In this respect, it
is important to note that regulation of unfair competition in many
foreign countries may directly apply to affected Russian
In 2011, as noted, two states in the U.S. passed laws on unfair
competition. The state of Washington and Louisiana are seeking to
promote fair competition, by making those guilty of infringing
competition laws, through the use of stolen or misappropriated
information technology, legally accountable for their actions. The
laws make product manufacturers legally accountable for the use of
stolen or misappropriated information technology, irrespective of
the country of their registration, if their products circulate in
the territory of the relevant states. If the information
technologies used in the manufacture, distribution, marketing or
sale of such products were used illegally, the product manufacturer
may be held liable for unfair competition practices.
The laws provide for a two-step procedure for eliminating unfair
competition. A manufacturer illegally using information
technologies first receives a warning from the owner of the
information technology, notifying the manufacturer of the alleged
infringement. If the warning is ignored, the following judicial
measures may be taken against the infringer and its products: (i)
reimbursement of damages in favor of the competitor; (ii) interim
measures in the form of prohibiting the manufacturer from using the
information technologies in the production of its products
illegally and from selling or offering such products in the
territory of the states; and (iii) seizure of the product
inventory, located in the territory of the applicable states.
As a result of these laws, not only manufacturers engaging in
unfair practices, but also contracting third parties may be held
responsible for using stolen or misappropriated information
technology. If it is proven that a manufacturer violated the law,
the aggrieved competitor may claim reimbursement of actual direct
losses from the third party selling the infringer's products in
the territory of the relevant states.
Consequently, Russian manufactures that directly or indirectly
(e.g. through distributors) export their products to the U.S. and
who have used stolen or misappropriated information technology in
their business operations may be subject to legal liability under
the abovementioned unfair competition laws, resulting in a possible
ban from selling or offering such company's products in the
territory of the respective state, fines (compensation for damages)
or even attachment of their products circulating in the United
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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