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Regular Session, 2011
HOUSE BILL NO. 231
BY REPRESENTATIVE FOIL
Prefiled pursuant to Article III, Section 2(A)(4)(b)(i) of the Constitution of Louisiana.
CONSUMERS/PROTECTI ON: Provides relative to stolen or misappropriated information
technology
AN ACT1
To amend and reenact R.S. 51:1427, relative to information technology; to provide for2
definitions; to provide for unfair acts involving stolen or misappropriated3
information technology; to provide for limitations on actions; to provide for claims4
against third parties; to provide for notice and an opportunity to cure; to provide for5
remedies; to authorize injunctions; to provide for damages; to provide for a stay of6
action; to authorize in rem jurisdiction; to establish affirmative defenses for third7
parties; to provide for a transition period; to provide for exclusive remedies; and to8
provide for related matters.9
Be it enacted by the Legislature of Louisiana:10
Section 1. R.S. 51:1427 is hereby amended and reenacted to read as follows: 11
ยง1427. Unfair or deceptive trade practices or acts; stolen or misappropriated12
computer software information technology; violations13
A. It shall be unlawful for a person to develop or manufacture a product, or14
to develop or supply a service using stolen or misappropriated property, including15
but not limited to computer software that does not have the necessary copyright16
licenses, where that product or service is sold or offered for sale in competition with17
those doing business in this state.18
As used in this Section, the following words, terms, and phrases have the19
meaning ascribed to them, unless the context clearly indicates a different meaning:20 HLS 11RS-387 ORIGINAL
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(1) "Article or product" means any tangible article or product, but excludes:1
(a) Any services sold, offered for sale, or made available in this state,2
including free services and online services.3
(b) Any product subject to regulation by the United States Food and Drug4
Administration and that is primarily used for medical or medicinal purposes.5
(c) Food and beverages.6
(d) Restaurant services.7
(2) "Copyrightable end product" means a work within the subject matter of8
copyright as specified by Section 102 of the United States Copyright Act.9
(3) "Essential component" means a component of an article or product10
provided or to be provided to a third party pursuant to a contract, including a11
purchase order, without which the article or product will not perform as intended and12
for which there is no substitute component available that offers a comparable range13
and quality of functionalities and is available in comparable quantities and at a14
comparable price.15
(4) "Manufacture" means to directly manufacture, produce, or assemble an16
article or product subject to Subsection B of this Section, in whole or substantial part,17
but does not include contracting with or otherwise engaging another person, or that18
person engaging another person, to develop, manufacture, produce, or assemble an19
article or product subject to Subsection B of this Section.20
(5) "Material competitive injury" means at least a three percent retail price21
difference between the article or product made in violation of Subsection B of this22
Section designed to harm competition and a directly competing article or product23
that was manufactured without the use of stolen or misappropriated information24
technology, with such a price difference occurring over a four-month period of time.25
(6) "Retail price" means the retail price of stolen or misappropriated26
information technology charged at the time of, and in the jurisdiction where, the27
alleged theft or misappropriation occurred, multiplied by the number of stolen or28 HLS 11RS-387 ORIGINAL
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misappropriated items used in the business operations of the person alleged to have1
violated Subsection B of this Section.2
(7)(a) "Stolen or misappropriated information technology" means hardware3
or software that the person referred to in Subsection B of this Section acquired,4
appropriated, or used without the authorization of the owner of the information5
technology or the owner's authorized licensee in violation of applicable law, but shall6
not include situations in which the hardware or software alleged to have been stolen7
or misappropriated was not available for retail purchase on a stand-alone basis at or8
before the time it was acquired, appropriated, or used by such a person.9
(b) Information technology shall be considered to be used in a person's10
business operations if the person uses the technology in the manufacture,11
distribution, marketing, or sales of the articles or products subject to Subsection B12
of this Section.13
B. Any violation of this Section shall be an unfair method of competition and14
unfair practice or act and shall subject the violator to any and all actions and15
penalties provided for in this Chapter. For the purpose of this Section, a violation16
shall occur each time such a product or service is sold or offered for sale.17
Any person who manufactures an article or product while using stolen or18
misappropriated information technology in its business operations after notice and19
opportunity to cure as provided in Subsection E of this Section and, with respect to20
remedies sought under Paragraph (F)(6) or Subsection G of this Section, causes a21
material competitive injury as a result of such use of stolen or misappropriated22
information technology, shall be deemed to engage in an unfair act where such an23
article or product is sold or offered for sale in this state, either separately or as a24
component of another article or product, and in competition with an article or25
product sold or offered for sale in this state that was manufactured without violating26
this Subsection. A person who engages in such an unfair act, and any articles or27
products manufactured by the person in violation of this Subsection, shall be subject28
to the liabilities and remedial provisions of this Section in an action by the attorney29 HLS 11RS-387 ORIGINAL
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general or any person described in Paragraph (F)(5) of this Section, except as1
provided in Subsections C through I of this Section.2
C. No action shall be brought pursuant to this Section, and no liability3
results, where:4
(1) The end article or end product sold or offered for sale in this state and5
alleged to violate Subsection B of this Section is any of the following:6
(a) A copyrightable end product.7
(b) Merchandise manufactured by or on behalf of, or pursuant to a license8
from, a copyright owner and which displays or embodies a name, character, artwork,9
or other indicia of or from a work that falls within Subparagraph (a) of this10
Paragraph, or merchandise manufactured by or on behalf of, or pursuant to a license11
from, a copyright or trademark owner and that displays or embodies a name,12
character, artwork, or other indicia of or from a theme park, theme park attraction,13
or other facility associated with a theme park.14
(c) Packaging, carrier media, or promotional or advertising materials for any15
end article, end product, or merchandise that falls within Subparagraph (a) or (b) of16
this Paragraph.17
(2) The allegation that the information technology is stolen or18
misappropriated is based on a claim that the information technology or its use19
infringes a patent or misappropriates a trade secret under applicable law or that could20
be brought pursuant to any provision of Title 35 of the United States Code.21
(3) The allegation that the information technology is stolen or22
misappropriated is based on a claim that the defendant's use of the information23
technology violates the terms of a license that allows users to modify and redistribute24
any source code associated with the technology free of charge.25
(4) The allegation is based on a claim that the person violated Subsection B26
of this Section by aiding, abetting, facilitating, or assisting someone else to acquire,27
appropriate, use, sell, or offer to sell, or by providing someone else with access to,28 HLS 11RS-387 ORIGINAL
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information technology without authorization of the owner of the information1
technology or the owner's authorized licensee in violation of applicable law.2
D. No injunction shall issue against a person other than the person3
adjudicated to have violated Subsection B of this Section, and no attachment order4
shall issue against articles or products other than articles or products in which the5
person alleged to violate Subsection B of this Section holds title. A person other6
than the person alleged to violate Subsection B of this Section includes any person7
other than the actual manufacturer who contracts with or otherwise engages another8
person to develop, manufacture, produce, market, distribute, advertise, or assemble9
an article or product alleged to violate Subsection B of this Section.10
E.(1) No action shall be brought pursuant to Subsection B of this Section11
unless the person subject to Subsection B of this Section received written notice of12
the alleged use of the stolen or misappropriated information technology from the13
owner or exclusive licensee of the information technology or the owner's agent and14
the person either failed to establish that its use of the information technology in15
question did not violate Subsection B of this Section or failed, within ninety days16
after receiving such a notice, to cease use of the owner's stolen or misappropriated17
information technology; however, if the person commences and thereafter proceeds18
diligently to replace the information technology with information technology whose19
use would not violate Subsection B of this Section, such a period shall be extended20
for an additional period of ninety days, not to exceed one hundred eighty days total.21
The information technology owner or the owner's agent may extend any period22
described in this Subsection.23
(2) To satisfy the requirements of this Subsection, written notice shall, under24
penalty of perjury, do the following:25
(a) Identify the stolen or misappropriated information technology.26
(b) Identify the lawful owner or exclusive licensee of the information27
technology.28 HLS 11RS-387 ORIGINAL
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(c) Identify the applicable law the person is alleged to be violating and state1
that the notifier has a reasonable belief that the person has acquired, appropriated,2
or used the information technology in question without authorization of the owner3
of the information technology or the owner's authorized licensee in violation of such4
applicable law.5
(d) To the extent known by the notifier, state the manner in which the6
information technology is being used by the defendant.7
(e) State the articles or products to which the information technology relates.8
(f) Specify the basis and the particular evidence upon which the notifier bases9
the allegation.10
(3) The written notification shall state, under penalty of perjury, that, after a11
reasonable and good faith investigation, the information in the notice is accurate12
based on the notifier's reasonable knowledge, information, and belief.13
F.(1) No earlier than ninety days after the provision of notice in accordance14
with Subsection E of this Section, the attorney general, or any person described in15
Paragraph (5) of this Subsection, may bring an action against any person that is16
subject to Subsection B of this Section:17
(a) To enjoin a violation of Subsection B of this Section, including by18
enjoining the person from selling or offering to sell in this state articles or products19
that are subject to Subsection B of this Section, except as provided in Paragraph (6)20
of this Subsection; however, such an injunction does not encompass articles or21
products to be provided to a third party that establishes that such a third party has22
satisfied one or more of the affirmative defenses set forth in Paragraph (H)(1) of this23
Section with respect to the manufacturer alleged to have violated Subsection B of24
this Section.25
(b) Only after a determination by the court that the person has violated26
Subsection B of this Section, to recover the greater of:27
(i) Actual damages, which may be imposed only against the person who28
violated Subsection B of this Section.29 HLS 11RS-387 ORIGINAL
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(ii) Statutory damages of no more than the retail price of the stolen or1
misappropriated information technology, which may be imposed only against the2
person who violated Subsection B of this Section.3
(c) In the event the person alleged to have violated Subsection B of this4
Section has been subject to a final judgment or has entered into a final settlement,5
or any products manufactured by such a person and alleged to violate Subsection B6
of this Section have been the subject of an injunction or attachment order, in any7
federal or state court in this state or any other state, arising out of the same theft or8
misappropriation of information technology, the court shall dismiss the action. If9
such a person is a defendant in an ongoing action, or any products manufactured by10
such a person and alleged to violate Subsection B of this Section are the subject of11
an ongoing injunction or attachment order, in any federal or state court in this state12
or any other state, arising out of the same theft or misappropriation of information13
technology, the court shall stay the action against such a person pending resolution14
of the other action. In the event the other action results in a final judgment or final15
settlement, the court shall dismiss the action against the person.16
(2) After determination by the court that a person has violated Subsection B17
of this Section and entry of a judgment against the person for violating Subsection18
B of this Section, the attorney general, or a person described in Paragraph (5) of this19
Subsection, may add to the action a claim for actual damages against a third party20
who sells or offers to sell in this state products made by that person in violation of21
Subsection B of this Section, subject to the provisions of Subsection H of this22
Section; however, damages may be imposed against a third party only if:23
(a) The third party was provided a copy of a written notice sent to the person24
alleged to have violated Subsection B of this Section that satisfies the requirements25
of Subsection E of this Section at least ninety days prior to the entry of the judgment.26
(b) The person who violated Subsection B of this Section did not make an27
appearance or does not have sufficient attachable assets to satisfy a judgment against28
the person.29 HLS 11RS-387 ORIGINAL
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(c) Such a person either manufactured the final product or produced a1
component equal to thirty percent or more of the value of the final product.2
(d) Such a person has a direct contractual relationship with the third party3
respecting the manufacture of the final product or component.4
(e) The third party has not been subject to a final judgment in any federal or5
state court in this state or any other state arising out of the same theft or6
misappropriation of information technology; however, in the event the third party is7
a party to an ongoing suit for damages, or has entered an appearance as an interested8
third party in proceedings in rem, in any federal or state court in this state or any9
other state arising out of the same theft or misappropriation of information10
technology, the court shall stay the action against the third party pending resolution11
of the other action. In the event the other action results in a final judgment, the court12
shall dismiss the action against the third party and any in rem action as to any articles13
or products manufactured for such a third party or that have been or are to be14
supplied to such a third party.15
(3) An award of damages against a third party pursuant to Paragraph (2) of16
this Subsection shall be the lesser of the retail price of the stolen or misappropriated17
information technology at issue or two hundred fifty thousand dollars, less any18
amounts recovered from the person adjudicated to have violated Subsection B of this19
Section, and Subparagraph (4)(a) of this Subsection shall not apply to such an award20
or recovery against the third party.21
(4) In an action pursuant to this Section, a court may:22
(a) Against the person adjudicated to have violated Subsection B of this23
Section, increase the damages up to three times the damages authorized by24
Subparagraph (1)(b) of this Subsection where the court finds that the person's use of25
the stolen or misappropriated information technology was willful.26
(b) With respect to an award pursuant to Paragraph (1) of this Subsection27
only, award costs and reasonable attorney fees to either of the following:28 HLS 11RS-387 ORIGINAL
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(i) A prevailing plaintiff in actions brought by an injured person pursuant to1
Subsection B of this Section.2
(ii) A prevailing defendant in actions brought by an allegedly injured person.3
(c) With respect to an action pursuant to Paragraph (2) of this Subsection4
brought by a private plaintiff only, award costs and reasonable attorney fees to a5
third party who qualifies for an affirmative defense pursuant to Subsection H of this6
Section; however, in a case in which the third party received a copy of the7
notification described in Subparagraph (2)(a) of this Subsection at least ninety days8
before the filing of the action pursuant to Paragraph (2) of this Subsection, with9
respect to a third party's reliance on the affirmative defenses set forth in10
Subparagraphs (H)(1)(c) and (d) of this Section, the court may award costs and11
reasonable attorney fees only if all of the conduct on which the affirmative defense12
is based was undertaken by the third party, and the third party notified the plaintiff13
of the conduct, prior to the end of the ninety-day period.14
(5) A person shall be deemed to have been injured by the sale or offer for sale15
of a directly competing article or product subject to Subsection B of this Section if16
the person establishes by a preponderance of the evidence that:17
(a) The person manufactures articles or products that are sold or offered for18
sale in this state in direct competition with articles or products that are subject to19
Subsection B of this Section.20
(b) The person's articles or products were not manufactured using stolen or21
misappropriated information technology of the owner of the information technology.22
(c) The person suffered economic harm, which may be shown by evidence23
that the retail price of the stolen or misappropriated information technology was24
twenty thousand dollars or more.25
(d) If the person is proceeding in rem or seeks injunctive relief, that the26
person suffered material competitive injury as a result of the violation of Subsection27
B of this Section.28 HLS 11RS-387 ORIGINAL
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(6)(a) If the court determines that a person found to have violated Subsection1
B of this Section lacks sufficient attachable assets in this state to satisfy a judgment2
rendered against it, the court may enjoin the sale or offering for sale in this state of3
any articles or products subject to Subsection B of this Section, except as provided4
in Subsection D of this Section.5
(b) To the extent that an article or product subject to Subsection B of this6
Section is an essential component of a third party's article or product, the court shall7
deny injunctive relief as to the essential component, provided that the third party has8
undertaken good faith efforts within the third party's rights under its applicable9
contract with the manufacturer to direct the manufacturer of the essential component10
to cease the theft or misappropriation of information technology in violation of11
Subsection B of this Section, which may be satisfied, without limitation, by the third12
party issuing a written directive to the manufacturer demanding that it cease the theft13
or misappropriation and demanding that the manufacturer provide the third party14
with copies of invoices, purchase orders, licenses, or other verification of lawful use15
of the information technology at issue.16
(7) The court shall determine whether a cure period longer than the period17
reflected in Subsection E of this Section would be reasonable given the nature of the18
use of the information technology that is the subject of the action and the time19
reasonably necessary either to bring such use into compliance with applicable law20
or to replace the information technology with information technology that would not21
violate Subsection B of this Section. If the court deems that a longer cure period22
would be reasonable, then the action shall be stayed until the end of that longer cure23
period. If by the end of that longer cure period, the defendant has established that24
its use of the information technology in question did not violate Subsection B of this25
Section, or the defendant ceased use of the stolen or misappropriated information26
technology, then the action shall be dismissed.27
G.(1) In a case in which the court is unable to obtain personal jurisdiction28
over a person subject to Subsection B of this Section, the court may proceed in rem29 HLS 11RS-387 ORIGINAL
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against any articles or products subject to Subsection B of this Section, sold or1
offered for sale in this state in which the person alleged to have violated Subsection2
B of this Section holds title. Except as provided in Subsection D of this Section and3
Paragraphs (2) through (4) of this Subsection, all such articles or products are subject4
to attachment at or after the time of filing a complaint, regardless of the availability5
or amount of any monetary judgment.6
(2) At least ninety days prior to the enforcement of an attachment order7
against articles or products pursuant to Paragraph (1) of this Subsection, the court8
shall notify any person in possession of the articles or products of the pending9
attachment order. Prior to the expiration of the ninety-day period, any person for10
whom the articles or products were manufactured, or to whom the articles or11
products have been or are to be supplied, pursuant to an existing contract or purchase12
order, may do either of the following:13
(a) Establish that the person has satisfied one or more of the affirmative14
defenses set forth in Paragraph (H)(1) of this Section with respect to the15
manufacturer alleged to have violated Subsection B of this Section, in which case the16
attachment order shall be dissolved only with respect to those articles or products17
that were manufactured for such a person, or have been or are to be supplied to such18
a person, pursuant to an existing contract or purchase order.19
(b) Post a bond with the court equal to the retail price of the allegedly stolen20
or misappropriated information technology or twenty-five thousand dollars,21
whichever is less, in which case the court shall stay enforcement of the attachment22
order against the articles or products and shall proceed on the basis of its jurisdiction23
over the bond. The person posting the bond shall recover the full amount of such24
bond, plus interest, after the issuance of a final judgment.25
(3) In the event the person posting the bond pursuant to Subparagraph (2)(b)26
of this Subsection is entitled to claim an affirmative defense in Subsection H of this27
Section, and that person establishes with the court that the person is entitled to any28
affirmative defense, the court shall award costs and reasonable attorney fees to the29 HLS 11RS-387 ORIGINAL
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person posting the bond and against the plaintiff in the event the plaintiff proceeds1
with an action pursuant to Paragraph (F)(2) of this Section against the person posting2
the bond.3
(4) In the event that the court does not provide notification as described in4
Paragraph (2) of this Subsection, the court, upon motion of any third party, shall stay5
the enforcement of the attachment order for ninety days as to articles or products6
manufactured for the third party, or that have been or are to be supplied to the third7
party, pursuant to an existing contract or purchase order, during which ninety-day8
period the third party may avail itself of the options set forth in Subparagraphs (2)(a)9
and (b) of this Subsection.10
H.(1) A court shall not award damages against any third party pursuant to11
Paragraph (F)(2) of this Section where that party, after having been afforded12
reasonable notice of at least ninety days and opportunity to plead any of the13
affirmative defenses set forth in this Subsection, establishes by a preponderance of14
the evidence any of the following:15
(a) Such a person is the end consumer or end user of an article or product16
subject to Subsection B of this Section, or acquired the article or product after its sale17
to an end consumer or end user.18
(b) Such a person is a business with annual revenues not in excess of fifty19
million dollars.20
(c)(i) The person acquired the articles or products in good faith reliance on21
either a code of conduct or other written document that governs the person's22
commercial relationships with the manufacturer adjudicated to have violated23
Subsection B of this Section and which includes commitments, such as general24
commitments to comply with applicable laws, that prohibit use of the stolen or25
misappropriated information technology by the manufacturer or written assurances26
from the manufacturer of the articles or products that the articles or products, to the27
manufacturer's reasonable knowledge, were manufactured without the use of stolen28
or misappropriated information technology in the manufacturer's business29 HLS 11RS-387 ORIGINAL
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operations; however, within one hundred eighty days of receiving written notice of1
the judgment against the manufacturer for a violation of Subsection B of this Section2
and a copy of a written notice that satisfies the requirements of Subsection E of this3
Section, the person shall undertake commercially reasonable efforts to do any of the4
following:5
(aa) Exchange written correspondence confirming that the manufacturer is6
not using the stolen or misappropriated information technology in violation of7
Subsection B of this Section, which may be satisfied, without limitation, by8
obtaining written assurances from the manufacturer accompanied by copies of9
invoices, purchase orders, licenses, or other verification of lawful use of the10
information technology at issue.11
(bb) Direct the manufacturer to cease the theft or misappropriation, which12
may be satisfied, without limitation, by the third party issuing a written directive to13
the manufacturer demanding that it cease the theft or misappropriation and14
demanding that the manufacturer provide the third party with copies of invoices,15
purchase orders, licenses, or other verification of lawful use of the information16
technology at issue.17
(cc) In a case in which the manufacturer has failed to cease the theft or18
misappropriation within the one hundred eighty day period, and the third party has19
not fulfilled either good faith option listed in Item (c)(i) of this Paragraph, prevent20
the future acquisition of the articles or products from the manufacturer during the21
period that the manufacturer continues to engage in the theft or misappropriation22
subject to Subsection B of this Section where doing so would not constitute a breach23
of an agreement between the person and the manufacturer for the manufacture of the24
articles or products in question that was entered into on or before one hundred eighty25
days after the effective date of this Section.26
(ii) The person acquired the articles or products pursuant to an agreement27
between the person and a manufacturer for the manufacture of the articles or28
products in question that was entered into before one hundred eighty days after the29 HLS 11RS-387 ORIGINAL
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effective date of this Section; however, within one hundred eighty days of receiving1
written notice of the judgment against the manufacturer for a violation of Subsection2
B of this Section and a copy of a written notice that satisfies the requirements of3
Subsection E of this Section, the person shall undertake commercially reasonable4
efforts to do any of the following:5
(aa) Obtain from the manufacturer written assurances that the manufacturer6
is not using the stolen or misappropriated information technology in violation of7
Subsection B of this Section, which may be satisfied, without limitation, by8
obtaining written assurances from the manufacturer accompanied by copies of9
invoices, purchase orders, licenses, or other verification of lawful use of the10
information technology at issue.11
(bb) Direct the manufacturer to cease the theft or misappropriation, which12
may be satisfied, without limitation, by the third party issuing a written directive to13
the manufacturer demanding that it cease the theft or misappropriation and14
demanding that the manufacturer provide the third party with copies of invoices,15
purchase orders, licenses, or other verification of lawful use of the information16
technology at issue.17
(cc) In a case in which the manufacturer has failed to cease the theft or18
misappropriation within the one hundred eighty day period, and the third party has19
not fulfilled either Subitem (c)(ii)(aa) or (bb) of this Paragraph, cease the future20
acquisition of the articles or products from the manufacturer during the period that21
the manufacturer continues to engage in the theft or misappropriation subject to22
Subsection B of this Section where doing so would not constitute a breach of the23
agreement.24
(d) The person has made commercially reasonable efforts to implement25
practices and procedures to require its direct manufacturers, in manufacturing articles26
or products for such person, not to use stolen or misappropriated information27
technology in violation of Subsection B of this Section. A person may satisfy this28
requirement by either:29 HLS 11RS-387 ORIGINAL
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(i) Adopting and undertaking commercially reasonable efforts to implement1
a code of conduct or similar written requirements, which are applicable to the2
person's direct manufacturers, that prohibit the use of stolen or misappropriated3
information technology by the manufacturer, subject to a right of audit, and the4
person either:5
(aa) Has a practice of auditing its direct manufacturers on a periodic basis in6
accordance with generally accepted industry standards.7
(bb) Requires in its agreements with its direct manufacturers that they submit8
to audits by a third party, which may include a third-party association of businesses9
representing the owner of the stolen or misappropriated intellectual property, and10
further provides that a failure to remedy any deficiencies found in an audit that11
constitute a violation of the applicable law of the jurisdiction where the deficiency12
occurred constitutes a breach of the contract, subject to cure within a reasonable13
period of time.14
(ii) Adopting and undertaking commercially reasonable efforts to implement15
a code of conduct or similar written requirements, which are applicable to the16
person's direct manufacturers, that prohibit use of stolen or misappropriated17
information technology by the manufacturer, and the person undertakes practices and18
procedures to address compliance with the prohibition against the use of the stolen19
or misappropriated information technology in accordance with the applicable code20
of conduct or written requirements.21
(e) The person does not have a contractual relationship with the person22
alleged to have violated Subsection B of this Section respecting the manufacture of23
the articles or products alleged to have been manufactured in violation of Subsection24
B of this Section.25
(2) A third party shall have the opportunity to be heard regarding whether an26
article or product is an essential component provided or to be provided to a third27
party, and shall have the right to file a motion to dismiss any action brought against28
it pursuant to Paragraph (F)(2) of this Section.29 HLS 11RS-387 ORIGINAL
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are additions.
(3) The court shall not enforce any award for damages against a third party1
until after the court has ruled on that party's claim of eligibility for any of the2
affirmative defenses set out in this Section, and prior to such a ruling may allow3
discovery, in an action pursuant to Paragraph (F)(2) of this Section, only on the4
particular defenses raised by the third party.5
(4) The court shall allow discovery against a third party on an issue only after6
all discovery on that issue between the parties has been completed and only if the7
evidence produced as a result of the discovery does not resolve an issue of material8
dispute between the parties.9
(5) Any confidential or otherwise sensitive information submitted by a party10
pursuant to this Subsection shall be subject to a protective order.11
I. A court shall not enforce an award of damages against a third party12
pursuant to Paragraph (F)(2) of this Section for a period of eighteen months from the13
effective date of this Section.14
J. The remedies provided pursuant to this Section are the exclusive remedies15
for the parties.16
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
Foil HB No. 231
Abstract: Prohibits the use of stolen or misappropriated information technology.
Present law provides that it shall be unlawful for a person to develop or manufacture a
product, or to develop or supply a service using stolen or misappropriated property,
including but not limited to computer software that does not have the necessary copyright
licenses, where that product or service is sold or offered for sale in competition with those
doing business in this state.
Proposed law repeals present law.
Proposed law defines "article or product" as any tangible article or product, but excludes:
(1)Any services sold, offered for sale, or made available in this state, including free
services and online services.
(2)Any product subject to regulation by the U.S. Food and Drug Administration and
that is primarily used for medical or medicinal purposes. HLS 11RS-387 ORIGINAL
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(3)Food and beverages.
(4)Restaurant services.
Proposed law defines "copyrightable end product" as a work within the subject matter of
copyright as specified by Section 102 of the U.S. Copyright Act.
Proposed law defines "essential component" as a component of an article or product
provided or to be provided to a third party pursuant to a contract, including a purchase order,
without which the article or product will not perform as intended and for which there is no
substitute component available that offers a comparable range and quality of functionalities
and is available in comparable quantities and at a comparable price.
Proposed law provides that "manufacture" means to directly manufacture, produce, or
assemble an article or product subject to proposed law, in whole or substantial part, but does
not include contracting with or otherwise engaging another person, or that person engaging
another person, to develop, manufacture, produce, or assemble an article or product subject
to proposed law.
Proposed law defines "material competitive injury" as at least a 3% retail price difference
between the article or product made in violation of proposed law designed to harm
competition and a directly competing article or product that was manufactured without the
use of stolen or misappropriated information technology, with such a price difference
occurring over a four-month period of time.
Proposed law defines "retail price" as the retail price of stolen or misappropriated
information technology charged at the time of, and in the jurisdiction where, the alleged theft
or misappropriation occurred, multiplied by the number of stolen or misappropriated items
used in the business operations of the person alleged to have violated proposed law.
Proposed law defines "stolen or misappropriated information technology" as hardware or
software that the person referred to in proposed law acquired, appropriated, or used without
the authorization of the owner of the information technology or the owner's authorized
licensee in violation of applicable law, but shall not include situations in which the hardware
or software alleged to have been stolen or misappropriated was not available for retail
purchase on a stand-alone basis at or before the time it was acquired, appropriated, or used
by such a person.
Proposed law provides that information technology shall be considered to be used in a
person's business operations if the person uses the technology in the manufacture,
distribution, marketing, or sales of the articles or products subject to proposed law.
Present law provides that any violation of present law shall be an unfair method of
competition and unfair practice or act and shall subject the violator to any and all actions and
penalties provided for in present law. For the purpose of present law, a violation shall occur
each time such a product or service is sold or offered for sale.
Proposed law repeals present law.
Proposed law provides that any person who manufactures an article or product while using
stolen or misappropriated information technology in its business operations after notice and
opportunity to cure as provided in proposed law and, with respect to remedies sought under
proposed law, causes a material competitive injury as a result of such use of stolen or
misappropriated information technology, shall be deemed to engage in an unfair act where
such an article or product is sold or offered for sale in this state, either separately or as a
component of another article or product, and in competition with an article or product sold
or offered for sale in this state that was manufactured without violating proposed law. HLS 11RS-387 ORIGINAL
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are additions.
Proposed law further provides that a person who engages in such an unfair act, and any
articles or products manufactured by the person in violation of proposed law, shall be subject
to the liabilities and remedial provisions of proposed law in an action by the attorney general
or any person described in proposed law, except as provided in proposed law.
Proposed law provides that no action shall be brought pursuant to proposed law, and no
liability results, where:
(1)The end article or end product sold or offered for sale in this state and alleged to
violate proposed law is any of the following:
(a)A copyrightable end product.
(b)Merchandise manufactured by or on behalf of, or pursuant to a license from,
a copyright owner and which displays or embodies a name, character,
artwork, or other indicia of or from a work that falls within proposed law, or
merchandise manufactured by or on behalf of, or pursuant to a license from,
a copyright or trademark owner and that displays or embodies a name,
character, artwork, or other indicia of or from a theme park, theme park
attraction, or other facility associated with a theme park.
(c)Packaging, carrier media, or promotional or advertising materials for any end
article, end product, or merchandise that falls within proposed law.
(2)The allegation that the information technology is stolen or misappropriated is based
on a claim that the information technology or its use infringes a patent or
misappropriates a trade secret under applicable law or that could be brought under
any provision of Title 35 of the U.S. Code.
(3)The allegation that the information technology is stolen or misappropriated is based
on a claim that the defendant's use of the information technology violates the terms
of a license that allows users to modify and redistribute any source code associated
with the technology free of charge.
(4)The allegation is based on a claim that the person violated proposed law by aiding,
abetting, facilitating, or assisting someone else to acquire, appropriate, use, sell, or
offer to sell, or by providing someone else with access to, information technology
without authorization of the owner of the information technology or the owner's
authorized licensee in violation of applicable law.
Proposed law provides that no injunction shall issue against a person other than the person
adjudicated to have violated proposed law, and no attachment order shall issue against
articles or products other than articles or products in which the person alleged to violate
proposed law holds title. A person other than the person alleged to violate proposed law
includes any person other than the actual manufacturer who contracts with or otherwise
engages another person to develop, manufacture, produce, market, distribute, advertise, or
assemble an article or product alleged to violate proposed law.
Proposed law provides that no action shall be brought under proposed law unless the person
subject to proposed law received written notice of the alleged use of the stolen or
misappropriated information technology from the owner or exclusive licensee of the
information technology or the owner's agent and the person either failed to establish that its
use of the information technology in question did not violate proposed law or failed, within
90 days after receiving such a notice, to cease use of the owner's stolen or misappropriated
information technology.
Proposed law provides that if the person commences and thereafter proceeds diligently to
replace the information technology with information technology whose use would not HLS 11RS-387 ORIGINAL
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violate proposed law, such a period shall be extended for an additional period of 90 days, not
to exceed 180 days total. The information technology owner or the owner's agent may
extend any period described in proposed law.
Proposed law requires the written notice to, under penalty of perjury, do the following:
(1)Identify the stolen or misappropriated information technology.
(2)Identify the lawful owner or exclusive licensee of the information technology.
(3)Identify the applicable law the person is alleged to be violating and state that the
notifier has a reasonable belief that the person has acquired, appropriated, or used the
information technology in question without authorization of the owner of the
information technology or the owner's authorized licensee in violation of such
applicable law.
(4)To the extent known by the notifier, state the manner in which the information
technology is being used by the defendant.
(5)State the articles or products to which the information technology relates.
(6)Specify the basis and the particular evidence upon which the notifier bases the
allegation.
Proposed law requires the written notification to state, under penalty of perjury, that, after
a reasonable and good-faith investigation, the information in the notice is accurate based on
the notifier's reasonable knowledge, information, and belief.
Proposed law provides that no earlier than 90 days after the provision of notice in
accordance with proposed law, the attorney general, or any person described in proposed
law, may bring an action against any person that is subject to proposed law:
(1)To enjoin a violation of proposed law, including by enjoining the person from selling
or offering to sell in this state articles or products that are subject to proposed law,
except as provided in proposed law; however, such an injunction does not encompass
articles or products to be provided to a third party that establishes that such a third
party has satisfied one or more of the affirmative defenses set forth in proposed law
with respect to the manufacturer alleged to have violated proposed law.
(2)Only after a determination by the court that the person has violated proposed law, to
recover the greater of:
(a)Actual damages, which may be imposed only against the person who violated
proposed law.
(b)Statutory damages of no more than the retail price of the stolen or
misappropriated information technology, which may be imposed only against
the person who violated proposed law.
Proposed law provides that in the event the person alleged to have violated proposed law has
been subject to a final judgment or has entered into a final settlement, or any products
manufactured by such a person and alleged to violate proposed law have been the subject
of an injunction or attachment order, in any federal or state court in this state or any other
state, arising out of the same theft or misappropriation of information technology, the court
shall dismiss the action.
Proposed law further provides that if such a person is a defendant in an ongoing action, or
any products manufactured by such a person and alleged to violate proposed law are the HLS 11RS-387 ORIGINAL
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are additions.
subject of an ongoing injunction or attachment order, in any federal or state court in this state
or any other state, arising out of the same theft or misappropriation of information
technology, the court shall stay the action against such a person pending resolution of the
other action. In the event the other action results in a final judgment or final settlement, the
court shall dismiss the action against the person.
Proposed law provides that, after determination by the court that a person has violated
proposed law and entry of a judgment against the person for violating proposed law, the
attorney general, or a person described in proposed law, may add to the action a claim for
actual damages against a third party who sells or offers to sell in this state products made by
that person in violation of proposed law, subject to the provisions of proposed law.
Proposed law provides that damages may be imposed against a third party only if:
(1)The third party was provided a copy of a written notice sent to the person alleged to
have violated proposed law that satisfies the requirements of proposed law at least
90 days prior to the entry of the judgment.
(2)The person who violated proposed law did not make an appearance or does not have
sufficient attachable assets to satisfy a judgment against the person.
(3)Such a person either manufactured the final product or produced a component equal
to 30% or more of the value of the final product.
(4)Such a person has a direct contractual relationship with the third party respecting the
manufacture of the final product or component.
(5)The third party has not been subject to a final judgment in any federal or state court
in this state or any other state arising out of the same theft or misappropriation of
information technology; however, in the event the third party is a party to an ongoing
suit for damages, or has entered an appearance as an interested third party in
proceedings in rem, in any federal or state court in this state or any other state arising
out of the same theft or misappropriation of information technology, the court shall
stay the action against the third party pending resolution of the other action. In the
event the other action results in a final judgment, the court shall dismiss the action
against the third party and any in rem action as to any articles or products
manufactured for such a third party or that have been or are to be supplied to such
a third party.
Proposed law provides that an award of damages against a third party pursuant to proposed
law shall be the lesser of the retail price of the stolen or misappropriated information
technology at issue or $250,000, less any amounts recovered from the person adjudicated
to have violated proposed law, and proposed law shall not apply to such an award or
recovery against the third party.
Proposed law provides that, in an action pursuant to proposed law, a court may:
(1)Against the person adjudicated to have violated proposed law, increase the damages
up to three times the damages authorized by proposed law where the court finds that
the person's use of the stolen or misappropriated information technology was willful.
(2)With respect to certain awards pursuant to proposed law, award costs and reasonable
attorney fees to either of the following:
(a)A prevailing plaintiff in actions brought by an injured person pursuant to
proposed law.
(b)A prevailing defendant in actions brought by an allegedly injured person. HLS 11RS-387 ORIGINAL
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(3)With respect to an action pursuant to proposed law brought by a private plaintiff
only, award costs and reasonable attorney fees to a third party who qualifies for an
affirmative defense pursuant to proposed law; however, in a case in which the third
party received a copy of the notification described in proposed law at least 90 days
before the filing of the action pursuant to proposed law, with respect to a third party's
reliance on certain affirmative defenses set forth in proposed law, the court may
award costs and reasonable attorney fees only if all of the conduct on which the
affirmative defense is based was undertaken by the third party, and the third party
notified the plaintiff of the conduct, prior to the end of the 90-day period.
Proposed law provides that a person shall be deemed to have been injured by the sale or
offer for sale of a directly competing article or product subject to proposed law if the person
establishes by a preponderance of the evidence that:
(1)The person manufactures articles or products that are sold or offered for sale in this
state in direct competition with articles or products that are subject to proposed law.
(2)The person's articles or products were not manufactured using stolen or
misappropriated information technology of the owner of the information technology.
(3)The person suffered economic harm, which may be shown by evidence that the retail
price of the stolen or misappropriated information technology was $20,000 or more.
(4)If the person is proceeding in rem or seeks injunctive relief, that the person suffered
material competitive injury as a result of the violation of proposed law.
Proposed law provides that if the court determines that a person found to have violated
proposed law lacks sufficient attachable assets in this state to satisfy a judgment rendered
against it, the court may enjoin the sale or offering for sale in this state of any articles or
products subject to proposed law, except as provided in proposed law.
Proposed law provides that, to the extent that an article or product subject to proposed law
is an essential component of a third party's article or product, the court shall deny injunctive
relief as to the essential component, provided that the third party has undertaken good faith
efforts within the third party's rights under its applicable contract with the manufacturer to
direct the manufacturer of the essential component to cease the theft or misappropriation of
information technology in violation of proposed law, which may be satisfied, without
limitation, by the third party issuing a written directive to the manufacturer demanding that
it cease the theft or misappropriation and demanding that the manufacturer provide the third
party with copies of invoices, purchase orders, licenses, or other verification of lawful use
of the information technology at issue.
Proposed law requires the court shall determine whether a cure period longer than the period
reflected in proposed law would be reasonable given the nature of the use of the information
technology that is the subject of the action and the time reasonably necessary either to bring
such use into compliance with applicable law or to replace the information technology with
information technology that would not violate proposed law.
Proposed law provides that if the court deems that a longer cure period would be reasonable,
then the action shall be stayed until the end of that longer cure period. If by the end of that
longer cure period, the defendant has established that its use of the information technology
in question did not violate proposed law, or the defendant ceased use of the stolen or
misappropriated information technology, then the action shall be dismissed.
Proposed law provides that, in a case in which the court is unable to obtain personal
jurisdiction over a person subject to proposed law, the court may proceed in rem against any
articles or products subject to proposed law, sold or offered for sale in this state in which the
person alleged to have violated proposed law holds title. Except as provided in proposed HLS 11RS-387 ORIGINAL
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are additions.
law, all such articles or products are subject to attachment at or after the time of filing a
complaint, regardless of the availability or amount of any monetary judgment.
Proposed law provides that, at least 90 days prior to the enforcement of an attachment order
against articles or products pursuant to proposed law the court shall notify any person in
possession of the articles or products of the pending attachment order. Prior to the expiration
of the 90-day period, any person for whom the articles or products were manufactured, or
to whom the articles or products have been or are to be supplied, pursuant to an existing
contract or purchase order, may do either of the following:
(1)Establish that the person has satisfied one or more of the affirmative defenses set
forth in proposed law with respect to the manufacturer alleged to have violated
proposed law, in which case the attachment order shall be dissolved only with
respect to those articles or products that were manufactured for such a person, or
have been or are to be supplied to such a person, pursuant to an existing contract or
purchase order.
(2)Post a bond with the court equal to the retail price of the allegedly stolen or
misappropriated information technology or $25,000, whichever is less, in which case
the court shall stay enforcement of the attachment order against the articles or
products and shall proceed on the basis of its jurisdiction over the bond. The person
posting the bond shall recover the full amount of such bond, plus interest, after the
issuance of a final judgment.
Proposed law provides that in the event the person posting the bond pursuant to proposed
law is entitled to claim an affirmative defense, and that person establishes with the court that
the person is entitled to any affirmative defense, the court shall award costs and reasonable
attorney fees to the person posting the bond and against the plaintiff in the event the plaintiff
proceeds with an action pursuant to proposed law against the person posting the bond.
Proposed law provides that in the event that the court does not provide notification as
described in proposed law, the court, upon motion of any third party, shall stay the
enforcement of the attachment order for 90 days as to articles or products manufactured for
the third party, or that have been or are to be supplied to the third party, pursuant to an
existing contract or purchase order, during which 90-day period the third party may avail
itself of the options set forth in proposed law.
Proposed law provides that a court shall not award damages against any third party pursuant
to proposed law where that party, after having been afforded reasonable notice of at least 90
days and opportunity to plead any of the affirmative defenses set forth in proposed law,
establishes by a preponderance of the evidence any of the following:
(1)Such a person is the end consumer or end user of an article or product subject to
proposed law, or acquired the article or product after its sale to an end consumer or
end user.
(2)Such a person is a business with annual revenues not in excess of $50 million
(3)The person acquired the articles or products:
(a)In good faith reliance on either a code of conduct or other written document
that governs the person's commercial relationships with the manufacturer
adjudicated to have violated proposed law and which includes commitments,
such as general commitments to comply with applicable laws, that prohibit
use of the stolen or misappropriated information technology by the
manufacturer or written assurances from the manufacturer of the articles or
products that the articles or products, to the manufacturer's reasonable
knowledge, were manufactured without the use of stolen or misappropriated HLS 11RS-387 ORIGINAL
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information technology in the manufacturer's business operations; however,
within 180 days of receiving written notice of the judgment against the
manufacturer for a violation of proposed law and a copy of a written notice
that satisfies the requirements of proposed law, the person shall undertake
commercially reasonable efforts to do any of the following:
(i)Exchange written correspondence confirming that the manufacturer
is not using the stolen or misappropriated information technology in
violation of proposed law, which may be satisfied, without limitation,
by obtaining written assurances from the manufacturer accompanied
by copies of invoices, purchase orders, licenses, or other verification
of lawful use of the information technology at issue.
(ii)Direct the manufacturer to cease the theft or misappropriation, which
may be satisfied, without limitation, by the third party issuing a
written directive to the manufacturer demanding that it cease the theft
or misappropriation and demanding that the manufacturer provide the
third party with copies of invoices, purchase orders, licenses, or other
verification of lawful use of the information technology at issue.
(iii)In a case in which the manufacturer has failed to cease the theft or
misappropriation within the 180 day period, and the third party has
not fulfilled either good faith option provided in proposed law,
prevent the future acquisition of the articles or products from the
manufacturer during the period that the manufacturer continues to
engage in the theft or misappropriation subject to proposed law where
doing so would not constitute a breach of an agreement between the
person and the manufacturer for the manufacture of the articles or
products in question that was entered into on or before 180 days after
the effective date of proposed law.
(b)Pursuant to an agreement between the person and a manufacturer for the
manufacture of the articles or products in question that was entered into
before 180 days after the effective date of proposed law; however, within 180
days of receiving written notice of the judgment against the manufacturer for
a violation of proposed law and a copy of a written notice that satisfies the
requirements of proposed law, the person shall undertake commercially
reasonable efforts to do any of the following:
(i)Obtain from the manufacturer written assurances that such a
manufacturer is not using the stolen or misappropriated information
technology in violation of proposed law, which may be satisfied,
without limitation, by obtaining written assurances from the
manufacturer accompanied by copies of invoices, purchase orders,
licenses, or other verification of lawful use of the information
technology at issue.
(ii)Direct the manufacturer to cease the theft or misappropriation, which
may be satisfied, without limitation, by the third party issuing a
written directive to the manufacturer demanding that it cease the theft
or misappropriation and demanding that the manufacturer provide the
third party with copies of invoices, purchase orders, licenses, or other
verification of lawful use of the information technology at issue.
(iii)In a case in which the manufacturer has failed to cease the theft or
misappropriation within the 180 day period, and the third party has
not fulfilled either of the previous two options, cease the future
acquisition of the articles or products from the manufacturer during HLS 11RS-387 ORIGINAL
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the period that the manufacturer continues to engage in the theft or
misappropriation subject to proposed law where doing so would not
constitute a breach of the agreement.
(4)The person has made commercially reasonable efforts to implement practices and
procedures to require its direct manufacturers, in manufacturing articles or products
for the person, not to use stolen or misappropriated information technology in
violation of proposed law. A person may satisfy this requirement by either:
(a)Adopting and undertaking commercially reasonable efforts to implement a
code of conduct or similar written requirements, which are applicable to the
person's direct manufacturers, that prohibit the use of stolen or
misappropriated information technology by the manufacturer, subject to a
right of audit, and the person either:
(i)Has a practice of auditing its direct manufacturers on a periodic basis
in accordance with generally accepted industry standards.
(ii)Requires in its agreements with its direct manufacturers that they
submit to audits by a third party, which may include a third-party
association of businesses representing the owner of the stolen or
misappropriated intellectual property, and further provides that a
failure to remedy any deficiencies found in an audit that constitute a
violation of the applicable law of the jurisdiction where the
deficiency occurred constitutes a breach of the contract, subject to
cure within a reasonable period of time.
(b)Adopting and undertaking commercially reasonable efforts to implement a
code of conduct or similar written requirements, which are applicable to the
person's direct manufacturers, that prohibit use of stolen or misappropriated
information technology by the manufacturer, and the person undertakes
practices and procedures to address compliance with the prohibition against
the use of the stolen or misappropriated information technology in
accordance with the applicable code of conduct or written requirements.
(5)The person does not have a contractual relationship with the person alleged to have
violated proposed law respecting the manufacture of the articles or products alleged
to have been manufactured in violation of proposed law.
Proposed law provides that a third party shall have the opportunity to be heard regarding
whether an article or product is an essential component provided or to be provided to a third
party, and shall have the right to file a motion to dismiss any action brought against it under
proposed law.
Proposed law prohibits the court from enforcing any award for damages against a third party
until after the court has ruled on that party's claim of eligibility for any of the affirmative
defenses set out in proposed law, and prior to such a ruling may allow discovery, in an action
under proposed law, only on the particular defenses raised by the third party.
Proposed law provides that the court shall allow discovery against a third party on an issue
only after all discovery on that issue between the parties has been completed and only if the
evidence produced as a result of the discovery does not resolve an issue of material dispute
between the parties.
Proposed law provides that any confidential or otherwise sensitive information submitted
by a party pursuant to proposed law shall be subject to a protective order. HLS 11RS-387 ORIGINAL
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Proposed law prohibits a court from enforcing an award of damages against a third party
pursuant to proposed law for a period of 18 months from the effective date of proposed law.
Proposed law provides that the remedies provided pursuant to proposed law are the exclusive
remedies for the parties.
(Amends R.S. 51:1427)