Microsoft may have gone a t-shirt too far. The company's latest effort to crackdown on those who benefit from the use of pirated versions of its software targets those who benefit indirectly -- the customers who purchase goods and services from others who used pirated software to produce the goods and services.

A measure making its way through the Washington state legislature would make it illegal for manufacturers that use pirated software to sell goods in the state. Sounds fair. But opponents say they interpret the bill to mean that Microsoft and others can sue US companies that use parts from overseas suppliers who used pirated software, according to the Seattle Times. The "bill would affect retailers that make $50 million or more in annual sales and that have a direct contract with the manufacturer. Retailers would have 18 months to change manufacturers or persuade their manufacturers to pay for software."

What might this look like? Groklaw, a news site covering free and open-source software issues, posted a scathing analysis of the law yesterday.

You heard me right. If a company overseas uses a pirated version of Excel, let's say, keeping track of how many parts it has shipped or whatever, and then sends some parts to General Motors or any large company to incorporate into the finished product, Microsoft can sue *not the overseas supplier* but General Motors, for unfair competition. So can the state's Attorney General. I kid you not. For piracy that was done by someone else, overseas. The product could be T shirts. It doesn't matter what it is, so long as it's manufactured with contributions from an overseas supplier, like in China, who didn't pay Microsoft for software that it uses somewhere in the business. It's the US company that has to pay damages, not the overseas supplier.

Microsoft calls Groklaw's take inaccurate. The company said:

The point around the Excel example referenced from the Groklaw piece is incorrect. Under the law, a company would have to steal/pirate a minimum of $20k of IP before someone could go after them for violation under the law. So in the example noted, where a company used one piece of pirated software, is not an accurate portrayal of how it works. Additionally, Microsoft can’t sue anyone under this legislation – only a manufacturer or State Attorney General can sue another manufacturer who is a competitor, with several key caveats. For example, under the right circumstances Weyerhaeuser could sue Kimberly-Clark, or Ford could sue Toyota, but Nike could not sue, say, Caterpillar or GM. And again, Microsoft or Autodesk or Adobe or whomever’s software gets pirated – none of them can sue, just the manufacturer who is injured by a competitor using stolen software

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The measure is opposed by the Washington Retail Association and some notable PC manufacturers -- Dell, IBM, Intel and Hewlett-Packard -- all of whom argue it holds them accountable for actions they can't control.

Brad Smith, Microsoft's General Counsel, countered that "companies in countries with lax intellectual-property protections laugh at Microsoft when it asks them to pay for software. ‘They tell us they have no intention of paying for something they can steal with immunity,' "

The Washington state House and Senate overwhelmingly passed respective versions of the bill (HB 1495 and SB 5449). Legislators are holding committee hearings to reconcile the two bills and pass a joint version. Louisiana lawmakers passed a similar measure last year.

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