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S.B. 201

             1     

PROTECTION AGAINST UNFAIR COMPETITION THROUGH

             2     
MISAPPROPRIATED TECHNOLOGY ACT

             3     
2011 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Curtis S. Bramble

             6     
House Sponsor: ____________

             7     
             8      LONG TITLE
             9      General Description:
             10          This bill enacts the Protection Against Unfair Competition through Misappropriation of
             11      Technology Act.
             12      Highlighted Provisions:
             13          This bill:
             14          .    defines and authorizes causes of action for manufacturing an article or product using
             15      misappropriated technology;
             16          .    requires an owner of technology to provide prior notice and gives someone alleged
             17      to be in violation an opportunity to eliminate the violation;
             18          .    provides for damages and other relief; and
             19          .    enacts related provisions.
             20      Money Appropriated in this Bill:
             21          None
             22      Other Special Clauses:
             23          None
             24      Utah Code Sections Affected:
             25      ENACTS:
             26          13-48-101, Utah Code Annotated 1953
             27          13-48-102, Utah Code Annotated 1953


             28          13-48-103, Utah Code Annotated 1953
             29          13-48-104, Utah Code Annotated 1953
             30          13-48-201, Utah Code Annotated 1953
             31          13-48-202, Utah Code Annotated 1953
             32          13-48-203, Utah Code Annotated 1953
             33          13-48-204, Utah Code Annotated 1953
             34          13-48-205, Utah Code Annotated 1953
             35          13-48-206, Utah Code Annotated 1953
             36          13-48-301, Utah Code Annotated 1953
             37          13-48-302, Utah Code Annotated 1953
             38          13-48-401, Utah Code Annotated 1953
             39          13-48-402, Utah Code Annotated 1953
             40          13-48-403, Utah Code Annotated 1953
             41          13-48-404, Utah Code Annotated 1953
             42          13-48-405, Utah Code Annotated 1953
             43          13-48-406, Utah Code Annotated 1953
             44     
             45      Be it enacted by the Legislature of the state of Utah:
             46          Section 1. Section 13-48-101 is enacted to read:
             47     
CHAPTER 48. PROTECTION AGAINST UNFAIR COMPETITION THROUGH

             48     
MISAPPROPRIATED TECHNOLOGY ACT

             49     
Part 1. General Provisions

             50          13-48-101. Title.
             51          This chapter is known as the "Protection Against Unfair Competition through
             52      Misappropriated Technology Act."
             53          Section 2. Section 13-48-102 is enacted to read:
             54          13-48-102. Definitions.
             55          As used in this chapter:
             56          (1) "Article or product":
             57          (a) means any tangible article or product; and
             58          (b) does not include:


             59          (i) a service, including a free or online service;
             60          (ii) a product that is:
             61          (A) subject to regulation by the United States Food and Drug Administration; and
             62          (B) used primarily for medical or medicinal purposes;
             63          (iii) a food or beverage; or
             64          (iv) a restaurant service.
             65          (2) "Liable defendant" means a person against whom judgment is entered in an action
             66      under Section 13-48-204 adjudicating the person to be liable under Subsection 13-48-201 (1).
             67          (3) "Manufacture":
             68          (a) means to make, produce, or assemble, in whole or in substantial part; and
             69          (b) does not include contracting with or otherwise engaging another person to make,
             70      produce, or assemble.
             71          (4) "Material competitive injury" means that over a period of at least two months an
             72      article or product that is manufactured using misappropriated technology has, as a result of the
             73      use of misappropriated technology, at least a 2% lower price than an article or product that is
             74      manufactured without using misappropriated technology.
             75          (5) "Misappropriated technology":
             76          (a) means technology that is acquired, appropriated, or used in violation of applicable
             77      law; and
             78          (b) does not include technology that is not available for retail purchase on a stand-alone
             79      basis at or before the time it is acquired, appropriated, or used.
             80          (6) "Retail price" means the price charged at the retail level for the technology at the
             81      time that, and in the jurisdiction where, the technology becomes misappropriated technology,
             82      multiplied by the number of items of misappropriated technology used in the business
             83      operations of the person who is claimed to be liable under Subsection 13-48-201 (1).
             84          (7) "Technology" means hardware or software.
             85          (8) "Technology owner" means the owner or exclusive licensee of the technology that
             86      becomes or is claimed to become misappropriated technology, and includes the authorized
             87      representative of the owner or exclusive licensee.
             88          (9) "Third party":
             89          (a) means a person other than a person claimed or determined to be liable under


             90      Subsection 13-48-201 (1); and
             91          (b) includes a person who contracts with or otherwise engages another person to
             92      develop, manufacture, market, distribute, or advertise an article or product that is wrongfully
             93      manufactured.
             94          (10) "Wrongfully manufactured" means manufactured under circumstances that meet
             95      the conditions stated under Subsection 13-48-201 (1)(a).
             96          Section 3. Section 13-48-103 is enacted to read:
             97          13-48-103. Other law.
             98          The rights and remedies provided for in this chapter are in addition to and independent
             99      of any rights and remedies available under Chapter 5, Unfair Practices Act.
             100          Section 4. Section 13-48-104 is enacted to read:
             101          13-48-104. Severability.
             102          A court's invalidation of a provision of this chapter may not affect the validity of any
             103      other provision of this chapter.
             104          Section 5. Section 13-48-201 is enacted to read:
             105     
Part 2. Manufacturer's Liability for Using Misappropriated Technology

             106          13-48-201. Liability for manufacturing an article or product using
             107      misappropriated technology.
             108          (1) Subject to the other provisions of this part, a person who manufactures an article or
             109      product is liable as provided in this chapter if:
             110          (a) the article or product is:
             111          (i) manufactured using misappropriated technology;
             112          (ii) sold or offered for sale in the state, either separately or as a component of another
             113      article or product; and
             114          (iii) in competition with another article or product that is manufactured without using
             115      misappropriated technology; and
             116          (b) the person:
             117          (i) is given notice as provided in Subsection 13-48-203 (1);
             118          (ii) (A) fails to establish that the technology the person uses to manufacture an article
             119      or product is not misappropriated technology; or
             120          (B) fails to cease using the misappropriated technology within 90 days, or a longer


             121      period that the technology owner authorizes, after receiving notice under Subsection
             122      13-48-203 (1), subject to Subsection (2).
             123          (2) If, after receiving notice under Subsection 13-48-203 (1), a person claimed to
             124      manufacture an article or product using misappropriated technology commences and proceeds
             125      diligently to replace the misappropriated technology with technology that is not
             126      misappropriated technology, the period referred to in Subsection (1)(b)(ii)(B) is extended to
             127      180 days, or a longer period that the technology owner authorizes.
             128          (3) A person is considered to manufacture an article or product using misappropriated
             129      technology if the person uses the misappropriated technology in the manufacture, distribution,
             130      marketing, or sale of the article or product.
             131          Section 6. Section 13-48-202 is enacted to read:
             132          13-48-202. Exceptions to liability.
             133          Section 13-48-201 does not apply and an action under this chapter may not be brought
             134      if:
             135          (1) the end article or product sold or offered for sale in the state is:
             136          (a) a copyrightable end product;
             137          (b) merchandise that:
             138          (i) is manufactured by, on behalf of, or under a license from a copyright owner; and
             139          (ii) displays or embodies a name, character, artwork, or other indicia of or from a work
             140      described in Subsection (1)(a);
             141          (c) merchandise that:
             142          (i) is manufactured by, on behalf of, or under a license from a copyright or trademark
             143      owner; and
             144          (ii) displays or embodies a name, character, artwork, or other indicia of or from a
             145      theme park, theme park attraction, or other facility associated with a theme park; or
             146          (d) packaging, carrier media, or promotional or advertising material for an article or
             147      product described in Subsection (1)(a), (b), or (c);
             148          (2) the allegation that technology is misappropriated technology is based on a claim
             149      that:
             150          (a) the use of the technology infringes a patent or misappropriates a trade secret under
             151      applicable law;


             152          (b) could be brought under United States Code, Title 35, Patents; or
             153          (c) the person is violating the terms of a license that allows users to modify and
             154      redistribute any source code associated with the technology free of charge; or
             155          (3) liability under Subsection 13-48-201 (1) is based on a claim that a person:
             156          (a) aided, abetted, facilitated, or assisted another person to acquire, appropriate, or use
             157      technology without the owner's authorization, in violation of applicable law; or
             158          (b) provided another person access to technology without the owner's authorization, in
             159      violation of applicable law.
             160          Section 7. Section 13-48-203 is enacted to read:
             161          13-48-203. Written notice.
             162          (1) As provided in Subsection 13-48-201 (1)(b)(i), a person may not be held liable and
             163      an action may not be brought under Subsection 13-48-201 (1) unless the person receives written
             164      notice from the technology owner as provided in this section.
             165          (2) The notice required under Subsection 13-48-201 (1)(b)(i) shall:
             166          (a) identify the misappropriated technology;
             167          (b) identify the technology owner;
             168          (c) state that the technology owner has a reasonable belief that the person has acquired,
             169      appropriated, or used the technology owner's technology in violation of applicable law, and
             170      identify the applicable law;
             171          (d) if known by the technology owner, state how the misappropriated technology is
             172      being used;
             173          (e) identify each article or product to which the misappropriated technology relates;
             174      and
             175          (f) describe the basis and evidence supporting the allegation.
             176          Section 8. Section 13-48-204 is enacted to read:
             177          13-48-204. Authority to bring civil action.
             178          (1) An action may be brought under this chapter against a person alleged to be liable
             179      under Subsection 13-48-201 (1) by:
             180          (a) the attorney general; or
             181          (b) a person injured as a result of an act giving rise to liability under Subsection
             182      13-48-201 (1).


             183          (2) (a) For purposes of Subsection (1)(b), a person is considered to be a person injured
             184      as a result of an act giving rise to liability under Subsection 13-48-201 (1) if:
             185          (i) the person manufactures an article or product that is sold or offered for sale in the
             186      state in competition with the article or product alleged to have been wrongfully manufactured;
             187          (ii) the person's article or product is not wrongfully manufactured; and
             188          (iii) the person suffers economic harm.
             189          (b) Economic harm under Subsection (2)(a)(iii) may be shown by evidence that the
             190      retail price of the misappropriated technology is $20,000 or more.
             191          Section 9. Section 13-48-205 is enacted to read:
             192          13-48-205. Extending a cure period.
             193          (1) The court in an action under this chapter shall determine whether a period longer
             194      than the period stated in Subsections 13-48-201 (1)(b)(ii)(B) and (2) is reasonable given:
             195          (a) the nature of the use of the technology that is alleged to be misappropriated
             196      technology; and
             197          (b) the time reasonably necessary to:
             198          (i) make the use of the technology comply with applicable law; or
             199          (ii) replace the misappropriated technology with technology that is not misappropriated
             200      technology.
             201          (2) If the court determines under Subsection (1) that a longer period is reasonable, the
             202      court shall stay the action until the end of the longer period as determined by the court.
             203          (3) The court shall dismiss the action at the end of the longer period determined under
             204      this section if, by the end of the period, the defendant:
             205          (a) establishes that the defendant's use of the technology that is the subject of the action
             206      complies with applicable law; or
             207          (b) ceases using the misappropriated technology.
             208          Section 10. Section 13-48-206 is enacted to read:
             209          13-48-206. In rem action.
             210          (1) If a court is unable to obtain personal jurisdiction over a person claimed to be liable
             211      under Subsection 13-48-201 (1), the court may proceed in rem against any article or product
             212      claimed to be wrongfully manufactured, including an article or product sold or offered for sale
             213      in the state, but only if the court first determines that a material competitive injury has


             214      occurred.
             215          (2) (a) Subject to Subsection (2)(b), an article or product claimed to be wrongfully
             216      manufactured is subject to attachment at or after the time a complaint under this part is filed,
             217      regardless of the availability or amount of a money judgment.
             218          (b) An attachment order under Subsection (2)(a) may issue only against an article or
             219      product owned by a person claimed to be liable under Subsection 13-48-201 (1).
             220          Section 11. Section 13-48-301 is enacted to read:
             221     
Part 3. Third Party Liability

             222          13-48-301. Liability of a third party -- Supplemental action against third party.
             223          (1) Subject to Subsection (2) and subject to the affirmative defenses under Section
             224      13-48-302 , a third party is jointly liable with a liable defendant if:
             225          (a) the third party sells or offers to sell in the state an article or product manufactured
             226      by a liable defendant;
             227          (b) the liable defendant manufactures:
             228          (i) the article or product that the third party sells or offers to sell; or
             229          (ii) a component of an article or product described in Subsection (1)(b)(i) equal to 30%
             230      or more of the value of the article or product; and
             231          (c) the liable defendant has a direct contractual relationship with the third party with
             232      respect to the manufacture of the article or product described in Subsection (1)(b)(i) or
             233      component described in Subsection (1)(b)(ii).
             234          (2) An action may not be brought under this part against a third party and the third
             235      party may not be held liable under Subsection (1) unless, at least 90 days before judgment is
             236      entered against the liable defendant, the third party is provided a written notice that meets the
             237      requirements of Subsection 13-48-203 (2).
             238          (3) After a court enters judgment against a liable defendant in an action brought under
             239      Section 13-48-204 , a plaintiff in the action may add to the action a claim for actual damages
             240      against a third party.
             241          Section 12. Section 13-48-302 is enacted to read:
             242          13-48-302. Third party affirmative defenses.
             243          (1) A court may not enter judgment or award damages against a third party in an action
             244      under this part if the third party, after being given a reasonable opportunity to plead any of the


             245      affirmative defenses in this section, establishes by a preponderance of the evidence that the
             246      third party:
             247          (a) is the end consumer or end user of the article or product that forms the basis of
             248      liability against the liable defendant, or acquired the article or product after its sale to an end
             249      consumer or end user;
             250          (b) is a business with annual revenue not exceeding $50,000,000;
             251          (c) subject to Subsection (2), acquired the article or product:
             252          (i) in good faith reliance on:
             253          (A) a code of conduct or similar written document that governs the third party's
             254      commercial relationship with the liable defendant and that includes a commitment that
             255      prohibits the use of misappropriated technology by the liable defendant; or
             256          (B) a written assurance from the liable defendant that, to the liable defendant's
             257      knowledge, the article or product was manufactured without the use of misappropriated
             258      technology in the liable defendant's business operations; or
             259          (ii) pursuant to an agreement that the third party and the liable defendant enter into
             260      before November 10, 2011 for the manufacture of the article or product; or
             261          (d) subject to Subsection (3), has made a commercially reasonable effort to implement
             262      practices and procedures to require the third party's direct manufacturers, in manufacturing
             263      articles or products for the third party, not to use misappropriated technology.
             264          (2) An affirmative defense under Subsection (1)(c) applies if, within 180 days after
             265      receiving written notice of the judgment against the liable defendant and a copy of a written
             266      notice that meets the requirements of Section 13-48-203 , the third party undertakes a
             267      commercially reasonable effort to:
             268          (a) confirm that the liable defendant is not using misappropriated technology in the
             269      manufacture of its articles or products;
             270          (b) require the liable defendant to cease the use of misappropriated technology; or
             271          (c) prevent the future acquisition from the liable defendant of articles or products that
             272      are wrongfully manufactured until the liable defendant ceases to use misappropriated
             273      technology, unless preventing the future acquisition would constitute a breach of an agreement
             274      that the third party and liable defendant entered into before November 10, 2011.
             275          (3) A third party makes a commercially reasonable effort to implement practices and


             276      procedures described in Subsection (1)(d) if the third party:
             277          (a) (i) adopts, and undertakes a commercially reasonable effort to implement, a code of
             278      conduct or similar written requirement that:
             279          (A) applies to the third party's direct manufacturers; and
             280          (B) prohibits the use of misappropriated technology by a manufacturer, subject to a
             281      right of audit to verify that the manufacturer does not use misappropriated technology;
             282          (ii) (A) has a practice of auditing direct manufacturers on a periodic basis according to
             283      generally accepted industry standards; or
             284          (B) by agreement requires its direct manufacturers to submit to audits by an
             285      independent auditor, which may include an association of businesses representing the owner of
             286      the misappropriated technology, and provides that a failure to remedy a deficiency found in an
             287      audit constitutes a violation of the applicable law of the jurisdiction where the deficiency
             288      occurs and a breach of the agreement between the third party and the manufacturer, subject to
             289      cure within a reasonable period of time; or
             290          (b) (i) adopts, and undertakes a commercially reasonable effort to implement, a code of
             291      conduct or similar written requirement that:
             292          (A) applies to the third party's direct manufacturers; and
             293          (B) prohibits the use of misappropriated technology by a manufacturer; and
             294          (ii) undertakes practices and procedures to address compliance with the code of
             295      conduct or similar written requirement.
             296          (4) A court may not enter judgment or award damages against a third party in an action
             297      under this part until after the court has ruled on the third party's claim of eligibility for any of
             298      the affirmative defenses under this section.
             299          Section 13. Section 13-48-401 is enacted to read:
             300     
Part 4. Remedies

             301          13-48-401. Damages against a liable defendant.
             302          (1) After determining that a person is liable under Subsection 13-48-201 (1), a court
             303      may award a prevailing plaintiff, other than the attorney general, actual damages incurred by
             304      the prevailing plaintiff or an amount that is three times the retail price of the misappropriated
             305      technology, whichever is greater.
             306          (2) Damages under Subsection (1) may be awarded only against a liable defendant.


             307          Section 14. Section 13-48-402 is enacted to read:
             308          13-48-402. Treble damages for willful violation -- Costs and attorney fees.
             309          A court may increase the amount of damages awarded under Subsection 13-48-401 (1)
             310      against a liable defendant up to three times the amount of damages if the court finds that the
             311      liable defendant's use of misappropriated technology was willful.
             312          Section 15. Section 13-48-403 is enacted to read:
             313          13-48-403. Damages against third party.
             314          (1) An award of damages against a third party under Part 3, Third Party Liability, shall
             315      be the retail price of the misappropriated technology or $250,000, whichever is less.
             316          (2) A plaintiff may not enforce a judgment against a third party until after a
             317      determination that a liable defendant does not have sufficient attachable assets to satisfy a
             318      judgment against the liable defendant.
             319          Section 16. Section 13-48-404 is enacted to read:
             320          13-48-404. Injunctive relief.
             321          (1) In addition to any damages or other relief provided in this chapter or which a court
             322      determines to be appropriate, and only after determining that a material competitive injury has
             323      occurred, a court may award a successful plaintiff in an action under this chapter injunctive
             324      relief:
             325          (a) enjoining a liable defendant from taking any further act that would give rise to
             326      liability under Subsection 13-48-201 (1); or
             327          (b) enjoining the sale or offering for sale in the state of any article or product that is
             328      wrongfully manufactured, if the court determines that the liable defendant lacks sufficient
             329      attachable assets in the state to satisfy the judgment against the liable defendant.
             330          (2) Injunctive relief under this section may be granted only against a liable defendant
             331      and may not be granted against a third party.
             332          Section 17. Section 13-48-405 is enacted to read:
             333          13-48-405. Costs and attorney fees in manufacturer liability case.
             334          In an action under Part 2, Manufacturer's Liability for Using Misappropriated
             335      Technology, a court may award court costs and attorney fees to the prevailing party.
             336          Section 18. Section 13-48-406 is enacted to read:
             337          13-48-406. Delayed enforcement of judgment for damages against a third party.


             338          A judgment for damages against a third party under this chapter may not be enforced
             339      until November 15, 2012.




Legislative Review Note
    as of 2-28-11 5:19 PM


Office of Legislative Research and General Counsel


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