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From Antitrust Law Daily, March 13, 2014

Oklahoma brings antitrust action against Chinese valve maker over alleged software piracy

By Jeffrey May, J.D.

The State of Oklahoma today filed an action against a Chinese oil equipment supplier for selling equipment in Oklahoma at artificially low prices and gaining an unfair competitive advantage over Oklahoma companies in violation of the state’s antitrust laws (Oklahoma v. Neway Valve Co., Case No. CJ-2014-1482).

According to the complaint, filed in Oklahoma County District Court, Neway Valve Company violated the Oklahoma Antitrust Reform Act (OARA) and the Oklahoma Deceptive Trade Practices Act by engaging in unfair, deceptive, and anticompetitive business practices. The state alleges that Neway and related entities have created an uneven playing field that harms their Oklahoma rivals by illegally utilizing unlicensed software in the production and distribution of their valves, thereby reducing their production costs. The state contends that Oklahoma companies use the same software in their valve production efforts.

Neway is China’s largest valve manufacturing company. According to the complaint, Neway uses between 1,300 and 1,400 desktop computers and laptops in its Chinese facilities; however, it has purchased only 380 software licenses for use in their computers. It is alleged that the defendants avoided purchasing an estimated $280,000 to $367,000 worth of licenses for just one piece of software.

As a result, the state alleges that the defendants are able to charge significantly less for their products to the detriment of Oklahoma rivals, such as Kimray, Inc. and others. “Kimray and other valve manufacturers and individual Oklahoma valve purchasers have been harmed by the Defendants’ unfair and deceptive acts or restraints of trade,” the state contends. The state alleges that Neway’s conduct is per se unlawful under the OARA.

Noting that “federal laws and international treaties do not address the pernicious downstream effects of such acts,” the state contends that “the Defendants’ use of stolen software to gain a competitive advantage over domestic valve manufacturing companies, including those in Oklahoma, can be remedied, however, by proscribing such tactics as unfair, deceptive, and anticompetitive methods of commerce under Oklahoma law.”

The state, as parens patriae, is seeking treble damages under the OARA. It also is seeking injunctive relief, as well as attorney fees and costs.

In a statement released today, the state attorney general’s office said that the lawsuit was “the first of its kind filed in Oklahoma and one of the first lawsuits in the nation filed by an attorney general to stop business-related piracy.”

“Law-abiding companies invest significant capital to license software to operate their businesses and serve their customers,” said Oklahoma Attorney General Scott Pruitt. “The use of stolen software and other intellectual property by unscrupulous companies is unfair, unlawful and gives them an advantage over those companies who follow the law. Piracy is costing Oklahoma companies billions of dollars in lost revenue, impacting their ability to invest in their companies to create new jobs and bolster the Oklahoma economy. Any company that seeks a market advantage through piracy, should be held accountable.”

Attorneys: Thomas A. Bates for Oklahoma Attorney General’s Office.

Companies: Neway Valve Co.; Kimray Inc.

MainStory: TopStory Antitrust OklahomaNews

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