Full Text of SB1075 97th General Assembly
SB1075sam001 97TH GENERAL ASSEMBLY | Sen. Don Harmon Filed: 4/11/2011
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| 1 | | AMENDMENT TO SENATE BILL 1075
| 2 | | AMENDMENT NO. ______. Amend Senate Bill 1075 by replacing | 3 | | everything after the enacting clause with the following:
| 4 | | "Section 1. Short title. This Act may be cited as the | 5 | | Unfair Use of Information Technology Act. | 6 | | Section 2. Findings and declaration of General Assembly. | 7 | | The General Assembly hereby finds and declares all of the | 8 | | following: | 9 | | (a) Manufacturers are a vital source of jobs and economic | 10 | | growth in the State of Illinois. Law-abiding manufacturers in | 11 | | this State suffer lost sales, market share, and jobs when they | 12 | | are forced to compete against companies that use stolen or | 13 | | misappropriated information technology to reduce production | 14 | | costs and gain a competitive edge. | 15 | | (b) The theft of American information technology is | 16 | | particularly rampant in foreign markets, reaching as high as |
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| 1 | | 90% in some countries. Information technology theft costs the | 2 | | U.S. economy thousands of jobs and billions of dollars in | 3 | | economic growth. | 4 | | (c) The use of stolen or misappropriated information | 5 | | technology unfairly lowers manufacturers' costs of production | 6 | | by tens if not hundreds of thousands of dollars. Manufacturers | 7 | | that knowingly use significant amounts of stolen or | 8 | | misappropriated information technology to reduce costs should | 9 | | not be allowed to benefit from these illegal acts. | 10 | | (d) Existing laws relating to unfair trade practices do not | 11 | | adequately address the harms that occur when manufacturers use | 12 | | stolen or misappropriated information technology to gain an | 13 | | unfair competitive advantage over companies that play by the | 14 | | rules. | 15 | | (e) It is the purpose of this Act to enable effective | 16 | | recourse against manufacturers that obtain an unlawful | 17 | | competitive advantage by using stolen or misappropriated | 18 | | information technology to make goods. | 19 | | (f) To accomplish this purpose, law-abiding manufacturers | 20 | | who have suffered economic harm from a directly competing | 21 | | manufacturer's sale of products made using stolen or | 22 | | misappropriated information technology will be allowed to | 23 | | pursue a cause of action against the company that used the | 24 | | stolen or misappropriated information technology. | 25 | | (g) The remedies available to the law-abiding manufacturer | 26 | | in such cases are limited to ensure that the relief obtained is |
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| 1 | | proportional to the harm. To safeguard against the possibility | 2 | | of frivolous litigation or other negative consequences, this | 3 | | Act also provides carefully circumscribed procedures and | 4 | | exemptions designed to protect businesses that make good-faith | 5 | | efforts to act in accordance with their legal responsibilities. | 6 | | (h) In particular, no action may be brought unless the | 7 | | manufacturer that allegedly used the stolen or misappropriated | 8 | | technology is provided with notice about the allegation and | 9 | | given an opportunity to either cure the violation or establish | 10 | | that it is not using stolen or misappropriated information | 11 | | technology. | 12 | | (i) Furthermore, actions may be brought only against | 13 | | businesses that themselves manufacture, produce, or assemble | 14 | | articles or products while using stolen or misappropriated | 15 | | information technology, not against other companies that | 16 | | merely contract with such businesses for the manufacture of | 17 | | articles or products. | 18 | | (j) To protect the interests of all businesses, this Act | 19 | | includes affirmative defenses and other safeguards to make sure | 20 | | that downstream purchasers and others will not be unfairly | 21 | | burdened. | 22 | | (k) It is the intent of the General Assembly that this Act | 23 | | shall be construed in ways that appropriately remedy the | 24 | | competitive harm that occurs when articles or products | 25 | | manufactured using stolen or misappropriated information | 26 | | technology are sold or offered for sale in this State. |
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| 1 | | Section 3. Definitions. As used in this Act, unless the | 2 | | context clearly requires otherwise: | 3 | | (a) "Article or product" means any tangible article or | 4 | | product, but excludes: (i) any services sold, offered for sale, | 5 | | or made available in this State, including free services and | 6 | | online services; (ii) any product subject to regulation by the | 7 | | United States Food and Drug Administration and that is | 8 | | primarily used for medical or medicinal purposes; (iii) food | 9 | | and beverages; and (iv) restaurant services. | 10 | | (b) "Copyrightable end product" means a work within the | 11 | | subject matter of copyright as specified in Section 102 of | 12 | | Title 17, United States Code, and which, for the purposes of | 13 | | this Act, includes mask works protection as specified in | 14 | | section 902 of Title 17, United States Code. | 15 | | (c) "Essential component" means a component of an article | 16 | | or product provided or to be provided to a third party pursuant | 17 | | to a contract, including a purchase order, without which the | 18 | | article or product will not perform as intended and for which | 19 | | there is no substitute component available that offers a | 20 | | comparable range and quality of functionalities and is | 21 | | available in comparable quantities and at a comparable price. | 22 | | (d) "Manufacture" means to directly manufacture, produce, | 23 | | or assemble an article or product subject to Section 5, in | 24 | | whole or substantial part, but does not include contracting | 25 | | with or otherwise engaging another person (or that person |
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| 1 | | engaging another person) to develop, manufacture, produce, or | 2 | | assemble an article or product subject to Section 5. | 3 | | (e) "Material competitive injury" means at least a 3% | 4 | | retail price difference, over a 4-month time period, between | 5 | | the article or product made in violation of Section 5 designed | 6 | | to harm competition and a directly competing article or product | 7 | | that was manufactured without the use of stolen or | 8 | | misappropriated information technology. | 9 | | (f) "Retail price" means the retail price of stolen or | 10 | | misappropriated information technology charged at the time of, | 11 | | and in the jurisdiction where, the alleged theft or | 12 | | misappropriation occurred, multiplied by the number of stolen | 13 | | or misappropriated items used in the business operations of a | 14 | | person alleged to have violated Section 5. | 15 | | (g) "Stolen or misappropriated information technology" | 16 | | means hardware or software that the person referred to in | 17 | | Section 5 acquired, appropriated, or used without the | 18 | | authorization of the owner of the information technology or the | 19 | | owner's authorized licensee in violation of applicable law, but | 20 | | does not include situations in which the hardware or software | 21 | | alleged to have been stolen or misappropriated was not | 22 | | available for retail purchase on a stand-alone basis at or | 23 | | before the time it was acquired, appropriated, or used by such | 24 | | a person. | 25 | | Information technology is considered to be used in a | 26 | | person's business operations if the person uses the technology |
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| 1 | | in the manufacture, distribution, marketing, or sales of | 2 | | articles or products subject to Section 5. | 3 | | Section 5. Unfair use of information technology. Any person | 4 | | who manufactures an article or product while using stolen or | 5 | | misappropriated information technology in its business | 6 | | operations after notice and opportunity to cure as provided in | 7 | | Section 15 and, with respect to remedies sought under | 8 | | subsection (f) of Section 20 or under Section 25, causes a | 9 | | material competitive injury as a result of such use of stolen | 10 | | or misappropriated information technology, is deemed to engage | 11 | | in an unfair act where such an article or product is sold or | 12 | | offered for sale in this State, either separately or as a | 13 | | component of another article or product, and in competition | 14 | | with an article or product sold or offered for sale in this | 15 | | State that was manufactured without violating this Section. | 16 | | A person who engages in such an unfair act, and any | 17 | | articles or products manufactured by the person in violation of | 18 | | this Section, is subject to the liabilities and remedial | 19 | | provisions of this Act in an action by the Attorney General or | 20 | | any person described in subsection (e) of Section 20, except as | 21 | | provided in Sections 10, 15, 20, 25, 30, and 40. | 22 | | Section 10. Exceptions. | 23 | | (a) No action may be brought under this Act, and no | 24 | | liability results, where: |
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| 1 | | (1) the end article or end product sold or offered for | 2 | | sale in this State and alleged to violate Section 5 is: | 3 | | (A) a copyrightable end product; | 4 | | (B) merchandise manufactured by or on behalf of, or | 5 | | pursuant to a license from, a copyright owner and which | 6 | | displays or embodies a name, character, artwork, or | 7 | | other indicia of or from a work that falls within | 8 | | subparagraph (A) of this subsection, or merchandise | 9 | | manufactured by or on behalf of, or pursuant to a | 10 | | license from, a copyright or trademark owner and which | 11 | | displays or embodies a name, character, artwork, or | 12 | | other indicia of or from a theme park, theme park | 13 | | attraction, or other facility associated with a theme | 14 | | park; or | 15 | | (C) packaging, carrier media, or promotional or | 16 | | advertising materials for any end article, end | 17 | | product, or merchandise that falls within subparagraph | 18 | | (A) or (B) of this paragraph (1); | 19 | | (2) the allegation that the information technology is | 20 | | stolen or misappropriated is based on a claim (i) that the | 21 | | information technology or its use infringes a patent or | 22 | | misappropriates a trade secret under applicable law or (ii) | 23 | | that could be brought under any provision of Title 35 of | 24 | | the United States Code; | 25 | | (3) the allegation that the information technology is | 26 | | stolen or misappropriated is based on a claim that the |
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| 1 | | defendant's use of the information technology violates the | 2 | | terms of a license that allows users to modify and | 3 | | redistribute any source code associated with the | 4 | | technology free of charge; or | 5 | | (4) the allegation is based on a claim that the person | 6 | | violated Section 5 by aiding, abetting, facilitating, or | 7 | | assisting someone else to acquire, appropriate, use, sell, | 8 | | or offer to sell, or by providing someone else with access | 9 | | to, information technology without authorization of the | 10 | | owner of such information technology or the owner's | 11 | | authorized licensee in violation of applicable law. | 12 | | (b) No injunction may issue against a person other than the | 13 | | person adjudicated to have violated Section 5, and no | 14 | | attachment order may issue against articles or products other | 15 | | than articles or products in which the person alleged to | 16 | | violate Section 5 holds title. A person other than the person | 17 | | alleged to violate Section 5 includes any person other than the | 18 | | actual manufacturer who contracts with or otherwise engages | 19 | | another person to develop, manufacture, produce, market, | 20 | | distribute, advertise, or assemble an article or product | 21 | | alleged to violate Section 5. | 22 | | Section 15. Notice and opportunity to cure. | 23 | | (a) No action may be brought under Section 5 unless the | 24 | | person subject to Section 5 received written notice of the | 25 | | alleged use of the stolen or misappropriated information |
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| 1 | | technology from the owner or exclusive licensee of the | 2 | | information technology or the owner's agent and the person: (1) | 3 | | failed to establish that its use of the information technology | 4 | | in question did not violate Section 5; or (2) failed, within 90 | 5 | | days after receiving such a notice, to cease use of the owner's | 6 | | stolen or misappropriated information technology. However, if | 7 | | the person commences and thereafter proceeds diligently to | 8 | | replace the information technology with information technology | 9 | | whose use would not violate Section 5, such a period must be | 10 | | extended for an additional period of 90 days, not to exceed 180 | 11 | | days total. The information technology owner or its agent may | 12 | | extend any period described in this Section. | 13 | | (b) To satisfy the requirements of this Section, a written | 14 | | notice must, under penalty of perjury: | 15 | | (1) identify the stolen or misappropriated information | 16 | | technology; | 17 | | (2) identify the lawful owner or exclusive licensee of | 18 | | the information technology; | 19 | | (3) identify the applicable law the person is alleged | 20 | | to be violating and state that the notifying party has a | 21 | | reasonable belief that the person has acquired, | 22 | | appropriated, or used the information technology in | 23 | | question without authorization of the owner of the | 24 | | information technology or the owner's authorized licensee | 25 | | in violation of such applicable law; | 26 | | (4) to the extent known by the notifying party, state |
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| 1 | | the manner in which the information technology is being | 2 | | used by the defendant; | 3 | | (5) state the articles or products to which the | 4 | | information technology relates; and | 5 | | (6) specify the basis and the particular evidence upon | 6 | | which the notifying party bases such allegation. | 7 | | (c) The written notification shall state, under penalty of | 8 | | perjury, that the information in the notice is accurate based | 9 | | on the notifying party's good-faith knowledge, information, | 10 | | and belief. | 11 | | Section 20. Remedies. | 12 | | (a) No earlier than 90 days after the provision of notice | 13 | | in accordance with Section 15, the Attorney General, or any | 14 | | person described in subsection (e) of this Section, may bring | 15 | | an action against any person that is subject to Section 5: | 16 | | (1) to enjoin violation of Section 5, including by | 17 | | enjoining the person from selling or offering to sell in | 18 | | this State articles or products that are subject to Section | 19 | | 5, except as provided in subsection (f) of this Section. | 20 | | However, such an injunction does not encompass articles or | 21 | | products to be provided to a third party that establishes | 22 | | that such a third party has satisfied one or more of the | 23 | | affirmative defenses set forth in subsection (a) of Section | 24 | | 30 with respect to the manufacturer alleged to have | 25 | | violated Section 5; or |
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| 1 | | (2) only after a determination by the court that the | 2 | | person has violated Section 5, to recover the greater of | 3 | | (i) actual direct damages, which may be imposed only | 4 | | against the person who violated Section 5; or (ii) | 5 | | statutory damages of no more than three times the retail | 6 | | price of the stolen or misappropriated information | 7 | | technology, which may be imposed only against the person | 8 | | who violated Section 5. | 9 | | In the event the person alleged to have violated Section 5 | 10 | | has been subject to a final judgment or has entered into a | 11 | | final settlement, or any products manufactured by such a person | 12 | | and alleged to violate Section 5 have been the subject of an | 13 | | injunction or attachment order, in any federal or state court | 14 | | in this State or any other state, arising out of the same theft | 15 | | or misappropriation of information technology, the court shall | 16 | | dismiss the action with prejudice. If such a person is a | 17 | | defendant in an ongoing action, or any products manufactured by | 18 | | such a person and alleged to violate Section 5 are the subject | 19 | | of an ongoing injunction or attachment order, in any federal or | 20 | | state court in this State or any other state, arising out of | 21 | | the same theft or misappropriation of information technology, | 22 | | the court shall stay the action against such a person pending | 23 | | resolution of the other action. In the event the other action | 24 | | results in a final judgment or final settlement, the court | 25 | | shall dismiss the action with prejudice against the person. | 26 | | Dismissals under this Section shall be res judicata to actions |
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| 1 | | filed against the person alleged to have violated Section 5 | 2 | | arising out of the same theft or misappropriation of | 3 | | information technology. | 4 | | (b) After determination by the court that a person has | 5 | | violated Section 5 and entry of a judgment against the person | 6 | | for violating Section 5, the Attorney General, or a person | 7 | | described in subsection (e) of this Section, may add to the | 8 | | action a claim for actual direct damages against a third party | 9 | | who sells or offers to sell in this State products made by that | 10 | | person in violation of Section 5, subject to the provisions of | 11 | | Section 30. However, damages may be imposed against a third | 12 | | party only if: | 13 | | (1) the third party's agent for service of process was | 14 | | properly served with a copy of a written notice sent to the | 15 | | person alleged to have violated Section 5 that satisfies | 16 | | the requirements of Section 15 at least 90 days prior to | 17 | | the entry of the judgment; | 18 | | (2) the person who violated Section 5 did not make an | 19 | | appearance or does not have sufficient attachable assets to | 20 | | satisfy a judgment against the person; | 21 | | (3) such person either manufactured the final product | 22 | | or produced a component equal to 30% or more of the value | 23 | | of the final product; | 24 | | (4) such person has a direct contractual relationship | 25 | | with the third party respecting the manufacture of such | 26 | | final product or component; and |
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| 1 | | (5) the third party has not been subject to a final | 2 | | judgment or entered into a final settlement in any federal | 3 | | or state court in this State or any other state arising out | 4 | | of the same theft or misappropriation of information | 5 | | technology. However, in the event the third party is a | 6 | | party to an ongoing suit for damages, or has entered an | 7 | | appearance as an interested third party in proceedings in | 8 | | rem, in any federal or state court in this State or any | 9 | | other state arising out of the same theft or | 10 | | misappropriation of information technology, the court | 11 | | shall stay the action against the third party pending | 12 | | resolution of the other action. In the event the other | 13 | | action results in a final judgment, the court shall dismiss | 14 | | the action with prejudice against the third party and | 15 | | dismiss any in rem action as to any articles or products | 16 | | manufactured for such a third party or that have been or | 17 | | are to be supplied to such a third party. Dismissals under | 18 | | this Section shall be res judicata to actions filed against | 19 | | the person alleged to have violated Section 5 arising out | 20 | | of the same theft or misappropriation of information | 21 | | technology. | 22 | | (c) An award of damages against a third party pursuant to | 23 | | subsection (b) of this Section must be the lesser of the retail | 24 | | price of the stolen or misappropriated information technology | 25 | | at issue or $250,000, less any amounts recovered from the | 26 | | person adjudicated to have violated Section 5, and paragraph |
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| 1 | | (d)(1) of this Section does not apply to such an award or | 2 | | recovery against the third party. | 3 | | (d) In an action under this Act, a court may: | 4 | | (1) against the person adjudicated to have violated | 5 | | Section 5, increase the damages up to 3 times the damages | 6 | | authorized by paragraph (a)(2) of this Section where the | 7 | | court finds that the person's use of the stolen or | 8 | | misappropriated information technology was willful; | 9 | | (2) with respect to an award under subsection (a) of | 10 | | this Section only, award costs and reasonable attorneys' | 11 | | fees to: (i) a prevailing plaintiff in actions brought by | 12 | | an injured person under Section 5; or (ii) a prevailing | 13 | | defendant in actions brought by an allegedly injured | 14 | | person; and | 15 | | (3) with respect to an action under subsection (b) of | 16 | | this Section brought by a private plaintiff only, award | 17 | | costs and reasonable attorneys' fees to a third party for | 18 | | all litigation expenses (including, without limitation, | 19 | | discovery expenses) incurred by that party if it prevails | 20 | | on the requirement set forth in paragraph (b)(3) of this | 21 | | Section or who qualifies for an affirmative defense under | 22 | | Section 30 of this Act; provided, however, that in a case | 23 | | in which the third party received a copy of the | 24 | | notification described in paragraph (b)(1) of this Section | 25 | | at least 90 days before the filing of the action under | 26 | | subsection (b) of this Section, that with respect to a |
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| 1 | | third party's reliance on the affirmative defenses set | 2 | | forth in paragraphs (a)(3) and (a)(5) of Section 30, the | 3 | | court may award costs and reasonable attorneys' fees only | 4 | | if all of the conduct on which the affirmative defense is | 5 | | based was undertaken by the third party, and the third | 6 | | party notified the plaintiff of the conduct, prior to the | 7 | | end of the 90-day period. | 8 | | (e) A person is deemed to have been injured by the sale or | 9 | | offer for sale of a directly competing article or product | 10 | | subject to Section 5 if the person establishes by a | 11 | | preponderance of the evidence that: | 12 | | (1) such a person manufactures articles or products | 13 | | that are sold or offered for sale in this State in direct | 14 | | competition with articles or products that are subject to | 15 | | Section 5; | 16 | | (2) such a person's articles or products were not | 17 | | manufactured using stolen or misappropriated information | 18 | | technology of the owner of the information technology; | 19 | | (3) the person suffered economic harm, which may be | 20 | | shown by evidence that the retail price of the stolen or | 21 | | misappropriated information technology was $20,000 or | 22 | | more; and | 23 | | (4) if the person is proceeding in rem or seeks | 24 | | injunctive relief, that the person suffered material | 25 | | competitive injury as a result of the violation of Section | 26 | | 5. |
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| 1 | | (f)(1) If the court determines that a person found to have | 2 | | violated Section 5 lacks sufficient attachable assets in this | 3 | | State to satisfy a judgment rendered against it, the court may | 4 | | enjoin the sale or offering for sale in this State of any | 5 | | articles or products subject to Section 5, except as provided | 6 | | in subsection (b) of Section 10. | 7 | | (2) To the extent that an article or product subject to | 8 | | Section 5 is an essential component of a third party's article | 9 | | or product, the court shall deny injunctive relief as to such | 10 | | an essential component, provided that the third party has | 11 | | undertaken good faith efforts within the third party's rights | 12 | | under its applicable contract with the manufacturer to direct | 13 | | the manufacturer of the essential component to cease the theft | 14 | | or misappropriation of information technology in violation of | 15 | | Section 5, which may be satisfied, without limitation, by the | 16 | | third party issuing a written directive to the manufacturer | 17 | | demanding that it cease the theft or misappropriation and | 18 | | demanding that the manufacturer provide the third party with | 19 | | copies of invoices, purchase orders, licenses, or other | 20 | | verification of lawful use of the information technology at | 21 | | issue. | 22 | | (g) The court shall determine whether a cure period longer | 23 | | than the period reflected in Section 15 would be reasonable | 24 | | given the nature of the use of the information technology that | 25 | | is the subject of the action and the time reasonably necessary | 26 | | either to bring such use into compliance with applicable law or |
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| 1 | | to replace the information technology with information | 2 | | technology that would not violate Section 5. If the court deems | 3 | | that a longer cure period would be reasonable, then the action | 4 | | shall be stayed until the end of that longer cure period. If by | 5 | | the end of that longer cure period, the defendant has | 6 | | established that its use of the information technology in | 7 | | question did not violate Section 5, or the defendant ceased use | 8 | | of the stolen or misappropriated information technology, then | 9 | | the action must be dismissed. | 10 | | Section 25. In rem jurisdiction. | 11 | | (a) In a case in which the court is unable to obtain | 12 | | personal jurisdiction over a person subject to Section 5, the | 13 | | court may proceed in rem against any articles or products | 14 | | subject to Section 5 sold or offered for sale in this State in | 15 | | which the person alleged to have violated Section 5 holds | 16 | | title. Except as provided in subsection (b) of Section 10 and | 17 | | subsections (b) through (d) of this Section, all such articles | 18 | | or products are subject to attachment at or after the time of | 19 | | filing a complaint, regardless of the availability or amount of | 20 | | any monetary judgment. | 21 | | (b) At least 90 days prior to the enforcement of an | 22 | | attachment order against articles or products pursuant to | 23 | | subsection (a) of this Section, the court shall notify any | 24 | | person in possession of the articles or products of the pending | 25 | | attachment order. Prior to the expiration of the 90-day period, |
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| 1 | | any person for whom the articles or products were manufactured, | 2 | | or to whom the articles or products have been or are to be | 3 | | supplied, pursuant to an existing contract or purchase order, | 4 | | may:
| 5 | | (1) establish that the person has satisfied one or more | 6 | | of the affirmative defenses set forth in subsection (a) of | 7 | | Section 30 with respect to the manufacturer alleged to have | 8 | | violated Section 5, in which case the attachment order must | 9 | | be dissolved only with respect to those articles or | 10 | | products that were manufactured for such a person, or have | 11 | | been or are to be supplied to such a person, pursuant to an | 12 | | existing contract or purchase order; or
| 13 | | (2) post a bond with the court equal to the retail | 14 | | price of the allegedly stolen or misappropriated | 15 | | information technology or $25,000, whichever is less, in | 16 | | which case the court shall stay enforcement of the | 17 | | attachment order against the articles or products and shall | 18 | | proceed on the basis of its jurisdiction over the bond. The | 19 | | person posting the bond shall recover the full amount of | 20 | | such bond, plus interest, after the issuance of a final | 21 | | judgment.
| 22 | | (c) In the event the person posting the bond pursuant to | 23 | | paragraph (b)(2) of this Section is entitled to claim an | 24 | | affirmative defense in Section 30, and that person establishes | 25 | | with the court that the person is entitled to any affirmative | 26 | | defense, the court shall award costs and reasonable attorneys' |
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| 1 | | fees to the person posting the bond and against the plaintiff | 2 | | in the event the plaintiff proceeds with an action pursuant to | 3 | | subsection (b) of Section 20 against the person posting the | 4 | | bond.
| 5 | | (d) In the event that the court does not provide | 6 | | notification as described in subsection (b) of this Section, | 7 | | the court, upon motion of any third party, shall stay the | 8 | | enforcement of the attachment order for 90 days as to articles | 9 | | or products manufactured for the third party, or that have been | 10 | | or are to be supplied to the third party, pursuant to an | 11 | | existing contract or purchase order, during which 90-day period | 12 | | the third party may avail itself of the options set forth in | 13 | | paragraphs (b)(1) and (b)(2) of this Section.
| 14 | | Section 30. Affirmative defenses for third parties. | 15 | | (a) A court may not award damages against any third party | 16 | | pursuant to subsection (b) of Section 20 where that party, | 17 | | after having been afforded reasonable notice of at least 90 | 18 | | days by proper service upon such party's agent for service of | 19 | | process and opportunity to plead any of the affirmative | 20 | | defenses set forth in this subsection, establishes by a | 21 | | preponderance of the evidence any of the following: | 22 | | (1) the person is the end consumer or end user of an | 23 | | article or product subject to Section 5, or acquired the | 24 | | article or product after its sale to an end consumer or end | 25 | | user; |
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| 1 | | (2) the person is a business with annual revenues not | 2 | | in excess of $50,000,000; | 3 | | (3) the person has made commercially reasonable | 4 | | efforts to implement practices and procedures to require | 5 | | its direct manufacturers, in manufacturing articles or | 6 | | products for such person, not to use stolen or | 7 | | misappropriated information technology in violation of | 8 | | Section 5. A person may satisfy this paragraph (3) by: | 9 | | (A) adopting and undertaking commercially | 10 | | reasonable efforts to implement a code of conduct or | 11 | | similar written requirements, which are applicable to | 12 | | the person's direct manufacturers, that prohibit use | 13 | | of stolen or misappropriated information technology by | 14 | | such a manufacturer, subject to a right of audit, and | 15 | | such person either: (i) has a practice of auditing its | 16 | | direct manufacturers on a periodic basis in accordance | 17 | | with generally accepted industry standards; or (ii) | 18 | | requires in its agreements with its direct | 19 | | manufacturers that they submit to audits by a third | 20 | | party, which may include a third-party association of | 21 | | businesses representing the owner of the stolen or | 22 | | misappropriated intellectual property, and further | 23 | | provides that a failure to remedy any deficiencies | 24 | | found in such an audit that constitute a violation of | 25 | | the applicable law of the jurisdiction where the | 26 | | deficiency occurred constitutes a breach of the |
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| 1 | | contract, subject to cure within a reasonable period of | 2 | | time; or | 3 | | (B) adopting and undertaking commercially | 4 | | reasonable efforts to implement a code of conduct or | 5 | | similar written requirements, which are applicable to | 6 | | the person's direct manufacturers, that prohibit use | 7 | | of stolen or misappropriated information technology by | 8 | | such manufacturer, and the person undertakes practices | 9 | | and procedures to address compliance with the | 10 | | prohibition against the use of the stolen or | 11 | | misappropriated information technology in accordance | 12 | | with the applicable code of conduct or written | 13 | | requirements; | 14 | | (4) the person does not have a contractual relationship | 15 | | with the person alleged to have violated Section 5 | 16 | | respecting the manufacture of the articles or products | 17 | | alleged to have been manufactured in violation of Section | 18 | | 5; or | 19 | | (5) the person acquired the articles or products: | 20 | | (A) and had either: (i) a code of conduct or other | 21 | | written document governing the person's commercial | 22 | | relationships with the manufacturer alleged to have | 23 | | violated Section 5 and which includes commitments, | 24 | | such as general commitments to comply with applicable | 25 | | laws, that prohibit use of the stolen or | 26 | | misappropriated information technology by such |
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| 1 | | manufacturer; or (ii) written assurances from the | 2 | | manufacturer of the articles or products that the | 3 | | articles or products, to the manufacturer's reasonable | 4 | | knowledge, were manufactured without the use of stolen | 5 | | or misappropriated information technology in the | 6 | | manufacturer's business operations; provided, however, | 7 | | with respect to both items (i) and (ii) of this | 8 | | subparagraph (a)(5)(A), that within 180 days of | 9 | | receiving written notice of the judgment against the | 10 | | manufacturer for violation of Section 5 and a copy of a | 11 | | written notice that satisfies the requirements of | 12 | | Section 15, the third party undertakes commercially | 13 | | reasonable efforts to do any of the following: | 14 | | (I) exchange written correspondence confirming | 15 | | that such manufacturer is not using such stolen or | 16 | | misappropriated information technology in | 17 | | violation of Section 5, which may be satisfied, | 18 | | without limitation, by obtaining written | 19 | | assurances from the manufacturer accompanied by | 20 | | copies of invoices, purchase orders, licenses, or | 21 | | other verification of lawful use of the | 22 | | information technology at issue; | 23 | | (II) direct the manufacturer to cease the | 24 | | theft or misappropriation, which may be satisfied, | 25 | | without limitation, by the third party issuing a | 26 | | written directive to the manufacturer demanding |
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| 1 | | that it cease such theft or misappropriation and | 2 | | demanding that the manufacturer provide the third | 3 | | party with copies of invoices, purchase orders, | 4 | | licenses, or other verification of lawful use of | 5 | | the information technology at issue; and for | 6 | | purposes of clarification, the third party need | 7 | | take no additional action to fully avail itself of | 8 | | this affirmative defense; or | 9 | | (III) in a case in which the manufacturer has | 10 | | failed to cease the theft or misappropriation | 11 | | within such 180-day period and the third party has | 12 | | not fulfilled either option (I) or (II) of this | 13 | | subparagraph (a)(5)(A), cease the future | 14 | | acquisition of such articles or products from such | 15 | | manufacturer during the period that such | 16 | | manufacturer continues to engage in such theft or | 17 | | misappropriation subject to Section 5 where doing | 18 | | so would not constitute a breach of an agreement | 19 | | between the person and the manufacturer for the | 20 | | manufacture of the articles or products in | 21 | | question that was entered into on or before 180 | 22 | | days after the effective date of this Act; | 23 | | (B) pursuant to an agreement between the person and | 24 | | a manufacturer for the manufacture of the articles or | 25 | | products in question that was entered into before 180 | 26 | | days after the effective date of this Act; provided |
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| 1 | | that within 180 days of receiving written notice of the | 2 | | judgment against the manufacturer for violation of | 3 | | Section 5 and a copy of a written notice that satisfies | 4 | | the requirements of Section 15, the person undertakes | 5 | | commercially reasonable efforts to do any of the | 6 | | following: | 7 | | (I) obtain from such manufacturer written | 8 | | assurances that such manufacturer is not using | 9 | | such stolen or misappropriated information | 10 | | technology in violation of Section 5, which may be | 11 | | satisfied, without limitation, by obtaining | 12 | | written assurances from the manufacturer | 13 | | accompanied by copies of invoices, purchase | 14 | | orders, licenses, or other verification of lawful | 15 | | use of the information technology at issue; | 16 | | (II) direct the manufacturer to cease such | 17 | | theft or misappropriation, which may be satisfied, | 18 | | without limitation, by the third party issuing a | 19 | | written directive to the manufacturer demanding | 20 | | that it cease such theft or misappropriation and | 21 | | demanding that the manufacturer provide the third | 22 | | party with copies of invoices, purchase orders, | 23 | | licenses, or other verification of lawful use of | 24 | | the information technology at issue; and for | 25 | | purposes of clarification, the third party need | 26 | | take no additional action to fully avail itself of |
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| 1 | | this affirmative defense; or | 2 | | (III) in a case in which the manufacturer has | 3 | | failed to cease the theft or misappropriation | 4 | | within such 180-day period and the third party has | 5 | | not fulfilled either option (I) or (II) of this | 6 | | subparagraph (a)(5)(B), cease the future | 7 | | acquisition of such articles or products from such | 8 | | manufacturer during the period that such | 9 | | manufacturer continues to engage in such theft or | 10 | | misappropriation subject to Section 5 where doing | 11 | | so would not constitute a breach of such agreement. | 12 | | (b) A third party shall have the opportunity to be heard | 13 | | regarding whether an article or product is an essential | 14 | | component provided or to be provided to such third party, and | 15 | | shall have the right to file a motion to dismiss any action | 16 | | brought against it under subsection (b) of Section 20. | 17 | | (c) The court may not enforce any award for damages against | 18 | | such a third party until after the court has ruled on that | 19 | | party's claim of eligibility for any of the affirmative | 20 | | defenses set out in this Section, and prior to such a ruling | 21 | | may allow discovery, in an action under subsection (b) of | 22 | | Section 20, only on the particular defenses raised by the third | 23 | | party. | 24 | | (d) The court shall allow discovery against a third party | 25 | | on an issue only after all discovery on that issue between the | 26 | | parties has been completed and only if the evidence produced as |
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| 1 | | a result of the discovery does not resolve an issue of material | 2 | | dispute between the parties. | 3 | | (e) Any confidential or otherwise sensitive information | 4 | | submitted by a party pursuant to this Section is subject to a | 5 | | protective order. | 6 | | Section 35. Certain Sections not applicable. A violation of | 7 | | this Act may not be considered a violation of the Consumer | 8 | | Fraud and Deceptive Business Practices Act and Sections 1 | 9 | | through 12 of the Consumer Fraud and Deceptive Business | 10 | | Practices Act do not apply to this Act. The remedies provided | 11 | | under this Act are the exclusive remedies for the parties. | 12 | | Section 40. Transition period. A court may not enforce an | 13 | | award of damages against a third party pursuant to subsection | 14 | | (b) of Section 20 for a period of 18 months from the effective | 15 | | date of this Act. | 16 | | Section 45. Severability. If any provision of this Act or | 17 | | its application to any person or circumstance is held invalid, | 18 | | the remainder of this Act or the application of the provision | 19 | | to other persons or circumstances is not affected.
| 20 | | Section 99. Effective date. This Act takes effect 90 days | 21 | | after becoming law.".
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