The globalization of American business continues to reverberate in new ways for inside counsel at U.S. companies. There’s rarely a day when some aspect isn’t reflected in a headline somewhere. All of this results from fundamental changes in our companies and in the economy. Customers are more global. Employee populations are more global. And for many companies, supply chains are more global.
This latter aspect increasingly impacts the legal obligations of U.S. companies. While in some ways this is new, in other respects it builds on trends of the past two decades.
As Secretary of State Hillary Clinton recently noted, “in the 1990s, businesses used their supply chains to take on the problem of child labor in the developing world.” This didn’t happen overnight. As companies started to move their manufacturing, there was an increasing focus on labor conditions in factories overseas. In part, this was a political and social phenomenon, and it also raised new legal issues that companies addressed in a responsible way.
Today, this phenomenon concerns a widening array of manufactured goods that are being produced around the world, especially in emerging markets. And it’s not just labor practices, but product safety and intellectual property standards that are attracting attention.
In a recent letter to the Federal Trade Commission, the attorneys general of 34 states noted that during the past decade, more than 2 million of their states’ manufacturing jobs had moved to China, India, Mexico and Russia. Their focus, in part, is on the American companies that remain. As they said, “while we recognize that our manufacturers must compete in the global economy, our companies should not be forced to compete on an unfair playing field.” Most domestic manufacturers respect and pay for IP, but many overseas do not.
At Microsoft, IP issues take center stage on a daily basis. And when it comes to supply chain responsibility, we clearly have a shoe on each foot. We rely on a supply chain of far-flung manufacturers that produce Xboxes and other hardware. Like most other software companies, we also experience piracy rates in excess of 80 percent in manufacturing sectors in several emerging markets.
We therefore pay close attention to evolving IP rules. As the 34 attorneys general wrote, “many of our states have laws that can be used to address this harm, including statutes patterned after the Federal Trade Commission Act.”
As a company, we support efforts to better ensure that manufacturers overseas respect American technology and IP rights. We see firsthand the negative impact of high piracy rates, and we believe that theft is wrong.
But we also appreciate that it’s important for the protection of IP to move forward in a practical way that ensures that business and innovation can go forward. Impractical approaches are more likely to drive up costs for businesses and consumers alike.
Put together, these factors motivated us to be an early sponsor of a new non-profit group that is focused on new solutions in this area. It’s called the Center for Responsible Enterprise and Trade, or CREATe. Building on meetings across the country and information it makes available at Create.org, CREATe focuses on fostering dialogue.
As we’ve seen with online issues this year, there’s no shortage of interest in the impact of a new generation of IP issues. But offline as well as online, we’ll all benefit if there’s more real dialogue about both the problems and the solutions that will do the most good—not only for those who create IP, but also for those who rely on it.
Lawyers have a critical role to play in fostering this dialogue. I’m hoping that groups like CREATe can help us get a good conversation started.
Brad Smith is general counsel and executive vice president of Microsoft Corp.