OKLAHOMA CITY (CN) - Oklahoma filed an antitrust lawsuit against a Chinese oil and gas equipment maker, claiming it sells valve components at artificially low prices using pirated manufacturing software.
The state sued Neway Valve Co. and five of its subsidiaries in Oklahoma County Court on Thursday.
It's one of the first lawsuits in the country brought by an attorney general to stop business-related piracy, according to Oklahoma Attorney General E. Scott Pruitt.
"In an industry characterized by thin margins, defendants have illegitimately and unlawfully reduced their production costs by illegally obtaining copyrighted software that is crucial to the production and sale of their products," the complaint states. "Defendants' unlawful conduct has created an uneven playing field that favors defendants' products over comparable products sold by Oklahoma manufacturers."
The "downstream effects" of such piracy are not generally addressed by federal laws and international treaties, but can be remedied under Oklahoma state law, the complaint states.
The state says an investigation was conducted in 2003 by Hong Kong-based Rouse & Co., regarding suspicions the Neway Valve was illegally underlicensing software.
"It is believed that Neway uses between 1,300 and 1,400 desktop computers and laptops in its Chinese facilities," the complaint states. "Despite this number, one U.S. software company confirms that defendants had purchased only 380 software licenses for use in their computers. ... Defendants are believed to have avoided purchasing an estimated $280,000 to $367,000 worth of licenses for just that one piece of software."
The investigation revealed that Neway Valve's customers include Shell, ExxonMobil and Chevron, and that programs including as Windows and AutoCAD were used, the complaint state.
Oklahoma claims Neway Valve is able to sell its components for 13 percent less than Oklahoma-based manufacturers due to the piracy.
The state claims the "illegally skewed marketplace" could force domestic companies to downsize or even move overseas to reduce costs.
"Oklahoma companies lost an estimated $3 billion in revenue between 2002 and 2012 due to global companies using pirated American software, according to a report by the Harvard Business School and National Association of Manufacturers," prosecutors said in a statement.
"The study concluded American manufacturers lost $239.9 billion in revenue during the same time period and that the competitive advantage gained by violators decreased U.S. GDP by nearly $70 billion and led to the loss of 42,000 jobs nationally."
Prosecutors say Oklahoma-based valve manufacturers Cameron, Balon Corp., CIRCOR and Kimray Inc. together employ several thousand employees.
Tom Hill, CEO and chairman of the board at Kimray, appreciated Pruitt's efforts against piracy.
"At Kimray, we are proud of our heritage as a lawful company focused on quality products and good character," Hill said Thursday. "Piracy provides an unfair advantage and creates unlawful gain. In the long-term, it damages all parties involved."
Based in Suzhou, Neway Valve is China's largest industrial valve manufacturer, according to its website. It provides valve components for use in chemical, power, shipbuilding, mining, water treatment and industrial systems.
Oklahoma seeks actual damages and injunctive relief for violations of the Oklahoma Deceptive Trade Practices Act, the Oklahoma Antitrust Reform Act and for unfair competition. It is represented by First Assistant Attorney General Thomas A. Bates.
Neway Valve president Davis Standefer told Courthouse News the company is investigating the complaint.
"The team at Neway wants to get to the bottom of this situation and ensure that our manufacturing facilities are doing what they are supposed to be doing," Standefer said Friday. "As we get more information, we will keep you informed."