MUSIC INDUSTRY PAYS FOR U.S. ONLINE GAMBLING INTRANSIGENCE

28 December 2007

WTO arbitration award adds little to trade body's credibility


Reaction to last week's World Trade Organisation decision to award $21 million in annual retaliatory measures to the Antiguan government in its online gambling dispute has gathered momentum over the weekend, with a prominent music industry publication roundly condemning the decision.

Music2dot0.com thoroughly examined the decision and its implications for the US music industry and was critical of the price that industry has to pay for US trade infringements in a totally unrelated field of international business, and the manner in which the US Trade Representative has manouevred in the long-running dispute.

Although the US has lost the case on principles, the retribution it has faced as a consquence has hardly been an effective deterrent, and the credibility of the WTO has not been enhanced by the affair.

Music 2.0 gives a detailed and accurate summary of the events which brought about the WTO confrontation and its consequences, describing the affair as a bizarre situation exposing the duplicity the USTR, which takes a holier-than-thou moral view when it comes to other nations, but indulges in protectionist activities for its own selective trade interests.

The article goes on to examine the implications of the award of the WTO arbitration panel, which in the absence of an effective way to sanction the collection of damages or impose effective trade sanctions against the US, allowed Antigua to suspend its WTO obligations to the US in respect of copyrights, trademarks and other forms of intellectual property including industrial designs, patents and the protection of undisclosed information to the tune of $21 million a year until the US is again in compliance with WTO requirements.

This could take place sooner rather than later, as with the removal of gambling from its treaty obligations already in process, the US will become compliant with the WTO.

And the decision is non-appealable, unless the US further discriminates against its tiny Caribbean neighbour by expansion in the online gambling field, in which case a re-assessment of damages could be undertaken.

In any case, retaliatory sanctions was not the first prize for the Antiguans, according to Finance Minister Dr. Errol Court, who has repeatedly said that Antigua favoured a negotiated settlement whereby it was given equal online gambling opportunities to the protected American companies in the field.

The Music 2.0 piece draws particular attention to the WTO Appellate Body conclusion that the US had the right to prevent offshore betting as a means of protecting public order and public morals, but since the US was not applying the rules equally to American operators who were notably offering remote betting on horse and dog racing, this was a clear violation of trade laws.

"It sounds like a contradiction in terms but there we have it, the tiny Caribbean nation of Antigua is now allowed the right to distribute music, movies and software produced in the US without obligations to pay US rights holders," the article continues.

"As Antigua has now been given carte blanche to distribute music as such, this has major implications globally in that companies registered in Antigua, can distribute US copyrighted music for free or for their own profit and would be to some measure, operating legally - based on this latest WTO ruling.

"As a result of the US wanting to protect the billions of dollars in domestic gambling interests above all, we now have a situation where the WTO has officially deemed it fair game for US musicians’ (and film and software producers’) products to be distributed and consumed by Antiguan businesses without any recourse to revenue. Musicians are certainly going to be thrilled that their own government has allowed a situation to arise where they are just a mere pawn in the game resulting in the fruits of their labor being given away for free to a foreign government."

Music 2.0 is critical of the big money lobbying behind political and government decisions, pointing out that legal actions and public policies are often enacted and lobbied for by large corporations, in order to preserve their own profitability.

And the difficult situation that Antigua faces in deploying its retributionary measures is examined too, with references to what may be intimidatory tactics by USTR spokesmen urging delays and hinting at decreased Antiguan investment. Quoting the New York Times, the article comments: “Even if Antigua goes ahead with an act of piracy or the refusal to allow the registration of a trademark, the question still remains of how much that act is worth. The Antiguans could say that’s worth $50,000, and then the U.S. might say that’s worth $5 million. The U.S. is going to dog them on every step of the way.”

"The US continues to complain to WTO about China and even goes to the extent of almost interfering with China’s internal laws in its effort to obtain greater control of music, movie and software distribution in China while seeking to reduce the levels of piracy of US content that exists in the country.

"However, it will be rich irony if the US sees fit to ignore this recent WTO ruling allowing Antigua (and offshore companies from all over the world registered there) to legally pirate US music, but then use this very same body to seek sanctions against China on charges of piracy of US copyrighted products."

Quoting Lode Van Den Hende, an international trade lawyer with the firm of Herbert Smith in Brussels, Music 2.0 makes the point that the U.S. is not behaving as one would expect. "One day they’re out there saying how scandalous it is that China doesn’t respect W.T.O. decisions, but then the next day there’s a dispute that doesn’t go their way and their attitude is: The decision is completely wrong, these judges don’t know what they’re doing, why should we comply?”

Music 2.0 opines that with the latest ruling, Antigua has now set a precedent for other countries to sue the United States for unfair trade practices, and in retaliation be within its rights to withdraw its recognition of US intellectual property rights.

Mark Mendel, the high profile legal counsel for Antigua, is also quoted: “Antigua was not aiming for this judgement, rather, they simply would like for the US to follow the rules of the WTO by allowing Antiguan gaming operators to offer horse race betting to Americans, just as American gaming operators are currently allowed to do. Until they do meet the legalities of the WTO rulings it will be legal to sell copyrighted materials.”

The value of such dealings could accumulate, according to Mendel - adding up to hundreds of millions of dollars over time. More worryingly for the US music industry, the retaliation could include the right to distribute digital music, where there is no reliable resource to monitor revenues, and for all practical purposes Antigua could be getting an unlimited free pass "...to gorge themselves silly on US copyrighted and trademarked products."

Antiguan Finance Minister Dr. Errol Cort, who has been deeply involved in the dispute for his government, says that the $21 million annual retaliatory amount will remain in place until the U.S. comes in compliance with the rulings and recommendations of the WTO’s Dispute Settlement Body, or until it reaches a mutually agreed settlement with Antigua and Barbuda under Article 21 of the GATS agreement."

Cort said his government was pleased to be recognised as having a legitimate WTO case, but disappointed with certain aspects of the decision.

“Although we are pleased that the extraordinary sanction of the suspension of intellectual property rights protection for U.S. interests has been given to us –only the second such authorisation in WTO history –we are disappointed with the segment of the decision limiting our annual compensation to such a mere fraction of our industry’s lost revenues,” Minister Cort said.

The minister reiterated that the objective of this process is not to actually apply sanctions, but to encourage the United States government to negotiate with his government towards a fair and mutually satisfactory resolution of the dispute.

“Despite the size of the award, the value of WTO-sanctioned suspension of intellectual property rights should not be underestimated. We think that this decision, as terribly flawed as it may be, should still have the desired result of getting the U.S. to sit down with us and seek an amicable resolution to our disagreement.

"In this regard, we look forward to meeting with the U.S. delegation in the very near future in an effort to have this matter fully resolved,” the minister said.

Online Casino News courtesy of InfoPowa