Saturday, December 22, 2007

Antigua Wins a Right to Piracy

In an unusual ruling on Friday at the World Trade Organization, the Caribbean nation of Antigua won the right to violate copyright protections on goods like films and music from the United States--up to $21 million--as part of a dispute between the two countries over online gambling.

The award follows a WTO ruling that Washington had wrongly blocked online gaming operators on the island from the American market at the same time it allowed online wagering on horse racing.

Antigua and Barbuda had claimed damages of $3.44 billion a year. That makes the relatively small amount awarded Friday, $21 million, something of a setback for Antigua, which had been struggling to preserve its gambling industry. The United States claimed that its behavior had caused $500,000 damage to the Antiguan economy.

Yet the ruling is significant in that it grants a rare form of compensation: the right of one country, in this case Antigua, to violate intellectual property laws of another--the United States--by allowing it to distribute copies of American music, movie and software products.

"That has only been done once before and is, I believe, a very potent weapon," said Mark Mendel, a lawyer representing Antigua, after the ruling. "I hope that the United States government will now see the wisdom in reaching some accommodation with Antigua over this dispute."

Though Antigua is best known for its pristine beaches and tourist attractions, the dozens of online casinos based there are vital to the island's economy, serving as its second-largest employer.

By pressing its claim, trade lawyers said, Antigua could set a precedent for other countries to sue the United States for unfair trade practices, potentially opening the door to electronic piracy and other dubious practices around the world.

Still, implementation will prove difficult, the lawyers say.

"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," said Brendan McGivern, a trade lawyer with White & Case in Geneva. "The Antiguans could say that's worth $50,000, and then the U.S. might say that's worth $5 million--and I can tell you that the U.S. is going to dog them on every step of the way."

The United States has aggressively fought Antigua's claims.

A WTO panel first ruled against the United States in 2004, and its appellate body upheld that decision a year later. In April 2005, the trade body gave the United States a year to comply with its ruling, but that deadline passed with little more than a statement from Washington that it had reviewed its laws and decided it has been in compliance.

From the start, the United States has claimed that it never intended to allow free, cross-border gambling or betting. Those activities are restricted in the United States, though some form of gambling is legal in 48 of 50 states.

In May, the United States announced that it was rewriting its trade rules to remove gambling services from the jurisdiction of the WTO. Washington has already agreed on deals with the European Union, Canada, and Japan to change the treaty but it has yet to reach agreements with several other nations, including Antigua.

On Friday, the United States Trade Representative issued a stern warning to Antigua to avoid acts of piracy, counterfeiting, or violations of intellectual property while negotiations are under way. Such behavior would "undermine Antigua's claimed intentions of becoming a leader in legitimate electronic commerce, and would severely discourage foreign investment in the Antiguan economy."

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