Antigua May Revoke US IP Treaties Unless WTO Online Poker Online Gambling Settlement is Reached

By the end of March, the government of Antigua says it is likely to enact the $21 million in trade sanction compensation awarded by the World Trade Organization (WTO) against the United States which allows Antigua to revoke U.S. intellectual property treaties and authorize wholesale copying of American music, movies, software products, and other "soft targets" if the Bush administration fails to respond to proposals for settling the online poker online gambling trade dispute between the two counties, according to Mark Mendel, the lawyer representing Antigua.

The Motion Picture Association of America has been closely following the case with tremendous concern, an organization official said, fearing that the copying could be extensively damaging and that, worse, a dangerous precedent could be set for other small countries angry at U.S. trade policy.

"It is not our preferred option to punish the MPAA or others for the U.S. government's intransigence, but the U.S. has refused to negotiate fairly," said Mark E. Mendel, who represents Antigua.

WHERE DID THE SANCTIONS COME FROM?

In 2003 the tiny dual Caribbean island nation of Antigua and Barbuda brought a case to the World Trade Organization claiming that the U.S. was violating trade treaties that as WTO members they all had signed, by preventing Antigua's online gambling operators from doing business in the American market.

More than 100 online gambling sites call Antigua and Barbuda home, making online gaming the nation's #2 employer.

In April 2005, the WTO Appellate Body ordered the United States to comply either by lifting its ban on foreign operators or by withdrawing a "discriminatory" exemption for US online horse-racing betting sites, within 18 months.

When the US still did not comply, Antigua brought it to the attention of the WTO, who in January 2007 again ordered the US to comply.

The U.S. lost its final appeal case in March 2007.

Afterwards, instead of complying with the WTO ruling, the U.S took the unprecedented step of withdrawing online poker and online gambling from its GATS treaties, which under WTO rules, then allowed affected WTO members who would lose future revenues to make claims against the USA.

In December 2007, the WTO awarded Antigua a damage settlement of $21 million per year in trade sanction compensation for the 2003 case it brought against the USA (though Antigua claimed $3.4 billion in losses).

As part of that $21 million settlement, WTO gave Antigua the right to levy the sanctions on U.S. intellectual property by lifting copyright on products such as software, CDs or DVDs.

Goods and materials that would be copied include "virtually everything from pharmaceuticals to music, anything with IP protection that can be duplicated, though we'll go for softer targets first," Mendel noted.

A BARGAINING CHIP FOR ANTIGUA OR A NIGHTMARE FOR U.S. COMPANIES?

Separate from damages, U.S. has yet to reach agreement on compensation it owes Antigua for removing online poker and online gambling from its WTO trade treaties (click here for related article).

The U.S. has already reached agreements with other WTO members who would similarly incur future losses to their online gambling businesses, including the European Union, Canada, Macau, Japan, India and Australia, and just last week with Costa Rica (click here for related article).

If Antigua cannot reach an agreement with the USA, Antigua suggested they might retaliate by revoking U.S. intellecutal property rights, with approval from the World Trade Organization. But they have never said when they would do so.

So far, the U.S. Trade Representative has dismissed that threat as a negotiating ploy. Sean Spicer, a spokesman for the US Trade Representative discounts Mendel's statements by pointing out that Antigua has not received WTO approval to procure its damages via reproducing and selling domestically U.S.-copyrighted goods and materials.

"They continually engage in disinformation," Mendel responded, in an article this week in Variety. "The reality is, yes, we have to go before WTO and request their authorization for IP sanctions against the U.S., but we can do that at any time and the WTO will agree. That is 100 percent guaranteed."

Mendel acknowledged his client would like such entities as the MPAA, the recording industry and Microsoft (organizations that depend on IP protection) to pressure the Bush administration into negotiating a "preferred" settlement, which would allow Internet gambling between Antigua and the U.S.

But he insisted the threat was neither idle nor empty. "Perhaps the U.S. doesn't think we're serious," Mendel said. "We are."

U.S. COMPANIES WORRY ABOUT LOSS OF IP PROTECTION

In a letter to the USTR about the potential effects of Antigua's retaliation, sent prior to December's ruling granting $21 million in damages, the MPAA wrote, "The proposed retaliation would be impossible to manage. The real and resulting economic harm would vastly exceed any amount the (WTO) might approve, even the grossly exaggerated amount ($3.4 billion) for which Antigua seeks approval, plus the economic harm would extend to other WTO members."

"MPAA believes it would be very difficult to insulate other WTO members from the effects of Antigua's proposed retaliation," the letter continued. "The unfortunate reality is that the failure to offer or enforce adequate protection of intellectual property rights in Antigua could foster abuses in other countries."

U.S. CONGRESS SUSPECTS USTR HAS GONE TOO FAR

In another twist to this saga, U.S. Congress has become nervous enough about the lack of detail provided by the US Trade Representative's Office over the settlements it reached with WTO members, particularly with giant trading partner the EU, that Oregon Congressman Peter DeFazio (D-OR) has formally requested full disclosure of the concessions granted without Congressional approval (click here for related article).

"The issue will be whether the USTR abused its authority by granting new market access to the EU without first securing the consent of the trade committees in Congress," said Nao Matsukata, formerly Director of Policy Planning for USTR Robert Zoellick and now a Senior Advisor for Alston & Bird, LLP.

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