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A delicious irony in using IP as a trade weapon

By William Patry

Back in the early 1980s, when the Reagan Administration initiated the use of trade leverage as a weapon to force Caribbean nations to revise their laws to fit U.S. content owners' bidding , no one dreamed a Caribbean nation would later turn the tables. Hats off to Antigua for doing so. A story in Saturday's NY Times (here) explains Antigua brought a WTO complaint over the U.S.'s refusal to permit online gambling originating from the island nation to be placed within the U.S., while permitting online betting on horses. The WTO ruled in Antigua's favor, awarding it the equivalent of $21 million in set-offs. Antigua has chosen to engage in unauthorized copying of U.S. films and music in that amount. One wonders whose figures Antigua will use to come to that amount: the IIPA's ludicrously inflated figures, where every estimated unauthorized copy represents a 1:1 displacement of a sale at U.S. prices, or something else of Antigua's own concoction? I am betting on the latter.

Courtesy of IPKat, here is the relevant section of the WTO award:

B. ANALYSIS BY THE ARBITRATOR

5.6 In its request for authorization to suspend concessions or other obligations, Antigua identified certain obligations under the TRIPS Agreement, that it proposed to suspend. Specifically, Antigua indicated that it intends to take countermeasures in the form of suspension of concessions and obligations under the following sections of Part II of the TRIPS:

Section 1: Copyright and related rights
Section 2: Trademarks
Section 4: Industrial designs
Section 5: Patents
Section 7: Protection of undisclosed information.

5.7 As we have determined above, Antigua may seek to suspend obligations under the TRIPS Agreement. In order for such suspension to be equivalent to the level of nullification or impairment of benefits accruing to Antigua, it must not exceed US$21 million.

5.8 It is incumbent on Antigua to ensure that, in applying such suspension, it does not exceed this level. Antigua has declined to provide any explanation on how it proposes to apply such suspension and how it will ensure that the level of the proposed suspension does not exceed the level to be authorized by the DSB. We regret that Antigua did not find it useful to provide such explanations.

5.9 We note that our mandate does not allow us, in reviewing the equivalence of the proposed suspension with the level of nullification or impairment, to consider the "nature" of the obligations to be suspended. We understand this to mean that we may not question the complaining party's choice of specific obligations to be suspended (other than in the context of considering a claim that the principles and procedures of Article 22.3 have not been followed) and that we must assess the level of the proposed suspension, rather than its form, against the level of nullification or impairment.

5.10 At the same time, it is important that the form that is chosen in order to enact the suspension is such as to ensure that equivalence can and will be respected in the application of the suspension, once authorized. The form should also be transparent, so as to allow an assessment of whether the level of suspension does not exceed the level of nullification. We also note that the suspension of obligations under the TRIPS Agreement may involve more complex means of implementation than, for example, the imposition of higher import duties on goods, and that the exact assessment of the value of the rights affected by the suspension is also likely to be more complex.

5.11 In the light of these considerations, we note the remarks made by the arbitrators in EC ? Bananas III (Ecuador), on the suspension of TRIPS obligations in that case. We consider these remarks to also be relevant to this case, in that the same considerations will be pertinent to the manner in which Antigua might implement a suspension of its obligations under the TRIPS Agreement.

5.12 Like the arbitrators in EC ? Hormones (US) (Article 22.6 ? EC) , US ? 1916 Act (EC) (Article 22.6 ? US) , and US - Byrd Amendment (Article 22.6 - EC) , we also note that the United States may have recourse to the appropriate dispute settlement procedures in the event that it considers that the level of concessions or other obligations suspended by Antigua exceeds the level of nullification or impairment we have determined for purposes of the award.

5.13 Finally, we note that Article 22.8 of the DSU provides that:
"The suspension of concessions or other obligations shall be temporary and shall only be applied until such time as the measure found to be inconsistent with a covered agreement has been removed, or the Member that must implement recommendations or ruling provides a solution to the nullification or impairment of benefits, or a mutually satisfactory solution is reached. ..."

VI. AWARD

6.1 For the reasons set out above, the Arbitrator determines that the annual level of nullification or impairment of benefits accruing to Antigua in this case is US$21 million and that Antigua has followed the principles and procedures of Article 22.3 of the DSU in determining that it is not practicable or effective to suspend concessions or other obligations under the GATS and that the circumstances were serious enough. Accordingly, the Arbitrator determines that Antigua may request authorization from the DSB, to suspend the obligations under the TRIPS Agreement mentioned in paragraph 5.6 above, at a level not exceeding US$21 million annually.

Full post as published by The Patry Copyright Blog on December 24, 2007 (boomark / email).