Music 2.0 - Exploring Chaos in Digital Music

December 23, 2007

WTO Legalizes Music Piracy in Antigua

Filed under: Music Industry — maths @ 2:14 pm
Pirates of Antigua

The World Trade Organization has granted the Caribbean nation of Antigua the right to pirate American goods and services like films and music until the U.S. government either permits Americans to gamble over foreign-based sites or eliminates its own exceptions for remote betting on horse and dog racing, including over the Internet.

It is a rather bizarre situation that seems to expose the duplicity exhibited by the US, which does not waste any opportunities to evangelize and impose its holier-than-thou moral views on gambling and music, film and software piracy upon other countries often for the purposes of simply aiming to protect its own trade interests spurred on by powerful internal US lobby groups.

A quick summary of how things have come to such a dramatic head:

BACKGROUND

Earlier this decade, powerful US casino groups with their own vested interests in preserving their gambling businesses lobbied the government to prevent access to offshore gambling in the name of protecting public morals - and the US government subsequently banned Internet gambling while still sneakily allowing other forms of cross-border gambling and betting services like horse-racing.

In 2003, Antigua then complained to the WTO about this as a violation of free trade treaties. A WTO panel then ruled against the United States in 2004, and a WTO Appellate Body upheld that decision a year later. In April 2005, the trade body then gave the United States a year to comply with its ruling, but that deadline passed with the US feebly claiming that it was in compliance, while it was obvious to all that even as the US pushed other nations, notably China to comply with other WTO regulations, it was itself defiantly refusing to comply.

In 2006, the US then went a step further by ordering U.S. banks and credit card companies to stop processing payments to online gambling businesses with the Unlawful Internet Gambling Enforcement Act. This then had the dramatic effect of cutting off a lucrative overseas online gambling market valued at $15.5 billion that was heavily dependent on the US which accounts for at least half of the world’s online gamblers.

This dramatically impacted Antigua, a former British colony of about 80,000 people which was seeking to wean itself off its reliance on tourism - which had been affected by a series of devastating hurricanes in the past – and focus on online casinos, which at one point during the good times in the past even generated annual incomes of $1 billion. Not only did the US continue to refuse to comply, but in May this year, it even attempted to rewrite its trade rules to remove gambling from the jurisdiction of the WTO. It then bought off influential WTO members from the 27-nation European Union, Japan and Canada by agreeing to compensate them while notably ignoring Antigua, Costa Rica, India and Macau amongst others. However, until the US gains the approval of all 151 members of the WTO, the US online gambling ban is deemed to be illegal, but with the more powerful member nations out of the way, the US could impose its will by brute force against the remaining lesser nations.

THE AWARD

Seeing that the US had no intention of complying, Antigua then claimed damages of $3.4 billion a year from the US with the latter countering that its actions only caused $500,000 in damages to Antiguan commerce. As the WTO panel agreed with Antigua that it had no effective way to sanction the collection of damages or impose effective trade sanctions against the US, it then 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, protection of undisclosed information up to the value of $21 million. The Register pointed out that:

“Repeated violations of WTO commitments in the face of contrary WTO rulings allows a victimized member country ultimately to suspend its own WTO obligations to the offending nation - a form of restitution much more punitive than tariffs alone. America runs a steady and hefty trade deficit in virtually every category of international trade other than intellectual property.”

The awarded amount is still being disputed by Antigua as being lower than their expectations but both the US and Antigua cannot appeal this final decision as unlike other WTO rulings, “awards of arbitrators are not subject to review by the WTO Appellate Body. Antigua would however retain the right to have WTO reassess the damage award should online gambling in the US expand and generate even more revenues beyond the WTO’s current estimation.”

It has to be noted that the WTO Appellate Body concluded 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.

IMPLICATIONS

    Legalized piracy
    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. 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.
    Free Music, Movies, Software
    As a result of the US wanting to protect the billions of dollars in local 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.
    Morality & the Political Economy of Intellectual Property
    There does not seem to be any more morality in the rights or wrongs of gambling or movie, music or software piracy. The next time the IFPI, RIAA or some other self-serving organization spouts the morality bullshit, let’s examine further to see who’s paying them and what is the bigger business agenda at play. The exercising of copyright or gambling restriction laws are usually accompanied by rhetoric about compensating the creators of original content or protecting public morals respectively but if one looks closely, we will find that legal actions and public policies are often enacted and lobbied for by large corporations, in order to preserve their own profitability
    Schoolyard Bully
    The United States Trade Representative Sean Spicer warned Antigua from proceeding with “acts of piracy, counterfeiting or violations of intellectual property rights” while they try and negotiate further. Ominously, he warned that continuing with any such planned actions would “undermine Antigua’s claimed intentions of becoming a leader in legitimate electronic commerce, and would severely discourage foreign investment” in Antigua. With the US wielding undue power with regards to financial services critical to global e-commerce like Visa and Mastercard, and not being hesitant to withhold these essential global services from not only Antigua but as we have seen in the past, renegade Russian music site Allofmp3.com also, we have to ask ourselves if the US should continue to be allowed to be in a position to use these essential services as a means to browbeat those that don’t comply with its wishes and own laws. (As a point of contention, the local Russian courts subsequently deemed Visa’s and Mastercard’s withdrawal of service to be based on areas of law not within their jurisdiction and hence illegal)
    False Valuation Tactics
    Notwithstanding the Americans’ might to strong-arm its companies into witholding services from Antiguan related enterprises, lawyers state that it will still prove difficult for Antigua to execute this ruling. As reported in New York Times, Brendan McGivern, a trade lawyer with White & Case in Geneva pointed out,

    “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.”

    As proof of this in action, we have seen how the RIAA has constantly inflated the valuation of damages to its member companies in previous litigation efforts against consumers. But I can’t help but also note that how when it suits its purpose, the US sought to place a grossly reduced valuation of a measly $500,000 in damages to Antigua for the US cross-border gambling ban.
    China
    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 itself sees it 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. As Lode Van Den Hende, an international trade lawyer with the firm of Herbert Smith in Brussels put it,

    “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?”

With this 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.
It will certainly be interesting to observe the next roll of the dice.

Update:
As reported by CasinoGamblingWeb.com, in a conference call on Friday the successful lawyer for Antigua, Mark Mendel pointed out that “Antigua cannot be vilified by the United States government as criminals as they will not actually be breaking copyright and piracy laws”. He insisted that “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.”

Although the online gambling industry would see the $21 million per year limitation as a setback, Mendel highlighted that for a start as of now, they can cumulatively add the amount for 2006 combined with that for 2007, and the sanctioned amount will add up to hundreds of millions of dollars after a few years. More worryingly for the US music industry, as this will also include the right to distribute digital music and as anyone who deals in this will be only too aware, there is no reliable recourse to monitor revenues, and for all practical purposes it seems that Antigua is basically getting an unlimited free pass to gorge themselves silly on US copyrighted and trademarked products.

This article was also reproduced in Gambling911.com and also P2Pnet.net

References:
WTO Arbitrator Decision, New York Times, The Register, Associated Press, Techdirt

Credits:
Pirates of the Caribbean image: Courtesy of Disney Pictures
Antigua Ancient Map: Courtesy of Grace Galleries
LEGIT design: Courtesy of Rumor Reporter

8 Comments »

  1. […] “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,” says Music 2.0. […]

    Pingback by Gambling industry, more important for US than the intellectual property? | Gambling WebLog — December 27, 2007 @ 12:31 pm

  2. […] the category of “The Other Side of the Coin” here is a comprehensive article about how the WTO/Antigua decision will affect the recording industry but allowing “legal […]

    Pingback by Pokamania » Blog Archive » Poker Potpourri 2007 — December 29, 2007 @ 3:49 am

  3. […] refere o Music2dot0.com, com esta decisão a OMC acaba indirectamente por legitimar a pirataria. Quem fica prejudicado são […]

    Pingback by Bem vindos a Antígua, a futura nação da música pirata made in USA | Remixtures — December 29, 2007 @ 7:35 am

  4. […] the category of “The Other Side of the Coin” here is a comprehensive article about how the WTO/Antigua decision will affect the recording industry but allowing “legal […]

    Pingback by Poker Potpourri 2007 | 1-2-3-Poker-Online.com — December 29, 2007 @ 11:23 pm

  5. Facts of reaction by China and US simply suggest that if the giants play a role model in being dissatisfied with decisions of the WTO which they set up for a purpose the earlier practise should be restored. The countries can include it in various treaties they sign up with other countries in the course of trade .It is obvious that each country wants to mantain its identity and bringing them under one umbrella should be done gradually.

    Comment by ABCDEF — February 22, 2008 @ 7:04 pm

  6. I used to never listen to country music, but it’s changed. A lot of it is more mainstream and I like that. Plus the women are hot and that makes everything better!

    Comment by country musician — March 4, 2008 @ 11:51 pm

  7. […] God’s Playing Field Yes, certainly piracy is now affecting the music industry dramatically in China but it is hypocritical for the IFPI to solely blame the Chinese for it as the major labels have to take some responsibility for its development too. Their strategy in China has been too narrowly focused on just legal and governmental actions. It’s all too easy to invoke WTO policies to beat China up, but one has to note that the WTO players can be likened to giants playing chess and trading bits of human livelihood like livestock as part of a gaming strategy for the greater good of their respective nations. WTO debates about morality and intellectual property are simply smoke screens for the preservation of profits of powerful lobby interest groups – see Antigua 1 vs USA 0. […]

    Pingback by Music 2.0 - Exploring Chaos in Digital Music » Western Music Piracy in China - the Major Labels’ role — October 2, 2009 @ 7:04 pm

  8. […] http://www.music2dot0.com/archives/97 Share this post: └ Tags: Antigua, Articles […]

    Pingback by Music Law Updates - WTO legalizes piracy in Antigua — November 17, 2011 @ 6:51 pm

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