Wannabe Software and Movie Pirates: Hold Your Fire

A story from the Associated Press today suggests that WTO-sanctioned piracy is still a way off. Antiguan Finance Minister Errol Cort arrives in Washington today to discuss the internet gambling dispute with U.S. Trade Representative Susan Schwab, in hope of resolving the case.

Last month I reported that a WTO arbitration panel had agreed with Antigua that the U.S. restrictions on gambling over the internet entitled the Antiguans to retaliation – in this case by suspending its obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) to protect U.S. trademarks and copyrights, as well as suspending market access for some U.S. services firms. Antigua has long maintained that retaliation is not its preferred option, and would rather negotiate with the Americans to allow regulated access to the U.S. internet gambling market.

Antigua has strongly rejected the WTO arbitrators’ decision about the level of damages – a decision that is made especially controversial given that one of the three panelists dissented from the opinion, a rare occurrence in WTO jurisprudence, and by their own admission that they were on “shaky grounds” in determining the level of damages. According to Antigua, by basing their analysis on the “most likely scenario of compliance” by the United States rather than the export opportunities foregone, the arbitrators were showing unfair sympathy to the American case. The Americans were pleased that the $21 million in annual damages was well below the figure sought by Antigua ($3.4 billion), but expressed concern over the form of retaliation authorized. The United States had originally argued that their restrictions were worth only $500,000 in damages.

Notwithstanding the back-and-forth over the amount of sanctions, a couple of problems remain. First, who is to say how much it is worth to, say, download illegally a new CD or movie. Is it equivalent to the market value of buying a legal copy of the material? Or is it worth the cost of the download itself (less than a penny, I imagine). That is important because the WTO would limit Antigua to $21 million fairly strictly, and the U.S., under instruction from Hollywood and the software industry, would be expected to pounce if they saw the limit violated. There is also the question of whether Antigua would be able to export the fruits of its copyright violation to other countries and “earn” the $21 million that way.

While this is not the first time that the WTO has sanctioned violating intellectual property protections by suspending obligations under (that first came in March 2000, when the WTO gave Ecuador permission to suspend TRIPS obligations to the tune of $201 million in their dispute over European banana tariffs), the authorization has never been “actioned.” And, if the U.S. comes to its senses and begins to allow its citizens to gamble online freely, this case may not bring that to fruition either.