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First-Ever IPR Violations as WTO-Authorized Retaliation Possible as Early as January

Wednesday, November 30, 2016
Sandler, Travis & Rosenberg Trade Report

Trade retaliation in the form of millions of dollars’ worth of intellectual property rights violations could be imposed against the U.S. if it does not resolve a long-running World Trade Organization dispute over online gambling by the end of 2016. Officials of the Caribbean island nation of Antigua and Barbuda, which won the right to retaliate against the U.S. a decade ago, issued this warning at a Nov. 24 meeting of the WTO’s Dispute Settlement Body.

In 2004 the WTO ruled that the United States’ Internet gambling ban violates commitments under the General Agreement on Trade in Services. The U.S. responded by removing online gambling from the scope of those commitments and saying it never meant to include them.

The WTO subsequently found that the U.S. had not complied with the initial ruling and granted Antigua permission to levy $21 million in retaliation, far below the $3.4 billion it had sought. Antiguan authorities did not want to resort to traditional measures such as higher tariffs on imported goods out of concern that they would be more harmful to Antiguan consumers than U.S. suppliers. Instead, they sought and obtained authorization to suspend concessions under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights concerning copyrights, trademarks, industrial designs, patents, and protection of undisclosed information.

At the Nov. 24 DSB meeting Antigua announced that if “an appropriate and beneficial settlement” with the U.S. is not reached by the end of 2016 it “will be compelled to take action to enforce the suspension of copyright on the sale of U.S. intellectual property.” One of the options for doing so that Antigua has raised in the past is setting up a subscription Web site allowing users to download U.S. movies, music, and software without having to pay royalties to the copyright holders.

Antigua also gave some indication as to what it would consider an acceptable settlement. The country’s DSB representative said that since the original WTO ruling Antigua has been deprived of trade revenues that cumulatively total more than $250 million, which he called a “meaningful sum of money” for Antigua and thus perhaps signaled that a payment from the U.S. in that amount would be sufficient. However, the representative also indicated that U.S. settlement proposals in the past have fallen far short of this amount despite the fact that it represents only 0.003 percent of the United States’ annual gross domestic product.

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