Posted: February 25th, 2013
By: Stephen C. Pritchard *
On January 28, 2013, the World Trade Organization (WTO) authorized the Caribbean nation of Antigua and Barbuda to revoke U.S. intellectual property rights in order to recoup damages stemming from a decade-old trade disagreement between the two countries. The dispute is based on a decision by the U.S. to bar its citizens from using remote casinos based in Antigua and Barbuda, which the smaller country claims violates the General Agreement on Trade in Services by protecting American casinos from international competition in violation of free trade. Antigua and Barbuda obtained WTO permission to implement the same measure in 2007 but had remained in negotiations with the U.S. in hopes of opening up its gambling operations once again. Having won in 2007, Antigua and Barbuda would have normally been entitled to impose tariffs on the U.S., but because of its size, there would be no noticeable impact, so the WTO authorized a separate avenue for recompense.
The Caribbean country still hopes to reach a settlement with the U.S., based in part on the differences in the amount of profits it could potentially receive under either option. Under the WTO’s 2007 ruling, the country would only be allowed to recover approximately $21 million annually via intellectual property sales. However, economists estimated that at one time, the online gaming industry was worth more than $3.4 billion to Antigua and Barbuda, a country that currently has an overall economy of only $1 billion. In 2000, the gambling industry in the small nation amounted to $1.716 billion, and in 2001, $2.392 billion with a 59% market share of the global online gaming business. With the advent of U.S. restrictions, the Antiguan industry shrank to $948 million in 2007, with only 7% of the global market share. Employment in the country related to the industry has also shrunk from 4,000 to less than 500 people. It is clear that the country stands to benefit much more from a settlement opening its remote gaming industry back up to U.S. citizens, even if only partially, than it does from establishing a method to sell U.S. intellectual property.
The U.S. claims that such sales would amount to theft, but the WTO has said that it is essentially a lawful suspension of intellectual property rights, which is expressly allowed for under WTO law. The sale of U.S. intellectual property could happen in several different ways, including subscription services for music and film access, or minimal charges per download of almost any media, such as music, film, video games, and computer software.
While $21 million per annum seems relatively small in relation to what the entertainment industry is known to spend, it is sure to raise the ire of music and film studios who have already been forced to turn to other profit opportunities in the face of illegal downloading and online streaming. The effects will not be borne just by the more prominent entertainment sources; e-books, audio books, computer software, video games, and even trademarks are all implicated by the loss of intellectual property in Antigua and Barbuda. Such action also sets a dangerous precedent for U.S. intellectual property holders, even if sanctioned by the WTO. If one small country has the ability to effectively hold such rights hostage during settlement negotiations, others may follow suit, and the ripple effects in aggregate could have unforeseen consequences. It remains to be seen what the U.S. government will do in response, or how the negotiations are to be affected, but there is certain to be an increase in lobbying by those intellectual property holders directly affected if Antigua and Barbuda follows through on its threat.
* Stephen C. Pritchard is a second year law student at Wake Forest University School of Law. He holds a Bachelor of Science in Information Systems and Operations Management, with minors in Economics and Political Science, from the University of North Carolina at Greensboro. Upon graduation, he intends to practice corporate and entertainment law.