When Trade and Intellectual Property Collide

When Trade and Intellectual Property Collide

When trade and intellectual property collide, strange things happen. In a dispute opposing Antigua and Barbuda to the United States at the World Trade Organization (WTO), that organization authorized Antigua and Barbuda to suspend the application of the its obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).

This follows the unwillingness or inability of the United States to modify its legislation that effectively banned Americans from gambling on foreign websites after a WTO panel found such legislation incompatible with the US’s obligations under the General Agreement on Trade in Services (GATS). Antigua and Barbuda must now decide whether they will use the authority granted by the WTO and suspend some of the protection of intellectual property belonging to US rights holders.

It is not the first time that a WTO dispute-settlement panel has authorized what is known as the “cross-retaliation” involving intellectual property. Typically, when one WTO Member fails to implement the findings of a dispute-settlement panel, the other party to the dispute can be authorized to “retaliate” by imposing trade sanctions in the same area (as the dispute). However, in certain cases it is difficult, if not impossible, for certain WTO Members to retaliate in that same area. For example, when WTO panels found that its banana import quotas violated Ecuador’s rights under WTO Agreements, Ecuador was authorized to retaliate by suspending copyright protection on EU sound recordings. This authority was never used, in part because Ecuador realized that if it did so, it would likely destroy the market for Ecuadorian music unable to compete with “free” European music.

Whether or not Antigua and Barbuda decide to retaliate as now authorized, the WTO decision is interesting on several different levels. First, it shows that, from the perspective of trade law, a dollar is a dollar. Copyright can be valued on the same common denominator as a banana or an online gambling site. For those of us who work in the area of intellectual property, this equipollency between very different types of activities and industries seems a bit contrived.

Second, the case shows that the WTO dispute-settlement system does not always work well when the “winning” party is a small country such as Ecuador or Antigua and Barbuda. A system of compensation, in which the “losing” party would actually pay the government of the “winning” party for losses incurred, exists in the WTO but it is mostly theoretical because it can only be used when the losing party agrees. This case shows that it may be time to reexamine the role of compensation in WTO dispute-settlement cases to avoid similar cases of hardly justifiable retaliation between unrelated industries.

Third, this is another case in which the United States is unwilling or unable to implement the findings of a WTO dispute-settlement panel that found it in violation of its WTO obligations. The United States lost a dispute concerning the TRIPS Agreement in the year 2000 and has yet to implement the findings of that panel report, dealing with an exception preventing the licensing of music performed in most US bars, hotels, restaurants and supermarkets. This policy direction may eventually lead certain other WTO’s members to doubt the efficacy of the WTO dispute-settlement system.

In the particular case hard questions have surfaced as to the way in which the authorization given Antigua and Barbuda may be used. First, the authorization to retaliate is limited to the territory of Antigua and Barbuda. As a result, any use of that authority in the online environment will undoubtedly raise jurisdictional issues. In fact, if the authority to retaliate is used in the territory of Antigua and Barbuda in a way that affects copyright protection in other countries, including the United States, would that not constitute a violation by Antigua and Barbuda of its obligations under the TRIPS Agreement?

Second, how is Antigua and Barbuda supposed to evaluate how to leave $21 million of copyright value unprotected, given that this is the cap of the WTO authorization,  and what gain will Antigua and Barbuda make by selling copyrighted US goods? Will it affect Antiguan sellers of similar goods from non-US origins? Should one calculate the  “copyright value” (typically licensing) that is normally included in the price of such goods but will not be? What rate(s) should be used?

Third, as a matter of international law, some may question the WTO’s ability to suspend not just obligations under the TRIPS Agreement, but also under copyright treaties administered elsewhere, including the World Intellectual Property Organization (WIPO).  By somehow allowing Antigua and Barbuda not to comply with its obligations under, for example, the Berne Convention, to which both Antigua and Barbuda and the United States are party to, has the WTO Dispute-Settlement Body created a precedent that might be used in very different contexts?

Bottom line, this case demonstrates that while there are gains to be made by incorporating international legal rules in the WTO (in particular in the area of dispute-settlement), there are also potential risks in boiling all subject matter to a mere matter of dollars and cents. More importantly, a clear need has emerged for more work to be done on the interface between trade rules and rules that have their own history and normative underpinnings, such as copyright law.


Daniel Gervais is Professor of Law and Director of the Intellectual Property Program at Vanderbilt University. Before joining Vanderbilt Law School in 2008, he was Acting Dean of the Common Law Section at the University of Ottawa. His focus is on international intellectual property law. He is also Editor-in-Chief of the Journal of World Intellectual Property and editor of www.tripsagreement.net. In 2012, he became the first North American Law Professor elected to the Academy of Europe.