A website providing unlimited music and movies for a token price is seeking to take advantage of a 2007 World Trade Organisation ruling between the Caribbean nations of Antigua and Barbuda and the United States, which granted Antigua the right to suspend some US intellectual property rights obligations. The action raises questions about implementation of cross-retaliation rulings, in which the complaining country can seek damages in a different sector than that in which the harm was incurred.

The government of Antigua and Barbuda on 17 July released a statement saying that the website, named Zookz.com, was not operating under the authority of the government and was not authorised either by the government or by the WTO to operate under the 2007 ruling. Zookz.com’s legal adviser said a court action was being prepared to force the government to apply the WTO ruling.

The suspension of IP rights obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) was awarded to Antigua in December 2007, in a case brought by the Caribbean country against the US over US measures prohibiting cross-border supply of gambling services from Antigua.

In what is referred to as “cross-retaliation,” because it allows the country to retaliate in a trade sector other than the one in dispute, the WTO decided that: “Antigua may seek to suspend obligations under the TRIPS agreement. In order for such suspension to be equivalent to the level of nullification or impairment of benefits accruing to Antigua, it must not exceed US$21 million.”

For William Pepper, international legal adviser to Carib Media, which owns Zookz, the “people (of Antigua) have been denied the benefits” of the 2007 WTO ruling, as over a year and a half later the government still has not taken advantage of the ruling, he told Intellectual Property Watch.

Zookz was preparing a “mandamus” application against the Antiguan government. The basis of the application is to ask the court to issue an order to require the government to set up rules and regulations and forward them to the WTO to finalise the WTO “reward,” Pepper said.

“Local counsel believed that the government had completed all of the formalities with the WTO,” Pepper said. “No one there would have believed that the government would have been so negligent as to not have completed those formalities for over a year and a half.”

For the moment the website is still up but is not conducting any business until the legal action has started, added Pepper.

Mark Mendel, attorney for the Antigua government, said that Antigua had not yet applied the IP sanctions because it was pursuing a negotiated solution. “I think that the government most likely believes that sanctions should be used only in the event that negotiations prove futile in their absence,” he said. “With respect to sanctions, while there has been much thought about how and against what they would be applied, there has not been any final determination at this time,” said Mendel.

Cross-Retaliation as a Scarecrow, Not Implemented

When a WTO member country thinks another member country is violating international trade rules, it can take its case to the WTO Dispute Settlement Body. According to the WTO dispute settlement rules, the sanctions should be imposed in the same sector as the dispute. However, under special circumstances, when those sanctions might lack efficiency or practicability, or inflict more harm on the winning country than the violation, the complainant country is allowed to retaliate in another sector than the one of the violation.

To date, the WTO had awarded only two countries the possibility to cross-retaliate under TRIPS: Ecuador in a dispute involving the European Union banana trading regime and Antigua and Barbuda, according to sources. Both winners were allowed to cross-retaliate under TRIPS, and suspend IP obligations. But neither has so far taken advantage of the ruling.

Then on 31 August, the WTO awarded Brazil the possibility to suspend certain obligations under TRIPS, under special circumstances, against the US in a dispute involving cotton.

According to Frederick Abbott, professor of international law at Florida State University College of Law, the cases of Antigua and Ecuador are quite different. Ecuador was seeking market access for bananas in the EU and had some success with negotiating a market access agreement, raising the threat of cross retaliation in TRIPS as the option if no satisfactory solution was reached.

Antigua, he said, requested a high level of suspension, about US$ 3.5 billion, and was awarded US$21 million annual suspension. Antigua is also highly dependent on travel and tourism from the US and on maintaining friendly relations in the financial services sector with the US. There have been concerns among some observers that political pressure can lead developing countries not to implement their WTO victories.

A recent financial scandal involving an Antigua-based scheme by US financier Allen Stanford, who was indicted in June, might also influence the Antiguan government’s consideration, Abbott said.

As to a private person seeking to give direct effect to the cross-retaliation authorisation, for example like setting up a music download website taking advantage of US copyright holders, prior to the implementation of the cross-retaliation by the Antiguan government, Abbott said that based on the legal situation in most other countries, “it is quite doubtful that a private person has the right to implement a WTO authorisation for suspension of TRIPS concessions prior to the government acting to implement the suspension.”

US laws on gambling seem to encounter resistance elsewhere as the European Commission released a report on 10 June on US internet gambling laws. The report concluded that the US measures are not consistent with WTO rules. The report also said that the issue should be addressed with the US government, in order to find a conciliatory solution.