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A $21 million WTO decision opens door to counterfeiting

Dec 24, 2007 4:36 AM

The United States has fought more than 25 wars, against enemies big and little: bit ones like Germany, Japan, Great Britain, Italy Viet Nam, North Korea, Spain, Afghanistan, Mexico, Iraq, ourselves; and smaller ones like Somalia, the Barbary Coast, and Granada.

And now Antigua.

This one, fortunately, is being fought economically, with no loss of life, other than offshore gambling operators. It is being fought over betting on the Internet.

Antigua is tiny, by whatever standards you measure, except perhaps by the number of offshore betting shops. Until they came along, it was best known for its beaches and weather. It is stormy now, at least in its battle against the United States.

The issue has been kicked around for more than three years in the World Trade Organization, where Antigua has fought vigorously and successfully.

If you’ve made a bet with an offshore gaming operation. you have been part of the battle.

Antigua and its even smaller partner island, Barbuda, claim the US has cost them $3.44 billion in losses by closing the Internet to US gambling. The US has agreed the damage may be $500,000. That’s a huge spread to cover, and last week the WTO, which has tried to referee this bout, came up with one of the most bizarre solutions in legal history.

Like Solomon, it tried the idea of cutting the disputed baby in half. It voted to allow using an illegal action — a crime — to solve a legal problem. It tossed aside the doctrine of intellectual property.

 It endorsed piracy by saying Antigua could ignore and violate international patent and copyright law on American films and music, up to $21 million.

The WTO earlier, three years ago, ruled that Washington had illegally blocked online gambling operators in Antigua from access to the American market. A year later, its appellate body upheld that decision, and gave the US one year to comply with its ruling. Washington ignored the deadline, then claimed it never intended to include gambling in its agreements with the WTO, and was rewriting the trade agreement to reflect that fact.

The WTO’s most recent response in effect legalizes counterfeiting, up to the $21 million award limit. How it plans to impose that limit in any meaningful way seems an impossibility, since if the two nations do not agree on the value of violations in reaching for $21 million, it could intensify the dispute rather than resolve it. Antigua could claim an act of piracy on music copyrights was worth a million. The US could say it was worth half of the $21 million, or the entire amount. Then what?

Substituting illegality for legality seems a desperate way to resolve any issue, but the American lawyer representing Antigua, Mark Mendel, calls it "a very potent weapon." He is referring, presumably, to setting a precedent — unenforceable or not — for far bigger trade partners than Antigua by condoning piracy.

To the gambler who picks up a phone or goes online with the Caribbean, this whole issue may seem remote and arcane at worst, or totally irrelevant at best. But it is not likely to go away.

Barney Frank of Massachusetts is still determined to get Congress to repeal the gaming legislation of last year and legalize Internet betting. He may be playing a solo act at the moment, but legalizing piracy and copyright and patent protection is an issue that can catch very quick attention in the Senate and the House. China looms large these days as a trading partner and giant economic engine.

China is not Antigua. It is, what, 10,000 times bigger and more important, with a huge imbalance in its export trade against its importation, and a thriving piracy industry right now despite illegality. It is not someone that can be shunted aside or ignored, like Antigua.

China is not likely to start booking American horse racing or sports, but if it decides to come down on the square that Antigua has drawn in the sand and claim other trade violations, the repercussions should be formidable.

Far-seers like Terry Lanni understand the huge implications of international online gaming. Some other Vegas operators are uneasy about where it is headed. We will know far better next Christmas.

Happy New Year.