There has been a lot of talk lately about the Caribbean island nation of Antigua and its neighbor Barbados, and their recent plan to lawfully sell US copyrighted works without having to pay royalties to content owners. The government of Antigua has been preparing their new content distribution website for some time and it is anticipated to debut to the public in the next few months. Will private companies also be able to set up their own online store in Antigua and circumvent US copyright laws or will the plan be limited to a state sponsored online store where the Antiguan government would collect and oversee revenue generated from the website? Will purchasers of content originating from the US be able to lawfully access the content offered by Antigua online? To understand what options are available, we must go back to the origins of the trade dispute and how the countries arrived at this creative remedy.

Back in 2003, when camera phones and color screens on mobile phones were just starting to gain traction with consumers, the tiny island nation of Antigua stood against the US plan to ban online gambling by disputing the issue at the World Trade Organization (“WTO”).[1] The island nation of Antigua took advantage of the growth of the online gambling industry by hosting over 120 industry companies employing up to 5% of its residents while it also contributed substantially to Antigua’s GDP. After criminal charges against US operators living in Antigua and threats to prosecute others, Antigua’s fledgling online gambling industry incurred substantial financial and job losses.

Antigua’s argument against the US was the various federal and state laws against online gambling constituted a “total prohibition” on cross-border gambling services, violating previous trade commitments made by the US. The enforcement mechanism used by Antigua against the US was the TRIPS (“Trade-Related Aspects of Intellectual Property Rights”) agreement adopted by the World Trade Organization (“WTO”) in 1994.[2] TRIPS allowed parties aggrieved by unfair trade practices a remedy against the harm through the WTO.[3] After hearing both sides, the WTO concluded the US overstepped its boundaries in 2004 when the US claimed that any work for an online gambling company constituted a criminal act, even when occurring in jurisdictions where online gambling was legal.[4] In 2001, during an early attempt to crack down on online gambling, the US federally prosecuted a US citizen who relocated to Antigua to set up an online casino website, outside the reach of US law.[5] The patchwork of federal and state laws including the Travel Act (18 U.S.C. § 1952) when read together with the applicable state laws, the Illegal Gambling Business Act (18 U.S.C. § 1955), the Wire Act (18 U.S.C. § 1084), and several state statutes were argued to violate the General Agreement on Trade in Services (GATS) and that no exceptions to these rules applied.[6]

After Antigua prevailed at the WTO in 2005, the the US appealed the ruling. While the appeals panel reversed several minor points against the US, it maintained the overall conclusion that the US laws harmed Antigua and that the US should amend its online gambling laws to conform with GATS.[7] The US was given until April 3, 2006 to revise its laws that were the subject of the trade dispute, and the date came and passed without the US making the recommended changes to the relevant laws. The WTO Dispute Settlement Body eventually concluded in 2007 that the US failed to comply with the WTO recommendations and sought to impose sanctions.[8]

In December of 2007, a WTO arbitrator awarded relief to Antigua by allowing it to suspend its TRIPS obligations to the US in an amount not to exceed $21,000,000.00 annually.[9] This decision was unprecedented because it was one of the first times an arbitrator or the WTO would allow a country to lawfully violate the intellectual property laws of another country by permitting royalty-free distribution of U.S. movies, music, and software. Because a state-sanctioned online infrastructure designed to monetize copyright infringement had never been developed, the service has taken time to develop.

The US cringed at the idea that they would have to allow a nation to sell its content royalty-free with the endorsement of the WTO, so they decided to ignore the order and sought to undermine the ruling in various channels. Development of the distribution framework then slowed within the bureaucracy of the WTO, so it has not been until recently that this creative trade dispute solution has started to receive attention again.

A US trade representative warned Antigua earlier this year, stating “The United States has urged Antigua to consider solutions that would benefit its broader economy. However, Antigua has repeatedly stymied these negotiations with certain unrealistic demands.”[10] In July of 2013, while defying the wishes of the US, Antigua began to move forward with the WTO sanctions to collect damages attributable to the US online gambling ban. Specifically, a seven-member WTO Remedies Implementation Committee was established to develop the framework to oversee and implement the royalty free content store until Antigua and Barbuda could be compensated fairly. The infrastructure is intended to operate royalty free until it accumulates $21,000,000.00 annually retroactive to the year 2006.

Only a state-run online store will be permitted, so criminal or civil penalties still likely exist if a private individual or company opts to open an online store in Antigua selling royalty free works. Similar to how it enforced a ban against online gambling on US citizens, the US will likely find a way to restrict purchasing of content from the Antiguan online store so that most US citizens could not benefit from the royalty free store. So chances are, unless you take a trip to Antigua or are based outside the US, then access to the royalty-free content may not be readily available to the general US public.

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[1] Request for Consultations by Antigua and Barbuda, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/1 (Mar. 27, 2003).

[2] TRIPS: Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, THE LEGAL TEXTS: THE RESULTS OF THE URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS 320 (1999), http://www.wto.org/english/tratop_e/trips_e/t_agm0_e.htm

[3] DSU, Dispute Settlement Rules Article 22.3: Understanding on Rules and Procedures Governing the Settlement of Disputes, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, THE LEGAL TEXTS: THE RESULTS OF THE URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS 354 (1999).

[4] “United States- Measures Affecting the Cross-Border Supply of Gambling and Betting Services,” Report of the WTO Panel, WT/DS/285/R (Nov. 10, 2004).

[5] United States v. Jay Cohen, No. 00-1574 (2nd Cir. 2000), at http://pub.bna.com/eclr/001574.htm.

[6] “United States- Measures Affecting the Cross-Border Supply of Gambling and Betting Services.” Report of the WTO Panel, 2004.

[7] “United States-Measures Affecting the Cross-Border Supply of Gambling and Betting Services.” WT/DS285113, “Award.” (Aug. 19, 2005).

[8] Report of the Panel, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, ¶ 7.1, WT/DS285/RW (Mar. 30, 2007).

[9] Decision by the Arbitrator, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, ¶ 6.1, WT/DS285/ARB (Dec. 21, 2007).

[10] US Warns Against Government-Authorized Piracy, Doug Palmer, Reuters News, Jan. 28, 2013, http://www.reuters.com/article/2013/01/28/us-usa-antigua-piracy-idUSBRE90R12G20130128.