Pirates of the Caribbean: Antigua May Risk US IP Rights in Fight Over Internet Gambling

Intellectual property may no longer be safe in Antigua if the Caribbean island is unable to reach an amicable agreement with the United States over permitting cross-border gambling. Specifically, the World Trade Organization (WTO) recently granted Antigua the right to proceed with their proposed plan to lift the intellectual property protection of US goods and services in their country in response to the US’s restrictions on cross-border gambling. If Antigua acts on their proposed plan, they will be the first WTO member to suspend intellectual property rights as part of an authorized retaliation in a trade dispute.

As background, Antigua is upset with the US government’s refusal to entertain its proposals related to permitting Internet gambling in its country or to settle with them over the US’s decision to not allow cross-border gambling. This all stemmed from what the United States calls an error in which it included cross-border gambling on its General Agreement on Trade in Services (GATS) commitments. GATS commitments are where WTO members choose which service sectors they will open up to trade and foreign competition. Although the United States has restricted online gambling for a number of years and adopted the Unlawful Internet Gambling Enforcement Act (commonly referred to as “UIGEA”), it accidentally permitted cross-border gambling on its GATS. Despite the fact that the United States took steps to modify its GATS schedule of commitments, it allegedly failed to negotiate compensation agreements with WTO member-countries that were affected by its decision to back-track and remove gambling from the list of services it would permit US citizens to seek abroad, as required by WTO regulations. After a WTO arbitration ruling, it was determined that the United States owed Antigua $21 million based on this alteration to US GATS commitments.

Despite this ruling, the United States allegedly has not been able to come to a compensation agreement with Antigua. Other countries, including Canada, Costa Rica, the European Union, India, Japan, and Macau have all accepted the United States offers. While some sources claim that the US offered Antigua approximately $500,000, Antigua’s ambassador to the United Kingdom claims that no offer was made and that the United States has ignored his country’s suggestions. As a tactical move to force the US to reconsider negotiations, Antigua sought permission to impose the $21 million in annual sanctions on the US by suspending intellectual property rights in their country. If they proceed with this plan, the US has indicated that it will view such actions as “theft” and “government authorized piracy.” Antigua dismissed such allegations, arguing instead that they were acting in line with their WTO authorization. It remains to be seen how the two countries will work out their differences.

Arent Fox is continuing to monitor issues related to Internet gambling. Please contact the listed attorneys with questions.