No Surprise: Zookz Shuts Down Indefinitely, Refunds Money

from the so-much-for-that-plan dept

Well, this wasn't difficult to predict at all. As noted last week, a company named Zookz clearly stretched and misinterpreted the WTO rulings in the dispute between Antigua and the US. Given the sheer number of emails their high-end PR people have been dumping my way, the fact that they were making a mockery of the ruling was part of the plan to get them press attention. Of course, they might not have expected the Antiguan gov't to quickly step up and point out that it didn't support Zookz either. So the latest is that Zookz has shut down the site and promised to return money to anyone who subscribed. They claim that they'll be back, but I wouldn't count on it. At least not in any form similar to what they originally advertised.

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Zookz! Misinterpreting The WTO To Annoy The RIAA

from the not-everyone-agrees dept

It's been quite some time since we last heard anything about the fascinating battle between the US and Antigua. It goes back a long time. We first wrote about this issue, nearly a decade ago, when the operators of online casinos in Antigua (where gambling is legal) were pretty pissed off to find out that the US claimed to have regulatory power over their online casino and could ban its use in the US. Antigua protested to the WTO, claiming that this was a violation of free trade agreements between the two countries. In 2004, the WTO agreed with Antigua, saying that because the US allows certain types of gambling, it's a violation of their agreement to ban Antiguan gambling sites. Of course, the US ignored the WTO and Antigua, recognizing that Antigua had little to no power over the US.

A year later, the WTO ruled again in favor of Antigua on this issue, though, amusingly, the US Trade Rep misleadingly claimed that the WTO had changed its mind. It had not. The US simply lied about what the WTO really said and declared victory, when it had actually lost again. The following year? The WTO again asked the US why it wasn't living up to its trade obligations on this point. In 2007, the WTO tried again and was ignored again.

In the midst of all this, a rather amusing and interesting suggestion popped up. In the random online discussions about how Antigua could actually flex its muscles against the US, someone pointed out that the WTO could allow Antigua to ignore US intellectual property, thereby allowing it to set up a cheap online download store. That idea gained traction at an incredibly fast pace, as lawyers jumped on the idea and set the wheels in motion. During that time, the US tried to unilaterally change its trade terms with Antigua to settle the matter, but that didn't get very far. Finally, at the end of 2007, the WTO agreed to letting Antigua ignore US intellectual property, but only to the tune of $21 million. Of course, the US quickly threatened Antigua not to go forward with any plans to violate US IP, but did little to rectify the situation. So last year, Antigua insisted it really (really, really, really!) was going to start ignoring US IP.

Since then? Well, it's been really quiet. Until now.

The LA Times has the story of a site called Zookz (from Carib Media), which claims to be taking advantage of the WTO ruling. It is, in fact, based in Antigua and is offering up unlimited music or movie downloads for $10/month -- or both music and movies for $18. Needless to say, the US government and the entertainment industry are vehemently opposed to Zookz interpretation of the WTO ruling -- especially when it comes to the fact that the Zookz service is apparently available outside of Antigua. Honestly, it seems like both sides are stretching the meaning of the ruling. The US and the entertainment industry basically want to completely ignore the WTO ruling, and interpret it to be entirely meaningless. That makes no sense, of course. The WTO wouldn't allow such sanctions unless there were a way to actually make use of them.

That said, it doesn't seem like the WTO ruling gave random private companies carte blanche to offer up music and movies. In fact, the Zookz interpretation gets even odder, where it interprets the $21 million to mean how much it can make, rather than the value "lost" to the industry. In fact, because of this Zookz claims that if it gets too close to selling $21 million (or if others enter the market, and combined they approach $21 million), they'll just have to start giving music and movies away for free to avoid going over the limit. While the WTO did want to give Antigua a weapon against the US, it's hard to believe that was what it meant. So, while this may be amusing to watch, the likelihood of Zookz lasting very long seems slim, at best.

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Antigua Doesn't See Settlement With US Over WTO Plan To Let It Ignore US Copyrights

from the stand-your-ground dept

The back and forth battle between the US and Antigua is long and involved. You can read the background if you want, but the short version is that the US suddenly claimed that Antigua-based online gambling sites were in violation of US anti-gambling laws. Antigua took offense at this, and noted that it appeared to violate free trade agreements between the two countries, most specifically because the US still allowed certainly types of domestic online gambling. The issue went to the WTO multiple times, and every time Antigua won -- and every time the US ignored the decision. At one point, the US pretended it won the ruling, and another time it announced that it was simply, unilaterally, changing its trade agreement with Antigua.

Since Antigua has little leverage against the US, it started to look at other options -- and took serious an idea that some folks first suggested in jest: if the US keeps ignoring the WTO rulings, let Antigua ignore US intellectual property rights. Antigua took this plan to the WTO, and the WTO approved it -- though, limited it to only $21 million worth of intellectual property, which given industry accounting probably represents half an album or so. Either way, the US threatened Antigua not to follow through on this plan, even though the WTO approved it -- and the two sides agreed to negotiate a settlement, with a deadline of today, June 6th.

Well, here we are, and Antigua is saying that (can you believe it?) the US appears to be taking a hardline position on this whole thing and no settlement is expected. It will be interesting to see if Antigua really follows through on ignoring US intellectual property, and how it goes about doing so. Also, it will be worth watching to see how they "count" just how much intellectual property they're ignoring. I'm assuming they won't use RIAA math.

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Antigua Says It's Going To Start Ignoring US Copyrights (For Real This Time)

from the no,-really,-really,-really dept

Officials in Antigua are now trying to draw a line in the sand, claiming that if the US doesn't finally agree to allow some forms of online gambling by the end of this month, it will go ahead with its threats to ignore US copyrights with the approval of the WTO. As you may recall, back in December, the WTO granted Antigua that right, after a loooooooong series of battles with the US over whether or not the US was violating free trade agreements by banning online gambling. Of course, every time the WTO sided with Antigua, the US would stall, claim the WTO sided with the US (when it clearly did not) and (my personal favorite) claim that even if it had broken trade agreements, it didn't matter any more because the US was unilaterally changing its trade agreements so that it was no longer violating them.

Of course, when Antigua won the final decision in December, allowing the country to ignore US intellectual property rights, the US government and the entertainment industry quickly warned Antigua not to follow through on those plans -- but the US government still won't shift in its position on the matter. Thus, Antigua is agitating to get this show on the road. While it first needs to get one last permission slip from the WTO, once that's in place, it can start ignoring the copyright on American movies and music. Of course, while some are suggesting that it may make sense for The Pirate Bay to move to Antigua, that's not accurate. After all, the WTO has said that Antigua can only violate $21 million worth of intellectual property, and with the way the entertainment industry counts damages, that's like half an album or so.

In fact, that seems to be exactly the angle that the entertainment industry is taking in this fight. An MPAA letter warning: "The proposed retaliation would be impossible to manage. The real and resulting economic harm would vastly exceed any amount the (WTO) might approve, even the grossly exaggerated amount ($3.4 billion) for which Antigua seeks approval, plus the economic harm would extend to other WTO members."

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Online Gambling Deals Between US And Other Countries Are A Matter Of National Security?

from the seriously? dept

Remember back in December, the EU, Canada and Japan suddenly agreed not to side with Antigua in the longstanding dispute over the US's online gambling ban violating free trade agreements? It was pretty clear that the US had cut some sort of deal with these countries (who had previously indicated they would side with Antigua). In order to understand what happened, a freelance writer named Ed Brayton filed a Freedom of Information Act request to get the actual agreement between the countries. And, as The Agitator points out, the US Trade Representative has denied the request, claiming that the agreement is classified, as it's a matter of national security. Yes. The US gov't is actually claiming that an agreement over online gambling between two countries is a matter of national security. Perhaps this really shouldn't be such a huge surprise. Remember, the law that was passed to ban online gambling was hidden as part of a law to protect our ports. Clearly, the EU, Canada and Japan had to side with the US against Antigua to protect our ports.

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Hollywood Is Hardly An Innocent Victim In Trade Disputes

from the poetic-justice dept

My Cato colleague Sallie James describes the ongoing standoff between the US and the rest of the world at the World Trade Organization over gambling. When Congress banned online gambling, tiny Antigua filed a complaint alleging that the actions violated WTO rules. Antigua won, but the United States has so far bullied them out of taking advantage of their victory. The US has threatened to retaliate against Antigua if the latter begins targeting US copyrights as authorized in the trade ruling. James says that the United States is in the process of negotiating alternative compensation, including increased access to other American services markets. If that deal falls through, she warns, Hollywood might find itself "footing the bill" for the US government's ill-conceived gambling ban.

I certainly agree with her that the gambling ban was a bad idea, but I'm not sure it makes sense to paint Hollywood as an innocent victim here. After all, Hollywood has been pushing for decades to link trade policy and copyright law, going so far as to support free-trade agreements that include terms micro-managing other countries' copyright policies and requiring them to enact laws like the DMCA as a condition of access to American markets. Free traders rightly object when special interests try to use free trade agreements as a way to coerce countries into enacting their preferred labor and environmental policies. We should be equally incensed when Hollywood lobbies for the use of trade agreements to coerce countries into enacting their preferred copyright policies. So there's a certain amount of poetic justice in the fact that Hollywood has found its copyrights in the crosshairs of a trade dispute. James also correctly notes that retaliatory tarriffs are an insane way to impose damages on the losing country in a WTO dispute because tariffs hurt consumers in the "winning" country at the same time it hurts producers in the "losing" country. In contrast, if damages are imposed by targeting copyright law, consumers in the winning country will actually be made better off by lower prices for the copyrighted products in question. So while it would be best of Congress repealed its idiotic gambling ban, I'm not going too upset if Hollywood's attempts to link copyright law to trade policy come back to bite them.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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WTO Gives Antigua Only $21 Million In Sanctions; US Says 'Not So Fast...'

from the this-ain't-over-yet dept

The battle between the US and Antigua over online gambling is rather long. You can go back here to read a summary of the back and forth -- but the quick version is that the US violated its own free trade agreements by banning some forms of online gambling (while allowing others). Antigua, home to many online gambling firms, filed a complaint with the WTO. The WTO repeatedly sided with Antigua, and the US repeatedly ignored those rulings, before the US eventually unilaterally claimed that it had changed its trade agreement so that online gambling wasn't covered. In response, Antigua (with very little power) started pushing for a different kind of sanction against the US: it asked to be allowed to violate intellectual property of US firms, including copyrights, patents and trademarks. Antigua didn't really want that to happen -- it wanted to use that to put pressure on the US to back down and allow online gambling. A bunch of other countries started siding with Antigua until the US bought them off, leaving Antigua and a few other small countries fighting the US at the WTO.

Today the WTO came down with its final (no, this time they swear, it's final, dammit!) ruling, saying (again) that the US definitely did violate trade agreements, but that Antigua is only entitled to $21 million. The WTO did allow Antigua to target US copyrights in order to make up that amount, but the way folks like the RIAA "count" the value of copyright, $21 million is, what, like 10 songs? This is obviously far short of what Antigua was hoping for. You would think that the US might just pay off the $21 million and be done with it... but that would only be if you didn't recognize the way our government worked. Instead, even though there's no appealing the WTO's decision, the US is already warning Antigua not to put in place any sanctions based on this ruling. The US claims that it's in the process of "revising its commitments" with regards to its trade agreements and that Antigua should wait until those revisions are complete before it thinks about putting in place sanctions. While Antigua "wins" again, the reality here is that the US appears to have bullied its way into the real winning position.

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Not Many Folks Pleased About US Paying Off EU, Japan And Canada Over Online Gambling

from the who-does-this-help? dept

On Tuesday, we wrote about how the US was paying off the EU, Japan and Canada over a trade dispute around online gambling. The real point was to get these three to back off from putting pressure on the US to abide by free trade agreements, which effectively required the US to allow online gambling as long as it was hosted in other countries. It's quite a shame that these countries basically accepted money to let the US get out of agreements it had made -- and many are beginning to point out how ridiculous the whole situation is, and how it's likely to harm future US trade agreements around the world. All for the sake of preventing people from being able to play a little online poker.

Related to this, bankers and bank lobbyists are trying to explain to US politicians that upcoming rules concerning online gambling are impossible to abide by. As you may recall, back in October, the US approved new legislation that would put the liability on banks to prevent money from being used for online gambling. Beyond the ridiculousness of trying to stop people from gambling online if they choose to do so, this particular law means that banks need to figure out what money is being used for online gambling and try to prevent such uses. How? Politicians don't bother to go that far. Meanwhile, I hear that the gov't continues to make good money from state lotteries...

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US Cuts Deals To Keep EU, Canada And Japan From Siding With Antigua In Online Gambling Dispute

from the so-much-for-that-plan dept

For quite some time now, we've covered the ongoing dispute between the US and Antigua over the fact that the US's ban on online gambling violates free trade agreements between the two countries. While the US has tried to unilaterally change those agreement to keep gambling out, the WTO has repeatedly made it clear that the US was at fault (even though the US has pretended otherwise). Either way, the US knew that it could simply ignore Antigua, as the tiny country couldn't do much to hurt it (even if it moved forward on its plan to become a piracy haven for digital content. However, earlier this year, there were rumblings that the EU would get involved on Antigua's side, putting a lot more pressure on the US. However, it appears that US politicians and diplomats made quick work of that signing new agreements with the EU, Canada and Japan to keep those three out of the way, leaving the dispute between the US and Antigua, with much less powerful countries like Costa Rica and Macau backing Antigua's position. Not surprisingly, online gambling firms in the EU aren't pleased that the powers that be in the EU rolled over like this -- and neither are folks in the US who still don't understand why it's okay for them to buy a lottery ticket, but they can't play a little poker online.

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Would A $100 Billion Fine Get The US To Pay Attention To Antigua's WTO Win?

from the your-attention-please... dept

We've covered the long and detailed saga of Antigua fighting the US via the WTO, but the short summary is this: Antigua claims that the US is violating a free trade agreement in banning online gambling (many online gambling firms are in Antigua). The WTO agreed with Antigua and the US proceeded to ignore the ruling. The WTO again sided with Antigua... and the US pretended the WTO had sided with the US... and again ignored the ruling. This has happened a few more times, with the US eventually unilaterally changing the terms of the free trade agreement -- which didn't satisfy either the WTO or Antigua. Of course, with Antigua being such a small country there has been little in the way of ramifications for the US for ignoring the ruling. That's why Antigua is now pushing for the right to ignore US copyrights and patents as a remedy. However, there may be an even more persuasive remedy. Back over the summer, the EU indicated that it might start siding with Antigua in the dispute -- and it's a lot more difficult for the US to simply ignore the EU. To make the situation even more fun, the latest news is that gambling firms in the EU are pushing for $100 billion in damages from the US. That's certainly an unlikely number, but it's going to get plenty of attention either way. If the EU (and Japan, apparently) really do take Antigua's side in this, the US may finally be forced to acknowledge that it lost. However, it still seems quite unlikely that it will stop the ban on online gambling any time soon.

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Antigua Seriously Pushing For WTO Approval To Distribute Free Music And Movies

from the well,-look-at-that... dept

Since 2003, we've been following the saga of Antigua's fight against the US in the World Trade Organization. Basically, Antigua argued that the US's ban on online gambling violated the free trade agreement the two countries had signed -- as it blocked online gambling sites based in Antigua (of which there are a bunch). Since then, the case has been fun to watch if only for how the US has responded to it. The WTO ruled in favor of Antigua at which point the US basically ignored the WTO, despite the WTO occasionally making angry noises. Then, there was the time that the US went so far as to declare that the WTO had reversed that original ruling on appeal... but the details showed that the US was making up that claim and the WTO was still supporting Antigua. Earlier this year, after the WTO started stomping its feet again, the US responded by saying it was simply (unilaterally) going to change its free trade agreement with Antigua, so that online gambling wasn't included. Obviously, Antigua finds that solution quite troublesome.

Back in early 2006, however, a few people began buzzing about an idea that Antigua could use to force the US to pay attention: become an WTO-backed ignorer of US copyright law. Since the US knew it could effectively ignore Antigua over online gambling, the idea was that Antigua should simply say that if the US won't support its free trade agreement, then it would start ignoring US copyright laws, and would then (with WTO-backing, mind you) allow modern versions of all sorts of copyright-violating services to prosper. We didn't think that Antigua would seriously go in this direction, but as a new NY Times article makes clear it's exactly what Antigua is now pushing for. Of course, the real hope is that in doing so, the Big Copyright players will force the US government to back down on the gambling issue. However, it might be a lot more interesting to see what would happen if Antigua really did become the protected legal home of more modern versions of (the old) Napster, my.mp3.com, the Pirate Bay, Allofmp3.com and others. Of course, as reader OKVol points out to us, the real irony here is that in potentially ignoring copyright monopolies, Antigua may be getting closer to real free trade than in living up to the terms of the free trade agreement between the two countries.

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