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.

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.

You may recall a few years ago that in the (still ongoing!) fight between Antigua and the US at the World Trade Organization (WTO), that the WTO came out with a ruling where the US declared immediate victory, though the details showed that actually the WTO had sided with Antigua. The US merely declared victory, and got its (wrong) story out to the press first.

It appears that's happening again.

Earlier this week, plenty of attention was paid to a WTO ruling concerning US disputes with China over a variety of intellectual property issues. The US Trade Representative quickly declared victory (pdf) and that's the story most of the folks in the press went with, claiming that this was a US victory where the WTO largely supported the US. Some even called it a major victory, while others were surprised that China seemingly was fine with the ruling.

Perhaps that's because if you actually read through the details, you realize, as Michael Geist points out, that the US actually lost very badly. There were three issues at stake -- and the only one the US "won" was the most minor of the three. On the two big issues, concerning China's border measures concerning counterfeit goods and its IP enforcement system within the country, the WTO sided strongly with China, and chastised the US for providing rather bogus "evidence" (often consisting of newspaper articles, rather than actual evidence) in support of its position. It seems like the only mainstream publication that actually bothered to read the report, rather than the USTR's "day is night" version of the events was Forbes, who notes that the USTR was being misleading in claiming victory. Of course, given how the US acted after it lost the Antigua case in the WTO, we can expect the US to appeal the ruling or... just ignore it and continue pretending the WTO actually ruled in its favor.

It appears that Brazil is considering following the lead of Antigua in asking the WTO for permission to ignore US copyright and patent laws (found via Howard Knopf). This isn't the first time that this has occurred. Three years ago, Brazil had suggested the same solution in response to the same issue: US subsidies to cotton farmers that Brazil feels go against international laws and treaties.

What's really interesting here, though is the ongoing recognition that this is an effective way to retaliate against US efforts to break treaties or laws. With a country like Antigua, which has little else it can do, it might not be that surprising. But seeing a much larger country like Brazil take this approach seriously may lead to it showing up in many more places as well.

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.

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."

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.

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.

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...

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.