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Chapter

7
The International
Legal
Environment:
Playing by the
Rules

Global Perspective:
The Pajama Caper
Walmart

was selling Cuban-made


pajamas in Canada. When US Walmart
officials became aware of the origin of
manufacture, they issued an order to
remove the pajamas because it is
against U.S. law (the Helms-Burton Act)
for a U.S. company or any of its foreign
subsidiaries to trade with Cuba.

Introduction

No single, uniform
international commercial law
governing foreign business
transactions exists
International marketers must
comply with the laws of each
country within which it
operate

Protection of Intellectual
Property:
Counterfeiting and Piracy
Firms

spend millions of dollars


establishing brand names or
trademarks to symbolize quality &
design only to be counterfeited and
pirated
Piracy and counterfeiting leads to lost
sales from the unauthorized use of
U.S. patents, trademarks, and
copyrights which amount to about $60
billion annually as well as lost jobs.
Counterfeited pharmaceutical drugs
can also lead death and bad publicity

Intellectual Property
Rights:
Inadequate Protection
There

is inadequate protection
from products being
counterfeited or pirated as
many countries do not
recognize trademarks and
patents registered in other
countries

Rights:
Prior Use vs.
Registration
In

the United States, a common-law


country, ownership of intellectual
property rights is established by prior
use
In many code-law countries,
ownership is established by
registration rather than by prior use
For

example, a trademark in Jordan


belongs to whoever registers it first in
Jordan so there are McDonalds
restaurants, Microsoft software, and
Safeway groceries all legally
belonging to a Jordanian

International
Conventions
Many

countries participate in
international conventions designed for
mutual recognition & protection of
intellectual property rights
The

three major international conventions


include:

The Paris Convention for the Protection of


Industrial Property, includes the United
States and 100 other countries
The Inter-American Convention includes most
of the Latin American nations & the US.
The Madrid Arrangement, which established
the Bureau for International Registration of
Trademarks, includes 26 European countries.

Patent Law
USA
Operates

Japan

under
first to invent rule
Protects individual
inventors
Patent applications
secret
Patents granted in up
to 24 months
Patents valid for 17
years from application
date issued

Operates

under
first to register rule
Promotes technology
sharing
Patent applications
public
Patents granted in 4
to 6 years
Patents valid 20 years
from application date
issued

Other Managerial Approaches


The

traditional, but weak remedies for


American companies operating in
countries such as China are several
prevention,

that is, engage local


representation and diligently register IP
with the appropriate agencies
pursue negotiation and alternative dispute
resolution
complain to the Chinese authorities
complain to the U.S. government and
World Trade Organization (WTO).

Cyberlaw: Unresolved
Issues
Existing internet law is vague or does not completely cover
such issues as the protection of domain names, taxes,
jurisdiction in cross-border transactions, and contractual
issues
The European Union, the U.S. and many other countries are
drafting legislation to address the myriad legal questions
not clearly addressed by current law
Laws being considered deal with Cybersquattersthose
who buy and register names and other similar descriptors
and hold them until they are sold at an inflated price
The collection of taxes on sale of products, i.e., when taxes
should be collected, where they should be collected, and by
whom, are all issues under consideration by countries
around the world

Cybersquatting
The

practice of registering a
domain name that is the
trademark of another person or
company
Cybersquatters

hope that the owner


of the trademark will pay huge
dollar amounts to acquire the URL
Some Cybersquatters misrepresent
themselves as the trademark owner
for fraudulent purposes

Taxes
A

typical tax system relies on


knowing where a particular
economic activity is located
But the Internet enables individual
workers to operate in many
different countries from a computer
When taxes should be collected,
where they should be collected, and
by whom are all issues under
consideration by countries around
the world.

Jurisdiction of Disputes
and
Validity of Contracts
Since

existing laws relating to


commerce do not always clearly
address the uniqueness of the
Internet, a body of cyberlaw is being
created.
Two of the most troubling areas are:
determining

whose laws will prevail


in legal disputes between parties
located in different countries
establishing the contractual validity
of electronic communications

Commercial Law within


Countries: Marketing
Laws
When

doing business in more


than one country, a firm must
comply with different marketing
laws
All countries have laws regulating
marketing activities in promotion,
product development, labeling,
pricing, and distribution channels

Commercial Law within


Countries: Marketing
Laws
In

Austria, premium offers, free


gifts, or coupons are considered as
cash discounts and are prohibited
Premium offers in Finland are
allowed as long as the word free is
not used
French law permits sales only twice
a year, in January and August

Commercial Law within


Countries: Marketing
Laws
Sweden

banned all television


advertising to children in 1991.
Greece, Norway, Denmark, Austria,
and the Netherlands all restrict
advertising directed at children.
In Canada, all claims and
statements must be examined to
ensure that any representation to
the public is not false or misleading.

Green Marketing
Legislation
Multinational

corporations also face


laws on environmental issues such as
industrial pollution, hazardous waste
disposal, and rampant deforestation
Green marketing laws focus on
environmentally friendly products &
on product packaging and its effect
on solid waste management
Germany has passed the most
stringent green marketing laws that
regulate the management and
recycling of packaging waste

Foreign Countries 'Antitrust


Laws
The

European Community, Japan, and


many other countries have begun to
actively enforce their antitrust laws
patterned after those in the United
States
Antimonopoly, price discrimination,
supply restrictions, and full-line
forcing are areas which lead to less
competition and higher prices for
consumers

U.S. Laws Apply in Host


Countries
Leaving

the boundaries of a home


country does not exempt a business
from home-country laws
What is illegal for an American
business at home can also be illegal
by U.S. law in foreign jurisdictions for
the firm, its subsidiaries, and
licensees of U.S. technology

U.S. Laws Apply in Host


Countries
(1)

Foreign Corrupt Practices Act


(FCPA)
Makes it illegal for companies to pay bribes to
foreign officials, candidates, or political
parties
(2) National Security Laws
U.S. firms, their foreign subsidiaries, or
foreign firms that are licensees of U.S.
technology cannot sell a product to a country
which could affect national security of the U.S.
(3) Antitrust Laws
Protects American consumers from actions
that restricts competition
Protects American export and investment
opportunities against any privately imposed
restrictions to compete on merit

Export Requirements
Although

the United States requires no


formal or special license to engage in
exporting as a business, permission or a
license to export may be required for
certain commodities and certain
destinations.
The Department of Commerce has
published a revised set of export
regulations known as the Export
Administration Regulations (EAR).

Export Requirements
Products

exported from the United States


require a general or a validated export
license, depending on the product where it
is going, the end use, and the final user.
The

general license permits exportation of


certain products that are not subject to EAR
control with nothing more than a declaration of
the type of product its value, & its destination.
The validated license, issued only on formal
applications, is a specific document authorizing
exportation within specific limitations
designated under the EAR.

Export Requirements
Four

electronic services facilitate the


paperwork and reduce the time
necessary to acquire export licenses.
ELAIN

(Export License Application and


Information Network)
ERIC (Electronic Request for Item
Classification),
STELA (System for Tracking Export License
Applications),
SNAP (Simplified Network Application
Process)