The International Legal Environment: Playing by the Rules International Marketing 15th edition Chapter 7 The International Legal Environment: Playing by the Rules Philip R. Cateora, Mary C. Gilly, and John L. Graham

Overview Bases for today’s legal systems The important factors in jurisdiction of legal disputes The various methods of dispute resolution The unique problems of protecting intellectual property rights internationally Cyberlaw Commercial law within countries U.S. Laws application in host countries Export restrictions Roy Philip

Bases for Legal Systems Four heritages form the basis for the majority of the legal systems of the world Common law Civil or code law Islamic law Marxist-socialist tenets Even though a country’s laws may be based on the doctrine of one of the four legal systems its individual interpretation may vary significantly Roy Philip

Common and Code Law Common law Code law Seeks interpretation through the past decisions of higher courts which interpret the same statues Applies established and customary law principles to a similar set of facts Are recognized as not being all-inclusive Ownership is established by use Code law Legal system is generally divided into three separate codes Commercial Civil Criminal Ownership is determined by registration Considered complete as a result of catchall provisions found in most code-law systems Roy Philip

Islamic Law The basis for Islamic law is interpretation of the Koran Islamic law defines a complete system that prescribes specific patterns of social and economic behavior for all individuals Property rights Economic decision making Types of economic freedom Among the unique aspects of Islamic law is the prohibition against the payment of interest The Islamic system Places emphasis on the ethical, moral, social, and religious dimensions to enhance equality and fairness for the good of society Roy Philip

Jurisdiction in International Legal Disputes No judicial body exists to deal with legal commercial problems arising between citizens of different countries Legal disputes can arise in three situations Between governments Between a company and a government Between two companies Jurisdiction is generally determined on the basis of: Jurisdictional clauses included in contracts Where a contract was entered into Where the provisions of the contract were performed Most clear-cut decisions can be made: When contracts or legal documents supporting a business transaction include a jurisdictional clause Roy Philip

Litigation The best advice is to seek settlement Deterrents to litigation Fear of creating a poor image and damaging public relations Fear of unfair treatment in a foreign court Difficulty in collecting a judgment that may otherwise have been collected in a mutually agreed settlement through arbitration The relatively high cost and time required when bringing legal action Loss of confidentiality Roy Philip

Protection of Intellectual Property Rights – A Special Problem http://www.wipo.int/about-ip/en/ - What is intellectual property? Companies spend millions of dollars establishing brand names or trademarks to symbolize quality and design and to entice customers Millions are spent on research to develop products, processes, designs, and formulas Intellectual or industrial properties are among the most valuable assets New technologies developed to prevent piracy Roy Philip

Counterfeiting and Piracy Lost sales from the unauthorized use of U.S. patents, trademarks, and copyrights Amount to more than $100 billion annually The piracy industry has grown so sophisticated Many counterfeit goods are indistinguishable from original Piracy actually can serve come companies Microsoft Counterfeit pharmaceuticals 2% of the $327 billion worth of drugs sold each year http://hwrms.com/blog/?p=453 – fun pirated products http://torrentfreak.com/top-10-most-pirated-movies-on-bittorrent-100629/ Roy Philip

Inadequate Protection Failing to adequately protect intellectual property rights can lead to the legal loss of rights in potentially profitable markets There have been many cases where companies have legally lost the rights to trademarks and have had to buy back these rights or pay royalties for their use McDonald’s in Japan Many businesses fail to take proper steps to legally protect their intellectual property Roy Philip

Prior Use Versus Registration Prior Use – whoever can establish first use is typically considered the rightful owner Registration – the first to register a trademark or other property right is considered the rightful owner A company that believes it can always establish ownership in another country by proving it used the trademark or brand name first is wrong and risks the loss of these assets It is best to protect intellectual property rights through registration http://www.audioholics.com/news/industry-news/dvd-piracy-china-black-market Roy Philip

International Conventions Three major international conventions Paris Convention for the Protection of Industrial Property Inter-American Convention Madrid Arrangement World Intellectual Property Organization (WIPO) Responsible for the promotion of the protection of intellectual property and for the administration of the various multilateral treaties through cooperation among its member states Patent Cooperation Treaty (PCT) European Patent Convention (EPC) The Trade-Related Aspects of Intellectual Property Rights (TRIPs) Roy Philip

Marketing Laws (1 of 2) All countries have laws regulating marketing activities Promotion Product development Labeling Pricing Channels of distribution Discrepancies across markets cause problems for trade negotiators – particularly for managers and their firms U.S. does not allow the buying or selling of human organs Some countries only have a few marketing laws with lax enforcement Others have detailed, complicated rules that are stringently enforced Roy Philip

U.S. Laws Apply in Host Countries (1 of 2) Foreign Corrupt Practices Act Makes it illegal for companies to pay bribes to foreign officials, candidates, or political parties National security laws Prohibit a U.S. company, its subsidiaries, joint ventures, or licensees to sell controlled products without special permission from the U.S. Antitrust laws Enforcement has two purposes in international commerce Protect American consumers Protect American exports and investments against any private restrictions The question of jurisdiction and how U.S. antitrust laws apply Sections I and II of the Sherman Act Roy Philip

U.S. Laws Apply in Host Countries (2 of 2) Antiboycott law U.S. companies are forbidden to participate in any unauthorized foreign boycott Required to report any request to cooperate with a boycott Extraterritoriality of U.S. laws Especially important to U.S. multinational firms Foreign governments fear the influence of American government policy on their economies through U.S. multinationals When U.S. laws conflict with those of host country When U.S. Justice Department restricts of forbids ventures because of anticompetitive effects Roy Philip