Chapter 1

Chapter 7The International Legal Environment: Playing by the Rules1Global Perspective:The Pajama CaperWalmart 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.

IntroductionNo single, uniform international commercial law governing foreign business transactions existsInternational marketers must comply with the laws of each country within which it operate

Protection of Intellectual Property:Counterfeiting and PiracyFirms spend millions of dollars establishing brand names or trademarks to symbolize quality & design only to be counterfeited and piratedPiracy 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 publicityCounterfeit products such as Rolex watches are very common in many countries, China and India being top on the list. Pirated music CDs, movies and books are some of the products commonly counterfeited. In the country of Turkey for example, there are stores that officially call themselves Genuinely Fake and sell counterfeit products. Piracy and counterfeiting causes losses in sales and profits for companies. However, some companies take a different approach; Microsofts Bill Gates states that he would rather have the Chinese copy MS products, because some day technology will force them to purchase some of the products and if one is familiar with MS, thats the product consumers will choose to purchase.4Intellectual Property Rights: Inadequate ProtectionThere is inadequate protection from products being counterfeited or pirated as many countries do not recognize trademarks and patents registered in other countries

Not only is there inadequate protection for trademarks or brands, others in the country can register and have rights to a brand like McDonalds or Coach and there is no legal protection. However, it is better today when companies are refusing to pay billions of dollars to get their trademark back from squatters, they give it up as there is no benefit to them.5In the United States, a common-law country, ownership of intellectual property rights is established by prior useIn many code-law countries, ownership is established by registration rather than by prior useFor 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 JordanianIntellectual Property Rights:Prior Use vs. RegistrationAs mentioned in the previous slide, in code law countries, individuals can register a trademark (however famous the brand is) and sit ion it and demand payment from the multinational company to release the trademark. A case in point is Starbucks Coffee when it first entered Japan, all of its Seattle theme, logo, colors and men u items were registered by Morinara Coffee. Starbucks fought its battles in court but to no avail and therefore had to change its usual menu, colors and most everything in order not to violate Morinaras registered trademark!6International ConventionsMany countries participate in international conventions designed for mutual recognition & protection of intellectual property rightsThe three major international conventions include:The Paris Convention for the Protection of Industrial Property, includes the United States and 100 other countriesThe 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.The World Intellectual Property Organization (WIPO) of the United Nations is promotes the protection of intellectual property and for the administration of the various multilateral treaties through cooperation among its member states. The Patent Cooperation Treaty (PCT) facilitates the patent application process among its member countries. The European Patent Convention (EPC) has a regional patent system that allows any nationality to file a single international application for a European patent. The side agreement of the WTO called TRIPS (Trade Related Aspects of Intellectual Property Rights) is one of the most comprehensive treaties that details intellectual property right protection in member nations.

7Patent LawUSAOperates under first to invent ruleProtects individual inventorsPatent applications secret Patents granted in up to 24 monthsPatents valid for 17 years from application date issuedJapanOperates under first to register rulePromotes technology sharingPatent applications publicPatents granted in 4 to 6 yearsPatents valid 20 years from application date issued

Other Managerial ApproachesThe traditional, but weak remedies for American companies operating in countries such as China are severalprevention, that is, engage local representation and diligently register IP with the appropriate agenciespursue negotiation and alternative dispute resolutioncomplain to the Chinese authoritiescomplain to the U.S. government and World Trade Organization (WTO).

Microsoft: If they steal I want them to steal my product philosophy that paid off when Bill Gates legally signed a deal with Lenovo in 2006 for all Lenovo computers to come with MS products.Philips: Engages in an open innovation policyWarner Brothers: Engages in charge what the market will bear policyIt seemed to work for all three of these companies.9Cyberlaw: Unresolved IssuesCybersquattingThe practice of registering a domain name that is the trademark of another person or companyCybersquatters hope that the owner of the trademark will pay huge dollar amounts to acquire the URLSome Cybersquatters misrepresent themselves as the trademark owner for fraudulent purposesCybersquatters register a well-known brand or trademark that misdirects a person to the CSQs site or to a competing companys site. They also register the domain names of famous companies such as Microsoft in Portugal hoping to extort money from the multinational company. In the case of Microsoft in Portugal, Microsoft decided to register a new name Microsoft1.pt and informed all its customers that this was the companys actual site and the CSQ gave up the domain.11TaxesA typical tax system relies on knowing where a particular economic activity is locatedBut the Internet enables individual workers to operate in many different countries from a computerWhen taxes should be collected, where they should be collected, and by whom are all issues under consideration by countries around the world. In the past, a company was deemed to have a taxable presence in a country if it had a permanent establishment there. But whether the existence of a server or a website qualifies as such a presence is not clear. One proposal that has enthusiastic support from tax authorities is for servers to be designated as virtual permanent establishments and thus subject to local taxes. On another note, the U.S. government is trying to impose a tax on consumers for all internet purchases. For example, if a consumer that lives in a State that has Sales Tax, but shops online from a state with no Sales Tax, the appropriate taxes would be levied on the citizens come the end of the calendar year.

12Jurisdiction of Disputes andValidity of ContractsSince 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 communicationsCyber business makes it difficult to enforce anything in case a dispute arises. A body of law is being compiled based on experiences and past practices.13Commercial Law within Countries: Marketing LawsWhen doing business in more than one country, a firm must comply with different marketing lawsAll countries have laws regulating marketing activities in promotion, product development, labeling, pricing, and distribution channels

Commercial Law within Countries: Marketing LawsIn Austria, premium offers, free gifts, or coupons are considered as cash discounts and are prohibitedPremium 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 LawsSweden 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 LegislationMultinational 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 managementGermany has passed the most stringent green marketing laws that regulate the management and recycling of packaging waste

Foreign Countries 'Antitrust LawsThe European Community, Japan, and many other countries have begun to actively enforce their antitrust laws patterned after those in the United StatesAntimonopoly, price discrimination, supply restrictions, and full-line forcing are areas which lead to less competition and higher prices for consumers Foreign countries also have started to develop and enforce antitrust laws more stringently.18U.S. Laws Apply in Host CountriesLeaving 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. technologyU.S. companies operating overseas are still bound by U.S. Law, particularly the three specified in the following slide.19U.S. Laws Apply in Host CountriesExport RequirementsAlthough 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). In addition to antitrust laws, U.S. companies that export must be particularly vigilant of products they export and which countries they export to. Where a companys product ends up and its end use is a concern of the U.S. company and its responsibility. It is essential for a company to read or get assistance on Export Administration Regulations (EAR), determine the Export Classification Number (ECCN) and also determine that it is not exporting to a denied country or person overseas. The U.S. government has made this process relatively easy by establishing several electronic services as specified in the slide. Particularly after 9/11, the formerly Bureau of Export Administration falls under the Homeland Security division called Bureau of Industry and Security (BIS) and has gotten more stringent.21Export RequirementsProducts 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.In addition to antitrust laws, U.S. companies that export must be particularly vigilant of products they export and which countries they export to. Where a companys product ends up and its end use is a concern of the U.S. company and its responsibility. It is essential for a company to read or get assistance on Export Administration Regulations (EAR), determine the Export Classification Number (ECCN) and also determine that it is not exporting to a denied country or person overseas. The U.S. government has made this process relatively easy by establishing several electronic services as specified in the slide. Particularly after 9/11, the formerly Bureau of Export Administration falls under the Homeland Security division called Bureau of Industry and Security (BIS) and has gotten more stringent.22Export RequirementsFour 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)In addition to antitrust laws, U.S. companies that export must be particularly vigilant of products they export and which countries they export to. Where a companys product ends up and its end use is a concern of the U.S. company and its responsibility. It is essential for a company to read or get assistance on Export Administration Regulations (EAR), determine the Export Classification Number (ECCN) and also determine that it is not exporting to a denied country or person overseas. The U.S. government has made this process relatively easy by establishing several electronic services as specified in the slide. Particularly after 9/11, the formerly Bureau of Export Administration falls under the Homeland Security division called Bureau of Industry and Security (BIS) and has gotten more stringent.23