Antigua seeks a different kind of payout in gambling dispute with US

If tiny Antigua and Barbuda gets its way, distributors of works by Beyoncé, Steven Spielberg and other American artists could get shortchanged in the eastern Caribbean islands.

Frustrated by the inability to collect billions on its World Trade Organization victory against the U.S. over Internet casinos, Antigua is seeking to cash in its winnings another way — by directing payments for American intellectual property, such as music and film, to the government. Antigua estimates the damage to its economy at $3.4 billion.

“We are tired of talking,” said Attorney General Justin Simon, who last month formed a committee to start working on a plan to collect the royalties.

Antigua, which took the U.S. to the WTO and won, first earned the right to retaliate six years ago. The latest WTO ruling came after the U.S. failed to honor its previous ruling that online gambling restrictions were illegal — and that Antigua could impose sanctions. The country then asked for the right to go after trademarks, copyrights and other intellectual property rights.

The government plans to collect up to $21 million annually in royalties retroactive to 2006, money that normally goes to American music and film distributors. It’s unclear whether the government would return any of the money it collects to distributors.

The request has ignited the ire of U.S. trade officials — who warn that Antigua’s proposal could damage its reputation — and film industry executives, who worry it could hurt future sales and open up a “Pandora’s box” to piracy in other countries.

“Antiguan officials understand that retaliation against U.S. intellectual property rights, such as copyrights, would not be constructive,” said Brian Quinn, a spokesman with the Office of the United States Trade Representative. “It would damage Antigua’s climate for investment and innovation, and would not promote settlement.”

A spokeswoman for the Motion Picture Association of America declined to comment, but pointed to concerns raised in a 2008 letter — a year after Antigua asked the WTO for the right to retaliate in order to collect on its estimated billions in gambling losses.

Calling the figure “grossly exaggerated,” the association said Antigua’s proposal would present “real economic harm.”

“The unfortunate reality is that the failure to offer or enforce adequate protection of intellectual property rights in Antigua could foster abuses in other countries,” Greg Frazier of the Motion Picture Association of America wrote.

Frazier also said that the “copyright-haven” proposal wasn’t manageable. Piracy, he noted, was already costing the film industry thousands in jobs and billions in lost sales.

“While we cannot provide a reliable estimate of the damage Antigua’s proposal would cause the U.S.,” Frazier said, “MPAA believes it would be very difficult to insulate other WTO members from the effects of Antigua’s proposed retaliation.”

Simon said the country’s decision to make its threat a reality comes after years of unsuccessful negotiations with U.S. trade officials over the country’s ban, which has crippled Antigua’s gaming industry. The industry once paid almost $13 million in salaries to its 3,000 workers and raked in as much as $7 million in licensing fees, Simon said.

“We have lost all of that,” he said.

Antigua first challenged U.S. federal and state laws barring Internet gambling in 2003. The WTO then sided with it in 2004 and 2005. The United States, however, remained seemingly unfazed and even issued arrest warrants for American gambling operators in Antigua, which the country has refused to comply with, Simon said.

“We have been at the negotiating table with the department of trade [but] nothing has come out of it. We have made suggestion after suggestion and we’ve been told, ‘We’ll get back to you,’ ” Simon said. “So at this stage, we really think that we should begin to structurally prepare ourselves for implementing the recommendations dealing with intellectual property.”

Antigua isn’t the first country that has received the retaliation light from the WTO. In 2000, banana-growing nation Ecuador got the right to impose $202 million in sanctions against European goods after the European Union failed to reform its banana-import system.

In 2007, Brazil also announced that it was going after U.S. trademarks, patents and other intellectual property as part of a WTO ruling that the U.S. doled out illegal subsidies to American cotton growers.

In both cases, however, the countries were able to negotiate before having to enforce the sanctions, which observers say is very difficult to do. Even the WTO’s ruling, they note, is difficult to enforce, demonstrated by the number of years nations have been forced to wait for resolution.

Those realities aren’t lost on Simon, who concedes that he hopes the threat of losing copyright fees will compel the U.S. music and film industry to put pressure on U.S. government officials to settle the dispute.

“We are small, we are Third World, we are developing,” he said, acknowledging that while Antigua doesn’t have the economic prowess of Brazil, it still wants to be taken seriously.

“It is a fact that Brazil found itself in a very similar situation in respect to subsidies the U.S. gave to their domestic cotton producers,” he said. “Nothing happened until Brazil determined it was going to evoke its WTO-approved sanctions. Within a few months, the U.S. began settling with Brazil.”