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InternationalMarketing,TheInternationalLegalEnvironment:PlayingbytheRulesChapter7,14thEditionPhilipR.CateoraMaryC.GillyJohnL.Graham,McGraw-Hill/IrwinInternationalMarketing14/e,Copyright2009byTheMcGraw-HillCompanies,Inc.Allrightsreserved.,7-2,WhatShouldYouLearn?,ThefourheritagesoftodayslegalsystemsTheimportantfactorsinjurisdictionoflegaldisputesIssuesassociatedwithjurisdictionoflegaldisputesandthevariousmethodsofdisputeresolutionTheuniqueproblemsofprotectingintellectualpropertyrightsinternationally,7-3,WhatShouldYouLearn?,HowtoprotectagainstpiracyandcounterfeitingThelegaldifferencesbetweencountriesandhowthedifferencescanaffectinternationalmarketingplansThedifferentwaysU.S.lawscanbeappliedtoU.S.companiesoperatingoutsidetheUnitedStatesThemanyissuesofevolvingcyberlaw,7-4,GlobalPerspectiveThePajamaCaper,Nosingle,uniforminternationalcommerciallawgovernsforeignbusinesstransactionsTheinternationalmarketermustpayparticularattentiontothelawsofeachcountryLawsgoverningbusinessactivitieswithinandbetweencountriesAnintegralpartofthelegalenvironmentofinternationalbusinessSecuringexpertlegaladviceisawisedecisionThefoundationofalegalsystemProfoundlyaffectshowthelawiswritten,interpreted,andadjudicated,7-5,BasesforLegalSystems,FourheritagesformthebasisforthemajorityofthelegalsystemsoftheworldCommonlawCivilorcodelawIslamiclawMarxist-socialisttenetsEventhoughacountryslawsmaybebasedonthedoctrineofoneofthefourlegalsystemsitsindividualinterpretationmayvarysignificantly,7-6,Lawyersper100,000PeopleinSelectedCountries,Exhibit7.1,7-7,CommonandCodeLaw,CommonlawSeeksinterpretationthroughthepastdecisionsofhighercourtswhichinterpretthesamestatuesAppliesestablishedandcustomarylawprinciplestoasimilarsetoffactsArerecognizedasnotbeingall-inclusiveOwnershipisestablishedbyuseCodelawLegalsystemisgenerallydividedintothreeseparatecodesCommercialCivilCriminalOwnershipisdeterminedbyregistrationConsideredcompleteasaresultofcatchallprovisionsfoundinmostcode-lawsystems,7-8,IslamicLaw,ThebasisforIslamiclawisinterpretationoftheKoranIslamiclawdefinesacompletesystemthatprescribesspecificpatternsofsocialandeconomicbehaviorforallindividualsPropertyrightsEconomicdecisionmakingTypesofeconomicfreedomAmongtheuniqueaspectsofIslamiclawistheprohibitionagainstthepaymentofinterestTheIslamicsystemPlacesemphasisontheethical,moral,social,andreligiousdimensionstoenhanceequalityandfairnessforthegoodofsociety,7-9,Marxist-SocialistTenets,Socialistcountriesarenowmoredirectlyinvolvedintradewithnon-MarxistcountriesNecessitatedthedevelopmentacommerciallegalsystemthatallowedengagementinactiveinternationalcommercePatternfordevelopmentvariesamongcountriesEachhasadifferentbackgroundDevelopmentofmarket-driveneconomiesatdifferentstagesPremiseisthatlawisstrictlysubordinatetoprevailingeconomicconditionsFundamentalpropositionsasprivateownership,contracts,dueprocess,andotherlegalmechanismshavehadtobedeveloped,7-10,JurisdictioninInternationalLegalDisputes,NojudicialbodyexiststodealwithlegalcommercialproblemsarisingbetweencitizensofdifferentcountriesLegaldisputescanariseinthreesituationsBetweengovernmentsBetweenacompanyandagovernmentBetweentwocompaniesJurisdictionisgenerallydeterminedonthebasisof:JurisdictionalclausesincludedincontractsWhereacontractwasenteredintoWheretheprovisionsofthecontractwereperformedMostclear-cutdecisionscanbemade:Whencontractsorlegaldocumentssupportingabusinesstransactionincludeajurisdictionalclause,7-11,InternationalDisputeResolutionConciliation,ConciliationisanonbindingagreementbetweenpartiestoresolvedisputesbyaskingathirdpartytomediatedifferencesSessionsareprivateAllconferencesbetweenpartiesandthemediatorareconfidentialAlthoughconciliationmaybethefriendlyroutetoresolvingdisputesItisnotlegallybindingAnarbitrationclauseshouldbeincludedinallconciliationagreements,7-12,InternationalDisputeResolutionArbitration,ConductedundertheauspicesmoreformaldomesticandinternationalarbitrationgroupsOrganizedspecificallytofacilitatetheresolutionofcommercialdisputesThepopularityofarbitrationhasledtoaproliferationofarbitralcentersEstablishedbycountries,organizations,andinstitutionsInter-AmericanCommercialArbitrationCommissionCanadian-AmericanCommercialArbitrationCommission(fordisputesbetweenCanadianandU.S.businesses)LondonCourtofArbitration(decisionsareenforceableunderEnglishlawandEnglishcourts)AmericanArbitrationAssociationInternationalChamberofCommerce(selectArbitration),7-13,InternationalDisputeResolutionArbitration,ContractsandotherlegaldocumentsshouldincludeclausesspecifyingtheuseofarbitrationtosettledisputesArbitrationclausesrequireagreementontwocountsToarbitrateinthecaseofadisputeaccordingtotherulesandproceduresofsomearbitrationtribunalToabidebytheawardsresultingfromthearbitration,7-14,InternationalDisputeResolutionLitigation,ThebestadviceistoseeksettlementDeterrentstolitigationFearofcreatingapoorimageanddamagingpublicrelationsFearofunfairtreatmentinaforeigncourtDifficultyincollectingajudgmentthatmayotherwisehavebeencollectedinamutuallyagreedsettlementthrougharbitrationTherelativelyhighcostandtimerequiredwhenbringinglegalactionLossofconfidentiality,7-15,ProtectionofIntellectualPropertyRightsASpecialProblem,CompaniesspendmillionsofdollarsestablishingbrandnamesortrademarksTosymbolizequalityanddesignToenticecustomersMillionsarespentonresearchTodevelopproducts,processes,designs,andformulasIntellectualorindustrialpropertiesareamongthemostvaluableassetsNewtechnologiesdevelopedtopreventpiracy,7-16,CounterfeitingandPiracy,LostsalesfromtheunauthorizeduseofU.S.patents,trademarks,andcopyrightsAmounttomorethan$100billionannuallyThepiracyindustryhasgrownsosophisticatedManycounterfeitgoodsareindistinguishablefromoriginalPiracyactuallycanservecomecompaniesMicrosoftCounterfeitpharmaceuticals2%ofthe$327billionworthofdrugssoldeachyear,7-17,PiracyRatesforComputerSoftwareTopandBottom20,Exhibit7.2,7-18,InadequateProtection,FailingtoadequatelyprotectintellectualpropertyrightscanleadtothelegallossofrightsinpotentiallyprofitablemarketsTherehavebeenmanycaseswherecompanieshavelegallylosttherightstotrademarksandhavehadtobuybacktheserightsorpayroyaltiesfortheiruseMcDonaldsinJapanManybusinessesfailtotakeproperstepstolegallyprotecttheirintellectualproperty,7-19,PriorUseVersusRegistration,PriorUsewhoevercanestablishfirstuseistypicallyconsideredtherightfulownerRegistrationthefirsttoregisteratrademarkorotherpropertyrightisconsideredtherightfulownerAcompanythatbelievesitcanalwaysestablishownershipinanothercountrybyprovingitusedthetrademarkorbrandnamefirstiswrongandrisksthelossoftheseassetsItisbesttoprotectintellectualpropertyrightsthroughregistration,7-20,InternationalConventions,ThreemajorinternationalconventionsParisConventionfortheProtectionofIndustrialPropertyInter-AmericanConventionMadridArrangementWorldIntellectualPropertyOrganization(WIPO)ResponsibleforthepromotionoftheprotectionofintellectualpropertyandfortheadministrationofthevariousmultilateraltreatiesthroughcooperationamongitsmemberstatesPatentCooperationTreaty(PCT)EuropeanPatentConvention(EPC)TheTrade-RelatedAspectsofIntellectualPropertyRights(TRIPs),7-21,MarketingLaws,AllcountrieshavelawsregulatingmarketingactivitiesPromotionProductdevelopmentLabelingPricingChannelsofdistributionDiscrepanciesacrossmarketscauseproblemsfortradenegotiatorsparticularlyformanagersandtheirfirmsU.S.doesnotallowthebuyingorsellingofhumanorgansSomecountriesonlyhaveafewmarketinglawswithlaxenforcementOthershavedetailed,complicatedrulesthatarestringentlyenforced,7-22,MarketingLaws,ThereoftenarevastdifferencesinenforcementandinterpretationamongcountrieshavinglawscoveringthesameactivitiesLawsgoverningsalespromotionsintheEuropeancommunityCensorshipofadvertisingisaconstantconcernFormanyU.S.productswithmarketsinEurope,meetingEUstandardsislessexpensivethandesigningproductsespeciallyforEurope,7-23,GreenMarketingLegislation,GreenmarketinglawsFocusonenvironmentallyfriendlyproductsandFocusonproductpackaginganditseffectonsolidwastemanagementAntitrustForbetterpartofthe20thcenturyantitrustlawsNonexistentNotenforcedinmostoftheworldscountriesU.S.wasexceptionEUhasdealtseverepenaltiesforantimonopoly,pricediscrimination,supplyrestrictions,andfull-lineforcing,7-24,GreenMarketingLegislation,TheU.S.interveneswhennon-U.S.companiesattempttoacquireAmericancompaniesAttimes,companiesaresubjecttoantitrustchargesinmorethanonecountryNestlesproposedacquisitionofDreyersGrandIceCreamMicrosoftEnforcementofantitrustinEuropealmostnonexistentuntiltheearlystagesofEUestablishedlegislation,7-25,U.S.LawsApplyinHostCountries,ForeignCorruptPracticesActMakesitillegalforcompaniestopaybribestoforeignofficials,candidates,orpoliticalpartiesNationalsecuritylawsProhibitaU.S.company,itssubsidiaries,jointventures,orlicenseestosellcontrolledproductswithoutspecialpermissionfromtheU.S.AntitrustlawsEnforcementhastwopurposesininternationalcommerceProtectAmericanconsumersProtectAmericanexportsandinvestmentsagainstanyprivaterestrictionsThequestionofjurisdictionandhowU.S.antitrustlawsapplySectionsIandIIoftheShermanAct,7-26,U.S.LawsApplyinHostCountries,AntiboycottlawU.S.companiesareforbiddentoparticipateinanyunauthorizedforeignboycottRequiredtoreportanyrequesttocooperatewithaboycottExtraterritorialityofU.S.lawsEspeciallyimportanttoU.S.multinationalfirmsForeigngovernmentsfeartheinfluenceofAmericangovernmentpolicyontheireconomiesthroughU.S.multinationalsWhenU.S.lawsconflictwiththoseofhostcountryWhenU.S.JusticeDepartmentrestrictsofforbidsventuresbecauseofanticompetitiveeffects,7-27,CyberlawUnresolvedIssues,DomainnamesandcybersquattersCybersquatters(CSQs)buyandregisterdescriptivenouns,geographicnames,andnamesofethnicgroupsandpharmaceuticalsubstances,andothersimilardescriptorsandholdthemuntiltheycanbesoldataninflatedpriceOthercybersquattingabusesthatcanposeaseriousthreattobusinessincludeparodysites,protestsites,TheInternetisnotalibel-freezoneLawsuitsinvolvinglibel,defamation,andproductliabilitycausecompaniestovoluntarilyrestricttheirWebsitestoselectedcountries,7-28,CyberlawUnresolvedIssues,TaxesInthepast,acompany