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 todays 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
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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 countrys laws may be based on

the doctrine of one of the four legal systems its
individual interpretation may vary significantly

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Common and Code Law

Common 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
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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
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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
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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

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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
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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-b
ittorrent-100629/
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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
McDonalds in Japan

Many businesses fail to take proper steps to

legally protect their intellectual property
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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-p
iracy-china-black-market
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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)

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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
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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
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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
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