Development of New Approaches in International Trade Law

• Publication year: 2017
• Author: By Jonathan Arnold, Esq.*

Development of New Approaches in International Trade Law

By Jonathan Arnold, Esq.*

I. CURRENT INTERNATIONAL ARENA-DANGER & OPPORTUNITY

It has been an exciting year in the international arena: a new presidential administration in the United States, the United Kingdom undertaking to leave the European Union ("EU"), the U.S. withdrawal from the Paris Climate Accord, the anticipated renegotiation of the North American Free Trade Agreement, and so on. Whether your take on all of this is good or bad (or both, or neither), things are definitely in flux. The author is reminded of the Chinese character for crisis, which incorporates elements of danger and opportunity.

This article will focus on selected recent legal approaches to international trade law in response to these changing conditions. Starting with the current California approach, this article will address intellectual property (IP) gaps resident within NAFTA and the approach California has taken in order to address software piracy. Next, it will review what is being done at the federal level, especially in connection with the international piracy of entertainment-based IP. Finally, a short discussion of the Border Adjustment Tax (BAT) will be presented. This discussion will include an analysis of how the potential upcoming change to the taxation on imports versus exports will require counsel to (1) provide legal advice that reaches down to the client's operations regarding export-based transactions, as well as (2) work to ensure that choice of law protects a stateside seller and properly addresses potential issues with the United Nations Convention on Contracts for the International Sale of Goods.

A. Current California Approach 1. In General

California—as the sixth largest economy in the world (and as Mexico's largest trading partner and Canada's second largest trading partner)—has recently emphasized the need to curtail both international software piracy and IP theft that both interfere with due revenue generation and disrupt the deferred compensation structure that is the coin of the realm when it comes to IP-based production.

This is especially important given the twin facts of California's overall economic prowess and that a key subset of California's economy—"Hollywood" (and the digital distribution of entertainment that originates throughout California)—is one of the world's largest generators of IP-based revenue for both California and the U.S.

(a) NAFTA—Issues

In looking at how California approaches the prevention of software piracy (a means by which foreign firms attempt to obtain a competitive advantage over domestic companies, especially California companies), it is first necessary to turn to the North American Free Trade Agreement (NAFTA). As successful as NAFTA has proven to be in a host of areas, a key emerging theme in international trade law is the fact that NAFTA's IP provisions are now substantially outdated. NAFTA was negotiated before the 1996 WIPO internet treaties, before the passage of the Digital Millennium Copyright Act (DMCA) and perhaps most importantly, prior to the sea change of Internet commerce that came with the turn of the century.¹As well-intentioned as these IP protections may have been in the 1990s, the relevant provisions have simply not kept pace with the task of combatting today's Internet-based copyright theft of movies, television programs, and music.

2. Filling the NAFTA Gap—State Statutory Solutions

While NAFTA is apparently coming up for renegotiation, California is currently implementing statutory solutions. California's Office of the Attorney General has set forth—under the auspices of the eCrime Unit—a set of practical guidelines based on California statutory law for the investigation and prosecution of both software piracy and internet-based IP appropriation. These guidelines include investigative assistance and criminal prosecution of IP crimes for the theft of trade secrets, to counterfeiting goods, to selling pirated sound recordings or audiovisual works, and more.² And where local jurisdictions decline prosecution due to technical and/or resource issues, California's investigators and prosecutors may refer cases to the California State Attorney General's office and, importantly, the U.S. Department of Justice ("DOJ").

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(a) Statutory Flexibility—Business & Professions Code section 17200

In terms of software piracy, a relatively recent case by California's Attorney General serves as a prime example of the success of California's approach, if for no other reason than the ultimate settlement represents the first time a state has been able to secure a legally enforceable judgment against an international company for pirating U.S. software—and did so by utilizing state statutory law.³ This landmark case resonated in the international arena as the enforceability of the ultimate judgment arose out of the complaint originally filed by the Office of the Attorney General, which sounded in California's Unfair Competition Law, Business and Professions Code section 17200, against international software pirates.⁴ The end result bore out the broad utility of this statute as a very useful tool for this type of IP piracy, given the broad powers devolved upon California law enforcement officials to fashion appropriate injunctive relief in order to prevent unfair competition.⁵

(b) Statutory Flexibility—Preview to Current Federal Approaches

As stated by the California Supreme Court, the injunctive powers provided by this state statute reflect the legislature's intent "to permit courts to enjoin ongoing wrongful business conduct in whatever context such activity might occur."⁶ California is setting one legal...