International Marketing
15th edition
Philip R. Cateora, Mary C. Gilly, and John L. Graham
Overview
• Bases for today’s 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
Roy Philip
2
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 country’s laws may be based on
the doctrine of one of the four legal systems its
individual interpretation may vary significantly
Roy Philip
3
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
Roy Philip
4
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
Roy Philip
5
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
Roy Philip
6
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
Roy Philip
7
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
Roy Philip
8
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-onbittorrent-100629/
Roy Philip
9
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
– McDonald’s in Japan
• Many businesses fail to take proper steps to
legally protect their intellectual property
Roy Philip
10
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/dvdpiracy-china-black-market
Roy Philip
11
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)
Roy Philip
12
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
Roy Philip
13
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
Roy Philip
14
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
Roy Philip
15