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TheInternationalLegalEnvironment:PlayingBytheRulesChapter7McGraw-Hill/Irwin?2005TheMcGraw-HillCompanies,Inc.Allrightsreserved.ChapterLearningObjectives1.Thefourheritagesoftoday’slegalsystems2.Theimportantfactorsinjurisdictionoflegaldisputes3.Issuesassociatedwithjurisdictionoflegaldisputesandthevariousmethodsofdisputeresolution4.Theuniqueproblemsofprotectingintellectualpropertyrightsinternationally.WaystoprotectagainstpiracyandcounterfeitingChapterLearningObjectives5.Thelegaldifferencesbetweencountriesandhowthedifferencescanaffectinternationalmarketingplans6.ThedifferentwaysU.S.lawscanbeappliedtoU.S.companiesoperatingoutsidetheU.S.7.ThemanyissuesofevolvingcyberlawIntroductionNosingle,uniforminternationalcommerciallawgoverningforeignbusinesstransactionsexistsInternationalmarketersmustcomplywiththelawsofeachcountrywithinwhichitoperateThelegalsystemsofdifferentcountriesaresodisparateandcomplexBesttogetexpertlegaladvicewhendoingbusinessinanothercountry(1)Commonlaw,derivedfromEnglishlawandfoundinEngland,theUnitedStates,Canada,andothercountriesonceunderEnglishinfluence(2)Civilorcodelaw,derivedfromRomanlawandfoundinGermany,Japan,France,andinnon-Islamicandnon--Marxistcountries(3)Islamiclaw,derivedfromtheinterpretationoftheKoranandfoundinPakistan,Iran,SaudiArabia,andotherIslamicstates(4)AcommerciallegalsystemintheMarxist-socialisteconomiesofRussiaandtherepublicsoftheformerSovietUnion,EasternEurope,China,whoselegalsystemisbasedontheeconomic,political,andsocialpoliciesofthestateBasesforLegalSystemsThebasesforthemajorityofthelegalsystemsoftheworldinclude:CommonandCodeLawUndercodelaw,thelegalsystemisgenerallydividedintothreeseparatecodes:(1)Commercialcode(2)Civilcode,and(3)CriminalcodeThebasisforcommonlawistradition,pastpractices,andlegalprecedentssetbythecourtsthroughinterpretationsofstatutes,legallegislation,andpastrulingsCommonlawseeks“interpretationthroughthepastdecisionsofhighercourtswhichinterpretthesamestatutesorapplyestablishedandcustomaryprinciplesoflawtoasimilarsetoffacts”Codelawisbasedonanall-inclusivesystemofwrittenrules(codes)oflawIslamicLawTheKoranformsthebasisfortheShari’ah(Islamiclaw)ItencompassesreligiousdutiesandobligationsandpatternsofsocialandeconomicbehaviorforallindividualsItincludesissuessuchaspropertyrights,economicdecisionmaking,andtypesofeconomicfreedomTheoverridingobjectiveoftheIslamicsystemissocialjusticeIslamiclawprohibitsthepaymentofinterestIslamicdoctrineadvocatesrisksharing,individuals’rightsandduties,propertyrights,andthesanctityofcontractEmphasisplacedontheethical,moral,social,andreligiousdimensionstoenhanceequalityandfairnessforthegoodofsocietyProhibitsinvestmentinactivitiesthatviolatetheShari’ah,e.g.,businessdealingwithalcohol,gambling,andcasinosMarxist-SocialistTenetsWiththecollapseofcommunism,theformereasternbloccountrieshavedevelopedacommerciallegalsystemtoengageininternationalcommerceTheCzechRepublicandPolandrevisedandreinstitutedpre–WorldWarIIcommerciallegalcodesMarxist-SocialistTenetsUSSRandChinahavehadtobuildfromscratchanentirecommerciallegalsystemwithrespecttoprivateownership,contracts,dueprocess,andotherlegalmechanismsChinaandRussiadifferasRussiaismovingtowardademocraticsystem,whereasChinaisattemptingtoactivateaprivatesectorwithinamulti-componentormixedeconomy,buttheirlegalsystemsarestillnascentJurisdictioninInternationalLegalDisputesDeterminingwhoselegalsystemhasjurisdictionwhenacommercialdisputearisesisanotherproblemofinternationalmarketing.TheWorldCourtatTheHagueandtheInternationalCourtofJusticeresolveinternationaldisputesbetweensovereignnationsoftheworldratherthanbetweenprivatecitizens.Legaldisputescanariseinthreesituations:(1)betweengovernments,(2)betweenacompanyandagovernment,(3)andbetweentwocompaniesJurisdictioninInternationalLegalDisputesTheWorldCourtcanadjudicatedisputesbetweengovernments,butdisputesinsituations2and3mustbehandledinthecourtsofthecountryofoneofthepartiesinvolvedorthrougharbitration.Wheninternationalcommercialdisputesmustbesettledunderthelawsofoneofthecountriesconcerned,theparamountquestioninadisputeis:Whichlawgoverns?Jurisdictionisgenerallydeterminedinoneofthreeways:(1)onthebasisofjurisdictionalclausesincludedincontracts(2)onthebasisofwhereacontractwasenteredinto,or(3)onthebasisofwheretheprovisionsofthecontractwereperformedInternationalDisputeResolutionInternationaldisputescanberesolvedby:Conciliation(alsoknownasmediation)isanonbindingagreementbetweenpartiestoresolvedisputesbyaskingathirdpartytomediatedifferencesConciliationsessionsareprivateandallconferencesbetweenpartiesandthemediatorareconfidentialThearbitrationprocedurecallsforthepartiesinvolvedtoselectadisinterestedandinformedpartyorpartiesasrefereetodeterminethemeritsofthecaseandmakeajudgmentthatbothpartiesagreetohonorInmostcountries,decisionsreachedinformalarbitrationareenforceableunderthelawLitigationdealswithfilingalawsuittosettlecommercialdisputesLawsuitsshouldbeavoidedformanyreasonsincludingcost,frustratingdelays,andextendedaggravation,andfearofcreatingapoorimage,damagingpublicrelations,fearofunfairtreatmentinaforeigncourtMarketingLawsWhendoingbusinessinmorethanonecountry,afirmmustcomplywithdifferentmarketinglawsAllcountrieshavelawsregulatingmarketingactivitiesinpromotion,productdevelopment,labeling,pricing,anddistributionchannelsInAustria,premiumoffers,freegifts,orcouponsareconsideredascashdiscountsandareprohibitedPremiumoffersinFinlandareallowedaslongasthewordfreeisnotusedFrenchlawpermitssalesonlytwiceayear,inJanuaryandAugustIntellectualPropertyRights,CounterfeitingandPiracyFirmsspendmillionsofdollarsestablishingbrandnamesortrademarkstosymbolizequalityanddesignonlytobecounterfeitedandpiratedPiracyandcounterfeitingleadstolostsalesfromtheunauthorizeduseofU.S.patents,trademarks,andcopyrightswhichamounttoabout$60billionannuallyaswellaslostjobsCounterfeitedpharmaceuticaldrugscanalsoleaddeathandbadpublicityThereisinadequateprotectionfromproductsbeingcounterfeitedorpiratedasmanycountriesdonotrecognizetrademarksandpatentsregisteredinothercountriesIntellectualPropertyRights,CounterfeitingandPiracyIntheUnitedStates,acommon-lawcountry,ownershipofintellectualpropertyrightsisestablishedbyprioruseInmanycode-lawcountries,ownershipisestablishedbyregistrationratherthanbyprioruseForexample,atrademarkinJordanbelongstowhoeverregistersitfirstinJordansothereare“McDonald’s”restaurants,“Microsoft”software,and“Safeway”groceriesalllegallybelongingtoaJordanianInternationalConventionsThethreemajorinternationalconventionsinclude:TheParisConventionfortheProtectionofIndustrialProperty,commonlyreferredtoastheParisConvention,includestheUnitedStatesand100othercountriesTheInter-AmericanConventionincludesmostoftheLatinAmericannationsandtheUnitedStates.TheMadridArrangement,whichestablishedtheBureauforInternationalRegistrationofTrademarks,includes26Europeancountries.ManycountriesparticipateininternationalconventionsdesignedformutualrecognitionandprotectionofintellectualpropertyrightsPatentLaw:TheU.S.versusJapanOperatesunder“firsttoinvent”ruleOperatesunder“firsttoregister”ruleProtectsindividualinventorsPromotestechnologysharingPatentapplicationssecretPatentapplicationspublicPatentsgrantedinupto24monthsPatentsgrantedin4to6yearsPatentsvalidfor17yearsfromPatentsvalid20yearsfromapplicationdateissuedUSAJAPANGreenMarketingLegislationandAntitrustIssuesMultinationalcorporationsalsolawsonenvironmentalissuessuchasindustrialpollution,hazardouswastedisposal,andrampantdeforestationGreenmarketinglawsfocusonenvironmentallyfriendlyproductsandonproductpackaginganditseffectonsolidwastemanagementGermanyhaspassedthemoststringentgreenmarketinglawsthatregulatethemanagementandrecyclingofpackagingwasteTheEuropeanCommunity,Japan,andmanyothercountrieshavebeguntoactivelyenforcetheirantitrustlawspatternedafterthoseintheUnitedStatesAntimonopoly,pricediscrimination,supplyrestrictions,andfull-lineforcingareareaswhichleadtolesscompetitionandhigherpricesforconsumersU.S.LawsApplyinHostCountriesLeavingtheboundariesofahomecountrydoesnotexemptabusinessfromhome-countrylawsWhatisillegalforanAmericanbusinessathomecanalsobe-illegalbyU.S.lawinforeignjurisdictionsforthefirm,itssubsidiaries,andlicenseesofU.S.technologyU.S.Lawsthatapplyinhostcountriesinclude:(1)ForeignCorruptPracticesAct(FCPA)(2)NationalSecurityLaws(3)AntitrustLawsU.S.LawsApplyinHostCountriesTheFCPAmakesitillegalforcompaniestopaybribestoforeignofficials,candidates,orpoliticalpartiesStiffpenaltiescanbeassessedagainstcompanyofficialsfoundguiltyofpayingabribe(1)ForeignCorruptPracticesAct(FCPA)(2)NationalSecurityLaws(3)AntitrustLawsU.S.firms,theirforeignsubsidiaries,orforeignfirmsthatarelicenseesofU.S.technologycannotsellaproducttoacountrywhichcouldaffectnationalsecurityoftheU.S.Thecontrolofthesaleofgoodsthathaveastrategicandmilitaryvaluewasprohibitedtocommunistcountriesthatw
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