International Marketing (mid ex)

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Islamic Law

The Koran forms the basis for the Shari’ah (Islamic law)

It includes issues such as property rights, economic decision making, and types of economic freedom

The overriding objective of the Islamic system is social justice

Islamic law prohibits the payment of interest or “riba”

It describes secular aspects of the law regulating human acts.

It describes specific patterns of social and economic behavior for all individuals.

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Because the laws are based on interpretation of the Koran, the international marketer must have knowledge of the religion’s tenets and understand the way the law may be interpreted in each region. Some Islamic Law countries are more liberal than others in the interpretation of the Koran.

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Commercial Law in Marxist Economies

A commercial legal system in the Marxist–socialist economies of Russia and the republics of the former Soviet Union, Eastern Europe, China, and other Marxist–socialist states

Legal system centered on the economic, political, and social policies of the state

As each country moves toward its own version of a free market system and enters the global market, a commercial legal system is also evolving from Marxist–socialist tenets.

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As socialist countries become more directly involved in trade with non-Marxist countries, it has been necessary to develop a commercial legal system that permits them to engage in active international commerce. For example, China has announced that it will adopt a constitution-based socialist legal system but with Chinese characteristics. For example, China has strict Cyber Laws and prohibits the use and access to certain websites such as Facebook but has formed its own social media site that the government can monitor closely called qq. Some formerly communist eastern European countries had a formally codified legal system before the onset of communism and are adapting that to engage in global trade.

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Jurisdiction in International Legal Disputes

Determining whose legal system has jurisdiction when a commercial dispute arises is another problem of international marketing.

The World Court at The Hague and the International Court of Justice resolve international disputes between sovereign nations of the world rather than between private citizens.

Legal disputes can arise in three situations:

between governments,

between a company and a government,

and between two companies

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There is no legal body to resolve disputes between citizens of different countries. The World Court can only intervene if the legal disputes are between governments, a company and a government or between two companies.

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Jurisdiction in International Legal Disputes

The World Court can adjudicate disputes between governments, but disputes in situations 2 and 3 must be handled in the courts of the country of one of the parties involved or through arbitration.

When international commercial disputes must be settled under the laws of one of the countries concerned, the paramount question in a dispute is: Which law governs?

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Because there is no international commercial law, the marketer has to look into the type or law and the specifics laws of each country the firm has operations in.

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Jurisdiction in International Legal Disputes

Jurisdiction is generally determined in one of three ways, on the basis of:

jurisdictional clauses included in contracts

where a contract was entered into, or

where the provisions of the contract were performed

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It is very important that when operating in another country to have the supporting documents that clearly state the jurisdiction in case a dispute occurs and whose laws will apply.

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International Dispute Resolution

Conciliation

Arbitration

Litigation

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If a buyer or partner in another country refuses to keep their end of the contract, there are various options to enforce it. The first steps usually involve resolving the issue informally, if that fails the above three methods are options.

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Conciliation

Conciliation or mediation is a non-binding agreement between parties to resolve disputes by asking a third party to mediate differences.

Discussion between parties and mediator are confidential and statements made by either party may not be used in future litigation or arbitration.

It is not legally binding.

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Conciliation is considered especially effective in resolving disputes with the Chinese as it is non-threatening.

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Arbitration

Parties select a disinterested and informed party as a referee to determine the merits of the case and make a judgment both parties agree to honor.

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Most arbitration is conducted under the auspices of one of the more formal domestic and international arbitration groups. These groups have formal rules for the process. In most countries, decisions reached in formal arbitration

are enforceable under the law.

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Litigation

Fear of creating a poor image

Fear of unfair treatment in a foreign court

Difficulty in collecting a judgment

Cost and time

Loss of confidentiality

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Litigation is the last resort and not a preferred option in most disputes, especially in countries where it considered public humiliation. For all of the above reasons, disputes are best resolved through conciliation or arbitration.

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Protection of Intellectual Property: Counterfeiting and Piracy

Firms spend millions of dollars establishing brand names or trademarks to symbolize quality and design only to be counterfeited and pirated

Piracy and counterfeiting leads to lost sales from the unauthorized use of U.S. patents, trademarks, and copyrights which amount to about $60 billion annually as well as lost jobs

Counterfeited pharmaceutical drugs can also lead death and bad publicity

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Counterfeit products such as Rolex watches are very common in many countries, China and India being top on the list. Pirated music CDs, movies and books are some of the products commonly counterfeited. In the country of Turkey for example, there are stores that officially call themselves “Genuinely Fake” and sell counterfeit products. Piracy and counterfeiting causes losses in sales and profits for companies. However, some companies take a different approach; Microsoft’s Bill Gates states that he would rather have the Chinese copy MS products, because some day technology will force them to purchase some of the products and if one is familiar with MS, that’s the product consumers will choose to purchase.

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Intellectual Property Rights: Inadequate Protection

There is inadequate protection from products being counterfeited or pirated as many countries do not recognize trademarks and patents registered in other countries

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Not only is there inadequate protection for trademarks or brands, others in the country can register and have rights to a brand like McDonald’s or Coach and there is no legal protection. However, it is better today when companies are refusing to pay billions of dollars to get their trademark back from squatters, they give it up as there is no benefit to them.

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In the United States, a common-law country, ownership of intellectual property rights is established by prior use

In many code-law countries, ownership is established by registration rather than by prior use

For example, a trademark in Jordan belongs to whoever registers it first in Jordan so there are “McDonald’s” restaurants, “Microsoft” software, and “Safeway” groceries all legally belonging to a Jordanian

Intellectual Property Rights: Prior Use vs. Registration

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As mentioned in the previous slide, in code law countries, individuals can register a trademark (however famous the brand is) and sit ion it and demand payment from the multinational company to release the trademark. A case in point is Starbucks Coffee when it first entered Japan, all of it’s Seattle theme, logo, colors and men u items were registered by Morinara Coffee. Starbucks fought its battles in court but to no avail and therefore had to change it’s usual menu, colors and most everything in order not to violate Morinara’s registered trademark!

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International Conventions

Many countries participate in international conventions designed for mutual recognition and protection of intellectual property rights

The three major international conventions include:

The Paris Convention for the Protection of Industrial Property, commonly referred to as the Paris Convention, includes the United States and 100 other countries

The Inter-American Convention includes most of the Latin American nations and the United States.

The Madrid Arrangement, which established the Bureau for International Registration of Trademarks, includes 26 European countries.

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The World Intellectual Property Organization (WIPO) of the United Nations is promotes the protection of intellectual property and for the administration of the various multilateral treaties through cooperation among its member states. The Patent Cooperation Treaty (PCT) facilitates the patent application process among its member countries. The European Patent Convention (EPC) has a regional patent system that allows any nationality to file a single international application for a European patent. The side agreement of the WTO called TRIPS (Trade Related Aspects of Intellectual Property Rights) is one of the most comprehensive treaties that details intellectual property right protection in member nations.

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Other Managerial Approaches

The traditional, but weak remedies for American companies operating in countries such as China are several

prevention, that is, engage local representation and diligently register IP with the appropriate agencies

pursue negotiation and alternative dispute resolution

complain to the Chinese authorities

complain to the U.S. government and World Trade Organization (WTO).

Multinational companies such as Microsoft, Philips and warner Brothers are coming up with other alternative approaches based on the factors that motivate consumers to engage in piracy

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Microsoft: If they steal I want them to steal my product philosophy that paid off when Bill Gates legally signed a deal with Lenovo in 2006 for all Lenovo computers to come with MS products.

Philips: Engages in an open innovation policy

Warner Brothers: Engages in “charge what the market will bear” policy

It seemed to work for all three of these companies.

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Cyberlaw: Unresolved Issues

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Cybersquatting

The practice of registering a domain name that is the trademark of another person or company

Cybersquatters hope that the owner of the trademark will pay huge dollar amounts to acquire the URL

Some Cybersquatters misrepresent themselves as the trademark owner for fraudulent purposes

Microsoft.pt, Yahoo.pt, Altavista.pt, Shop.pt, Shopping.pt!

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Cybersquatters register a well-known brand or trademark that misdirects a person to the CSQ’s site or to a competing company’s site. They also register the domain names of famous companies such as Microsoft in Portugal hoping to extort money from the multinational company. In the case of Microsoft in Portugal, Microsoft decided to register a new name Microsoft1.pt and informed all its customers that this was the company’s actual site and the CSQ gave up the domain.

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Taxes

A typical tax system relies on knowing where a particular economic activity is located

But the Internet enables individual workers to operate in many different countries from a computer

When taxes should be collected, where they should be collected, and by whom are all issues under consideration by countries around the world.

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In the past, a company was deemed to have a taxable presence in a country if it had a permanent establishment there. But whether the existence of a server or a website qualifies as such a presence is not clear. One proposal that has enthusiastic support from tax authorities is for servers to be designated as “virtual permanent establishments” and thus subject to local taxes. On another note, the U.S. government is trying to impose a tax on consumers for all internet purchases. For example, if a consumer that lives in a State that has Sales Tax, but shops online from a state with no Sales Tax, the appropriate taxes would be levied on the citizens come the end of the calendar year.

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Jurisdiction of Disputes and Validity of Contracts

Since existing laws relating to commerce do not always clearly address the uniqueness of the Internet, a body of cyberlaw is being created.

Two of the most troubling areas are:

determining whose laws will prevail in legal disputes between parties located in different countries

establishing the contractual validity of electronic communications

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Cyber business makes it difficult to enforce anything in case a dispute arises. A body of law is being compiled based on experiences and past practices.

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Commercial Law within Countries: Marketing Laws

When doing business in more than one country, a firm must comply with different marketing laws

All countries have laws regulating marketing activities in promotion, product development, labeling, pricing, and distribution channels

In Austria, premium offers, free gifts, or coupons are considered as cash discounts and are prohibited

Premium offers in Finland are allowed as long as the word free is not used

French law permits sales only twice a year, in January and August

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Each country has its own marketing laws that the international marketer needs to comply with and be aware of. One of the most common regulation in advertising is a ban on comparative advertising.

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Patent Law

USA

Operates under “first to invent” rule

Protects individual inventors

Patent applications secret

Patents granted in up to 24 months

Patents valid for 17 years from application date issued

Japan

Operates under “first to register” rule

Promotes technology sharing

Patent applications public

Patents granted in 4 to 6 years

Patents valid 20 years from application date issued

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U.S. Laws Apply in Host Countries

Leaving the boundaries of a home country does not exempt a business from home-country laws

What is illegal for an American business at home can also be ­illegal by U.S. law in foreign jurisdictions for the firm, its subsidiaries, and licensees of U.S. technology

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U.S. companies operating overseas are still bound by U.S. Law, particularly the three specified in the following slide.

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U.S. Laws Apply in Host Countries

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The END.