International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 6
06-1
Module 6: Intellectual Property Rights and Other Legal
Forces
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 6
06-2
Copyright © 2020 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
YOUR CONTENT
SUMMARY
The purpose of this chapter is to alert the students to the size and complexity of legal problems
facing international business. They should be aware that there are potential legal problems
about which they should consult experts. We begin with an overview of the three types of legal
systems: civil, common, and religious. Following a brief review of the rule of law, we then
discuss the specifics of international law, include extraterritoriality, contracts, and litigation. We
then go over intellectual property rights and Incoterms. We finish the module with specific
national legal forces.
LEARNING OBJECTIVES
LO 6-1 Describe the three types of legal systems.
LO 6-3 Discuss the general legal concerns in global business.
LO 6-5 Discuss the standardization of laws among nations.
LO 6-6 Describe the impacts of the national-level legal forces in the areas of
competition, trade, tort, ethics, and accounting.
KEY TERMS AND DEFINITIONS
antitrust (p. 169)
Laws that prevent inappropriately large concentrations of
power and its abuse through price-fixing, market sharing,
and monopolies
arbitration (p. 160)
A dispute resolution process agreed to by parties in lieu of
going to court, in which one person or a body makes a
binding decision
competition laws (p. 169)
Another term for antitrust law, used by the EU and other
countries
copyright (p. 166)
Exclusive legal rights of authors, composers, creators of
software, playwrights, artists, and publishers to publish and
dispose of their work.
International Business, 2e
Instructor Guide to Module 6
06-3
extraterritorial application of
laws (p. 159)
A country’s attempt to apply its laws to nonresidents and
foreigners, and to activities that take place beyond its
borders
Foreign Corrupt Practices Act
(FCPA) (p. 175)
U.S. law that prohibits payments to foreign government
officials in order to receive special treatment
Incoterms (p. 168)
Predefined commercial terms established by the
International Chamber of Commerce
intellectual property (IP) (p.
163)
A creative work or invention that is protectable by patents,
trademarks, trade names, copyrights, and trade secrets
litigation (p. 162)
Legal proceeding conducted to determine and enforce
particular legal rights
patent (p. 163)
A government grant giving the inventor of a product or
process the exclusive right to manufacture, exploit, use,
and sell that invention or process
private international law (p.
159)
Law that governs relationships between individuals and
companies that cross international borders
product liability (p. 172)
A standard that holds a company and its officers and
directors liable and possibly subject to fines or
imprisonment when their product causes death, injury, or
damage
public international law (p.
159)
Law that governs relationships between governments
strict liability (p. 172)
A standard that holds the designer or manufacturer liable
for damages caused by a product without the need for a
plaintiff to prove negligence in the product’s design or
manufacture
tort (p. 172)
An injury inflicted on another person, either intentionally
or negligently
trademark (p. 165)
A shape, color, design, phrase, abbreviation, or sound used
by merchants or manufacturers to designate and
differentiate their products
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Instructor Guide to Module 6
06-4
trade name (p. 166)
A name used by a merchant or manufacturer to designate
and differentiate its products
trade secret (p. 167)
Any information that a business wants to hold confidential
treaty (p. 159)
Agreement between countries, also known as convention,
compact, and protocol
International Business, 2e
Instructor Guide to Module 6
06-5
CONTENT OUTLINE
The following section provides the flow of information using the LEARNING OBJECTIVES as a
guide, KEY TERMS learners will need to take away from the course, and LECTURE NOTES to
drive home teaching points.
LO 6-1
Describe the three types of legal systems.
• Types of Legal Systems
o Civil Law
o Common Law
o Religious Law
Key Terms:
I. Types of Legal Systems
A. Civil Law
1. Based on codification, derived from ancient Roman law, most widespread.
2. Napoleonic law (France), German civil law.
3. Court not a forum; judge questions parties to establish truth, then law applied.
B. Common Law
1. Relies on previous court decisions and interprets statutes and regulations.
2. Law evolving, precedents play an important role.
3. Court is adversarial (England, former colonies) and defendant presumed innocent until
proven guilty.
2. Shariah in some Moslem countries; Halakha informs law of Israel.
Thailand).
LO 6-2
Describe the rule of law and its sources.
• International Legal Forces
o Rule of law
Key Terms:
• public international
law
• private international
International Business, 2e
Instructor Guide to Module 6
II. International Legal Forces
A. Rule of Law
1. Laws followed, court rulings fair; alternative to decisions made by ruling
elite/political dictatorship.
2. Hong Kong vs. Shanghai:
a. HK has advantage due to reliability of legal system.
b. World bank Index scores China 45, HK 94.
A. What Is International Law?
1. Rules nations have agreed to follow.
2. Creates stability for relationships that span legal systems.
a. Public—between nations (ex. rights of nations, diplomatic relations).
b. Private—between individuals or firms (ex: international contract).
A. Sources of International Law
1. Treaties between nations.
a. Bilateral and multilateral.
b. Include compacts, conventions, protocols, and customs.
c. Many sponsored by UN; WTO also active in this area.
LO 6-3
Discuss the general legal concerns in global business.
• General Legal Concerns in Global Business
o Extraterritoriality
o Performance of Contracts
▪ United Nations Solutions
▪ Arbitration
o Litigation
Key Terms:
• Extraterritorial
application of laws
• arbitration
• litigation
III. General Legal Concerns in Global Business
A. Extraterritoriality
1. This application of law beyond geographic borders and to non-residents outside of
country is problematic for firms, esp. with employment law.
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 6
1. Dispute resolution and decisions by international forums cannot be enforced.
2. UN solutions available.
1. UN Convention on the international Sale of Goods (CISG) specifies rights of
seller and buyer.
2. Most countries have ratified—applied automatically.
B. Arbitration
1. Alternative favored by many outside U.S., who dislike U.S. court system.
2. Quicker, less expensive, and more private than litigation.
C. Litigation
3. Can be complicated and expensive.
a. U.S. discovery process (sharing of facts) may be seen as intrusive.
b. It is public, costly, and lengthy.
4. Establishing jurisdiction can be difficult.
a. Bhopal example.
b. Choice of law and choice of forum clauses in contract are helpful.
LO 6-4
Identify methods to protect intellectual property.
• Intellectual Property Rights
o Patents
o Trademarks
o Trade Names
o Copyrights
o Trade Secrets
Key Terms:
• intellectual property
(IP)
• patent
• trademark
• trade name
• copyright
IV. Intellectual Property Rights
A. Intellectual property is creative work, and their rights are their legal protection.
1. Agreed to by international treaties.
WTO’s Trade-Related Aspects of Intellectual Property Rights (TRIPS); World
Intellectual Property Organization (WIPO); proposed Anti-Counterfeiting Trade
Agreement (ACTA) (Table 6.1).
B. Types of protection:
International Business, 2e
Instructor Guide to Module 6
a. Global Intellectual Property Center of U.S. Chamber of Commerce has
developed IP Index to measure country-based progress (Figure 6.2).
b. UN efforts to reduce lengthy patents, esp. in pharmaceuticals.
c. Patent trolls and pirates attempt to steal patent rights.
2. Trademarks—mark that is reserved for company’s sole use.
a. Protection’s length varies by country, usually 10-20 yrs. + renewals.
b. Madrid Agreement, administered by WIPO.
c. Standardized within EU.
3. Trade names—used to identify and differentiate products.
a. Protected under WIPO, TRIPS.
b. Burberry plaid, Dove, Fairy Liquid.
4. Copyrights—exclusive legal rights of authors, composers.
a. New area is computer software and Internet-based distribution.
b. Napster’s successful Metallica challenge.
5. Trade secrets
a. Any information not generally known to the public that a business
wishes to keep confidential.
b. Most common type of IP protection.
c. Advantages include no public filing that shares innovation with the
government, no registration process, less costly than patent.
LO 6-5
Discuss the standardization of laws among countries.
Key Terms:
A. Business flows better when there is standardization of laws or harmonization.
B. Many initiatives, some have been successful.
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 6
5. UN Convention on the International Sale of Goods (CISG) and other UN-negotiated
agreements have led to some harmonization.
6. UNCITRAL, ISO, ITU, IEC.
LO 6-6
Describe the impacts of the national-level legal forces in the
areas of competition, trade, tort, ethics, and accounting.
• Some Specific National Legal Forces
o Competition Laws
o Trade Obstacles
o Tort Law
o Miscellaneous Laws
o Foreign Corrupt Practices Act
o Accounting Law
Key Terms:
• competition laws
• antitrust laws
• tort
• product liability
• strict liability
• Foreign Corrupt
Practices Act (FCPA)
VI. Some Specific National Legal Forces
A. Tremendous variation.
B. Local counsel may be costly, but necessary (Disney in Paris).
C. Competition Laws (or antitrust laws)
1. To prevent price fixing, market sharing, and monopolies.
2. In U.S. per se concept—activities illegal, regardless of effect (injury).
3. Legal cartels in EU (no consumer harm) illegal in U.S.
4. U.S. law regards consumers first; EU looks to rivals’ objections.
5. Japanese antitrust law modeled on U.S.; cultural value of harmony influences its
application.
D. Trade Obstacles
2. Standards, language (France), high tariffs, long quarantines.
3. U.S. uses tariffs, quotas, “voluntary” trade agreements to control imports.
E. Tort Laws
1. In U.S. such personal harms/damages may result in large money awards, unlike in
other countries.
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 6
06–10
3. Strict liability concept holds company responsible for harm, even when no
negligence in design/manufacture.
4. In liability cases, non-U.S. courts do not award punitive damages.
5. In Japan, with limited discovery, liability plaintiff must prove design/manufacturing
negligence.
6. In U.S., lawyers take cases on contingency-fee basis. Outside U.S., losing plaintiff
may be assessed defendant’s legal costs.
F. Miscellaneous Laws
1. Know the local law so it doesn’t surprise you.
2. Law of home country plays no role in foreigner’s arrest.
G. Foreign Corrupt Practices Act
1. Prohibits bribes to government officials and transparency in accounting
transactions.
2. Elevates ethical standards in international business (see Table 6.4).
3. May create comparative dis-advantage for U.S. companies.
4. Does not prohibit grease.
5. Has set the model for OECD, UN, EU, and UK anti-bribery efforts and legislation.
H. Accounting Law
1. Sarbanes-Oxley Act (SOX) in response to world-wide scandals, sets higher
standards for boards, management, and accounting firms.
2. Harmonization between rest of the world’s accounting standards (IFRS) and U.S.
International Business, 2e
Instructor Guide to Module 6
06–11
Copyright © 2020 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
2018. It addresses how data on individuals can be obtained, stored, processed, or otherwise
used, and it requires safeguards to protect that data. Any company that does business in the
European Union, even if just a single online customer, must comply with this regulation.
1. What implications might the GDPR have even for small companies or nongovernmental
organizations such as charities or churches that have a limited online presence and that are
not based in the European Union?
The main idea to discuss is the cost of compliance for small companies and organizations
compared to the value of a presence in the European Union. What options do they have? They
2. Do you think that this extraterritorial application of EU laws to companies operating in
other nations should be allowed? Why or why not?
Some students may suggest that living in an online world means that there are no physical
boundaries so extraterritoriality is a natural thing. If this is proposed, ask where this will end.
Should every country be allowed to act extraterritorially? How do you comply with all of these
laws? What if the laws conflict (such as keeping data private versus giving a particular
government full access)?
If extraterritoriality is opposed, ask how to define a territory in an online world. Is it the county
where the firm is headquartered? Where the servers are? Where the customer is? What is to
stop a firm from moving headquarters to avoid onerous laws?
GLOBAL DEBATE: The WTO and U.S. Dolphin-Safe Tuna Labeling: A Threat to National
Sovereignty?