Lurking In USMCA – IP Provisions With An International Agenda 30/10/2018 by Steven Seidenberg for Intellectual Property Watch Leave a Comment Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window) Steven Seidenberg is a freelance reporter and attorney who has been covering intellectual property developments in the US for more than 20 years. He is based in the greater New York City area and may be reached at firstname.lastname@example.org. Donald Trump is no fan of international norms or rules. He’s made this clear on numerous occasions, including during his two speeches at the United Nations. It is surprising, therefore, that one of the few international deals he has made as president – the recently announced treaty replacing NAFTA – contains IP provisions whose main purposes seem to be extending US rules overseas and establishing IP norms for future international agreements. Donald Trump The 1992 North American Free Trade Agreement (NAFTA) eased trade restrictions between Canada, Mexico and the United States, but the treaty has long been a bête noire for Donald Trump. He has called it “the worst trade deal maybe ever signed anywhere.” And as president, he put tremendous pressure on Canada and Mexico to renegotiate the treaty. The pressure worked. A replacement agreement was reached on 30 September. The new United States-Mexico-Canada Agreement (USMCA) is largely similar to NAFTA and, like NAFTA, mostly addresses trade issues. However, USMCA also contains some important new rules on IP protection. After Life For instance, Article 20.H.7 of the treaty mandates that all signatory nations must provide people with copyright protection lasting at least life-plus-70 years. This imports America’s copyright term into the treaty. The provision will have no effect on Mexico, where copyright already lasts for life-plus-100. The provision will, however, have a big effect on Canada, forcing it to extend its term of protection for an additional 20 years. “It will keep anything out of the public domain for the next 20 years,” said Prof. Michael Geist, who teaches law at the University of Ottawa. That will benefit a limited number of copyright owners whose older works are still valuable, but according to Geist, it will do nothing for the vast majority of older works which are no longer economically valuable. And it will harm libraries, museums, and the general public. “It will cost the public much more to access and use [affected] works, and such access may be significantly delayed,” said Geist. “Many works that have cultural or historical value, but not economic value, may not be available for use.” Even economically valuable works may become unavailable to the public for a variety of reasons, such as the inability to locate a work’s authors. The treaty provision also will have an important effect on the US. “It locks the US into a copyright term of life-plus-70, which would be a problem if we ever want to go back to the Berne Convention’s life-plus-50 term,” said Prof. Marketa Trimble of the University of Nevada’s William S. Boyd School of Law. The USMCA thus has secured, via international agreement, the 70-year duration of rights for copyright owners in the US. “It would be naive to think that this provision was only about increasing the copyright term in Canada,” said Trimble. “It had domestic effects, with stakeholders also pursuing their domestic agendas.” Sounds Familiar Article 20.F.14 of the USMCA requires that biologics be protected for at least 10 years. This 10-year term is already enshrined in US law, but Canada and Mexico must add two years to their current terms of protection. That will be a boon to some biotech firms, providing them with two extra years of monopoly prices for their biologics. Conversely, it will hurt companies that want to put out generic versions of these drugs, forcing the firms to wait an additional two years before they can enter the market. That wait will harm consumers and all those paying for health care. Each additional year of biologics protection can boost heath care costs by billions of dollars, according to Geist. This USMCA provision also locks the US into its current term of biologic protection. “That could have significant influence,” said Geist. “In the US, there is some debate about the proper length of protection for biologics. Some bills in Congress would reduce the protection to seven years. With new technology, it is hard to know how long protection should be.” Thanks to USMCA, however, large biotech firms that make new biologics can rest easy, knowing that their 10 year term of protection is secure. Another aspect of US law found its way into the USMCA. Articles 20.J.10-11 and the Annex to Section J of the USMCA largely follow the provisions of Section 512 of America’s Digital Millennium Copyright Act. The USMCA will thus require Canada and Mexico to create safe harbors that protect ISPs and online service providers such as YouTube. These companies will not be liable for copyright infringements which occur through their networks but which they do not control, initiate or direct. To maintain this safe harbor protection, the online firms must remove content specified by copyright owners as infringing and must terminate the accounts of repeat infringers. Online firms need not monitor their systems for users’ infringing activity. If a user’s content is removed for allegedly infringing copyright, the user must be notified of the removal and can get the content put back online by sending a counter-notice to the online firm. Many experts have applauded this part of the USMCA, claiming that it provides online firms with needed protection against copyright infringement claims. It is, however, certainly another example of the US inserting its legal standards into international agreements. Just Passing Through Article 20.J.6.5 of the USMCA provides controversial new protections to trademark and copyright owners. It authorizes customs officials of a signatory nation to seize suspected counterfeit trademarked goods and pirated copyrighted goods – even if those goods are merely in transit to another nation and would not be distributed within the seizing country. Such seizures are problematic because they can result in intermediate countries imposing their IP standards on transshipments that are legal in the origination and destination countries. For instance, in 2008 and 2009, Dutch authorities repeatedly seized generic medicines that were lawfully made in India and were being transhipped to Brazil, where the drugs were also legal. The Netherlands, however, asserted it could seize the drugs because they were counterfeits under Dutch trademark law. India and Brazil challenged the seizures, filing a WTO dispute proceeding against the Netherlands and the EU in 2010. The following year, the parties agreed to a settlement. The EU declared it would no longer intercept in-transit generic medicines unless there was a substantial likelihood such medicines would be diverted to the EU market, and the EU agreed to revise its border control regulations accordingly. In 2005, the European Court of Justice interpreted the new regulations in Class International and found that an EU trademark owner could demand the seizure of in-transit goods only if those goods would necessarily be diverted to the EU market. The court expanded on that rule in 2006, with its decision in Montex Holdings. The European Court of Justice held that a trademark owner in one EU state could not demand the seizure of infringing in-transit goods destined for another EU state, if the goods did not infringe in the destination state and would not necessarily be put on the market in the transit state. A Gap in Trademark Rights A similar situation arose in South Africa. The Gap made some clothes in Lesotho, Swaziland, Zimbabwe, Mauritius and Madagascar and shipped them to other countries via South Africa. Gap owned its trademark in the countries of the goods’ origin and destination, but A M Moolla Group owned the South African trademark rights to use Gap on clothing. Moolla asserted that its trademark rights were violated by Gap’s transshipments of clothing and demanded South Africa’s customs service seize the transshipments. The South African Supreme Court of Appeal ruled in 2004 against Moolla. The decision, In the matter of A M Moola Group Limited v. The Gap, Inc. [pdf], noted that TRIPS Art. 51 requires signatory nations (such as South Africa) to empower their customs agents to seize imported counterfeit trademark or pirated copyright goods. However, footnote 13 of this TRIPS provision explicitly states the provision does not require the seizure of transshipped goods. Such seizures are allowed under TRIPS, but the court held that South Africa’s implementing legislation did not authorize the seizure of transshipments, only the seizure of goods imported for the South African market. In reaching this decision, the court quoted TRIPS’ preamble, which stated that the agreement was intended “to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade.” (TRIPS is the 1994 World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights.) “I think the South African court and the European Court of Justice were right,” said Trimble. “It makes sense to leave IP enforcement to the countries of origin and destination, because if an intermediate country could seize transshipments, legitimate goods could be seized, forcing the origin and destination countries to find other routes for their commerce.” Policy Differences It is widely agreed, however, that intermediate countries should seize transshipments under certain circumstances. In order to stop international terrorism and organized crime, nations should seize transshipments of weapons and illegal drugs. Countries disagree about whether or not to seize transshipments of counterfeit/pirate IP goods, because countries have different views about the danger posed by such goods. “It is a question of philosophy,” said Trimble. Allowing transshipments of counterfeit IP goods makes sense if one believes such goods are not as harmful as illegal drugs or weapons. “If you see them as equally harmful, then I can see why you would want to seize them in transit,” said Trimble. The pro-seizure position is bolstered by claims that organized crime is responsible for much international counterfeiting. If the claims are true, seizing counterfeits becomes an important anti-crime measure, not just a means of protecting one trademark owner’s rights. The US, however, has strong economic reasons to push for the seizure of IP transshipments. The country is home to many businesses that own valuable trademarks and copyrights. Those US companies would enjoy greater profits if dubious IP transshipments could be seized. It is nevertheless surprising that the US insisted this issue be addressed in the USMCA. Canada and Mexico transship few dubious IP goods, so why is this transshipment provision in the USMCA? “The United States is probably, as it is with the life-plus-70 copyright term, trying to set an international standard,” said Trimble. She added that the transshipment issue “does not relate to just these three countries; the position tells us about future US negotiating stances for international agreements.” Such negotiations are on the horizon. “The US has announced that it is going to renegotiate trade agreements with the EU and other countries,” said Trimble. She added, “The US often reuses provisions from one agreement in other agreements,” and in the USMCA, “the US seems to be creating a blueprint for future negotiations.” Image Credits: Gage Skidmore from Peoria, AZ: Wikimedia Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window) Related Steven Seidenberg may be reached at email@example.com."Lurking In USMCA – IP Provisions With An International Agenda" by Intellectual Property Watch is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.