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The Circuitous Journey of Circumvention Exceptions in Trade Agreements

· November 2, 2018

The exceptions to the anti-circumvention provision in the recently concluded trade United States-Mexico-Canada Agreement (“USMCA”) reflect the culmination of a circuitous decade-long journey back to similar exceptions in the Korea-U.S. Free Trade Agreement (“KORUS”). USMCA’s anti-circumvention provision, however, contains one significant improvement: it permits the adoption of additional permanent exceptions. USMCA thereby avoids KORUS’s rigidity.

KORUS

KORUS, signed in 2007, contains a provision based on section 1201 of the U.S. Digital Millennium Copyright Act (“DMCA”). KORUS Article 18.4(7)(a) requires the parties to prohibit the circumvention of technological measures (“TPMs”) that control access to a work. Article 18.4(7)(d) mandates that the parties “confine exceptions and limitations” to the prohibition to a specific list of activities that matches the specific exceptions in the DMCA, such as for reverse engineering or security testing. Article 18.4(7)(d)(viii) allows the adoption of additional exceptions after a legislative or administrative proceeding that identified particular noninfringing uses that would be adversely affected by the circumvention prohibition. Significantly, any additional exceptions could only be temporary, lasting no more than three years. This tracked the duration of exemptions adopted under the DMCA’s triennial rulemaking.

TPP

The U.S. proposal for the intellectual property chapter in the Trans-Pacific Partnership (“TPP”) Agreement, leaked in 2011, revealed an anti-circumvention provision similar to that contained in KORUS. As in KORUS, the leaked text mandated that the parties “confine exceptions and limitations” to the circumvention prohibition to a specific list of exceptions matching those in the DMCA. As in KORUS, any additional exceptions could only be temporary, lasting no more than three years.

However, after the cell phone unlocking controversy in the United States, the negotiators became aware of the rigidity created by a closed list of permanent exceptions. In 2013, the Librarian of Congress terminated a DMCA exemption that allowed the unlocking of cell phones so that they could be used on a competing network. The termination led to public outcry, which spurred members of Congress to look for a legislative solution. They quickly learned that a permanent exception for cell phone unlocking would violate KORUS. Because cell phone unlocking was not on KORUS’s list of permitted permanent exceptions, KORUS would allow only a temporary cell phone unlocking exemption.

Eager to prevent this problem in the future, Chile and some other delegations in 2013 opposed the closed list of permanent exceptions proposed by the United States. The final TPP text agreed to on October 5, 2015, allowed parties much greater flexibility in adopting exceptions than KORUS or the U.S. 2011 proposal. The list of specific exceptions was replaced with a broader provision that allows a Party to adopt any exception so long as it is intended to enable a non-infringing purpose and does not undermine the effectiveness of the TPM requirement.

CPTPP

Soon after his inauguration in 2017, President Donald Trump announced that the United States would not join the TPP. Without the United States, TPP could not go into force. However, the remaining eleven countries decided to proceed with the agreement, which they called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”). Because the United States had been the “demandeur” of the anti-circumvention provision in TPP, and it was not participating in the CPTPP negotiations, the remaining parties suspended the anti-circumvention provision in the CPTPP text agreed upon in January 2018.

USMCA

Meanwhile, the United States negotiated an updated North American Free Trade Agreement with Canada and Mexico. (Mexico and Canada are also parties to the CPTPP.) These negotiations resulted in the USMCA in October 2018. USMCA’s intellectual property chapter includes a prohibition on circumvention similar to that in KORUS. As in KORUS, USMCA mandates that the parties “confine exceptions and limitations” to the circumvention prohibition to a specific list matching the specific exceptions in the DMCA. As in KORUS, a party can adopt additional exceptions through a legislative or administrative process for noninfringing uses of a particular class of works when the ban on circumvention would have an actual or likely adverse impact on that noninfringing use.

But USMCA’s circumvention exceptions do not come full circle back to KORUS. In KORUS, any additional exceptions could last only three years, like the exemptions adopted in the DMCA triennial rulemaking. In contrast, USMCA permits additional exceptions to be permanent. USMCA thus avoids the rigidity of KORUS. Evidently, the negotiators learned the lessons of the cell phone unlocking controversy. Additionally, they no doubt were aware that the Copyright Office in its section 1201 report had recommended the adoption of additional permanent exemptions for assistive technologies, repair of computer-program enabled devices, and unlocking of cell phones and mobile devices. USMCA will not be an obstacle to updating the DMCA in this manner.

Digital Trade

Companies rely on clear, predictable rules that facilitate digital trade to export their products and services around the world. These rules include balancing the competing interests between encouraging investment and enabling information access; promoting the free flow of information online; and maintaining balanced intermediary liability regimes.