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Will Copyright Disputes Derail the NAFTA Express?

· August 28, 2017

Efforts to update the North American Free Trade Agreement (NAFTA) have been on a fast track, as U.S., Canadian, and Mexican negotiators have maintained an aggressive schedule to reboot the 1994 trade agreement.

As a new round of negotiations approaches, intellectual property issues have moved to the fore.  With negotiations resuming in Mexico at the end of this week, music industry rightsholders have increased pressure on the Administration to defy Congressional directives on IP in Trade Promotion Authority.  In some cases, content industry interests have pushed provisions that would extend beyond U.S. law.

The pressure for an aggressive copyright agenda out of step with U.S. law first became evident during June hearings on negotiating priorities.  Recording industry interests have since doubled down on this with advertisements renewing those demands.  

As DisCo previously covered, music industry rightsholders insisted that NAFTA should create new rights and civil causes of action — specifically, “communication to the public” rights not presently found in the U.S. Code.  (Both courts and scholars disagree on whether or not these rights already exist in U.S. law.)  Rightsholders including the MPAA have also urged U.S. negotiators to commit to “site-blocking” — that is, obligations to push entire sites offline based on accusations of user misconduct.  Similar policy proposals were the subject of the 2012 SOPA controversy, and were shelved.

Rightsholders have asked USTR to discard or narrow online safe harbors in NAFTA, provisions that protect telecommunications companies and Internet firms from copyright liability for users’ infringement, provided those firms respond quickly to complaints.  These provisions were first included in U.S. agreements in 2003-04 when the Bush Administration concluded free trade agreements with Singapore and Chile.  (Like the 1998 Digital Millennium Copyright Act, this FTA language was part of a package deal in which additional regulations were imposed on circumventing digital locks for the film industry’s benefit, and liability limitations were provided for online services and telecommunications intermediaries.)  

In asking USTR to jettison the DMCA safe harbors, rightsholder groups rely on a flawed Phoenix Center study to suggest that safe harbors are somehow costing the U.S. hundreds of millions of dollars.  This conveniently ignores new economic research showing that weakening the U.S. safe harbor framework would eliminate over 425,000 U.S. jobs and decrease GDP by $44 billion annually, while making it more difficult for small and medium-sized enterprises to operate.

USTR is also being urged to exclude provisions that require balance in copyright systems.  A balanced copyright regime ensures that U.S. technology innovators are not stymied by civil lawsuits in foreign countries for providing new technologies and services that are permitted under Section 107, the U.S. fair use statute.  This and related provisions provide flexibility and business certainty to roughly one-sixth of the U.S. economy, supporting over 18 million U.S. jobs, and drive the development of new technologies such as machine learning.

The strategy of forcing Congress to change U.S. law by agreeing to new commitments in an international agreement has been criticized as “policy laundering”, but it actually has precedent in the IP context: the 1990s Clinton-era copyright term extension (sometimes criticized as a handout to Hollywood and music publishers) came about in precisely this fashion, with the 1996 WIPO Copyright Treaty, a UN instrument, forming the vehicle.

It would nevertheless be surprising to see the Administration embrace this strategy to create new rights and obligations under U.S. law — particularly when doing so might lead to U.S. companies being subject to private litigation abroad.  First, using an international agreement to abandon established U.S. law is unlikely to be well-received by Congress, which has already made known its negotiating priorities.  Congress specifically identified the importance of safe harbors and balanced copyright in any trade negotiations.  The House Ways & Means Committee’s 2015 report backing Trade Promotion Authority states that U.S. trade agreements should both include DMCA limitations on liability for service providers and “foster an appropriate balance in copyright systems, inter alia by means of limitations and exceptions consistent with the internationally recognized 3-step test.”  The 2015 Senate report on Trade Promotion Authority includes a nearly identical statement.

Jettisoning Congressional priorities at the behest of rightsholder industries would also be surprising because the controversy that would arise is likely to delay an agreement which all parties are anxious to advance.  Whether NAFTA remains on the fast track will depend upon whether these efforts to subvert Congressional directives succeed.

Intellectual Property

The Internet enables the free exchange of ideas and content that, in turn, promote creativity, commerce, and innovation. However, a balanced approach to copyright, trademarks, and patents is critical to this creative and entrepreneurial spirit the Internet has fostered. Consequently, it is our belief that the intellectual property system should encourage innovation, while not impeding new business models and open-source developments.