The new NAFTA (USMCA): What it means for Copyright Industries in Canada

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The first stage of the long saga of NAFTA renewal is over. Agreement in principle was achieved at the 11th hour on September 30 when Canada joined the previously agreed US-Mexico Agreement, just prior to the US Administration’s deadline imposed because it needed to notify Congress of the text of the Agreement by October 1. It has been relabelled as the US-Mexico-Canada Agreement (USMCA) since, in the US at least, NAFTA is a dirty word despite the fact that much of the agreement preserves what was in the original NAFTA Accord.

Preservation was the name of the game for Canada’s negotiators and they largely succeeded in this goal. That is not to say that Canada was not required to make some concessions in order to hold onto what it wanted to protect. These concessions included a limited opening of the highly protected dairy market, agreement to extend the term of patent protection on biologic pharmaceuticals by an additional two years, and loosening restrictions on what Canadian consumers can bring back into Canada from the US duty free. Even these “concessions” have potential upsides for Canada, such as added impetus to unwind the arcane supply management system that punishes Canadian families with artificially high prices for dairy products, greater incentives for pharmaceutical R&D in Canada and of course, easier cross-border shopping for Canadian consumers. In the area of copyright, there were changes that are hard to characterize as concessions since they bring significant benefit to Canada’s creative industries, while also being on the list of US negotiating objectives.

Term Extension

Among these are the extension of the term of copyright protection from 50 to 70 years beyond the death of the author, a move that will bring Canada into line with almost all OECD countries and many others. This measure has already been applauded by the Writers’ Union of Canada and SOCAN, the collecting society for songwriters, composers and music publishers. The Writers’ Union commented, “The extension of the copyright term of protection to 70 years after the death of the author is a significant improvement and strengthening of creators’ rights in Canada, and will stimulate the economy.”

However, anti-copyright commentator Michael Geist was quick to jump on this provision, arguing that “with studies (what studies?) indicating that the term extension could add hundreds of millions to education costs, 20 extra years of copyright protection will not come cheaply.” Geist has beaten this drum before, arguing back in 2016 that Canada’s decision (at that time) to extend its copyright term as part of the Trans-Pacific Partnership negotiations would cost the Canadian economy in excess of $100 million per year. As I pointed out then, this estimate was largely based on a flawed New Zealand study on the cost of term extension to that economy, a study that was thoroughly debunked at the time by Professor George Barker, Director at the Centre for Law and Economics at the Australian National University. In the end, the term extension provisions (and a few other IP provisions) of the TPP were “suspended” after the US withdrew from the pact. But as I noted last November, those provisions were pulled off the table in order to give Canada some negotiating collateral when it came time to closing the renegotiation of NAFTA. And that is exactly what happened. The suspended TPP provisions are now part of USMCA.

Canada has 2.5 years from the date of implementation of the Agreement to make the change in law, but it will likely be enacted as soon as the Agreement comes into effect, likely some time in 2020.

Cultural Exception–Except Super Bowl Ads! (Is that “Culture”?)

In addition to welcoming the extension of the copyright term of protection, both the Writers’ Union and SOCAN also congratulated the Trudeau government on preserving the Canadian cultural exception, a negotiating goal that is a sine qua non for any Canadian government. This was achieved under USMCA Chapter 32 (Exceptions and General Provisons), Article 32.6 (Cultural Industries). A cultural industry is defined as the publication, distribution, sale and exhibition of books, magazines, periodicals, newspapers, film, video, music recordings, print music and broadcasting. This latter category is limited to radio-communications in which the transmissions are intended for direct reception by the general public, all radio, television and cable broadcasting undertakings and all satellite programming and broadcast network services; notably not including OTT services and streaming). The article states that with the exception of eliminating tariffs on trade in cultural products and the elimination of one very specific “cultural” measure (a CRTC ruling that prevented the simultaneous substitution of Canadian ads into the annual Super Bowl game broadcast feed), “this Agreement does not apply to a measure adopted or maintained by Canada with respect to a cultural industry”.

Some Canadian football fans will be annoyed; Bell Media, who have invested in the Canadian rights to the Super Bowl broadcast will be delighted as the ads they sell will be served to Canadian viewers whether they watch CTV or the US network feed in Canada. More viewers mean more ads which means more revenue for Bell Media which ultimately means more revenue dedicated to Canadian production through the Canadian Media (Production) Fund.

The exemption is not a total free pass because similar to the cultural exception clause in the original Canada-US FTA and NAFTA, there are remedies for Mexico and the US if Canada invokes the exception. Either can adopt measures of similar effect and can retaliate with measures of equivalent commercial value. Nonetheless, Canada continues to be free to subsidize its cultural industries, although changes in technology and delivery mean that such measures are less effective in the digital age than in the past.

Other Positive Measures

Other positive provisions for rights-holders relate to commitments to measures against circumvention of Technical Protection Measures (i.e. encryption of content) and Rights Management Information, consistent with current Canadian law, mutual commitments to civil and criminal enforcement measures to protect intellectual property, and application of the accepted Berne Convention standard, the so-called “three step test” (“Members shall confine limitations and exceptions to exclusive rights to certain special cases which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the rights holder.”) to any limitations and exceptions. Therefore there is no requirement to broaden exceptions to copyright.

Internet Safe Harbours

There has already been some discussion about the importance and meaning of language in the Digital Trade chapter (Chapter 19) relating to Internet safe harbours for non-copyright related content. (ISPs are granted safe harbour immunity in Chapter 20 for copyright infringing materials, provided they take action to remove or disable access to copyright infringing material when so informed. Canada’s existing “notice and notice” system is maintained). With respect to digital trade, Michael Geist claims that inclusion of the Chapter 19 language on safe harbours is a “welcome addition” to the USMCA. The clause states;

To that end (i.e. promotion of digital trade), other than as provided in Part 4 below (which states that nothing in this article shall apply to any measure of a Party pertaining to intellectual property, including measures addressing liability for intellectual property infringement, or be construed to enlarge or diminish a Party’s ability to protect or enforce an IP right or to enforce a criminal law), no Party shall adopt or maintain measures that treat a supplier or user of an interactive computer service as an information content provider in determining liability for harms related to information stored, processed, transmitted, distributed, or made available by the service, except to the extent the supplier or user has, in whole or in part, created, or developed the information.”

From this language Geist concludes, “In other words, Internet companies are not liable for the content of their users”.

Dr. Geist has been a keen advocate of the transfer to Canada of Section 230 language from the Communications Decency Act (1996) in the US which provides broad immunities to Internet intermediaries for content posted on their platforms by users. There is great concern in the US that this legislation is too broad and has been abused by internet platforms. Recently the legislation was amended in the US to close a loophole that allowed platforms to continue to promote sexual exploitation of children by hiding behind the immunities provided by this law. This amendment is known as FOSTA (Fighting Online Sex Trafficking Act). In the run-up to the negotiations, the cyber-libertarian Electronic Frontier Foundation (EFF) was even so brazen as to suggest that;

“Exporting Section 230 to Mexico and Canada isn’t the only reason to advocate for its inclusion in a modernized NAFTA. This negotiation comes at a time when Section 230 stands under threat in the United States, currently from the SESTA and FOSTA proposals, which could escalate into demands that platforms also assume greater responsibility for other types of content. As uncomfortable as we are with the lack of openness of trade negotiations, baking Section 230 into NAFTA may be the best opportunity we have to protect it domestically.”

Does this provision in Chapter 19 mean that Section 230 will be “baked in” to law in Mexico, Canada and the US? In my view, inclusion of safe harbour language in the USMCA is regrettable but needs to be kept in context. Certainly, it runs counter to trends in Europe where platforms are being held more not less accountable for the content on their platforms. The safe harbour concept was established at the dawn of the Internet and unfortunately has been abused by many Internet intermediaries, and has failed to create an adequate basis for dealing with Internet-enabled harms. That said, the champions of these US legacy principles (like Michael Geist) are over-selling their implications. It is an overstatement and mischaracterization to make a sweeping claim that Internet companies are not responsible for the content of their users as a result of the digital chapter of the USMCA. Moreover there is no requirement to change Canadian law.

First, no one wants to make Internet companies liable for their users’ content; only for failure to meet a reasonable duty of care in the way that they operate their businesses. Second, and more to the point, Article 19.17.2 does not require the establishment of a safe harbour regime for Internet intermediaries. It merely confirms the distinction between primary and secondary publishers in Canada, and makes no changes in the law. Further, it is subject to broad exceptions necessary to protect public morals and maintain public safety, human, animal or plant life or health and the privacy of individuals. Canada, the US and Mexico most certainly did not give up their ability to legislate to hold platforms accountable and responsible for the way in which they operate.

Next Steps

The reaching of agreement in principle is by no means the end of the road. Apart from the legal “scrub”, to iron out anomalies and clarify language, there is the ratification process. The US is facing mid-term elections so it is anyone’s guess as to the composition of Congress at the time the Agreement actually makes its way there for final approval. I won’t hazard a comment on the Mexican process but in Canada the government will have to move expeditiously if the implementing legislation is to be approved prior to next general election in the fall of 2019. Many things can happen to delay the process.

We will hear much more about the winners and losers under the USMCA before NAFTA finally assumes its new form. In the meantime there is plenty to digest for rights-holders on both sides of the border.

© Hugh Stephens, 2018.

2 thoughts on “The new NAFTA (USMCA): What it means for Copyright Industries in Canada”

  1. Hugh – two things quite new in the agreement (aside from the shocking China clause): [1] annual review of macroeconomic and exchange rate policies; and [2] an annual competitiveness gathering which includes a reference to joint trade action against third parties (China?). David Crane

    Like

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