The USMCA/CUSMA and Intellectual Property: Canada Wins

Source: shutterstock.com

The government of Justin Trudeau is now moving quickly with legislation to ratify the new trilateral North American trade agreement in the wake of the announcement last month that the Trump Administration would lift the steel and aluminum tariffs that were imposed on Canada (and Mexico) in June 2018 on ostensible “national security” grounds. Yes, aluminum and steel from Canada (and other US allies) apparently threaten US national security according to the justification for the tariffs put forward by the US Administration and imposed during the NAFTA 2.0 negotiations.

(If Canadian aluminum threatens the national security of the US, I wonder about all that undercover Canadian talent in Hollywood. Is the cultural security of the USA at risk? Not only that, the Toronto Raptors won the NBA championship! What next?)

Anyway, now that the tariff impediment has been removed, ratification should proceed in the three constituent countries. By the way, just as the new agreement is viewed differently in each, it also has a different name in each place. If you are in Canada, it is CUSMA (if referring to it in English), USMCA if you are in the US, and I’m not sure what they call it in Mexico, one suggestion is T-MEC? In Canadian French it is known as ACEUM—does this rhyme with vacuum? Remember Ross Perot’s “giant sucking sound”, back in the 1990s?

But I digress.

Lifting the US tariffs (resulting in the cancellation of retaliatory Canadian and Mexican tariffs on US products) should smooth the ratification process in Congress, where Chairman of the Senate Finance Committee Sen. Chuck Grassley (R-IA) made it very clear that USMCA ratification would not proceed unless the “national security” tariffs were removed. This should avoid a scenario where President Trump’s threats to cancel the existing NAFTA agreement if Congress did not move to ratify the USMCA would come into play. Of course this optimistic scenario almost went out the window with Trump’s announced decision—since rescinded–to apply unilateral tariffs to Mexican imports ostensibly in retaliation for Mexico not adequately policing its borders. The Democrat-controlled House still poses challenges for ratification however. It’s never over until it’s over.

But let’s assume that ratification will now proceed. This is good news for Canada, since CUSMA/USMCA represents the best chance for relative trade peace with its largest trading partner. Canada fought a rear-guard action to preserve as much of the original NAFTA as possible in the face of Donald Trump’s declaration that the Agreement was “the worst trade deal ever made”. By and large, Canada succeeded and CUSMA/USMCA largely mirrors NAFTA with a couple of tweaks. However, victory is in the eye of the beholder and the new agreement, in Trump’s words, is now, “the most important trade deal we’ve ever made by far”. Among the areas where changes were made were in auto trade, where North American content requirements were raised, and intellectual property.

As I wrote at the time that CUSMA/USMCA was signed, the IP commitments that Canada made in the area of copyright were characterized by some as “concessions” but in fact they will bring significant benefit to Canada’s creative industries. Now a new paper has been published by the Macdonald-Laurier Institute on the IP provisions of the USMCA, incorporated in Chapter 20 of the Agreement. Written by lawyer Richard Owens, it is called “Who’s Afraid of the USMCA: Why the Intellectual Property provisions in the US Mexico Canada Agreement are good for Canada and its trading partners”.

While Owens devotes considerable time to outlining the benefits of a stronger IP regime for productivity and innovation, and examines the issue of biologics and patents in some detail, he also addresses copyright issues, which is where I will focus my comments. One of the important copyright issues dealt with in the USMCA is copyright term extension in Canada (from 50 years beyond the death of the author to 70), to bring Canada in line with the period of protection in the US, EU and many other countries. Stronger IP protection has its critics, including former Blackberry Co-CEO Jim Balsillie, who (despite the fact that most of Blackberry’s value lay in its IP), adopts the argument that Canada is a net importer of IP and will “be permanently writing more cheques than collecting them”. This argument suggests that Canada should continue to be an IP free-rider and can expect to find itself permanently in a net IP importing position. This ignores the stimulative effect on IP creation that better protection will bring. Balsillie made these same wrong-headed arguments at the time the Trans-Pacific Partnership (TPP) was being negotiated. Owens dismisses arguments that extending copyright term will be a negative for the Canadian economy (and notes its benefits for creators), while pointing out that the recent Shifting Paradigms report on copyright reform in Canada, issued by the Parliamentary Committee on Canadian Heritage, strongly endorsed term extension for the benefit of the creative sector.

He examines two other issues relevant for copyright industries and rights-holders, the “notice and notice” regime in Canada with regard to online copyright infringement and the safe harbour provisions in the IP chapter. Owens is no fan of Canada’s “notice and notice” regime, which requires ISPs to forward to suspected infringing users notices received from copyright owners. However that is where the ISPs obligation ends. The goal of the procedure is supposed to be “educational”, reminding users of their alleged copyright infringements. The assumption, I suppose, is that once they know someone is looking, they will stop. For consistent consumers of pirated material, this is no disincentive at all.

Canada succeeded in getting its “notice and notice” regime grandfathered in the Agreement. The alternative would be the system in the US referred to as “notice and takedown” where at the same time that an ISP is made aware of alleged infringement, it is required to takedown the suspect content, subject to a counter-notice by the alleged infringer. The problem is that this system doesn’t work either. The takedowns are usually done automatically, using technology, but the sheer volume of takedowns has overwhelmed the system. Moreover, once taken down pirated content often pops up again using a slightly different URL. Rights-holders in the US have pushed for a “notice and staydown” system but that appears to be elusive.

Finally, Owens looks at the issue of safe harbors (for ISPs enabling the distribution of copyright infringing materials) in Chapter 20 and cautions that they should be read narrowly so that they don’t create in Canada a situation similar to that which exists in the US under Section 230 of the Communications Decency Act. This 1996 legislation has been interpreted by courts in the US as giving virtual blanket immunity to platforms to host just about anything put up by users, legal or illegal, and escape any liability. In fact, this issue is directly addressed not in the IP chapter but in the previous chapter of USMCA, Chapter 19, on Digital Trade. Some commentators in Canada who pushed for Section 230 to be incorporated into CUSMA/USMCA in order to extend it to Canada (anti-copyright law professor Michael Geist being a notable example) have claimed that Article 19.17 brings a Section 230 equivalent to Canada. Geist has claimed that “Internet companies are not liable for the content of their users”. This is a misinterpretation of the Agreement’s obligations and is, fortunately, wrong.

As I concluded in a recent blog that examined this issue, “Did Canada get Section 230 Shoved Down its Throat in the USMCA?;

Canada is under no obligation to pass any legislation incorporating Section 230 language. In fact, the USMCA specifically says that Parties have the freedom to implement Article 19.17 in various ways including through ongoing application of common lawPlatforms are still liable under the Canadian common law as secondary publishers when they knowingly publish the contents of a primary publisher that is, for example, defamatoryFar from having Section 230 type safe harbours shoved down its throat, Canada protected its ability to regulate platforms and protected the ability of the courts to take action against platform abuse where and when required”.

That should set aside any concerns that Canada will go down the Section 230 road, a road that is coming under increasing scrutiny in the US.

Owens concludes by stating;

The USMCA contains measured, beneficial steps along the road to improving IP protection in Canada, and to enhance high-value trade among the parties. These steps will be good for trade and foreign investment and good for Canada’s domestic IP economy…Criticism of the IP provisions of the USMCA is unwarranted. The provisions are good for Canada and we must not delay the ratification of this critical trade agreement”.

In Canada the process has been launched with the introduction of the implementing legislation. At the same time, the Canadian government has said that its approval process would move in lock-step with the US, as the agreement goes through Congress, where it still could run into difficulties and be subject to demands for amendment. While Canada would have preferred to stay with the old NAFTA, or at least update the original agreement more to its liking, the outcome can truly be described as positive for all three countries. Even Donald Trump now likes it (the new name no doubt helps). Among the areas where the US can consider that it made “gains” is Chapter 20, on Intellectual Property, but when someone else’s gain also benefits you, it is an easy “concession” to make. That is certainly the case with the IP provisions of CUSMA/USMCA/T-MEC/ACEUM. Whatever you want to call it, it’s now important to get it over the finish line in all three countries.

© Hugh Stephens 2019. All Rights Reserved.

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