Monday, July 10, 2017

Strengthen NAFTA's IP Chapter

President Trump has been critical of the North American Free Trade Agreement (NAFTA), a trilateral free trade agreement involving the United States, Canada, and Mexico, stating that he would withdraw the U.S. from the 23-year-old agreement. He even drafted an executive order that would have removed the United States, but he ultimately decided not to issue it.

Still, President Trump apparently remains concerned about NAFTA, and this is a concern to hundreds of millions of North American consumers and entrepreneurs who benefit from the economic prosperity that NAFTA has fostered. Instead of contemplating withdrawing the U.S. from NAFTA, President Trump should focus his attention on modernizing NAFTA. In this regard, he should focus special attention on strengthening NAFTA’s IP Chapter in order to better protect creators and inventors throughout North America.

Withdrawal from NAFTA would have detrimental economic effects on the North American economy. The daily volume of economic trade among the three member countries is over $3.5 billion. From the United States’ perspective, about $1.3 trillion in annual economic activity crosses U.S. borders with Canada and Mexico. There are also 14 million U.S. jobs that directly depend on trade with Canada and Mexico. In other words, hundreds of millions of consumers and entrepreneurs throughout North America value the economic benefits of NAFTA, including access to inexpensive goods and services, low barriers to entry for entrepreneurs, and of course, the enjoyment of artistic creations that protections of intellectual property rights enable.

Modernizing NAFTA by strengthening IP rights protections, especially to take account of the digital economy that was almost non-existent when NAFTA was negotiated, would be helpful. In a recent blog post, John Murphy, the U.S. Chamber of Commerce’s Senior Vice President for International Policy, discusses some key areas where NAFTA could be modernized to benefit consumers and entrepreneurs in all three member countries. In recent comments submitted to the Office of the U.S. Trade Representative and the Trade Policy Staff Committee, Mr. Murphy specifically addresses aspects of NAFTA’s IP Chapter that could be better enforced and some that should be updated.

Some parts of Canadian and Mexican IP laws, along with enforcement practices, do not protect U.S. interests. For example, the position of both Canada and Mexico with regard to the transshipment of counterfeit and pirated goods into the United States is too relaxed. This places a high burden on U.S. border officials to police illicit trade. Pirated and counterfeit digital goods have become increasingly available since NAFTA was implemented in 1994, just before the digital economy started to grow. The distribution of pirated and counterfeit goods was listed as a key area of weakness for both Canada and Mexico in the Global IP Center’s (GIPC) 2017 International IP Index.

Also, with respect to pharmaceutical patents, Mexico has not fully implemented the regulatory data protection provisions of NAFTA and neither Mexico nor Canada meets the standard in U.S. law of twelve years of regulatory data protection for biologic products. The U.S. Chamber of Commerce suggests that both countries provide at least five years of patent term restoration that grants full rights to compensate for the patent life lost to patent office and regulatory approval delays. Also, the judicial systems in both countries should provide effective enforcement of patents and compensation for patent infringement. Needless to say, Canada and Mexico scored relatively low on the patents category of GIPC’s International IP Index.

The U.S. Chamber of Commerce listed a number of recommendations that should be part of an updated IP Chapter in NAFTA:

  • Commitment to full national treatment without carve outs.
  • Re-commitment to strong base terms of protection for patents, copyrights and related rights, trademarks, and designs, and establishment of a statutory commitment to protect trade secrets.
  • Exclusive rights for all forms of IP regardless of business models.
  • Guarantee of technology-neutral patent eligibility for all industry sectors strictly based on the international norm of novelty, usefulness, and non-obviousness.
  • Clear and carefully-defined rules for exceptions to rights across all forms of IP.
  • Rule of law mechanisms that enable IP owners to maintain, commercialize, and defend their rights, including, for example:

o   Prohibition of forced transfer of IP rights and government interference in commercial technology agreements;
o   Strong legal protections against circumvention of technological protection measures for the digital marketplace, with appropriate exceptions;
o   Patent linkage rules that enable pharmaceutical innovators to resolve patent disputes before potentially infringing products enter the market; and,
o   Patent term extension and restoration to address bureaucratic delays.

  • Statutory protection for proprietary information, including trade secrets as well as regulatory test data submitted to governments, and establishment of criminal penalties for trade secrets theft, including by means of a computer system.
  • Deterrent-level civil and criminal remedies in law, backed up by effective enforcement efforts, to combat trade in counterfeit goods, among other goals, and halt damage to iconic U.S. brands and the jobs that depend upon them.
  • Appropriate and effective safe harbor mechanisms for intermediary liability.
  • Ensure NAFTA partners implement relevant international IP agreements in domestic law.
  • Participation in partnership with the United States in a forward-looking norm-setting agenda through multilateral treaties and trade agreements to ensure that U.S., Canadian, and Mexican IP interests are promoted around the world.

The U.S. Chamber’s comments regarding modernizing NAFTA’s IP Chapter conclude this way:

Ensuring full implementation of existing NAFTA rules and upgrading Canadian and Mexican IP laws would give American creators and innovators an expanded regional platform to launch new products and services with the assurance that their IP is protected. In turn, Canada and Mexico would be better able to enjoy the benefits of the research and development investments and creative work taking place in their own markets, which due to a weak IP environment too often are lost to foreign competitors. Likewise, modernizing NAFTA’s IP provisions would strengthen the digital economy throughout North American by powering the knowledge sector, which is critical to driving digital growth.

Stronger IP rights protections will incentivize more innovation and investment. This will benefit consumers, entrepreneurs, artists, and inventors in all three member countries. With $1.3 trillion in annual economy activity and 14 million U.S. jobs on the line, President Trump should be focusing not on withdrawing from NAFTA but rather on updating it in a way that strengthens the IP Chapter.