Senate Passes the USMCA

On January 16, the U.S. Senate passed H.R. 5430, the United States-Mexico-Canada Agreement Implementation Act. The Senate deserves credit for promptly approving the USMCA following its passage in the House of Representatives in December 2019. The USMCA includes several provisions that will help strengthen Americans' copyrights in those neighboring nations. H.R. 5430 has been transmitted to President Trump for signature. 

Free State Foundation President Randolph May and I described the pro-copyright provisions contained in the USMCA and recommended its passage. My April 2019 Perspectives from FSF Scholarspaper, "Trade Agreements Should Include Stronger Online Copyright Protections" and my similarly-titled October 2019 Perspectivespaper, "Trade Agreements Should Strengthen Copyright Protections Against Piracy" also discussed the USMCA's pro-copyright features.

House of Representatives Passes the USMCA

On December 19, the House of Representatives passed H.R. 5430, the United States-Mexico-Canada Agreement Implementation Act. The House should be commended for its approval of the USMCA, which contains many provisions that will help strengthen Americans' copyrights in those neighboring nations. 

Free State Foundation President Randolph May and I have previously described the pro-copyright merits of the USMCA and called on Congress to pass it. As I explained in my April 2019 Perspectives from FSF Scholars paper, "Trade Agreements Should Include Stronger Online Copyright Protections":

By negotiating for stronger copyright protections and enforcement in international trade agreements, the U.S. can help curb the significant economic losses sustained by American copyright owners. The proposed USMCA, signed by President Trump in October 2018, and likely to be voted on by Congress this year, includes many provisions that would modernize and strengthen protections for Americans' copyrighted works in Canada and Mexico. For instance, under the USMCA, each member nation would be required to secure copyright owners' full enjoyment of exclusive rights in sound recordings and public performances. Each nation would guarantee contractual liberty so that copyright owners can transfer their rights for full value. Also, each nation would make available stronger remedies in civil copyright infringement cases, including injunctive relief as well as statutory damages. And each nation would authorize their border officials to pursue, seize, and destroy pirated goods. 

For more, see my similarly-titled October 2019 Perspectives paper, "Trade Agreements Should Strengthen Copyright Protections Against Piracy," which touches on the importance of the USMCA and other pro-copyright trade agreements in the context of the current problem of online piracy of movies and TV content. 

Hopefully, the Senate will promptly take up and pass the USMCA in early 2020. 

Trade Agreements Should Not Export Ineffective Copyright Laws

On August 6, 2019, Representatives Frank Pallone, Jr. and Greg Walden, the Chairman and Ranking Member of the House Committee on Energy and Commerce, sent a letterto U.S. Trade Representative Robert Lighthizer expressing their concern that the proposed United States-Mexico-Canada Agreement (USMCA) contains a provision (Article 19.17) that mirrors Section 230 of the Communications Decency Act. Section 230 shields online services from some of the liability associated with third-party content posted on the services. As Chairman Pallone and Ranking Member Walden observe, "the effects of Section 230 and the appropriate role of such liability shield have become the subject of much debate in recent years."

In light of the ongoing debate in the U.S. regarding Section 230, Congressmen Pallone and Walden state:

"While we take no view on that debate in this letter, we find it inappropriate for the United States to export language mirroring Section 230 while such serious policy discussions are ongoing. For that reason, we do not believe any provision regarding intermediary liability protections of the type created by Article 19.17 are ripe for inclusion in any trade deal going forward."

Like Chairman Pallone and Ranking Member Walden, I don't take any position here on the current debate surrounding Section 230.

But their letter does readily call to mind a similar point made by my Free State Foundation colleague Seth Cooper in his April 2019 Perspectives from FSF Scholars titled, "Trade Agreements Should Include Stronger Online Copyright Protections." In his paper, Seth points out that the USMCA's Article 20.J.11 incorporates provisions that are based on Section 512 of the 1998 Digital Millennium Copyright Act. Section 512 is the provision that contains a "notice and takedown" process addressing when online service providers can receive limited liability protections for infringing content and activity on their websites. In other words, like Section 230, Section 512 is a statutory provision limiting the liability of online provider intermediaries.

In his Perspectives, Seth explains why Section 512, geared to 1990s dial-up Internet technologies, "takes a decidedly un-modern approach to online copyright infringement that takes place on user-upload websites." And he explains there, as Seth and I have previously in "Modernizing International Agreements to Combat Copyright Infringement" and elsewhere, why Congress needs to modernize Section 512 in order to protect copyright holders from rampant infringement. Inclusion of Article 20.J.11 in the USMCA agreement, mirroring as it does Section 512, risks perpetuating the deficiencies in the current under-protective notice-and-takedown system that prevails in U.S. copyright law.

Therefore, Seth's April 2019 Perspectives concluded, in language that bears repeating:

"Absent clarification, inclusion of Section 512-like terms in the USMCA also risks limiting Congress' ability to modernize U.S. copyright law to better combat online infringement….[T]he Administration and Congress should make clear that the USMCA's online infringement provisions are not precedent for future trade agreements. Statements of administrative action by the U.S. Trade Representative expressly should affirm that Article 20.J.11's provisions are limited to the USMCA itself.

Going forward, Section 512-like terms – as least as long as Section 512 remains un-modernized – should not be included in U.S. trade agreements. In the face of this century's technological advances, the U.S. should not let international agreements bind Congress by chaining copyright enforcement to last century's technological assumptions."

Indeed, this is the same point made by Representatives Pallone and Walden in their letter with regard to Section 230. The same logic applies to the USMCA's provision mirroring Section 512.

In sum, Congress needs to reexamine Section 512 as a matter of modernizing U.S. domestic law to reduce illegal copyright infringement. And in face of such reexamination, going forward, U. S. trade agreements should not export provisions containing Section 512-like terms.

IP Commission Recommends Steps to Protect America From International IP Theft

On February 21, 2019, the Commission on the Theft of American Intellectual Property issued a report highlighting "policy developments in the last 18 months related to strengthening the United States' ability to protect IP." The IP Commission's 2019 Review focused on U.S.-China relations, offering recommendations for more effectively preventing forced technology transfers, economic espionage, and intellectual property (IP) theft. 

According to the IP Commission's 2017 report, "the annual cost of counterfeit goods, pirated software, and theft of trade secrets to the U.S. economyis between $225 billion and $600 billion," and China is "the world's principal IP infringer." In fiscal year 2017, 87% of counterfeit goods seized coming into the U.S. originated from China and Hong Kong.

The IP Commission's 2019 Review applauded American policymakers' responses to Chinese IP wrongful practices:

The Trump Administration has elevated the elimination of China’s theft of American IP, whether through cyber-theft, forced technology transfers, stolen trade secrets, counterfeiting of products, or other means, to one of the leading foreign policy priorities and a top goal of the U.S.-China economic negotiations. 

The IP Commission acknowledged the Section 301 investigative report findings of the United States Trade Representative (USTR) regarding Chinese IP policies and practices. The USTR concluded that China "unfairly target[s] critical U.S. technology with the goal of achieving dominance in strategic sectors" and that its practices are harmful to American innovation and competitiveness. Additionally, the IP Commission's 2019 Review acknowledged the USTR's placement of China on the "Priority Watch List" over concerns that include "trade secret theft, online piracy and counterfeiting, a high volume of manufacturing and exporting counterfeit goods, technology transfer requirements, mandatory application of adverse terms to foreign IP licensors, localization requirements, and weak enforcement." 

Finally, the IP Commission made several recommendations for strengthening American IP protections from foreign theft, including: (1) construction of an"independent international database for scoring of entities from foreign countries that pose IP risk;" (2) a streamlined process for reporting and responding to IP theft; (3) requiring the Securities and Exchange Commission (SEC) to determine whether companies' use of stolen IP ought to be publicly reported; (4) meaningful sanctions by the Federal Trade Commission (FTC) against foreign companies using stolen IP; and (5) use of "multilateral institutions to harmonize national and international legal and regulatory frameworks."

Previously, FSF President Randolph May and I have addressed the pressing need to strengthen protections for Americans' IP internationally – particularly for copyrighted movies and music. In our Perspectives from FSF Scholars paper, "Modernizing International Copyright Agreements to Combat Copyright Infringement," we explain that several foreign countries insufficiently protect Americans' copyrighted works from digital piracy and online infringement taking place through cyberlocker websites and stream-ripping websites. As we urged there: "The Trump Administration should ensure that stronger protections for Americans' creative works are included in new treaties and trade agreements that are attuned to the Digital Age."

In particular, the proposed United States-Mexico-Canada Agreement (USMCA) would strengthen copyright protections and enforcement by securing Americans' full enjoyment of exclusive rights in sound recordings, ensuring longer protection terms, and providing stronger civil remedies and criminal penalties for copyright infringement. However, international agreements such as USMCA should not include outdated online infringement provisions that are similar to Section 512 of the Digital Millennium Copyright Act of 1998. Section 512 is ineffective in protecting copyrighted movies and music from massive online infringement via user-upload websites. We identify problems with Section 512 and call for reforms to strengthen online copyright protections in our Perspectives paper, "Modernizing Civil Copyright Enforcement for the Digital Age Economy: The Need for Notice-and-Takedown Reforms and Small Claims Relief."

In sum, in the interest of securing greater protection for Americans' intellectual property, it's worth paying close attention to the IP Commission's most recent report. 

United States Still Leads the World in Strong Protections for IP Rights

On February 7, 2019, the U.S. Chamber of Commerce’s Global Innovation Policy Center (GIPC) released the seventh edition of the International IP Index. Appropriately enough it's titled “Inspiring Tomorrow.” The Index rates the intellectual property (IP) systems of 50 countries, representing over 90% of the world’s gross domestic product. Scores were derived from several specific factors pertinent to gauging protection of intellectual property rights.

Thus, the GIPC Index is a valuable tool which allows policymakers to better understand where their countries stand in relation to others.

Although the U.S. ranks at the top of the International IP Index, its release nevertheless should prompt U.S. policymakers to strengthen our IP rights system. The Index identifies the lack of a targeted legal basis for addressing online piracy as a key area of weakness. Moreover, poor Index scores for IP rights systems in certain foreign countries should spur U.S. trade negotiators to seek stronger protections for Americans’ IP rights overseas. By seeking to bolster IP protections around the globe, the U.S. will further benefit from the strong relationship between strong IP rights and economic activity.

Scores in the 2019 International IP Index are based on eight key categories relating to IP rights: patent rights, copyrights, trademarks, trade secrets, commercialization of IP assets, enforcement, systemic efficiency, and membership in and ratification of international treaties. Those eight categories encompass 45 separate indicators pertinent to assessing the strength of an IP system.

Because scoring for this year’s Index is based on 45 indicators instead of 40 as in last year’s Index, a weighted-score was calculated to determine whether countries’ protections of IP rights were stronger or weaker than that calculated in last year’s Index. Among the 50 countries, 23 improved their weighted-scores in the 2019 Index. Many of the improved scores came from developing countries.

For the seventh consecutive year, the United States had the highest score. The U.S. IP system rated 42.66 out of 45. The United Kingdom and Sweden followed with scores of 42.22 and 41.03, respectively. The countries with the lowest scores were Egypt, Algeria, and Venezuela at 11.83, 10.28, and 7.11, respectively.

Despite the United States’ leadership, there are some areas of weakness discussed in the Index. For example, the United States has a perfect score with regard to encouraging creativity by virtue of strong copyright protections, but it lacks an effective enforcement regime to disable access to websites which facilitate pirated content and counterfeit goods. A 2017 report by the IP Commission found that the annual cost of counterfeit goods, pirated software, and theft of trade secrets to the U.S. economy is between $225 billion and $600 billion.

To combat online piracy, Congress can help by updating the Digital Millennium Copyright Act’s notice and takedown system under Section 512. My October 2018 FSF blog stated that the United States-Mexico-Canada Agreement (USMCA) strengthens IP rights protections and enforcement relative to the North American Free Trade Agreement’s (NAFTA) IP Chapter. However, the USMCA failed to address the outdated “notice and takedown” provision to improve its protection for creators' content.

Moreover, modernizing the U.S. Copyright Office by updating its technological capabilities to maintain a readily searchable database of copyright registrations would be helpful. So too would be giving the Copyright Office the authority to address Section 512 matters and establishing a process for adjudicating small infringement claims. Congress should act to modernize the Copyright Office to enable it to adequately address piracy issues and other copyright-related infringements.

While there was significant improvement among many of the developing countries in GIPC’s Index, the low scores in many developing countries reinforces the need for U.S. pursuit of trade agreements that better secure protections for IP rights holders internationally. As more countries adopt strong protections of IP rights through trade agreements, the entire global economy also will grow substantially, because legal institutions, including regimes that safeguard IP rights, constitute a positive externality for the global economy. The mutual gains from global trade increase when more nations adopt and enforce laws that protect IP rights.

Importantly, the Index emphasizes that there is a “strong correlation between the strength of the national IP environment and different types of economic activity, including rates of R&D spending, innovation, technology creation, and creativity.” Across all countries, the Index found several noteworthy correlations between strong IP protections and economic innovation and creativity. On average, IP-driven countries:

• Are 26% more competitive,

• Are 53% more likely to employ high-skilled and high-paid workers,

• Are 33% more likely to receive private-sector investment in R&D activities,

• Are 39% more likely to attract foreign investment,

• Have over 4 times more online and mobile content generated,And are twice as likely to produce and export complex, knowledge-intensive products.

Strong protections for IP rights incentivize investment in research and development, innovation, and creative content production because they ensure entrepreneurs have an opportunity to earn a return on their labors. And as economies with strong IP rights regimes grow and prosper, consumers are the ultimate beneficiaries as new goods and services, in whatever form they take, are brought to market.

In sum, the International IP Index provides U.S. and foreign policymakers a useful tool for assessing the need to improve their IP systems so that they can enhance innovation and creativity in today’s economy.

Signing of USMCA Spotlights International Copyright Protections

On November 30, President Trump and leaders from Canada and Mexico officially signed the proposed United States-Mexico-Canada Agreement (USCMA). Completion of the trade agreement's negotiation was announced in October. If approved by Congress, USMCA will replace the North American Free Trade Agreement (NAFTA). 

USMCA contains several provisions to better secure Americans' copyright protections. FSF President Randolph J. May and I address many of those provisions in our Perspectives from FSF Scholars paper, "Modernizing International Copyright Agreements to Combat Copyright Infringement." Among its pro-copyright provisions, USMCA would help American owners of sound recordings the full scope of public performance rights. Additionally, USMCA provides for stepped up enforcement through increased civil and criminal penalties for infringing activities such as "stream-ripping" and "camcording." 

However, USMCA incorporates language similar to the Section 512 "notice-and-takedown" provision contained in current U.S. copyright law. Section 512 is outdated and ineffective in protecting digital music and video content from mass infringement on popular user-upload websites. Future trade agreements and treaties should avoid that language. Congress and the Trump Administration should work to reform and update the notice-and-takedown system. We discuss these aspects of Section 512 in further detail our Perspectives paper, "Modernizing Civil Copyright Enforcement for the Digital Age Economy: The Need for Notice-and-Takedown Reforms and Small Claims Relief."

USMCA Strengthens IP Rights Protections But Can Be Improved Further

On October 1, 2018, the Trump Administration announced a new multilateral free trade agreement with Mexico and Canada, set to replace the North American Free Trade Agreement (NAFTA). In some respects, the Intellectual Property (IP) Chapter in the United States-Mexico-Canada Agreement (USMCA) would strengthen the protections and enforcement of IP rights relative to NAFTA's IP Chapter, and this is an improvement. Notably, the USMCA would implement provisions and enforcement mechanisms that should diminish the facilitation of pirated and counterfeit goods in the three member countries.

However, the proposed agreement also carries forward an outdated "notice-and-takedown" provision that does not properly protect the interests of creators and consumers.

FSF scholars recently have advocated for the modernization of NAFTA's IP Chapter. (See here and here.) And the USMCA would improve some important measures related to the protection of the rights of trademark and copyright holders. Here are some of the key provisions in the USMCA that would strengthen IP rights protections:

• Requires a minimum copyright term of life of the author plus 70 years, and for those works with a copyright term that is not based on the life of a person, a minimum of 75 years after first authorized publication. Canada currently has terms of life of the author plus 50 years and 70 years, respectively.

• Requires strong standards against the circumvention of technological protection measures that often protect works such as digital music, movies, and books.

• Enhances provisions for protecting trademarks, including well-known marks, to help companies that have invested effort and resources into establishing goodwill for their brands.

• Provides important procedural safeguards for recognition of new geographical indications (GIs), including strong standards for protection against issuances of GIs that would prevent United States producers from using common names, as well as establishes a mechanism for consultation between the member countries on future GIs pursuant to international agreements.

Additionally, the proposed agreement would require some enforcement mechanisms to deter the facilitation of pirated and counterfeit goods. Specifically, IP enforcement procedures must be available for the digital environment for copyright and trademark. The USMCA also includes procedures and penalties for unauthorized "camcording" of movies, which is a significant source of pirated movies online.

From the United States' perspective, about $1.3 trillion in annual economic activity is attributable to trade that crosses the U.S. borders with Canada and Mexico. Efforts to stop online piracy and the sale of counterfeit goods will encourage creators and entrepreneurs to develop new content and invest in new brands because they will have a greater ability to earn a return on their labor and resources.

However, there is one area where the USMCA needs work. The USMCA includes outdated safe harbor provisions very similar to the provisions adopted in the Digital Millennium Copyright Act (DMCA). In particular, the USMCA carries forward without strengthening a "notice-and-takedown" provision that does not adequately protect creators and consumers.

As Free State Foundation President Randolph May and Senior Fellow Seth Cooper stated in a February 2018 Perspectives from FSF Scholars, the notice-and-takedown provision was adopted twenty years ago and does not reflect today's digital marketplace for copyrighted works:  

"[Under the notice-and-takedown provision], copyright holders are entitled to give notice to an online service provider when infringing content is posted on its network or website. A provider receives immunity if it 'responds expeditiously to remove, or disable access to, the material that is claimed to be infringing.'"

"In the late 1990s there were far fewer Internet users and far fewer online platforms for user posting of content. Today, user-upload websites such as YouTube, Vevo, Dailymotion, and SoundCloud make massive amounts of music and video content available. Regrettably, users of those websites and others post far too much infringing content. For example, between 2011 and 2015, the sound recording industry issued over 175 million takedown notices to various online providers."

"As a result of mass online infringement and the burdensome nature of the notice and takedown process, copyright owners lose revenues that they would receive otherwise from legitimate sales of copies to consumers."

Compared to NAFTA, the USMCA takes some important steps to modernize and strengthen the protection and enforcement of IP rights to account for a burgeoning digital marketplace. But it's not perfect. Congress and the Office of the United States Trade Representative still need to find a way, in the context of negotiating trade agreements, to revise the "notice-and-takedown" regime in a way that adequately protects creators and consumers.