Five Ways NAFTA Talks Can Level the Innovation Playing Field

After years of ceding to US demands for tough anti-piracy rules, it’s time for Canada to fight for its interests

Published: August 9, 2017

Author: Michael Geist

This article is part of a series about what the renegotiation of the North American Free Trade Agreement means for the knowledge economy in Canada and the people who turn ideas into innovations within one of the world’s largest free trade zones.

The intellectual property (IP) chapter of the North American Free Trade Agreement (NAFTA) promises to be among the most contentious aspects of the trade talks about to get under way.

Canada has enacted major amendments to its laws on copyright and patents in recent years, but the United States is still likely to seek further concessions.

After years of “playing defence” in the face of US demands, the challenge for Canada in this round of negotiations is to pivot onto the front foot and proactively ensure the country’s priorities and policies are reflected in the agreement.

The list of capitulations by Canada in the last decade is long, starting with new criminal liability for using a camcorder to record a film in a movie theatre — despite previous ministerial insistence that Canadian law already effectively addressed the issue.

In the past five years alone, Canada has added anti-circumvention laws similar to those found south of the border, enacted anti-counterfeiting laws, extended the term of protection for sound recordings, engaged in patent and trademark reforms, and added stronger enforcement measures — including “enabler” provisions aimed at websites accused of enabling piracy.

When seen together with recent court decisions that addressed US concerns about patent rules, the record shows that Canada has acquiesced to many demands from Washington.

As the country embarks on a new round of NAFTA talks, it should be recognized that Ottawa already meets its international obligations when it comes to respect for copyright and patents, and has largely addressed long-standing US demands regarding additional reforms.

At a broad level, the Canadian negotiating goal should be to retain an appropriate balance, one that fosters creativity and access while ensuring that there is room for Canadian-specific policies that sit within the flexibilities of the international IP framework.

Translating that goal into negotiating priorities means using NAFTA to establish a level playing field for innovative Canadian business across the North American market. How can a renegotiated NAFTA address the current barriers? There are at least five ways.

Canada has enacted major amendments to its laws on copyright and patents in recent years, but the United States is still likely to seek further concessions.

Inclusion of Balance as an Objective

The initial drafts of the Trans-Pacific Partnership (TPP) agreement included language on objectives within the IP chapter that emphasized balance. Canada was supportive of this approach. NAFTA should include similar language on maintaining balance across all IP rights, the legitimate interests of users, promoting access to and preserving the public domain, ensuring that IP rights do not create barriers to legitimate trade, and facilitating access to affordable medicines.

The objectives provision may not carry the same weight as positive obligations in the treaty, but they are important, reflecting the goals of the negotiating parties and providing a lens through which all other provisions can be interpreted. Canada and many other countries wanted to ensure that the language maintained a pro-innovative balance between rights holders and users on all IP provisions within the TPP. The government should support that approach in NAFTA.

Fair Use and Flexible Fair Dealing

Led by the United States, several countries around the world, including Israel, Singapore and South Korea, have established fair use provisions within their copyright laws. Fair use does not mean free use — rather, it means that there is a balance that allows certain uses of works without permission, as long as the use is fair.

The Supreme Court of Canada has already ruled that Canada’s fair dealing provision must be interpreted in a broad and liberal manner. Yet the current law features a limited number of purposes (research, private study, criticism, news reporting, education, parody, satire and review), which risks rendering innovative activities illegal.

US creators and businesses have a significant competitive advantage because of the American approach to fair use. To ensure a level playing field for innovation, the NAFTA IP chapter should require that all parties feature a fair use or fair use–equivalent provision.

Anti-circumvention Legislation Exceptions

Canadian copyright law’s anti-circumvention provisions are among the most restrictive in the world and badly undermine the traditional copyright balance in the digital world, creating unnecessary restrictions on innovation. Canadians can freely exercise their fair dealing rights in the analog world, but a set of 2012 reforms went far beyond the treaty requirements of the World Intellectual Property Organization by creating unnecessary restrictions on fair dealing in the digital environment. This creates a “fair dealing gap,” where there is a gross mismatch between user rights in the analog world and the digital sphere. 

While the Canadian exceptions were narrowly constructed and limited to a handful of circumstances, the United States has actually been expanding its digital lock exceptions. It recently introduced exceptions for innovative activities such as automotive security research, repairs and maintenance, archiving and preserving video games, and remixing videos from DVDs and Blu-ray sources.

The imbalance in exceptions creates an uneven playing field for innovation and should be remedied by NAFTA. Canada has the power to introduce new digital lock exceptions but has yet to do so. NAFTA should prescribe statutory minimums for anti-circumvention exceptions, including one for fair use and fair dealing.

Canadian copyright law’s anti-circumvention provisions are among the most restrictive in the world and badly undermine the traditional copyright balance in the digital world, creating unnecessary restrictions on innovation.

IP Abuse and Misuse

The NAFTA IP chapter should also address the abuse of IP rights that may inhibit companies from innovating or discourage Canadians from taking advantage of the digital market. The benefits of an anti-IP abuse law could be used to touch on the three main branches of IP: patents, trademarks and copyright.

For example, leading technology companies have issued repeated warnings about patent trolling, which refers to instances in which companies that had no involvement in the development of a patent seek payments from legitimate companies by relying on dubious patents. Patent trolls have a negative impact on economic growth and innovation, with millions spent on unnecessary litigation. 

Canadian companies have faced the daunting prospect of expensive US-based patent litigation that can have a chilling effect on innovation and create barriers to market entry.

NAFTA provisions against patent trolling and other IP abuses would benefit the full North American market by creating much-needed safeguards against abusive patent behaviour.

Copyright Term

One of the chief concerns with past trade negotiations is the expectation that the United States requires other countries to mirror its IP laws, even if those laws extend far beyond international law requirements. The Canadian approach should be to require NAFTA parties to meet international law, but to retain the full flexibility found within those laws.

For example, the term of copyright in Canada is presently the life of the author plus an additional 50 years, a term compliant with the international standard set by the Berne Convention. The term is life plus 70 years in the United States.

From a policy perspective, Ottawa’s decision to maintain the international standard of life plus 50 years is consistent with the evidence that term extension creates harms. Switching to a term of 70 years would leave Canadians with an additional 20 years of no new works entering the public domain, with virtually no gains in terms of new creativity. In other words, in a policy world in which copyright strives to balance creativity and access, term extension restricts access but does not enhance creativity.

The negative effects of term extension have been confirmed by many economists, including in a study commissioned by Industry Canada (now called Innovation, Science and Economic Development Canada), which concluded that extending the term simply does not create an additional incentive for new creativity. Moreover, studies in other countries that have extended the term of copyright have concluded that it ultimately costs consumers, as additional royalties are sent out of the country. Increased costs and reduced access hurt Canadian innovation without providing commensurate economic or cultural gains. Each NAFTA country has a different term of protection. Canada’s position within NAFTA negotiations should be to require all parties to comply with the Berne Convention standard — protection during the author’s lifetime plus 50 years — with the non-mandatory option for each party to exceed that term as they see fit.

The opinions expressed in this article/multimedia are those of the author(s) and do not necessarily reflect the views of CIGI or its Board of Directors.