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Digital Issues in NAFTA: Copyright Industry Comments on NAFTA

This is part of a series of posts on digital issues in NAFTA.

Today is the third day of three days of hearings that the Office of the U.S. Trade Representative is conducting on the upcoming renegotiation of the North American Free Trade Agreement (NAFTA). The comments submitted by some associations representing copyright owners concerning their priorities for the modernization of NAFTA indicate that they hope to use NAFTA to change U.S. copyright law in their favor. At the same time, they intend to prevent NAFTA from reflecting the balance inherent in the U.S. copyright system.

Amendments Relating to Safe Harbors

The Recording Industry Association of America (RIAA) and the Motion Picture Association of America (MPAA) hope to use the NAFTA negotiations to obtain changes to the safe harbors in the Digital Millennium Copyright Act (DMCA). The DMCA’s safe harbors, codified at 17 U.S.C. § 512, have proved essential to the construction of the Internet. They have allowed companies to invest in the development of innovative platforms without the fear of crippling damages liability for the infringing activities of their users. Previous U.S. free trade agreements incorporated language that closely tracked section 512, and technology associations such as CCIA have advocated inclusion of a similar provision in NAFTA.

RIAA, however, supports a safe harbor provision in NAFTA that is limited to “passive intermediaries without requisite knowledge of the infringement on their platforms, and inapplicable to services actively engaged in communicating to the public.” In amicus briefs in several cases interpreting the DMCA, RIAA and other copyright industry associations have argued that the DMCA’s hosting safe harbor, 17 U.S.C. § 512(c), applies only to the act of storing content uploaded by the user, but not to subsequently making the content available to the public. The courts have rejected this overly-narrow interpretation of the DMCA as nonsensical. What is the point of storing content on an Internet platform if it is not shared with other users? Yet that is exactly what RIAA seeks to incorporate in NAFTA.

RIAA further seeks that NAFTA require that injunctions should be available against all intermediaries, including ISPs and search engines, and that such injunction “be dynamic, i.e., covering future domain changes.” Such injunctive relief would go well beyond that permitted under section 512(j).

MPAA also seeks to change section 512 via NAFTA. Like RIAA, MPAA believes that the courts have misinterpreted section 512. Thus, MPAA recommends for NAFTA “a new approach” that involves “moving to high-level language that establishes intermediary liability and appropriate limitations on liability.” MPAA claims that this new approach “would be fully consistent with U.S. law,” but the writing is on the wall. It observes that other countries have responded “more effectively and nimbly” to online infringement “through site blocking, notice-and-staydown, and injunctive relief.” MPAA obviously hopes to leverage its “new approach” in NAFTA to amend section 512 to obtain these remedies.

The changes RIAA and MPAA seek would be enormously controversial, and could very well derail the NAFTA negotiations. Moreover, they are incompatible with the trade negotiating objectives set by Congress, which require that IP provisions of trade agreements “reflect a standard of protection similar to that found in U.S. law.”

Amendments Relating to Sound Recordings

RIAA states that “NAFTA should provide strong exclusive rights for all copyright owners, including for communication to the public, making available, and full national treatment for terrestrial public performance.” The more detailed explanation RIAA provides for this objective, although somewhat cryptic, suggests that RIAA seeks in NAFTA a public performance right in sound recordings. Although the composer of a song has a public performance right in that song, the performer who records the song does not have a public performance right under 17 U.S.C. § 114 (except for digital performances). Thus, terrestrial radio stations have to pay license fees to the copyright owners of the musical compositions they play, but not to the copyright owners of the recordings of those musical compositions. RIAA and the record labels it represents have long sought a slice of the performance rights pie. Regardless of whether one thinks such a performance right in sound recordings is good policy, NAFTA is the wrong place to seek changes to U.S. law.

RIAA also appears to be seeking amendments relating to digital performances of sound recordings. Section 114 provides webcasters with a compulsory license for certain kinds of streams. RIAA seems to be asking for complete control over digital performances of sound recordings: “full exclusive communication to the public rights, instead of the remuneration rights.”

The language in the RIAA comments is so sweeping that it could even extend to bringing pre-1972 sound recordings within the scope of the Copyright Act. Currently, pre-1972 sound recordings receive protection only under state common law copyright, not the federal Copyright Act. The breadth of the rights RIAA seeks in NAFTA could require Congress to amend the Copyright Act to apply to pre-1972 sound recordings. Again, that may be good policy, but NAFTA is the wrong forum for changing U.S. law.

Balanced Protection

While MPAA and RIAA seek changes in U.S. law via NAFTA, they oppose NAFTA properly reflecting the balance inherent in the U.S. copyright law that has enabled creative activity to thrive in the United States. The U.S. Copyright Act provides strong protection that encourages the investment of time and effort in creative endeavors, but at the same time contains exceptions and limitations that allow new authors to build on existing works. Central among these exceptions and limitations is the fair use doctrine, 17 U.S.C. § 107.

Historically, our free trade agreements, from NAFTA to the Korea-U.S. Free Trade Agreement (KORUS), have focused on increasing the protections for copyright owners. The only reference to exceptions has been a recitation of the Berne Three Step Test that “each Party shall confine limitations or exceptions to the rights provided for in this Article to certain special cases that do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder.”

However, during the course of the negotiations of the Trans-Pacific Partnership Agreement (TPP), the United States proposed inclusion of a provision that obligated parties to endeavor to achieve an appropriate balance in their copyright system through exceptions for legitimate purposes such as criticism, comment, news reporting, teaching, scholarship, and research. This list of legitimate purposes derives directly from section 107. This provision ultimately was adopted as Article 18.66 of the TPP. (See here for a discussion of the evolution of Article 18.66.)

Although Article 18.66 included language from section 107, it did not specifically obligate parties to incorporate fair use into their copyright laws. Moreover, it didn’t mandate parties to achieve a balance; they were mandated to endeavor to achieve a balance. Nonetheless, the copyright industry has strongly opposed including this balancing language in NAFTA.

The Copyright Alliance, for example, asserts that while it “believe[s] in a ‘balanced’ copyright system,” the “concept of ‘balance’ is actively being twisted and used as a vehicle for weakening copyright protections….” For this reason, it is “skeptical about including this type of language in a trade agreement.”

MPAA also opposes inclusion of balancing language. It simply wants “a clean recitation of the three-step test.” The International Intellectual Property Alliance likewise recommends that “NAFTA should confine its exceptions and limitations provision to the three-step test.” Similarly, RIAA argues that “efforts to export the American fair use exception are particularly troubling.” For this reason, RIAA believes that the United States should not support “broad provisions that could diminish, or otherwise generate legal uncertainty with respect to, the three step test.” Presumably this is a reference to language similar at TPP Article 18.66.

However, omission of balanced protection language in NAFTA would run contrary to the Senate Foreign Relations Committee report on Trade Promotion Authority, which states “the view of the Committee that U.S. trade agreements should contain copyright provisions that…foster an appropriate balance in copyright systems, inter alia by means of limitations and exceptions….”

Lack of Lock-Step Within Copyright Industries

Although the BSA | The Software Alliance in the past has had similar views to those of MPAA and RIAA with respect to copyright policy, its NAFTA comments adopt a significantly different position from MPAA, RIAA, and the Copyright Alliance. It states that NAFTA should provide “safeguards to foster the Internet’s continued growth as a platform for free expression, innovation, and digital commerce.” Specifically, the NAFTA IP chapter should provide “safe harbors from liability for infringing, or otherwise unlawful, content posted by third parties.” Such safe harbors “should not be conditioned on any obligation by an ISP to monitor or filter infringing activity, as such obligations would weaken incentives for innovation and threaten the dynamism and values that have made the Internet so valuable.” Thus, unlike MPAA and RIAA, BSA is not seeking to use NAFTA to force changes to section 512.

Moreover, with respect to exceptions and limitations, BSA states that “NAFTA should ensure that copyright laws are sufficiently flexible to permit commercial text and data mining of all lawfully accessible content.” This suggests that BSA might support language even stronger than TPP Article 18.66.

BSA’s positions on the NAFTA IP chapter thus seem to align with those of tech industry associations such as CCIA, the Consumer Technology Association, and the Internet Association.

Intellectual Property

The Internet enables the free exchange of ideas and content that, in turn, promote creativity, commerce, and innovation. However, a balanced approach to copyright, trademarks, and patents is critical to this creative and entrepreneurial spirit the Internet has fostered. Consequently, it is our belief that the intellectual property system should encourage innovation, while not impeding new business models and open-source developments.

Digital Trade

Companies rely on clear, predictable rules that facilitate digital trade to export their products and services around the world. These rules include balancing the competing interests between encouraging investment and enabling information access; promoting the free flow of information online; and maintaining balanced intermediary liability regimes.