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Keeping the DMCA’s Grand Bargain in NAFTA

Last week, the content industry launched a new coalition—ACTION for Trade—dedicated to keeping Internet intermediary safe harbors out of the renegotiated North American Free Trade Agreement (“NAFTA”). Matt Schruers noted in a recent DisCo post that such an effort would break with existing law and Congressional direction in trade promotion legislation. It also would break a nearly 20-year-old bargain brokered by Senator Orrin Hatch, now the chairman of the Senate Finance Committee. This bargain, first embodied in the Digital Millennium Copyright Act (“DMCA”), has been replicated in U.S. free trade agreements with sixteen countries.

Congress enacted the safe harbor system in 1998 as one title of the much broader DMCA. This broader statute, in a separate title, established prohibitions on the circumvention of technological protection measures. These two titles were adopted together to create a balanced approach to copyright enforcement in the Internet environment. They represented a carefully negotiated compromise between diverse stakeholders.

Title I of the DMCA implemented the World Intellectual Property Organization (“WIPO”)’s Copyright Treaty and Performances and Phonograms Treaty by creating prohibitions on the circumvention of technological protection measures and the removal of copyright management information. These provisions now constitute Chapter 12 of title 17. Title II of the DMCA established the safe harbors, now codified at section 512 of title 17.

Title I and title II originally were introduced as separate bills (the WIPO Copyright and Performances and Phonograms Treaties Implementation Act and the Online Copyright Infringement Liability Limitation Act, respectively). The WIPO implementation bill was supported by the content industry and opposed by sectors of the technology industry. The safe harbor bill was supported by the online service providers and opposed by the content industry. In the face of this opposition, both bills stalled. Senator Orrin Hatch, then Chairman of the Senate Judiciary Committee, in a bold legislative move, merged the two bills into one. He calculated that the content industry would be willing to accept the safe harbors in exchange for WIPO implementation. This calculation proved correct, and Congress enacted the DMCA, with the safe harbors and the technological protection measure (“TPM”) provisions, in October 1998.

The content industry was so pleased with the DMCA’s TPM provisions that it sought to have them reflected in the free trade agreements negotiated by the George W. Bush Administration. In response, the service providers requested that the safe harbors be included as well, thereby maintaining the balance of the DMCA. Negotiations ensued between the content industry and the service providers to boil the ten pages of section 512 down to a length more appropriate for a trade agreement. Agreement was reached, and language concerning both safe harbors and TPMs was included in the “template” of the free trade agreements the Bush Administration negotiated with Australia, Bahrain, Chile, Central America (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua), Morocco, Oman, and Singapore. The Obama Administration used the same template in its free trade agreements with Colombia, Korea, and Panama, as well as the Trans-Pacific Partnership Agreement (“TPP”). (Although the wording ultimately changed, TPP contained the same basic principles of safe harbors and prohibitions on the circumvention of TPMs.)

The balanced structure of the DMCA has been reflected in our trade agreements for the purpose of benefitting the overseas operations of both the content industry and the service providers. Precisely because the free trade agreements embodied the DMCA’s evenhanded approach, USTR negotiated the copyright sections of these agreements with relatively little domestic controversy. Now, however, the content providers seek to depart from this framework in NAFTA; they hope to achieve the DMCA’s benefit—the TPM provisions—without the tradeoff they have agreed to repeatedly since 1998. Indeed, they agreed to the DMCA framework as recently as last year, when they supported adoption of TPP.

The bargain Senator Hatch crafted in 1998 remains fair. The content providers believe that the TPM provisions have benefitted them greatly. In response to a notice of inquiry issued by the Copyright Office concerning section 1201 earlier in the year, the Association of American Publishers, the Motion Picture Association of America, and the Recording Industry Association of America filed joint comments stating that “the protections of Chapter 12 have enabled an enormous variety of flexible, legitimate digital business models to emerge and thrive….” BSA|The Software Alliance, the Copyright Alliance, the Software and Information Industry Association, and the Entertainment Software Association similarly asserted that Chapter 12 has facilitated the secure online distribution of content. These content providers have benefitted from the inclusion of TPM provisions in the free trade agreements; they have been implemented into the domestic law of almost all the countries with whom we have negotiated FTAs.

By the same token, service providers have benefitted from the DMCA’s safe harbors. By reducing the threat of crippling copyright liability for the infringing acts of third parties, the safe harbors have allowed Internet intermediaries to construct platform that allow millions of Americans to interact and share content they have created. They have “allowed the Internet to become what it is today—a worldwide democratizing platform for communication, creativity, and commerce.”

Moreover, the truth is that the DMCA’s safe harbors have also benefitted content providers, while the TPM provisions have helped technology companies. The safe harbors are conditioned on service providers expeditiously removing content upon receiving a notice of claimed infringement. This notice and takedown system in effect grants content companies automatic injunctions without the expense and delay of going to court. And the TPM provisions have encouraged Internet companies to enter into a new line of commerce: the streaming of content to subscribers.

In sum, the grand bargain of the DMCA still works domestically, and it should continue to be reflected in our trade agreements.

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.