We’ve been writing a lot about the Trans Pacific Partnership (TPP) agreement over the past few years. There are many, many problems with it, but the two key ones are the intellectual property chapter and the investment chapter. Unlike some who are protesting TPP, we actually think that free trade is generally a good thing and important for the economy — but neither the intellectual property section nor the investment chapter are really about free trade. In many ways, they’re about the opposite: trying to put in place protectionist/mercantilist policies that benefit the interests of a few large legacy industries over the public and actual competition and trade. We’ve already discussed many of the problems of the intellectual property chapter — which is still being fought over — including that it would block the US from reforming copyright to lower copyright term lengths (as even the head of the Copyright Office, Maria Pallante has argued for).
And, last week, Wikileaks leaked the investment chapter, which is focused on corporate sovereignty provisions, officially known as “investor state dispute settlement” or “ISDS” (named as such, in part, because the negotiators know it sounds boring, so they hope the public won’t pay attention). As people go through the details and the fine print, they’re finding some serious problems with it. Sean Flynn has a very in-depth look at how the combination of these two chapters — the IP chapter and the investment chapter — could very likely threaten fair use (and, with it, undermine the First Amendment).
The full details as to how are a bit tricky to understand, because it involves digging through the leaked versions of both chapters, and understanding some of the subtle language choices, but it’s a serious concern. Flynn’s article also goes through the history of how such corporate sovereignty provisions have been expanded and increasingly used over the past decade or so. But the key part is this: the investment chapter certainly can (and will) be read to cover intellectual property as well, including the idea that a company can invoke the ISDS process if it feels its “intellectual property” has been “expropriated” in some manner. The word “investment” in the investment chapter is defined incredibly broadly and explicitly includes “intellectual property” as well as “other tangible or intangible, movable or immovable property.” It also, importantly, notes that an investment, for the purpose of ISDS, covers:
every asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk.
Now, it’s no secret that the legacy entertainment industry is no fan of fair use (even if they often rely on it themselves). While fair use is officially part of the law in the US, the entertainment industry just recently fought very hard to block it in the UK and Australia, arguing (ridiculously) that fair use would harm innovation.
Even where there are very strong arguments for fair use — such as in helping the blind access works — the entertainment industry has twisted the so-called “three step” test from the Berne Agreement to argue that that is the most that is allowed for fair use. The three step test is actually really about limiting fair use, rather than enabling it. It is in the Berne agreement (as a relatively recent addition) as one possible “exception” to copyright, but not the only one. However, the haters of fair use like to pretend that it is the only one allowed under that agreement.
Under the three step test, “exceptions” to copyright occur when there are:
limitations and exceptions to exclusive rights to (Step 1) certain special cases (Step 2) which do not conflict with a normal exploitation of the work and (Step 3) do not unreasonably prejudice the legitimate interests of the rights holder
And, of course, in the US, fair use goes way beyond that already. And, as Flynn points out, it appears from the leaked text of TPP, the US would now be opening itself up to an ISDS challenge from a foreign owned company (remember: Universal Music is owned by a French company, Sony Music is owned by a Japanese company and Warner Music is owned by Russians…) that the fair use doctrine itself “expropriates” its “intellectual property” rights by going beyond the three steps test. Here’s Flynn:
And here is a major one lurking in the shadows. Many copyright intensive industries are hostile to the U.S. fair use doctrine and many of the decisions of courts emanating from it. There have been arguments raised from time to time that the doctrine or its applications are contrary to the so-called Berne 3-step test requiring that limitations and exceptions to rights be limited to certain special cases, not conflict with a normal exploitation of the work and not unreasonably prejudice the legitimate interests of the author (see this rebuttal from Gervais et al.). No other country has attempted to sue the U.S. or the nearly dozen other countries around the world that have fair use. But will the content industry be so reticent with such challenges in the future? With the TPP ISDS chapter, they will not have to in 40% of the global economy.
And this isn’t so far fetched. As we’ve been discussing, under existing ISDS/corporate sovereignty provisions in NAFTA, Eli Lilly is currently suing Canada for $500 million because Canada refused to grant it some patents. Eli Lilly is arguing that this “expropriated” Eli Lilly’s “intellectual property” and took away its “expected profits.”
Is it that difficult to believe that a recording studio or movie studio might make a similar argument on a fair use determination on one of its copyright-covered works?
And, if fair use is undermined, so is free speech. As we’ve noted, the Supreme Court itself has long argued that current fair use doctrine is a necessary “safety valve” in making sure that copyright does not violate the First Amendment. In other words, fair use is a key part of your First Amendment rights.
And yet… the USTR is basically putting in place a plan and system to undermine this, because the big copyright players are among the very few people who are allowed to see the negotiating text and to “advise” the USTR on what should be in it. Once again, it would seem like the most obvious way to deal with this would be for the USTR to release the negotiating documents, so that the public would be aware of what’s being negotiated, and could discuss the possible consequences — like how the current rules have the potential to undermine fair use and free speech. But, for reasons that the USTR still will not explain (perhaps because they reveal the USTR’s true reasoning for such provisions), it refuses to do so.
Tag: NAFTA
How Corporate Sovereignty In Trade Agreements Can Force National Laws To Be Changed
As we noted recently, one of the most worrying aspects of corporate sovereignty chapters in trade agreements is the chilling effect that they can have on future legislation. That’s something that the supporters of this investor-state dispute settlement (ISDS) mechanism never talk about. What they do say, though, is that corporate sovereignty cannot force governments to change existing laws. A recent defeat for Canada before an ISDS tribunal proves that’s not the case:
An international trade tribunal has ordered Ottawa to pay ExxonMobil and another oil company $17.3 million, following a complaint that the companies were required to spend money in Newfoundland and Labrador on research and development.
The case was brought by ExxonMobil using the corporate sovereignty provisions in the North American Free Trade Agreement (NAFTA), and concerned another agreement, called the Atlantic Accord. As CBC News explains:
Under the terms of the Atlantic Accord, a federal-provincial agreement on oil development first negotiated in 1985, oil companies are required to support petroleum-focused research and development in Newfoundland and Labrador, as part of its local benefits package.
In other words, three decades ago, Canadian politicians had passed a research and development package, one of whose measures was designed to boost local employment — exactly the kind of thing that voters want their politicians to do. But the ISDS tribunal ruled that under NAFTA, this was not permitted, and awarded substantial damages to ExxonMobil for being required to comply with the Atlantic Accord. But it gets worse:
Unless the governments of Canada and Newfoundland and Labrador agree to change the R&D legislation, Ottawa could be on the hook for continued damages. The federal government is responsible because NAFTA is an agreement between sovereign nations.
That is, the corporate sovereignty provisions in NAFTA are being used to force the Canadian government to change existing and long-standing legislation — something that ISDS fans assure us never happens.