On October 2 the U.S Trade Representative released what has been called the final, or “nearly-final,” text of the draft Anti-Counterfeiting Trade Agreement.  ACTA, as it is known, has been the subject of a good deal of controversy for several reasons.  First, because much of its negotiation has been in secret.  Second, because it seems like an end run around both the WIPO / WTO negotiation process for harmonized IP rights protection and around Congress, since it is billed as an “executive agreement” rather than a treaty and therefore does not need Congressional approval.  Finally, rumors have flown that ACTA would force substantive and draconian changes in US law (and the laws of other countries) that would greatly increase the scope of IP protection without legislative action on those topics.

It is clear that this last draft of ACTA is substantially weaker than previous versions that have been released, and a very great deal weaker than what rumor said was contained in the earlier undisclosed drafts.  Nevertheless, I still come away from a reading of this text thinking that its primary purpose is to shift lots of the costs of enforcing IP rights from the private industries that hold those rights to government agencies, funded by taxpayers.  It is odd (or maybe not odd at all) that large corporations, which generally complain about excessive regulation, seem to embrace “big government” when it serves their interests at lower cost (to them).

Because it is a trade agreement not subject to Congressional oversight, ACTA is not, technically, permitted to change US law.  It is billed as an agreement about enforcement of existing laws, not an attempt to enlarge the legal scope of IP rights.  That claim, however, is subject to lots of skepticism. Indeed, Senator Ron Wyden of Oregon has asked the Congressional Research Service to study the current iteration of the agreement to see if and where ACTA requires commitments incompatible with US law.

One change that ACTA was rumored to contain – a “three strikes” provision that would require ISPs to disconnect users who were accused (by the content industries) of copyright infringement – is not found in this text.  According to this article from Bloomberg, pressure from Google is the reason we do not have to fight off that particular bad idea.  Nevertheless, there are several places, notably in the border security provisions, where this version of ACTA would appear to allow enforcement of IP regulations without judicial involvement, something that seems like a significant change in the way IP law currently works.  The whole issue of how the “remedies” sections of ACTA might alter the legal landscape for US citizens is detailed in this article on “Areas where the Oct. 2, 2010 ACTA text is inconsistent with U.S. law.”

Another place where this text is not as bad as it could be is on DRM.  The US did not succeed in getting its negotiating partners to agree to DMCA like provisions; no doubt the abject failure of those provisions to prevent piracy, could with their unfortunate impact on legitimate activities like teaching, contributed to this failure.  Nevertheless, legal protection for of some kind for DRM systems is encouraged in this text of ACTA and DRM systems, by definition, extend a content owners control beyond what is provided for in national copyright laws.

There are several definitional problems in this final draft of ACTA.  This post from TechDirt discusses one of them, the definition of “commercial scale,” the breadth of which seems to make lots of essentially private activities into criminal acts.  Also, the concept of piracy, which has usually referred to large-scale commercial infringement, is defined in this text as any copying that is not authorized by the rights holder and which would be infringing under the laws of the country involved.  In both these cases we see the ratcheting up of both rhetoric and actual enforcement to a level where all infringement is potentially criminal.  Thus more enforcement costs can be transferred from private industry to national governments.

It remains unclear how this “final” text of ACTA will be implemented.  Although no additional negotiations are scheduled, there are still significant areas of disagreement that are noted in the text.  One important such area is whether or not the provisions apply only to copyright protected goods or also to patented inventions.  The countries that were party to the negotiations have up to two years to “sign on” to ACTA but, in its current state, it is unclear what such signers would be agreeing to and how they could implement ACTA in the national laws.  Perhaps, after all, this long and expensive process of negotiation will result in nothing more than a bargaining chip for industries to use to move enforcement costs off of their books and on to taxpayers.

Several months ago we discussed an article about international copyright that suggested the possibility that the developing countries who are part of the World Intellectual Property Organization (WIPO) could seek to reverse the trend toward harmonizing IP protections at a very high level by “de-harmonization.” Such de-harmonization would by directed at exploiting the space provide for limitations and exceptions in the major international copyright agreements in order to benefit local circumstances.  That article focused on the three fastest growing economies in the developing world – Brazil, Russia, India and China — the so-called BRIC countries.

Now comes this news release announcing that India and Brazil, along with 16 other countries from the developing world, have grouped together to more effectively represent the needs of such countries at WIPO.  As the announcement says, these 18 countries “aim to transform the World Intellectual Property Organization… [in]to a U.N. agency helping members achieve development goals through a balanced and calibrated use of intellectual property.” It sounds like these nations are taking to heart the advice that the WIPO and WTO treaties and agreements leave them room to adjust policy in ways that best suit their own needs, rather than accepting a “one size fits all” approach that favors the rich, content-producing nations.  The news release goes on to complain that strong intellectual property rights protections are being used to deprive people of needed medicines and to “steal developing countries’ traditional knowledge.”

These complaints are familiar to those who follow the negotiations at WIPO even in a cursory fashion, and there has been a new emphasis in recent months on the “Development Agenda” at WIPO and on how to redress the balance between protection of existing rights and access necessary for development.  The formation of this new block within WIPO is clearly an effort to move the organization along this path more quickly.

The timing, however, also makes it very hard to ignore that this new IP group, as well as the emphasis on development that it has been formed to foster, is one of the major factors in the decision by a number of developed nations to forgo WIPO negotiations in favor of the “pluri-lateral” approach being taken with ACTA, the Anti-Counterfeiting Trade Agreement.  As we have explained before, the ACTA treaty is being negotiated amongst a group of wealthy nations outside of the WIPO process.  Such negotiations are allowed by the WIPO treaties, although it is debatable if such sweeping tightening of IP enforcement was ever envisioned when those agreements were negotiated.  In any case, Michael Geist and others have argued that ACTA was born out of frustration with WIPO and the attention that was being paid there to the concerns of poorer countries who fear that rigid enforcement regimes will stifle their economic growth.

The specter raised by these developments is a fragmentation of the international IP community, with rich nations negotiating only amongst themselves for ever stronger measures to enforce intellectual property rights and developing countries talking only to themselves at WIPO about how such enforcement stifles growth and threatens lives.  When we connect the dots that these developments represent, it is an unfortunate and even frightening picture that emerges.

Following up on an earlier post about the potential for fast-growing developing countries to adopt less restrictive, more growth-oriented IP regulations, I want to look at two concepts that are important for understanding international IP debates.

The first is “counter-harmonization,” which is used several times in the article I referred to about the BRIC countries by Jerome Reichman.  The movement to harmonize international copyright laws resulted in the Berne Convention, which the US finally joined in 1988, and the TRIPs agreement (for “Trade Related Aspects of Intellectual Property”) adopted by the World Trade Organization in 1994.  Those treaties have a lot to say about harmonizing levels of protection for copyrighted materials, but very little in regard to limitations and exceptions.  In other words, parties to the agreements are obligated to provide protection without formalities and to extend protection for at least the life of an author plus 50 years.  No similar obligation exists to provide any particular exceptions to copyright protection, such as educational viewings of films, free library lending, or reproduction of small excerpts for the purpose of research and scholarship.

In fact, the international treatises have generally seemed rather hostile to limitations and exceptions, even though they are as much at the core of the reason for copyright as is protection itself, at least insofar as copyright is intended to encourage creativity and innovation.  Creativity depends on some rights of reuse as much as it does on the assurance of a market for new works.  But in Berne and TRIPs, all exceptions in the national laws of the signers are made subject to a three-step test that has been interpreted, wrongly in my opinion, to be so narrow that many existing exceptions in national laws would violate its terms.

The call for counter-harmonization comes out of the WIPO development agenda, which has recognized that harmonizing only high levels of protection without also building in safeguards for reuse and innovation is contrary to the best interests of developing countries.  Those countries are being encourage, by Prof. Reichman and others, to exploit the flexibility still available under Berne and TRIPS to adopt limitations and exceptions that best suit the needs of their own growing economies.

The other major concept that is currently getting some attention is “cross-retaliation.”  The TRIPs agreement, for the first time in international law, gives countries the right to retaliate against another signer, if and when their IP rights are not protected, by imposing tariffs and other restrictions on other types of goods and trade.  So if country A gets a ruling that its IP rights are not being adequately protected in country B, A can impose tariffs on manufactured goods or crops imported from B.  This was new in the TRIPs agreement and has created some interesting problems.  Pedro Paranagua, who is a law professor from Brazil and a doctoral candidate at Duke University’s Law School, explains in this blog post how retaliation can be used both to enforce IP protections and to penalize an IP producer who competes unfairly in other markets.

As Paranagua explains, the US and other developed countries want retaliation under TRIPs to be a one-way affair — available only to a country whose IP rights were infringed so that they could penalize the infringer in other markets.  The WTO, however, ultimately allowed cross-retaliation to be two-way, so that a country whose markets in other goods are unfairly impeded — cotton is the market at issue in Paranagua’s post — could retaliate against IP from the offending country.

Cross-retaliation is another example of unintended consequences for the United States, and another indication that developing countries, particular those whose economies are growing rapidly, can use the international IP treaties to their own advantage.  As the global economy becomes more and more competitive, it behooves each nation, including ours, to re-examine its stance on IP regulation with an eye to fostering its overall best interests, rather than the needs of only one segment of the world-wide market.

The arena of international intellectual property and the WIPO Development Agenda is one I enter with considerable trepidation, because it is complex and shrouded in a language all its own.  Fortunately, one of Duke’s own law professor’s, Jerome Reichman, is an always reliable guide, and I read with careful attention his article “Intellectual Property in the Twenty-First Century: Will Developing Countries Lead or Follow?”  The article is itself technical and complex, but it is rewarding for its message to the developing world that they have a choice as they create or refine IP laws for their own best interests.  Reichman argues persuasively that simply replicating the high-protectionist regimes in place in the U.S. and the European Union is not the only, or the best, option for countries trying to develop their own economies.

Reichman’s article is available here, on the web site for the Houston Law Review (in vol. 46, number 4).

The danger, of course, is that when levels of IP protection are set too high they can inhibit innovation and growth.  Established technologies and industries can be protected to the point of becoming lazy, while new innovation and creative development can be stifled.  Reichman cites several examples of this trend, in a general way, when he describes patent “thickets,” “blocking” strategies that prevent improvements and how overlapping IP claims can inhibit broad use of “platform technologies” for innovation.  Anyone interested in a specific example of how patent protection can inhibit needed scientific development should read this blog post about hoarding of biological samples because of fears that patented drugs will be developed from them and increase the cost of health care for the developing countries that hold the samples.

Reichman proposes some specific strategies that developing countries, particularly that group of developing nations with very fast-growing economies that are known as BRIC (Brazil, Russia, India & China) countries, could follow to prevent these problems and to foster innovation and growth.  In the patent arena he suggests several places where compulsory licenses would be productive – for secondary research, especially when it can offer an improvement on the original technology, and for third party suppliers whose involvement is necessary to supply a particular market in the public interest.  He also advocates some doctrines that can be incorporated into IP law that would encourage growth.  Here, for example, he suggests an “essential facilities” doctrine in patent law that would make it possible to “pool” overlapping patents when access to a vital technological platform for research is at stake.  In copyright, he suggests that the idea/expression distinction be codified in national laws and that a broad, clear research exception be included, as well as a more flexible exception like the U.S. fair use provision.

In general, Reichman’s suggestions about how a combination of compulsory licenses and “liability rules” could be used to give IP law the flexibility to really encourage research and development point in a positive direction for the developing world.  He also acknowledges that these countries will have to stand up against the pressure brought on them by the U.S and the E.U. to adopt imitative regimes of high-protectionist rules that, he argues, would ultimately be counter-productive.

As I read this article, I kept thinking about the concern expressed by politicians and the media about the high level of U.S. debt held by China and the general sense that these “BRIC” countries are mounting a serious challenge to the dominant place the U.S. has held in the world economy.  If some of these fast-growing economies were to adopt Reichman’s recommendations, that competition could increase dramatically.  Indeed, U.S. dominance might find itself “hit with a BRIC.”  Perhaps the best way for the U.S. to stay competitive with the world is not to try a foist our regime, which seems to be counter-productive in the most literal sense, on others, but to move ourselves toward a more growth-oriented system of IP protections, limitations and exceptions.