Part 1: Notes on the August 25, 2010 version of the ACTA consolidated text

KEI has obtained a copy of the August 25, 2010 version of the ACTA consolidated negotiating text. This is Part 1 of our initial notes on the document.

(Part 2 is available here.)

(revised September 9, 2010)

Preamble

The preamble in the August, 25, 2010 text includes 10 paragraphs, of which only 3 do not have brackets.

The United States, the EU and Japan do not support the first paragraph in the preamble, which includes the text of Article 7 of the TRIPS, on objectives. The bracketed text in the ACTA is:

Noting that enforcement of {intellectual property rights} should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to the social and economic welfare, and to the balance of rights and obligations;

Instead, the U.S. wants to devalue this clause by including a general reference in another paragraph of the preamble, that the parties are "Determined to implement this Agreement in a manner consistent with the objectives and principles set out in the TRIPS Agreement;"

The ACTA text now has a brief but welcome reference to the Doha Declaration on the TRIPS and Public Health, which reads as follows:

Recognizing the principles set out in the Doha Declaration on the TRIPS Agreement and Public Health, adopted on November 14, 2001, by the WTO at the Fourth WTO Ministerial Conference, held in Doha, Qatar;

Chapter One, Section A: Initial Provisions.

Article 1.4: Privacy and Disclosure of Information.

The US, Japan, Singapore, Korea, Swiss and Morocco do not support paragraph 2, which would protect written information from being disclosed or used "for a purpose other than that for which the information was requested or required, except with the prior consent of the Party providing the information."

Chapter One, Section A. Article 1.X safeguards

Japan/Mexico/Korea/US and EU want to delete this article, which includes the following safeguards:

[AUS/NZ/Sing/CAN: ARTICLE 1.X:

1. The enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.

2. Parties may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement.

3. Appropriate measures, provided that they are consistent with the provisions of this Agreement, may be needed to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.] [J/Mex/Kor/US: delete this provision]

[EU/CH: Delete Article 1.X per language in preamble.]

KEI Comment: One of the problems with the ACTA are the one-size fits all standards for the enforcement of intellectual property rights. Paragraphs 1 and 2 of Article 1.X track Articles 7 and 8 of the TRIPS, and are important safeguards that help countries interpret their obligations under the agreement. Both the U.S. and the EU have agreed to this text in other agreements. The opposition to Article 1.X in Chapter One is connected with a separate bracketed reference to Article 7 and 8 of the TRIPS in the preamble, which reads as follows:

[CH/US/EU/Kor/Mor/Mex/J: Determined to implement this Agreement in a manner consistent with the objectives and principles set out in the TRIPS Agreement;]

It would be better to include Article 1.X in Chapter One, rather than rely upon the reference to the TRIPS articles in the pre-amble, and shows the weak support for safeguards by some countries.

It is also important to note that Article 8.2 of the TRIPS, which is one of the paragraphs referenced in Article 1.X of the preamble, is only one place in the TRIPS were the control of anticompetitive practices is referenced. The other section is Article 40, which includes 4 paragraphs, and quite strong language in in 40.1 and 40.2:

SECTION 8: CONTROL OF ANTI-COMPETITIVE PRACTICES IN CONTRACTUAL LICENCES Back to top
Article 40

1. Members agree that some licensing practices or conditions pertaining to intellectual property rights which restrain competition may have adverse effects on trade and may impede the transfer and dissemination of technology.

2. Nothing in this Agreement shall prevent Members from specifying in their legislation licensing practices or conditions that may in particular cases constitute an abuse of intellectual property rights having an adverse effect on competition in the relevant market. As provided above, a Member may adopt, consistently with the other provisions of this Agreement, appropriate measures to prevent or control such practices, which may include for example exclusive grantback conditions, conditions preventing challenges to validity and coercive package licensing, in the light of the relevant laws and regulations of that Member.

3. ... 4....

The additional reference to the TRIPS Article 40 language would be helpful, particularly as regards to "nothing in this agreement shall prevent...".

Chapter One, Section B: Definitions.

Committee is defined as "the ACTA Committee established in Chapter Five;"

Intellectual property rights are still defined as all categories in Sections 1 through 7 of Part II of the TRIPS.

Pirated copyright good means any good that are copies made without the consent of the right holder or person duly authorized by the right holder . . . where the making of that copy would have constituted an infringement of a copyright or a related right under the law of the country in which the procedures set out in [Sections X are invoked;]/6

/fn6 Drafters note: Footnotes in other chapters to be deleted if definitions are added to this Section.

KEI Comment: The text could be more explicit that this definition does not extend to copies that are lawfully made, without the permission of the right owners.

Chapter Two, General Obligations.

Article 2.X.2

Only supported in full by the EU, is this important text:

[EU: Each party shall ensure that the rights of the [EU/CH: defendants and] third parties shall by duly protected and guaranteed.]

KEI Comment: Why can't the Obama administration support this?

On the issue of the proportionality of enforcement measures and remedies to the seriousness of the infringement, the EU/CH/Mor position is the strongest. The Mexico, US, Japan, NZ, Canada, Australia position is weaker. On the issue of the interests of third parties, this is reversed.

Chapter Two, General Obligations, paragraph 4, dealing with use by, for, or authorized by a government.

In paragraph 4, the US and Australia, NZ, the US and Canada, and the EU have made different proposals, as follows:

4. [US/Aus: Notwithstanding the other provisions of this [J:Chapter][Agreement], the parties may limit the remedies available against a government's unauthorized use of intellectual property covered under this Agreement or against such unauthorized use by a third party that was authorized by a government, to payment of remuneration. The right holder shall be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization.]

[NZ: Notwithstanding the other provisions of this Chapter in relation to civil remedies and criminal penalties, the Parties may:

(a) limit civil remedies available against a government's unauthorized use of intellectual property covered under this Agreement or against such unauthorized use by a third party that was authorized by a government to payment of remuneration. The right holder shall be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization; and
(b) limit or exclude criminal penalties for such unauthorized use of intellectual property rights.]

[Can/US: In other cases, the remedies under this Chapter shall apply or, where those remedies are inconsistent with a Party's law, declaratory judgments and adequate compensation shall be available.]

[EU suggests deleting this article.]

KEI Comment: This is a very important part of the ACTA. In the current draft, the United States, NZ and Australia are moving to the TRIPS norms, which allow the flexibility to use limits on remedies for infringement to create liability rules in some areas. This is quite encouraging. There is zero evidence that statutory exceptions on injunctions or damages have contributed to counterfeiting, and many country have some types of exception in their national laws, including of course the United States, which currently makes use of these flexibilities more than any other country. The EU opposition to the proposals by the US, Canada and New Zealand are unfortunate, and are counter to legal traditions in several EU member states. The EU has yet to provide a public rationale for its opposition to the statutory exceptions to remedies that have been proposed in paragraph 4.

Chapter Two, General Obligations, paragraph 5, dealing with scope of agreement.

The most fundamental issue in the ACTA is the scope of intellectual property rights addressed in the agreement. The divisions between the negotiating parties are set out in paragraph 5 of Chapter two, which now reads:

5. {MX/Aus/Sing/NZ/US/Can: define scope of the intellectual property rights covered in the Agreement} {EU/CH: the scope of intellectual property rights will be defined at the start of each chapter.}
{Aus/US/NZ/Can/Sing: This agreement shall apply [NZ/Can/Sing: only] [Kor: at least] to trademark counterfeiting and copyright piracy unless otherwise specified. The Section on the Digital Environment shall apply only to copyright and related rights.}

KEI Comment: Here the EU/Swiss position is to decide the scope of IP types in each chapter, while Australia, New Zealand, Canada and US want to narrow the ACTA to only trademark counterfeiting and copyright piracy.

Chapter Two, Civil Enforcement, Availability of Civil Procedures

Article 2.1.1 provides the first substantive example of the division among the parties on the scope of the agreement, with Japan, Switzerland and the EU holding out for including patents and other Part II TRIPS IP in civil enforcement, and Singapore, Canada, New Zealand, Australia, the US and Mexico seeking to limit the chapter to copyright and related rights and trademarks.

Article 2.1 Availability of Civil Procedures
1. [Can/US/NZ/Sing/AUS: In the context of this section, e][E]ach Party shall make available to right holders civil judicial procedures concerning the enforcement of any {J/CH/EU: intellectual property right} {Sing/Can/NZ/Aus/US/Mex: copyrights and related rights and trademarks}.

Chapter Two, Civil Enforcement, Injunctions

The injunctions section continues to shrink. The EU and Switzerland want two sentences. Canada, New Zealand, Australia, the US, Singapore and Mexico want one sentence. The EU Switzerland second sentence would extend the injunctions to "intermediaries whose services are used by a third party to infringe an intellectual property right." Services like ISPs, Google and eBay are among those most obviously impacted by the EU/CH proposal on intermediaries.

Within the core proposal there is weak support for the language on "subject to statutory limitations under its domestic law" that has been proposed by Canada, Australia and Singapore. This is surprising, given the extensive efforts to change the US and the EU positions, and despite evidence that the US and several countries in the EU make use of extensive statutory exceptions in their own national laws, as detailed here and here.

[EU/Sing: 1. ] In civil judicial proceedings concerning the enforcement of {Can/NZ/Aus/US/Sing/Mex: copyright or related rights and trademarks} {J/EU: intellectual property rights} each Party shall provide that its judicial authorities shall have the authority [Can/Aus/Sing: subject to statutory limitations under its domestic law] to issue an order to a party to desist from an infringement, including an order to prevent infringing goods from entering into the channels of commerce.

[EU/CH: 2 The Parties shall also ensure that right holders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right.]

One possible explanation for the US opposition to the statutory exceptions proposal by Canada, Australia and Singapore is the US support for more general exceptions in Article 2.x paragraph 4, discussed above, which covers the same issues, and provides for broader exceptions, as regards cases where adequate remuneration is provided to right holders. However, this does not address all cases where exceptions might be relevant, in cases where statutes do not allow either injunctions or damages -- such as the case for non-disclosed patents associated with regulatory pathway for biosimiliar drugs, or some elements of proposals to address orphaned copyrighted works.

Chapter Two, Civil Enforcement, Damages

The damages section of ACTA is considerably longer. In Article 2.2.1., the ACTA negotiators disagree on the types of intellectual property rights covered, but they appear to have agreed on a standard for damages that is considerably higher than found in the TRIPS, in this text:

In determining the amount of damages {US/Can: for copyrights and related rights infringements and trademarks counterfeiting}, its judicial authorities shall have the authority to consider, inter alia, any legitimate measure of value submitted by the right holder, which may include the lost profits, the value of the infringed good or service, measured by the market price, the suggested retail price.

KEI Comment: By requiring the judicial authorities to consider "any legitimate measure of value submitted by the right holder," including specifically "the suggested retail price," this Article in ACTA would be contrary to national statutes that provide for different standards, such as limits on damages to reasonable royalties. The use of "the suggested retail price" is an aggressive standard for liability, particularly for some types of copyright infringement cases, and clearly inappropriate for some cases. One obvious area where the standard will present problems are the cases where governments seek to liberalize access to orphaned copyrighted works. If applied to patent cases and other types of intellectual property rights, it would be contrary to a number of U.S. statutes, including the new health care reform bill provisions on generic biologic medicines, and many other cases, including some cases where zero remuneration is set out in the statute. If the standard is applied to patent cases, it will also run directly contrary to the proposals in the US Congress to limit the discretion of plaintiffs to present certain methodologies in terms of damages. (See discussion here)

Here, as elsewhere, the US opposition to paragraph 3 on page 4 is significant, concerning the control of anticompetitive practices. In the US, as in some other countries, there is no liability for infringement in certain cases involving anticompetitive acts. This is not really recognized in the ACTA text. How many of the ACTA parties have bothered to include competition authorities in the negotiations?

The US also continues to push for considerably higher global norms for "at least" copyright and related rights and trademark counterfeiting, including in particular on the issue of "pre-established" or "presumed" damages, unrelated to actual harm. As Jonathan Band, CCIA and others have pointed out, this is potentially a very costly change for countries that do not provide for fair use defenses on infringement.

The negotiators appear to have agreed that every country should provide judicial authorities with the discretion to order losing parties to pay for court costs, fees, subject to some minor qualifiers, such as "where appropriate," or "as provided for under that Party's domestic law."

KEI Note: In the United States, under 28 USC 1498, the recover of such fees is limited in some cases involving use by or for governments.

"compensation shall not include such costs and fees if the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust."

Chapter Two, Civil Enforcement, Other Remedies

This section pretty much ignores the many national statutory exceptions to the seize and destroy remedies, including those mandated by Article 37 of the TRIPS. See: http://www.keionline.org/node/890