Crunch Time in the NAFTA Negotiations: What's at Play for Canada on Digital Policy

As the NAFTA negotiations hit a possible home stretch this week, the focal point has been primarily on issues such as dispute resolution, the dairy sector, and the auto industry. However, the digital policy issues will have huge implications for Canada and the outline of the agreement between the U.S. and Mexico suggests that Canada is facing considerable pressure to agree to changes to our copyright, patent, IP enforcement, and digital policy rules, contrary to our preferred negotiation approach.

The U.S. appears to be pushing for a TPP+ approach – the TPP provisions plus some additional changes it did not get as part of those negotiations. This is notable since Canadian authorities admitted that the TPP went far beyond any previous Canadian free trade agreement. The Canadian starting point is presumably the CPTPP,  the revised TPP where Canada successfully argued for the suspension of some of the U.S.-backed provisions. This post outlines five of the biggest issues that are likely at play, though many others such as de minimis rules for shipments that affect online commerce will be closely watched and could ultimately require future reforms.

1.    Copyright term

The outline of the U.S.-Mexico agreement indicates that copyright term was included in the deal, but its scope remains a bit of a mystery. The outline states:

Extend the minimum copyright term to 75 years for works like song performances and ensure that works such as digital music, movies, and books can be protected through current technologies such as technological protection measures and rights management information.

That does not sound like a full copyright term extension beyond the international treaty standard of life of the author plus 50 years. The TPP included a life plus 70 years requirement and both the U.S. and Mexico meet or exceed that number. Canada remains at life plus 50. The U.S.-Mexico agreement may involve works-for-hire or song performances. Regardless, the U.S. has long been focused on pressuring Canada to extend the term of copyright and seems likely to want to do so here. If so, the cost will be significant, locking down works from the public domain for decades and potentially increasing educational costs by millions of dollars.

2.    Notice-and-Takedown for ISPs

The U.S.-Mexico agreement outline references a requirement for a notice-and-takedown system consistent with U.S. law:

Establish a notice-and-takedown system for copyright safe harbors for Internet service providers (ISPs) that provides protection for IP and predictability for legitimate technology enterprises who do not directly benefit from the infringement, consistent with United States law.

There was a similar requirement in the TPP, but that agreement included an acknowledgement that Canada’s notice-and-notice system met that standard. Canada will presumably argue that the same approach should apply, though these negotiations give the U.S. the opportunity to revisit that concession.

3.    Biologics Protections

The U.S.-Mexico agreement outline references a requirement for ten years of data protection for biologics drugs:

Includes 10 years of data protection for biologic drugs and expanded scope of products eligible for protection

This is a significant increase on the TPP which offered 8 years or 5 years plus other measures to provide a comparable outcome in the market. This was one of the most contentious TPP issues as countries recognized that every additional year potentially adds billions of health care costs. In fact, even U.S. agencies have expressed doubt about the need for long term protections. Coming on the heels of the Canada – EU Trade deal, which effectively extended patent terms through restoration, the additional costs for pharmaceuticals in Canada would be enormous to a country that already has some of the highest prices in the world.

4.    Anti-Counterfeiting Border Measures

The U.S.-Mexico agreement outline references strong border measures against counterfeiting as a key achievement, including:

Enforcement authorities must be able to stop goods that are suspected of being pirated or counterfeited at all areas of entry and exit.

Canada passed anti-counterfeiting legislation several years ago as part of a U.S. requirement for joining the TPP negotiations. That legislation expanded the powers of customs agents with respect to suspected counterfeit products. The U.S. has been pressuring Canada to further extend those provisions to cover in-transit shipments (ie. stop shipments that are not bound for Canada but only passing through on the way to another country) and will presumably interpret this provision as requiring changes to Canadian law.

5.    Digital Trade Chapter

The digital trade chapter in the new NAFTA appears to be very similar to the one found in the TPP.  The outline states:

The new Digital Trade chapter will:
•    Prohibit customs duties and other discriminatory measures from being applied to digital products distributed electronically (e-books, videos, music, software, games, etc.).
•    Ensure that data can be transferred cross-border, and that limits on where data can be stored and processed are minimized, thereby enhancing and protecting the global digital ecosystem.
•    Ensure that suppliers are not restricted in their use of electronic authentication or electronic signatures, thereby facilitating digital transactions.
•    Guarantee that enforceable consumer protections, including for privacy and unsolicited communications apply to the digital marketplace.
•    Limit governments’ ability to require disclosure of proprietary computer source code and algorithms, to better protect the competitiveness of digital suppliers.
•    Promote collaboration in tackling cybersecurity challenges while seeking to promote industry best practices to keep networks and services secure.
•    Promote open access to government-generated public data, to enhance innovative use in commercial applications and services.
•    Limit the civil liability of Internet platforms for third-party content that such platforms host or process, outside of the realm intellectual property enforcement, thereby enhancing the economic viability of these engines of growth that depend on user interaction and user content.

While several of these provisions are easily met by Canada – privacy, anti-spam rules, electronic signatures, cybersecurity, government open access among them – this chapter will still raise several issues. First, the good news is that there is a provision for safe harbours for Internet platform liability, a key missing issue from Canada’s Internet law framework. This will create important Internet speech safeguards without which Canada has been at a competitive disadvantage.

Second, the data transfer and localization rules will raise concerns, particularly if they limit the applicability of Canadian policies such as privacy protection. The inclusion of the provision is unsurprising, but the detailed language will matter.

Third, prohibition on “other discriminatory measures” on digital products distributed electronically goes to the heart of the cultural exemption Canada obtained in the CPTPP. The U.S. has pushed for a broad provision (for example, no discriminatory limitations on foreign online video services) and appears to have obtained one with its agreement with Mexico.