Canada and the U.S. reached agreement late yesterday on a new NAFTA (now renamed the U.S.-Mexico-Canada Agreement or USMCA). While much of the focus is on the dairy industry, dispute resolution, and the auto sector, the agreement will have significant implications for intellectual property, digital policy, and broadcasting. It will take some time to examine all the provisions, but the short-hand version is that Canada has agreed to extend the term of copyright, saved the notice-and-notice system for copyright infringement claims, extended the term of protection for biologics at significant long-term cost to the health care, agreed that Internet companies are not liable for third party content, extended border measures on counterfeiting, and promised to drop the CRTC policy that permitted U.S. commercials to be aired during the Super Bowl broadcast.

With few exceptions, the U.S. adopted a Trans Pacific Partnership+ approach with 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. While the Canadian starting point was presumably the CPTPP, the revised TPP where Canada successfully argued for the suspension of some of the U.S.-backed provisions, Canada caved on that position as the IP and digital trade chapters largely revert back to the TPP model. The only good news from a Canadian perspective is that this includes a carve out for Canada’s notice-and-notice system, which the U.S. acknowledged in the TPP met the notice-and-takedown standard.

Copyright

The IP chapter opens with balancing language as an objective:

The protection and 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.

Yet the major copyright change for Canada is the extension in the term of copyright beyond the international standard of life of the author plus 50 years to life of the author plus 70 years. The term of copyright was never going to hold up a major trade agreement and Canada did agree to an extension in the original TPP. However, the cost will be significant, locking down works from the public domain for decades and potentially increasing educational costs by millions of dollars. From a domestic policy perspective, the change should impact the current copyright review as term extension has been one of the top requests from rights holders and areas of concern for users. The extension shifts the copyright balance in Canada and should be factored into future reforms, including the benefits of extending fair dealing to restore the balance.

One area that did not change is the notice-and-notice system as the IP chapter includes an annex (Annex to Section J) that creates an exemption to the notice-and-takedown requirement for any party that, as of the date of the agreement, has a notice-and-notice system. That means that Canada gets to keep notice-and-notice, though Mexico is not able to adopt it in lieu of notice-and-takedown. This will be viewed as a win from a Canadian perspective, though it was an easy giveaway for U.S. negotiators.

The agreement also includes provisions on limitations and exceptions (borrowing from the Berne Convention’s three-step test) and detailed anti-circumvention rules that permit exceptions in limited circumstances. These provisions are open to considerable interpretation that could be invoked as part of future copyright reform efforts.

The agreement also features expanded border measures and anti-counterfeiting requirements. 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. had 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). Canada has agreed to provide agents with those powers on in-transit shipments, thereby requiring further reforms to Canadian law.

Biologics

On the patent side, the big change is the extension of data protection for biologics drugs to 10 years. 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, the additional costs for pharmaceuticals in Canada in the long-term will be enormous.

Broadcasting

While a cultural exemption was touted as one of the major Canadian wins, Canada actually did cave to U.S. pressure by agreeing to change its broadcast policy. In 2016, the CRTC changed its policy on simultaneous substitution for the broadcast of the Super Bowl, allowing for the U.S. signal to air in Canada with the commercial intact. Bell, the broadcast rights holder, and the NFL objected with multiple appeals and court cases (including one currently before the Supreme Court of Canada). In Annex 15-D, Canada agreed to rescind the CRTC policy with a requirement that all programs be treated equally. That means that Canada could drop simultaneous substitution altogether, but not for an individual program. The same annex also includes a commitment to authorize U.S. home shopping program services.

Digital Trade

The digital trade chapter largely mirrors the one found in the TPP. That means that there are provisions on prohibiting customs duties, facilitating electronic transactions, anti-spam measures, and very weak language on having domestic privacy and consumer protection rules. The USMCA does not include a stand-alone net neutrality provision as found in the TPP.

The two most important features of the chapter involve (i) data localization and transfer and (ii) safe harbours for Internet companies. Data localization has emerged as an increasingly popular legal method for providing some additional assurances about the privacy protection for personal information. Although heavily criticized by those who fear that it harms the free flow of information, requirements that personal information be stored within the local jurisdiction is an unsurprising reaction to concerns about the lost privacy protections if the data is stored elsewhere. The USMCA restricts the ability for a country to impose data localization rules, which could have an impact on future privacy reforms. Similarly, the data transfer provisions limit the ability to restrict data transfers across borders, which could become a challenge should the EU require restrictions to meet its privacy standards. Canada effectively agreed to similar provisions in the TPP and their inclusion in this agreement is unsurprising.

Internet safe harbours did not make it into the TPP and is a welcome addition to the USMCA. The provision states:

no Party shall adopt or maintain measures that treat a supplier or user of an interactive computer service as an information content provider in determining liability for harms related to information stored, processed, transmitted, distributed, or made available by the service, except to the extent the supplier or user has, in whole or in part, created, or developed the information.

In other words, Internet companies are not liable for the content of their users. While this does not require the creation of a legislative safe harbour, it restricts the ability for a country to create a system premised on liability for Internet companies. Moreover, the same provision excludes liability for actions taken by Internet companies to remove harmful or objectionable content on a voluntary basis.



Cross-Border Shipments

The agreement also raises the minimum threshold for cross-border shipments that will not be subject to customs duties and taxes. The Canadian limit has long been at $20, much to the frustration of cross-border shoppers. The new limits for Canada will be C$150 for customs duties and C$40 for taxes.

There will no doubt be much more to review in the fine print of the agreement, but the first look at the deal suggests that Canada caved on many issues, identifying notice-and-notice as a priority ask. From a political perspective, since many of digital USMCA provisions were found in the TPP that was negotiated by the Conservative government, it is unlikely the Conservatives will oppose those concessions. The USMCA will result in significant reforms to Canadian copyright law, which should be factored into the current copyright review given the shift in copyright balance toward rights holders with decades of additional protections.