With yesterday’s leak of the full ACTA text (updated to include the recent round of talks in Lucerne) the simmering fight between the U.S. and the E.U. on ACTA is now being played out in the open. During the first two years of negotations, both sides were at pains to indicate that there was no consensus on transparency and the treaty would not change their domestic rules. Over the past four months, the dynamic on both transparency and substance has changed.

The turning point on transparency came as a result of two events in February and March. First, a Dutch government document leak that identified which specific countries were barriers to transparency. Once identified, the named European countries quickly came onside to support release of the text, leaving the U.S. as the obvious source of the problem. Second, the European Parliament became actively engaged in the ACTA process and demanded greater transparency. As the New Zealand round approached, it was clear that the Europeans needed a resolution on transparency. The U.S. delegation used the transparency issue as a bargaining chip, issuing a release at the start of the talks that it hoped that enough progress could be made to allow for consensus on sharing the text. The U.S. ultimately agreed to release the text, but subsequent events indicate that it still views transparency as a bargaining chip, rather than as a commitment.

At the conclusion of the latest round of negotiations in Lucerne, the U.S. did not achieve its goals for the talks and refused to agree to the release of an updated text. The disagreement between the U.S. and E.U. has played out in the open this week, with the USTR’s Stan McCoy acknowledging that the talks did not achieve as much as the U.S. hoped and EU Commissioner Karel de Gucht plainly blaming the U.S. for blocking release of the text, indicating that he did not expect much progress in the next round on talks in Washington, and calling out the U.S. for its “hypocrisy” on key issues. The fact the text was leaked within hours of de Gucht’s comments highlight Europe’s frustration with the U.S. position on transparency.

The transparency fight is really cover for the bigger fight – the substance of the treaty. A review of the latest text reveals that virtually every major area of disagreement (there are still many) comes down to the U.S. on one side and the E.U. on the other. The various other ACTA countries including Canada, Mexico, Japan, Korea, Singapore, Australia, New Zealand, and Switzerland, are often simply left to pick a side. There are some independent proposals and some specific language suggestions from those countries (including a coalition of Australia, NZ, Singapore, and Canada promoting a provision on abuse of IP rights), but most of the agreement boils down to the U.S. vs. the E.U.

By far the biggest source of disagreement remains scope of the agreement, with the U.S. (supported by Australia, Canada, New Zealand, and Singapore) pushing for an agreement limited to trademark and copyright, while the E.U. and Switzerland seeking to extend it to all intellectual property. Of particular importance to the E.U. is the inclusion of geographical indications and industrial designs, with de Gucht calling the issue a “red line” issue and questioning the value of the treaty if they are not included. If they are included, many countries will be forced to make significant changes to their domestic laws, since many do not have criminal or civil enforcement or border measures dealing with the issue. In other words, satisfying the E.U. on the issue may require reneging on earlier commitments to leave domestic laws largely untouched. However, failure to satisfy the E.U. may ultimately kill the agreement altogether. Moreover, with the same U.S. companies that urged the government to negotiate ACTA, now warning against extending it too far, adopting the E.U. position risks alienating some of ACTA’s biggest supporters. The issue of scope is one that will ultimately require one side to cave or otherwise leave ACTA in limbo for the foreseeable future.