Experts' opinion that Canada 'caved on IP' in USMCA is all about skewed perspective

By May Cheng

This article was originally published by The Lawyer’s Daily, part of LexisNexis Canada Inc.

On Oct. 1, 2018, following frenzied weekend trade negotiations, Canada announced that it would join in the new tripartite agreement to replace the North American Free Trade Agreement, also known as NAFTA, with the new name United States-Mexico-Canada Agreement or USMCA. As analysts started to weigh in, initial reports indicated that the deal included wins for the auto industry and losses for Canadian dairy farmers, but a good trade agreement overall for Canada.

Early news coverage also started to point to experts claiming that Canada "sold out" on intellectual property (IP) provisions and that the deal on IP was "bad for Canada." These assessments regarding IP are overblown and appear to be based on "experts" who view all forms of enhanced IP protection as potentially stifling for innovation in Canada. As an IP expert who generally represents brand owners, I couldn't disagree more.

The theory on how USMCA is bad for IP in Canada was laid bare in a Financial Post article on Oct. 1, 2018, with the following quote from Jim Balsillie: "IP-intensive industries contribute just under $7 trillion annually to the U.S. economy, so this is a good deal for the U.S.,' Research In Motion co-founder Jim Balsillie said in an emailed statement. 'Because of decades of failed innovation policies that completely ignored IP ownership, Canada is a large net importer of IP, so this is a bad deal for Canada's plans to build a 21st-century economy."

The implication of these arguments is that Canada's failure to foster innovation with strong IP policies in the past is to blame for lack of innovation in Canada, and therefore harmful to us now as a net importer of technology. This is shortsighted thinking at best and fails to recognize that more IP innovators might set up shop in Canada with more favourable protection of IP in place. It also suggests we as Canadians don't want to protect the IP rights of others so we can knock them off as soon as possible. How is that a winning strategy for Canada?

It's also important to put the terms of the USMCA in context of Canada's position on past trade negotiations, because many of the IP provisions in the USMCA were already part of the Trans-Pacific Partnership (TPP). In fact, the provisions concerning trademark rights are virtually identical to those agreed to under the TPP. No similar criticisms seem to have been levelled as loudly towards the previously negotiated TPP.

Among the most talked about changes under the USMCA are term extensions for copyright, biologics, industrial designs and patents. Term extensions can be argued to favour creators and innovators by allowing their period of exclusivity to last longer, resulting in more time for commercializing IP and recovery of investments.

Under the USMCA, Canada's trademark system will be upgraded to join international treaties that Canada already announced it would sign on to years ago, coming into force in 2019. Similarly, existing amendments to Canada's Industrial Design Act, to be adopted later this year, already meet the USMCA requirements.

There will be required legislative changes in Canada, such as extending border measures on counterfeit goods to in-transit shipments, new criminal sanctions for trade secret theft and interception of satellite signals, as well as recognition of other electronic measures to protect copyright, such as technological protection measures. However, many of these USMCA terms were previously covered in the TPP.

Notably, Canada did not bow to U.S. demands for more restrictive "safe harbours" for Internet service providers (ISPs). Although there is language in the USMCA that limits when ISPs can benefit from safe harbours, an annex to the IP chapter exempts Canada on the basis of its existing copyright regime.

In conclusion, it's disingenuous to declare that Canada got a bad deal on IP, when it had already been in the process of adopting many of the enhanced protections for IP rights and had already agreed to similar terms in the TPP. It may also be premature to pass judgment on the final provisions, since the USMCA draft must survive the scrutiny of all of the legislatures in each of the countries that are party to the agreement.

May M. Cheng is a certified specialist in intellectual property (IP) law and a partner in the IP group at Osler . She has 25 years of experience in advising clients on all aspects of IP protection and enforcement and was retained in 2017 to rewrite the IP laws for the government of the Bahamas to facilitate their ascension to the WTO.

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This article was originally published by The Lawyer's Daily -- providing Canadian legal news, analysis and current awareness for lawyers and legal professionals who need a real-time view on the shifting legal landscape.