By Sean Flynn, with translation assistance of Lina Diaz and Sofia Castillo, American University Washington College of Law

Yesterday, in a situation a similar to Colombia’s rushed passage of “Ley Lleras 2,” the Panamanian Congress sprinted to finalization of an incredibly unbalanced copyright bill — Bill no. 510, “On Copyright and Related Rights.” The bill is meant to bring the country into compliance with its trade obligations under the US-Panama Trade Promotion Agreement.  The legislation now awaits the Presidents signature, which appears all but certain to happen soon, perhaps today. Over the past week, there has been increasing attention to the provisions of the bill giving financial incentives to enforcement agents from fines collected for copyright infringements on the internet. This note describes three substantive issues showing the bill’s marked imbalance: lack of protection for transient electronic copies on the internet; a shift from an “open” to a “closed list” system of limitations and exceptions; and a requirement that all limitations and exceptions for users of copyrighted content be interpreted “strictly.” Together, these provisions will severely disadvantage the many businesses and social and cultural expressions that rely on limitations and exceptions to copyrights for their existence.


A.     The bill extends copyright protection to temporary electronic copies of information without adequate limitation and exception for transient copies necessary for electronic communication.

As in other U.S. trade agreements, and in the leaked drafts of the Trans Pacific Partnership Agreement now under negotiation, the Panama-U.S. trade agreement requires that Panama extend copyright protection to “temporary” copies, including to temporary “electronic storage.” But the FTA lacks, as does Panama’s proposed law, the narrowing provision in U.S. Copyright law restricting protection to copies that are “sufficiently permanent or stable to permit it to be perceived, reproduced or otherwise communicated for a period of more than transitory duration.”

Transient copies, such as buffer copies on a computer’s random access memory (RAM), are necessary for a host of streaming services that carry content over the internet to end users. Recognizing a right to exclude such copies, in addition to the ultimate right to distribute the content itself, adds another layer of licensing requirements that can block innovative services (like Netflix or Pandora) from being offered. Many other trade agreements and national and regional laws contain explicit exceptions for “transient” or “incidental” copies necessary for technological or other communications.[1] But the Panama Free Trade Agreement contains nothing of the kind, and neither does Panama’s law. By extending protection to temporary electronic storage, with no clear exception for transient electronic copies  – the Panama bill fails to give internet service providers and other businesses the legal certainty they need to enter and maintain operations in Panama’s market. This is particularly true when combined with the next two limiting provisions discussed below.

B.      The law shifts from an open list to a closed list system.

In the new law, Panama removes an open ended “fair use” clause and substitutes for it a “closed list” system of narrow and defined limitation and exceptions. This means that any use not clearly addressed in the closed list of exceptions (such as the creation of “transformative” content of the kind common in user generated videos) cannot achieve legality without a change in the statute itself. Open systems, which the U.S. “fair use” system is a prime example, add to a list of specifically authorized uses an open ended catch-all provision for users that applies a series of balancing factors (such as whether the new use competes in the same market as the original) to allow interpreters to accommodate new uses within the existing law. Open systems are far more accepting and promoting of the development and use of new technologies than closed ones. Recognizing this, countries from Brazil to Australia are considering changes to introduce more openness into their copyright systems. Panama is moving in the opposite direction.

Panama’s existing law prior to the change contains an element of openness, defining “fair uses” under the law as “uses that do not interfere with the normal exploitation of the works concerned or prejudice the legitimate interests of the author.” This clause appeared to allow new uses to argue that they are nonetheless lawful although not specifically enumerated elsewhere in the law as long as they do not unduly “interfere with” or “prejudice” the rights of users. A quite fair standard, and one permitted under multilateral intellectual property treaties. But the new bill would get rid of this flexibility, redefining a “fair use” as restricted to “special cases specifically provided for in this Act.”

C.      The proposed law would require “strict” interpretation of users’ rights.

Article 66 of the new law introduces a new statutory requirement that “limitations or exceptions to exclusive economic rights are to be strictly interpreted.” Coming on top of the shift to a closed list and the absence of notable exceptions needed in the digital environment, this clause appears a final nail in the coffin of balanced copyright in Panama.

The shift to a closed list and mandate that all exceptions be interpreted strictly reflects an extremely unbalanced view of copyright that imagines proprietor rights to be primary and the chief concern of the law, with limitations and exceptions relegated to a second tier status – specifically defined and interpreted strictly. A much better conception – for the law, for new technology, and for consumer and user interests – has been repeatedly affirmed by the Canadian Supreme Court. That court has held limitations and exceptions to copyright to “constitute an integral part of copyright law” — “necessary to maintain a fair and proper balance between the rights of a copyright owner, the rights of users and the public interest.” It accordingly has embraced the polar opposite guidance on interpreting the law, holding:

“The fair dealing exception, like other exceptions in the Copyright Act, is a user’s right.  In order to maintain the proper balance between the rights of a copyright owner and users’ interests, it must not be interpreted restrictively.” CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] 1 S.C.R. 339, 2004 SCC 13. (emphasis added).

US trade policy, and other countries pursuing copyright reform, should following Canada’s lead instead of Panama’s.

For more on Canada’s interpretation of copyright, see PIJIP’s recent webcast on the Canadian Supreme Court.

[1] See Chile-US FTA Art. 17.7(3) fn. 17 (“For works, other than computer software, and other subject matter, such exceptions and limitations may include temporary acts of reproduction which are transient or incidental and an integral and essential part of a technological process and whose sole purpose is to enable (a) a lawful transmission in a network between third parties by an intermediary; or (b) a lawful use of a work or other subject-matter to be made; and which have no independent economic significance.”); EU Information Society Directive, 2001/29/EC (“EUISD”), art. 5(1) (protecting “temporary acts of reproduction” with “no independent economic significance”); EU Software Directive, art. 5(1) (providing that acts of reproduction of a computer program “shall not require authorisation by the rightholder where they are necessary for the use of the computer program by the lawful acquirer in accordance with its intended purpose, including for error correction”); Malaysia Copyright Act, 2012 sec. 9(b), amending section 13(2) (adding exception for “the making of a transient and incidental electronic copy of a work made available on a network if the making of such copy is required for the viewing, listening, or utilization of the said work”); Singapore Copyright Act (sec. 38A (permitting temporary or transient reproductions made in the course of communication); Australia Copyright Act sec. 43A and 43B (permitting temporary reproductions as part of making or receiving a communication or as a necessary part of using a work).