Sean Flynn and Mike Palmedo
Comments to U.S. Trade Representative
re: Negotiating Objectives for a U.S.-European Union Trade Agreement
Docket # USTR-2018-0035
Full comment, including appendices (PDF)
STATEMENT OF INTEREST
The Program on Information Justice and Intellectual Property (PIJIP) is the internationally recognized intellectual property and information law research and academic program of American University Washington College of Law (AUWCL). PIJIP is managing a multidisciplinary research project on the impact of copyright user rights in the digital environment. One issue that the United States and the European Union face in their upcoming negotiations is the degree to which they should seek to include language promoting copyright balance through limitations and exceptions in the agreement. We make this statement to share information from our research indicating that the promotion of balanced copyright systems promotes U.S. trade interests.
Our research indicates that American firms operating overseas in industries that rely on copyright exceptions enjoy better outcomes on average when our trading partners’ copyright laws are more balanced – defined as having limitations and exceptions that are open to the use of any type of work, by any user, or with a general exception that is open to any purpose subject to protections of the legitimate interests of right holders. Econometric research on both the activities of foreign affiliates of U.S. firms and exports by U.S. firms illustrate this conclusion. At the same time, firms in the more traditional “copyright sectors” (i.e. – music, movies, and printed media), have not negatively affected by greater balance and openness.
We also provide the results of research on existing language in trade and international law that promote balance in copyright laws and include some analysis of how such provisions could better meet U.S. interests.
SUBMISSION
U.S. and Foreign Firms Benefit from Balanced Copyright in Other Countries
PIJIP has been working over several years on empirical research pertaining to the impact of balanced copyright systems on trade and economic development. One key element of an adequately balanced copyright system is having sufficiently “open” limitations and exceptions for the digital environment. We refer to “open” limitations and exceptions for the digital environment as those that are open to the use of any kind of work, by any kind of user and for any purpose, as long as the use does not unreasonably prejudice the legitimate interests of the author. Such openness is the hallmark of the U.S. fair use clause. These “open” aspects are crucial because the digital environment creates new opportunities to use different kinds of works, by different users and for different purposes than were envisioned in most copyright statutes. An open statute is a flexible one – and flexibility is needed to accommodate and encourage innovation in the digital environment
Our research indicates:
- Greater openness is associated with better outcomes for foreign affiliates of U.S. multinational enterprises in the Scientific, Technical & Professional Services industries
- Commerce department data provides no evidence that affiliates of U.S. firms classified under the NAICS 51 heading – including publishing, music, and movies – perform more poorly in countries with more open copyright user rights
- U.S. firms in the computer service, information service, and contract R&D industries export more services to countries with greater openness
- U.S. exports of books are not negatively affected by the openness of copyright user rights in the importing countries
- Greater openness is not associated with lower net income for the local firms in movie or music industries in the countries that we have studied, though there is weak evidence of a negative relationship between openness and print publishing
See appendix A for a description of our econometric test.
OPTIONS FOR PROMOTING BALANCE IN TRADE AGREEMENTS
International trade and treaty law has been increasingly attentive to the need for balance and user rights in copyright policy to meet the social, economic and trade interests of all countries. There is not, at present, however, a sufficient model in existing law for promoting these ends.
Samples of provisions from other Free Trade Agreements or other international agreements that could be used as a baseline for negotiating objectives with the EU are included in Appendix B. In general, the pattern from these clauses is that international law has sought three main goals thus far:
- protecting rights of countries to enact “fair use” rights under the confines of the three step test,
- promoting “balance” in copyrights systems,
- Requiring limitations and exceptions for certain activities, such as for temporary copies needed to enable transmissions in the digital environment.
Each of these models could be improved.
Protecting “fair use” does not do enough. The fair use protection models, such as the language in the Korea FTA, protect “fair use” without defining what elements of fair use they are protecting. Our research suggests that what is most important about fair use and other balanced limitations and exceptions systems is the degree to which they are open to any work, user, and purpose. Some have claimed that such open exceptions would violate the “three step test” in Berne Article 9; TRIPS article 13 and like provisions elsewhere. The protections of fair use appear intended to prevent such challenges. But they are very ambiguous. An important clarification would be that the three step test does not prohibit exceptions that apply a flexible proportionality test to an “open list” set of purposes. For example, the Max Planck Declaration, A Balanced Interpretation of the “Three-Step Test” in Copyright Law provides:
3. The Three-Step Test’s restriction of limitations andexceptions to exclusive rights to certain special cases does not prevent
(a) legislatures from introducing open ended limitationsand exceptions, so long as the scope of such limitations and exceptions isreasonably foreseeable; or
(b) courts from
– applying existing statutory limitations and exceptions tosimilar factual circumstances mutatis mutandis; or
– creating further limitations or exceptions, wherepossible within the legal systems of which they form a part.
Likewise, the few agreements that promote “balance” are too vague to guide countries to the path of greatest benefit. The TPP’s model for promoting balance has been improved somewhat in Australia’s proposal in the RCEP negotiation, which should be noted. But it does not clearly require what is most necessary for trade in the digital environment, which is being sufficiently open to innovation in the digital environment. Specifically, it would be beneficial for every country to offer two aspects of what is known as“transformative use” in the US:
- Expressions of a work for a different purpose and for a different audience than the original, such as criticism and review,illustration, quotation (including display of snippets), pastiche, etc.
- Non-expressive uses (i.e. intermediate technological steps in the production of metadata that does not communicate the work), such as uses of works to facilitate machine learning, computational analysis, text and data mining, caching, creation of temporary copies to facilitate transmission, etc.
Trade law could evolve to more certainly require recognition of these basic user rights in the digital economy.
