Why an International Trade Agreement Could Be as Bad as SOPA

International agreements for regulating intellectual property are a one-way ratchet process: enforcement and protection provisions can go up but never down.

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A few weeks ago a sleeping giant woke up, when the Internet -- average users and Silicon Valley companies -- united in protest against two bills before Congress, the Stop Online Piracy Act (SOPA) and the Protect Intellectual Property Act (PIPA), which would have severely limited online freedom of expression and privacy. But all is not yet well: Another threat to a free and open Internet is in the works.

This time the threat isn't coming from Congress; it's a trade agreement recently signed by 31 nations including the United States and 22 members of the European Union. This accord, called the Anti-Counterfeiting Trade Agreement (ACTA), is ostensibly designed to address problems of intellectual property enforcement and trafficking in counterfeit goods across national borders. However, critics contend that it suffers from many of the same problems as its recent stateside legislative relatives, SOPA and PIPA. Some have called it SOPA's international "evil twin." 

The treaty will enter into force after six of the 31 signing parties formally ratify it. Despite the near certainty of its ratification we still don't really know what it will do. It remains unclear to many what effect the agreement will have on the communicative and civil rights of citizens around the world.

In order to understand how ACTA threatens online free speech in the name of IP enforcement and to evaluate whether it is truly as bad as SOPA, it needs to be viewed within the larger trends in international IP regulations. Viewed in this context, it becomes clear that while many of the alarmists specific claims are inaccurate, ACTA exposes the systemic danger in how international intellectual property regulation has evolved over the last 20 years. 

The State of the IP Legal Landscape

The current international regime for regulating intellectual property law is established, largely, by a set of treaties enacted through existing supranational institutions, primarily the United Nations and the World Trade Organization. The ground-rules for modern IP law were established in 1994 by the WTO in the form of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), which extended to software and digital artifacts the longstanding protections for literary and artistic works (established in Berne in 1886). Two years later the World Intellectual Property Organization, one of 17 specialized UN agencies, extended this protection further with two treaties that banned the creation, use, and distribution of circumvention technologies that could break DRM (Digital Rights Management) or other technical protection measures. Often these technical protection measures make it difficult for users to exercise legitimate exceptions to copyright like fair use or non-commercial copying for personal use and storage. Legitimate exceptions include things like using short excerpts of copyrighted video for to make a point in a documentary film or using the characters from a copyrighted work in a parody.

The Digital Millennium Copyright Act (DMCA) in the United States and the EU Copyright Directive of 2000 were implementations of the international standards established by WIPO and TRIPS. In addition to implementing the WIPO requirements that outlawed anti-circumvention technologies, these bills established what have become known as "safe harbor provisions." Essentially, Internet service providers (ISPs), search engines, and websites that host user generated content like YouTube or Wikipedia are not, themselves, liable for infringing content that they host or make accessible as long as they "respond expeditiously to remove, or disable access" to content after being contacted by a rights-holder claiming infringement. 

In the U.S. these safe-harbor provisions take the form of "notice, takedown and counter-notice" systems, where rights holders claim infringement, content hosts takedown the material and the original uploader can send a counter-notice asserting that it was not infringement and it is put back up. These provisions are a mixed bag. Chilling Effects, a joint project of the Electronic Frontier Foundation and a handful of universities, has noted that this system assumes rights-holders' cease-and-desist claims are legitimate and tends to undermine fair use exceptions. However, without these safe harbor provisions that limit liability, the landscape would be too risky for websites like YouTube that host user-uploaded content to exist at all. Canada, in contrast, has a "notice-and-notice" system, where ISPs pass the cease-and-desist notices on to the user who uploaded the content, and that person can decide whether or not to comply. This system protects against over-reaching claims of rights-holders and protects exceptions like fair-use.

The recently defeated Stop Online Piracy and Protect Intellectual Property Acts in the United States, among other things, threatened to remove these safe-harbor provisions by holding ISPs and others accountable for infringing material hosted on their servers. This would have led to significant self-censoring and policing of user content by risk-averse ISPs and, likely, the removal of lots of non-infringing material. Cory Doctorow has noted that because computers are general-purpose tools that treat all data the same, the only way to engage in preemptive, rather than notice-based, screening for infringement is to monitor all traffic and lock down users' abilities to participate. Indeed, Digital Rights Management (DRM), taken to its extreme, "always converges on malware" and "attempts to make a network that can't be used for copyright infringement always converges with the surveillance measures that we know from repressive governments." Because IP regulation tends towards these invasive forms, it ends up being an issue of freedom with real gravity rather than merely esoteric policy wonkery. 

The Role of ACTA

ACTA is a threat to the future of a free and open Internet. Timothy Lee recently noted the recent proliferation of inaccurate and alarmist claims about the ACTA. Many of these claims seem to be based on proposed provisions that were diluted or removed in the final version. For instance, there was initially a push for a "three strikes" policy where repeat infringers could be cut off from the internet. The other claims seem to be worst-case readings of overly general and vague provisions within the treaty's text. For instance, the treaty mandates that signing nations "promote cooperative efforts within the business community to effectively address trademark and copyright or related rights infringement." This has been read by some as an attempt to require ISPs and content host to play an active role in policing content, rather than merely reacting to infringement notices.  An implementation of this requirement that undermined safe-harbor provisions in this way would indeed be damaging, but the treaty seems to leave room for a variety of approaches including existing "notice-and-takedown" and "notice-and-notice" systems. 

Alarmist claims are not all unfounded, however. ACTA does mandate a system for determining civil damages in infringement cases that is patently ridiculous. The agreement endorses several possible determination frameworks, including "the quantity of the goods infringing... multiplied by the amount of profit per unit [if they had been] sold by the right holder if there had not been the act of infringement." As any freshman in Econ 101 could point out, consumption levels at price 0 (piracy) will be much much higher than consumption levels at any other price. Assuming that every download is a sale lost by the content industry is plainly inaccurate. Enshrining damage determination criteria along these lines will lead to more judgments like Jamie Thomas-Rasset who was ordered to pay $1.92 million for sharing 24 songs, on the calculation that each song she shared cost the rights-holders $80,000. 

The TRIPS agreement enables judicial authorities to act inaudita altera parte -- that is, without prior hearing -- to implement provisional measures to halt activity by the defendant "where any delay is likely to cause irreparable harm to the right holder, or where there is a demonstrable risk of evidence being destroyed." The ACTA text on provisional measures is largely lifted from the TRIPS agreement, with one notable exception that strengthens the position of rights-holders and may threaten the rights of defendants. Both agreements give judicial authorities the power to require evidence of imminent infringement and irreparable damage from claimants prior to enacting provisional measures. In ACTA these measures include, but are not limited to, the ability to "order the seizure or other taking into custody of suspect goods, and of materials and implements relevant to the act of infringement." That is, ACTA appears to legitimate -- but not require -- domain-name seizure similar to those carried out by the Immigration Customs Enforcement Agency in the U.S.. 

However, ACTA omits the TRIPS provision that parties to these provisional measures shall be notified of the actions immediately and the defendant guaranteed a review and right to be heard to contest the provisional measures. In this aspect ACTA appears to be a step away from due-process proceedings that are customary in IP law. 

When we look at ACTA we must be aware that the problems are not limited to this particular agreement. Rather ACTA is a natural next-step for a dysfunctional system. It is a system whose structure inexorably pushes it toward ever-stricter regulations, without reciprocal protections for freedom of speech.

International IP agreements, from Berne in the 19th century to ACTA in the 21st, tend to follow some general contours. IP law has always been a balance between the competing interests of the author and the general public. However, international agreements have typically not struck a balance; they are often one-sided. They set minimum standards for protection and enforcement, but they do not tend to set any maximum levels of enforcement that parties may not exceed. Parties are always free to implement more stringent measures. In contrast, the agreements' freedom-of-speech protections -- ensuring the proportionality of punishment and exceptions like "fair use" -- tend to be optional. Indeed, in ACTA "rights, limitations, exceptions, or defenses to copyright or related rights infringement" are left as matters of national law. 

This has led to a long-term trend towards greater intellectual property protections. Parties to these agreements tend to implement them in different ways, with different levels of enforcement and different exceptions. Some -- usually the United States -- enact provisions that go beyond the minimum requirements of international standards. Differing implementations leads to a perception that navigating these complexities is an impediment to international trade and multilateral enforcement. In the name of "harmonizing" laws between parties a new round of international negotiation begins to establish new minimum standards. In every case these new minimums have been set at what were previously the "above-and-beyond" optional measures taken under the previous agreements. During negotiations the TRIPS agreement was conceptualized as a "Berne-plus." Similarly, negotiators discussed ACTA as a "TRIPS-plus." Essentially, this is a one-way ratchet process: enforcement and protection provisions can go up but never down.

Understanding this dynamic sheds a troubling light on the negotiation process that created ACTA. Negotiations on ACTA began in 2006 between the United States and Japan with the EU and Canada joining soon after. These negotiations were secret, closed, and took place outside of established institutions for addressing international IP issues such as the World Trade Organization or the OECD. 

A set of cables from the WikiLeaks U.S. diplomatic cable dump collected by La Quadrature du Net expose the intentions of these parties during the negotiation process. An early cable describing initial discussions between the U.S and Japan makes clear that the express goal of ACTA from the beginning was to  "set a 'gold standard' for IP R[egulation] enforcement among a small number of like-minded countries, and which other countries might aspire to join." In response to a Japanese proposal to conduct negotiations within an established international institutional framework, in this case the OECD, the Office of the U.S. Trade Representative's (USTR) Chief Negotiator for IPR Enforcement, Stanford McCoy, "stressed that this should be a freestanding agreement, not related to any international grouping such as the G-8 or OECD, which might make it more difficult to construct a high-standards agreement." Two-time commissioner of the Japanese Patent Office, Hisamitsu Arai, is quoted in one of the cables as saying "the intent of the agreement is to address the IPR problems of third-nations such as China, Russia, and Brazil, not to negotiate the different interests of like-minded countries ... [and] could serve as a yardstick for measuring the market economy status of [these] countries." In an apparent attempt to establish a veneer of legitimacy by including a so-called "third-nation," the U.S. approached the generally IP-regulation-friendly Mexican government who stressed "their willingness to join the Anti-Counterfeiting Trade Agreement (ACTA) negotiations" and "push-back against Brazilian efforts to undermine IPR." La Quadrature likened this agreement to Mexico offering to play the "good cop" to the U.S.'s "bad cop" in international negotiations with less developed countries.

It is worth noting that the negotiations throughout most of the process were highly secret with negotiators forced to sign non-disclosure agreements, a fact that, according to one cable, made even some of the negotiating parties uncomfortable. There were few avenues for public or civil-society input. Meanwhile many U.S. based multinational corporations and their interest groups, including the Recording Industry Association of America, the Motion Picture Association of America, Sony, and Time Warner were consulted via formal USTR advisory boards.

In light of the one-way ratchet dynamic described above, these cables present a clear picture of the intentions of those involved in the drafting of ACTA. The agreement is an obvious tool for cranking the ratchet by going outside of existing institutions to establish a "high-standards agreement," and then pressuring non-signatory countries who rely on trade and aid from wealthy signatory countries to comply with ACTA standards. This would seemingly create the preconditions for yet another round of negotiations within existing supra-national institutions to establish new minimum standards in the name of "harmonization." Of course for this round the starting point for these minimums would be ACTA levels and the result would likely be an "ACTA-plus" framework. Despite the many SOPA comparisons that have been made by anti-ACTA protesters, its content suggests that it is something much closer to a slightly expanded version the U.S. DMCA to be exported abroad. 

It is unlikely that ACTA will significantly alter U.S. or European law. What it will do, is entrench those laws so that democratically elected national legislators will have their hands tied by undemocratically drafted international agreements should they choose to alter or repeal their existing IP laws. It is for this reason that Congressman Darell Issa (R-CA) has called it "more dangerous than SOPA." The battle over Internet freedom is being waged on two simultaneous fronts: In non-liberal regimes like China and Iran, as regimes seek to quell dissent through the use of filtering, blocking and packet inspection tools, and in liberal countries, particularly western ones, where the front line is less explicitly about free speech and civil rights; instead it comes in the form of enforcement of ever-stricter intellectual property regulations. 

Intellectual property law has, thus, become an Internet freedom issue, and as liberal governments implement increasingly draconian filtering measures for intellectual property (IP) enforcement they legitimate the use of similar measures for other purposes by illiberal governments. Evaluated in context and with these potential ramifications in mind,  ACTA -- and certainly the ratchet process that ACTA demonstrates -- may be every bit as dangerous as Darell Issa warns.


Image: William Attard McCarthy/Shutterstock
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Alexander Furnas is a research fellow at the Sunlight Foundation in Washington, D.C.

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