[A2k] TPP & ISP liability developments

Peter Maybarduk pmaybarduk at citizen.org
Fri Jul 31 15:15:58 PDT 2015

Inside US Trade
Australia Takes Tough Line On IP, Investment Amid Market Access Fight
Posted: July 30, 2015

LAHAINA, Hawaii -- Australia is refusing to move off defensive positions in the intellectual property (IP) and investment chapters of the Trans-Pacific Partnership (TPP), as it remains embroiled in fight with the United States over its demands for new access for its sugar and dairy exports to the U.S. market.

On IP, Australia is pushing back on at least two issues. The first is the length of the data exclusivity period for biologics, with Australian Trade Minister Andrew Robb publicly saying he cannot go beyond five years, falling far short of the U.S. demand for 12.

The second issue relates to the obligations in the chapter for Internet service providers (ISP) to remove potentially infringing content by their users in order to escape liability for copyright infringement. Australia is seeking a footnote stating that the TPP disciplines on this issue -- expected to be more general in nature -- would prevail over the more specific ones included in its existing bilateral free trade agreement with the United States.

In the area of investment, Australia continues to fight for several footnotes or provisions on investor-state dispute settlement (ISDS) that are opposed by other countries. Sources said these objections have prevented TPP countries from concluding the investment chapter, as everything else is basically agreed.

The first provision is a footnote indicating that the application of the ISDS mechanism to Australia is contingent on it securing an acceptable outcome on market access.

Secondly, Australia is fighting for language in the investment chapter that it says provides safeguards that shield health and environment measures from being challenged under ISDS. Robb said in an interview with Inside U.S. Trade that Australia is seeking language on this issue similar to that which it achieved in its free trade agreements with South Korea and China.

The Australia-Korea free trade agreement includes language identical to that in the U.S. model bilateral investment treaty that is aimed at providing some protection from ISDS for public welfare regulations by stating that they generally cannot constitute so-called "indirect expropriations," which are prohibited without compensation. However, the Korea-Australia FTA contain two clarifying footnotes that are not present in the U.S. model.

The general language included in both states: "Except in rare circumstances, non-discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety, and the environment, do not constitute indirect expropriations."

The first footnote in the Australia-Korea FTA states that the list of "legitimate public welfare objectives" included in the language is not exhaustive. The second states: "For greater certainty and without limiting the scope of paragraph 5, such regulatory actions to protect public health include regulation, supply and reimbursement with respect to pharmaceuticals, diagnostics, vaccines, medical devices, health-related aids and appliances and blood and blood products."

U.S. business representatives view these two footnotes as unnecessary, arguing they do not change the scope of the general language. They view them instead as merely politically motivated -- an effort to assuage an Australian public skeptical of ISDS that their interests are being protected.

A leaked draft of the TPP investment chapter dated from January showed that Australia was seeking another type of safeguard on ISDS. This would be in the form of a specific carveout from ISDS for any measures related to four government bodies involved in health care regulation. They are the Pharmaceutical Benefits Scheme, Medicare Benefits Scheme, Therapeutic Goods Administration and the Office of the Gene Technology Regulator.

At this point in the negotiation, however, other TPP countries seem unlikely to agree to language that is that specific.

On ISP liability, the TPP is expected to include an obligation for countries to set up a system similar to that in U.S. law where ISPs must take down content that has been flagged by right holders as potentially infringing. The U.S.-Australia FTA included this same "notice-and-takedown" requirement, but the TPP language is expected to be more general in nature than the bilateral, according to business sources.

It is also expected to exempt Canada, which has a more lax system that requires ISPs to transmit the notice from the right holders to their users but not take down the content.

The U.S. Chamber of Commerce publicly opposed Australia's stance on ISP liability in a two-page list of its IP priorities in TPP distributed to reporters on July 22. "We are very concerned by Australia's effort to secure a footnote that would relieve them of their bilateral FTA ISP obligation and instead be bound by the weaker TPP ISP obligation," the document said. "This is a terrible precedent for U.S. trade policy and breaches one of industry's redlines -- that the TPP not erode gains from the earlier bilateral agreements."

U.S. business representatives were unable to identify specifically how the TPP provisions would be weaker than the bilateral FTA. But they have generally argued that this request by Australia goes against the U.S. government's position as conveyed to industry that when the TPP contains language on the same topic as an FTA, the "stronger" of the two provisions will prevail.

Copyright experts identified several ways in which the TPP provisions on ISP liability could be more general than the Australia FTA. For instance, the Australia FTA -- like U.S. law -- contains a requirement that ISP terminate the accounts of repeated offenders, but this issue is controversial and could be omitted from the TPP, they speculated.

Second, the U.S.-Australia FTA allows ISPs to escape liability for monetary penalties if they follow the notice-and-takedown process, but it does not shield them from court-imposed remedies such as injunctive relief. The TPP could be more flexible in that it leaves it up to countries to decide whether they want to shield ISPs from injunctive relief, experts said.

Third, the bilateral lists four specific types of functions carried out by ISPs for which the safe harbor applies: transmitting, caching, storage and referral. The TPP language may not limit the safe harbor to these four functions, although experts said they were not aware of any other functions currently carried out by ISPs.

Finally, the Australia FTA contains a side letter that specifically prescribes the format of the notice of potentially infringing content. Experts said the TPP might not include a similar side letter, although one source noted that having a more prescriptive notice format actually benefits ISPs over right holders.

This is because right holders would naturally prefer a more general notification claiming that all or a substantial portion of a given website contains infringing content, while ISPs prefer more specific information about the content so they can more easily find it and remove it.

More information about the A2k mailing list