ALM Properties, Inc.
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Coming in from the Cold
Each year, in a document known as the "Special 301" report, the U.S. Trade Representative lists those countries whose policies on intellectual property have raised eyebrows, and blood pressure readings, back in the States. These are the nations40 of them in 2012where U.S. companies may find their IP rights in peril, whether from piracy, insufficient protections, or lax enforcement (and usually all three). The most egregious offenders go on a special code-red subsection in the report, known as the Priority Watch List. It's full of the usual suspects. China? Check. India? Check. Russian Federation? Check.
Oh, and Canada.
Opinion may be mixed on whether to forgive or thank our northern neighbor for giving us William Shatner and Celine Dion. But on one point, the U.S. government, key trade associations, and even some top Canadian politicians have been in agreement: Canada's intellectual property lawsspecifically, its Copyright Actcould use an overhaul. They haven't been shy about their feelings, either. In a February press release urging Canada's continued presence on the Priority Watch Listwhere it has been since 2009, after 14 years on the less ominous Watch Listthe International Intellectual Property Association, a coalition of trade groups representing the U.S. software, motion picture, music, and other industries, said the country stands "virtually alone among developed economies in the OECD (and far behind many developing countries) in failing to bring its laws in compliance with the global minimum world standard. . . . [Canada] is cementing its reputation as a haven where technologically sophisticated international piracy organizations can operate with impunity."
Canada's prominence on the Special 301 report has been "a sort of black eye" for the country, says David Weslow, a partner at Washington, D.C.'s Wiley Rein, who often works on cross-border IP matters. The problem, he and other IP experts say, boils down to this: Unlike the United States and the European Union, Canada didn't rushor even ambleto adopt the provisions of two key 1996 treaties ratified by the World Intellectual Property Organization (WIPO). These provisions, which were incorporated by the U.S. in 1998's Digital Millennium Copyright Act (DMCA), set ground rules for copyright in the age of online and digital media. Chief among these are a prohibition against circumventing technologies that control access to copyrighted works, such as encryption that prevents easy copying of a DVD. The DMCA also spells out the obligations of Internet service providers and other companies that host online content. They would be granted safe harbor from any infringement by their users if they carried out specific actions mandated by the law, like taking down allegedly infringing content until the matter was resolved by negotiation or court.
There have been other IP trouble spots, too. Canadian law has been less clear than its American counterpart on the dos and don'ts of reverse engineering software, a practice that often requires accessing copyrighted computer code so your own product will be interoperable with it. Canada's policies on counterfeit goods have also been a problem. "In the U.S., if a trademark owner has taken steps with Customs, agents can seize counterfeits at the border," says Weslow. "In Canada, agents don't have the authority to make the seizure."
American complaints haven't exactly fallen on deaf ears. For one thing, as the largest trading partner of the United Statesnearly $600 billion flowed between the nations in 2011Canada has a vested interest in smoothing out any kinks in the relationship. But it has an interest, too, in boosting its own industries and markets, and becoming a bigger player on a bigger world stage. "There is a recognition today that countries that are out of step with global norms are impacted negatively in relation to foreign investment and opportunities in research and innovation," says Jane Caskey, global practice leader of Norton Rose's intellectual property practice in Toronto. "So there is an incentive for such countries to better align with global norms."
Since 2005, there have been four attempts to amend Canadian copyright law. Every one of them has been controversial within Canada; the biggest sticking point being their embrace of and prohibitions on skirtingso-called digital locks, the access control technologies blessed by the DMCA. The first three bills were introduced by minority governments and died when new elections were called.
The fourth has fared better. Introduced last September by a now majority government under Conservative party Prime Minister Stephen Harper, Bill C-11the Copyright Modernization Actpassed Canada's House of Commons on June 18 and, as of press time, was before the Senate, where it is widely expected to pass by the start of the summer recess.
Yet for U.S. companies, this "modernization" may not be all they were hoping for, and understanding what it gives, what it doesn't give, and what it may take away will be important for those who want to protect or leverage their IP rights in Canada.
The Canadian amendments adopt digital locks in a big way. Copyright owners can use technological measures not only to prohibit unlawful copying, but even the making of personal-use backups (a process that is legal when no locks are present). Circumventing these locks is prohibited, as is the sale of devices that can crack them. That last provision is no small point, says Jesse Feder, director of international trade and intellectual property at the Business Software Alliance, a U.S.based industry association and member of the IIPA: "Canada has become a distribution hub for things like mod chips used to break the protection measures in game consoles." For content creators in the U.S., he says, the new provision is "a great step forward."
Also key, say IP lawyers, is an all-new right that the amendments create; what's known as the "making available right." This provision extends the reach of copyright law in Canada. In essence, it means that the copyright owner alone has the right to make a work available, via telecommunications, so that it can be accessed at a time and place of an individual's choosing.
Previously, making an infringement case against a broadcaster (or someone posting a copyrighted work online) meant not only showing that the defendant made it available, but that the work was actually received, viewed, or downloaded. Now, "the infringement is just to make it availableit is irrelevant whether anyone actually picked it up," says Claude Brunet, chair of Norton Rose's Canadian copyright and entertainment team. While the digital locks may be getting all the attention, Brunet says that the making available right is where the real strength of the copyright revisions lies. "This will be an enormous tool for copyright owners. You don't have to worry about the end user. . . . You can [go] right to the source."
Significantly, notes the BSA's Feder, the provision will enable copyright holders to bring actions against those who host protected works onlinemaking them available, for example, via the peer-to-peer (P2P) file sharing networks that have become the scourge of the software, game, movie, television, and music industries. "Since hosting is one of the main ways we exploit works in the digital age, it is important that this act falls within the scope of copyright law," says Feder.
The revisions also settle the reverse engineering for software issueit is now expressly allowedand provide a civil remedy against those who provide an Internet service that they know or should have known is designed primarily to enable acts of copyright infringement (again, think P2P networks).
All of these provisions are wins for those beating the drums for reform, but another revision has left some, like the BSA, disappointed. Instead of a DMCAlike "notice and takedown" requirement, the Canadian amendments call for a system known as "notice and notice." Here, a company that is hosting subscriber content that has been alleged to infringe leaves the material alone. To avoid liability, it simply needs to pass along the copyright owner's notice of infringement. "It's mystifying why Canada chose only to have notice forwarding with hosted material," says Feder. "The U.S. system, where a subscriber can challenge a takedown and have [content] go back up unless the copyright owner files a lawsuit, has proven to be workable and nonintrusive."
The revisions also scale back the ability to monetize some rights, says Brunet. This is because it expands Canada's "fair dealing" defenses to copyright infringement to include education, satire, and parody. Under traditional Canadian copyright law, the photocopying of textbooks in schools was often a source of income for copyright owners, via collective management organizationssimilar to how the American Society of Composers, Authors, and Publishers collects licensing fees from those who perform or broadcast music that was created by ASCAP members.
The fair dealing extensions put such a system "very much under attack," says Brunet. The irony, he adds, is that many U.S. companies won't even realize that the right is gone, since they probably didn't know that it existed in the first place. A few groups like ASCAP notwithstanding, collective management of copyright is "a system that is not really developed in the U.S.," says Brunet. "In some respects, Canada was actually a better place for U.S. copyright owners than the U.S."
Meanwhile, the groundwork is being laid for overhauling Canada's trademark enforcementanother sore spot for U.S. rights holders. Last October, Canada signed the Anti-Counterfeiting Trade Agreement, along with countries including Australia, Japan, Singapore, and the United States. ACTA, as the pact is known, is intended to improve international cooperation, establish best practices for enforcement, and provide an improved legal framework for addressing counterfeiting and piracy problems. The Canadian government says that it will introduce the necessary legislation to implement the agreementwith Bill C-11 a first step.
"In the past, IP was not seen as a central asset. IP lawyers were often brought into a deal at the eleventh hour," says Caskey. "Now companies are viewing IP as not only a highly valued asset, but also central to the business and revenue generation. What you're seeing is a heightened sensitivity to thatand a heightened call to action."
The New Regime
A Quick and Dirty Guide to the Copyright Modernization Act