Copyright and the TPP: The Big Picture

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As Public Knowledge dives into the Trans-Pacific Partnership’s (TPP) secret negotiation process and the details of its copyright provisions, it is useful to periodically step back and consider how the intellectual property chapter of the TPP fits into the framework of the TPP as a whole. The copyright provisions of the TPP, as based on the text proposed by the U.S. that was leaked in February 2011, would contradict the TPP’s overall goal of creating a seamless Pacific market and would chill innovation to the detriment of both consumers and businesses.

The TPP generally is an ambitious effort to open trade and encourage investment among the countries that border the Pacific Ocean. That is why the TPP covers so many different areas of the economy, like agriculture, textiles, environmental protections, and intellectual property.

Intellectual property (IP), however, fits uneasily into the trade agreement framework. When countries negotiate an IP chapter in a trade agreement, they don’t negotiate tariffs, as in traditional trade negotiations. Instead, the countries agree to alter their domestic laws so that particular companies can enjoy stronger protections in the countries that are party to the agreement.

When it comes to copyright, the goal of the negotiation is usually not persuading each country to treat foreign persons and companies equal to domestic entities (as when countries agree to lower tariffs against each other’s goods). That goal has already been achieved through IP agreements negotiated under the World Trade Organization framework. All the TPP countries are party to that agreement and are already obliged to treat foreign IP owners on par with their domestic IP owners. Instead, the stated goal of the US, in the TPP, is to ratchet up copyright protection and enforcement in other countries.

The idea is not to achieve a level playing field: it’s to entrench and protect incumbent business models, regardless of the consequences for consumers and new businesses.

If the US’s goal is to encourage innovation and leave breathing room for innovative new businesses to experiment and thrive, it must stop demanding copyright provisions whose only practical effect is to protect existing business models and discourage anyone else from trying something new.

In the copyright space, we have seen how copyright owners can use strong copyright protection and harsh enforcement provisions to chill innovation. Particularly, incumbent distribution intermediaries, like major record labels, have used the copyrights they obtain from the actual artists to stifle the development of upstart distribution competitors. Major labels have used their copyright catalogs to thwart new digital distributors—which would actually benefit musicians by offering them more ways to reach fans—by denying them licenses to large portions of today’s most popular music, or by requiring new distributors to give the labels enormous advances or disproportionately high royalties in return for the licenses.

For example, when the digital music startup Beyond Oblivion filed for bankruptcy this past January, the company owed Sony Music Entertainment and Warn Music Group $50 million each. Note: Beyond Oblivion was forced to shut down before they even launched their service, so the company owed $100 million in advances before a single user had listened to a single song. These types of demands increase barriers to new digital distributions start-ups and discourage investors from funding new distribution companies.

But distributors have to play this game because they can see from the example of companies like Veoh that even if they are not liable for copyright infringement, the costs of litigation may put them into bankruptcy. Veoh, an internet video platform, was sued by Universal Music Group for copyright infringement in 2006. Veoh was ultimately vindicated in court and found not liable for copyright infringement, but by the time the litigation had finished the company had already been forced into bankruptcy due in part to high litigation costs.

This is just one example of how unbalanced copyright laws and unreasonable enforcement measures that fail to respect due process and basic fairness only serve to preserve and promote the power of incumbents instead of allowing new businesses to compete with existing corporate copyright owners.

If the US wants to strike a deal that creates a seamless international market that welcomes new market entrants to thrive in a global marketplace, then the US must consider all interests at stake: incumbent businesses, new businesses, and consumers. Until then, the copyright provisions of the TPP will only work against the negotiators’ goals.

As the TPP negotiations in Dallas continue, Public Knowledge will continue blogging to keep you up-to-date on this important agreement. For more information and updates visit www.tppinfo.org.

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