USTR 301 Report Needs Balance

By Joshua Lamel, Executive Director of Re:Create Coalition

The United States Trade Representative (USTR) will hold a public hearing on March 1 on its Special 301 report, which identifies countries that lack adequate intellectual property (IP) protection or “deny fair and equitable market access to US persons who rely on intellectual property protection.” In past years, Special 301 reports ignored or downplayed market access barriers relating to copyright balance, focusing instead on those due to copyright enforcement. This is despite the importance of copyright balance to the U.S. economy. This year, USTR should listen to the growing number of companies and public interest groups who are advocating for the fullbalance of US copyright law within this report, not just the parts of copyright on which a subset of US stakeholders and creators depend.

This probably all sounds like gobbledygook to the average reader, so let’s first explain what we mean by “special 301 report,” “balanced copyright” and “fair and equitable market access” and why this is so important. The Special 301 report is a report prepared by the U.S. Trade Representative that is meant to highlight countries whose Intellectual Property laws and policies can create problems for U.S. companies doing business in those countries. One such problem is that U.S. companies are struggling for fair and equitable market access. In the past, the 301 report has focused on only intellectual property enforcement as an issue. However, as the Internet economy has grown, there are other aspects of copyright law worthy of consideration. Specifically, these are balancing provisions such as fair use, the first sale doctrine, safe harbors and exemptions to copyright law that are in the public interest.

As the Internet Association highlighted in its Special 301 report filing: “Copyright law in the US does not begin or end with Section 106. It was conceived of and exists as a whole, a whole that includes fair use, exemptions, compulsory licenses, the first sale doctrine, and other provisions that further the public good.” These important components of US copyright law have unleashed the rise of US Internet services and creators as global traders, as one leading Internet scholar points out in his analysis of How Law Made Silicon Valley.

This can be a win-win situation for all stakeholders. Research shows that countries with balanced copyright rules — including fair use, first sale, and safe harbors — generate strong economic growth for both copyright-dependent industries and industries that depend upon copyright limitations and exceptions. Many Internet platforms, online services, creators, and users depend upon balanced IP rights and protections in order to create new content, remix existing content, and build new systems for sharing works. When other countries constrain these rights or fall short of the balancing requirements within US law, it becomes harder for US businesses, start-ups and creators to gain access to foreign markets..

Yet foreign markets lacking similar rights and protections have harmed and constrained the global growth of these expanding platforms, communications services, and creators. For example, Facebook has identifiedthe material risks it faces “in certain jurisdictions outside the United States where our protection from liability for third-party actions may be unclear and where we may be less protected under local laws than we are in the United States.” While some companies may be willing to take on the significant costs and damages associated with unbalanced foreign copyright rules, startups and smaller websites and Internet platforms are more likely to be deterred from entering other markets.

Consider a draft Ukrainian law (highlighted in CCIA’s comments) that would:

  • require site-blocking of entire hosting services and Internet service providers;
  • impose obligations to affirmatively monitor users’ behavior;
  • compel disclosure of personal information about users alleged to have infringed; and
  • require content removal within 24 hours.

If such a law goes forward, what investor in their right mind would support the decision of a new Internet service to expand into the Ukrainian market? Very few. In a recent survey, 89% of US investors in early-stage companies agreed with the following statement: “An ambiguous regulatory framework makes me uncomfortable investing in digital content intermediaries that offer user-uploaded music or video.”

Beyond increased legal risk and decreased investment, creators and service providers have needed and will need to limit features or shut down services in other countries due to a lack of balanced IP. As CCIA points out, countries are increasingly enacting “quotation levies” that “compel search providers and other online services to pay for the ‘privilege’ of quoting from publicly available news publications.” One immediate impact of Spain’s law was Google’s closure of its site and its departure from the market for Spanish news aggregation. Other services such as Planeta Ludico,NiagaRank, InfoAliment, and Multifriki also exited the market.

It is essential that any trade diplomacy from the US avoid painting a one-sided picture of copyright law. For example, in last year’s Special 301 report, “the United States urged India to provide additional protections against online copyright piracy,” without providing any explanation of what balancing factors should be weighed when adopting such rules.

This year, USTR should listen to the voices of Internet stakeholders in compiling its report — both to avoid giving support to unbalanced expansions of IP enforcement rules, and to actively advocate for the full balance of US copyright law by highlighting IP-related barriers that prevent Internet services from reaching a global base of users.

Let’s hope that USTR and the Special 301 Subcommittee are attentive to the new rules of Internet-driven trade and the full spectrum of IP stakeholders.

(As seen on Medium)