January 20, 2016 4:01PM

The TPP’s Fair Use Provision Is a Big Step in the Right Direction

At their core, trade agreements like the Trans-Pacific Partnership improve U.S. and foreign trade policy by reducing artificial barriers to mutually beneficial exchange.  That is, the TPP will bring us freer trade.  Unfortunately, the TPP will bring us other things as well.

For decades, trade agreements have included rules that are not strictly related to trade.  One area where this has become especially controversial is intellectual property.  A number of prominent U.S. industries, particularly movie studios and record labels, benefit immensely from strong copyright protection in the United States and want that same protection afforded in foreign markets.

But including copyright rules in trade agreements is problematic for a number of reasons.  For one thing, when U.S. negotiators press for these rules, they have to compromise on other demands.  The TPP will, for example, require Canada to extend copyright duration from its current length of 50 years after an author’s death to 70 years after death.  But it won’t require Canada to dismantle its protectionist supply management system that keeps out U.S. dairy products to the detriment of Canadian consumers. 

Removing protectionist trade barriers brings broad benefits to businesses and consumers throughout the region.  The same cannot be said for lengthening copyright terms from really long to really, really long.

Despite the inappropriateness of linking copyright policy and trade liberalization, intellectual property rules are likely to be a part of trade agreements into the foreseeable future.  It’s important, therefore, that we get the right rules in place.

Historically, trade agreements have been used to strengthen and solidify only the restrictive parts of copyright law.  Like past agreements, the TPP sets minimum standards of protection, meaning that reform can only go in one direction. 

But a well-functioning copyright system depends on limitations and exceptions that respect the rights of users to interact with copyrighted material in new, creative, and useful ways.  Without a proper balance between creator and user rights, copyright monopolies can actually prevent innovation by restricting the use of old things and inviting government intervention in the market.  Vital components of a just and innovation-maximizing copyright system include limited duration, reasonable penalties for infringement, and exceptions to liability—like fair use

This is where the TPP makes an important and beneficial contribution to copyright rules in trade agreements.  The TPP is the first trade agreement to include a provision calling on members to achieve an appropriate balance in their copyright laws through limitations and exceptions to exclusive rights. 

I explain what's at stake, and why this new provision is such a positive contribution to the TPP, in the new Cato video:

Let's dive into the issue a little bit deeper. Here’s Article 18.66 of the TPP:

Each Party shall endeavour to achieve an appropriate balance in its copyright and related rights system, among other things by means of limitations or exceptions . . . giving due consideration to legitimate purposes such as, but not limited to: criticism; comment; news reporting; teaching, scholarship, research, and other similar purposes.

This provision is the first of its kind in imposing a positive obligation to employ limitation and exceptions and to achieve “balance.”  It’s not as strongly worded (“shall endeavour”) as many of the more restrictive provisions in the TPP, but it is broadly worded enough to form a sound foundation for further progress. 

One very important thing about this provision is that it fits well with current U.S. law, which unlike many other countries, applies fair use as a very flexible concept.  Some specific activities (such as parody, commentary, or criticism) have been consistently recognized as meeting the factors that courts weigh to determine when fair use applies, but there is not a closed list of acceptable uses. 

This means that new types of uses not foreseen by a court or legislature are more likely to be permitted in the United States than in foreign countries that have a less flexible approach to fair use.  There are many reasons why the world’s Internet companies are based in the United States, and a robust fair use exception to copyright is one of them.

The TPP’s provision on copyright balance is an important step toward recognizing that more intellectual property protection isn’t always better.  Together with rules protecting the free flow of data, the copyright balance provision does more to promote economic activity and innovative growth than tweaking foreign copyright regulations.  It also furthers the core value of the TPP as a mechanism to reduce the negative impact of rent-seeking and to liberalize markets.