ACTA

ACTA is the Anti-Counterfeiting Trade Agreement*.* It is a plurilateral trade agreement governing the enforcement of intellectual property (IP) rights that has been negotiated by the governments of several countries including Canada. These countries were seeking to establish international standards for the enforcement of intellectual property rights in order to fight IP piracy and trade in counterfeit goods.   Counterfeit goods are faked merchandise and include imitations of pharmaceuticals, food products, automotive parts, and consumer goods such as electronics. Pirated goods are unauthorized copies of copyright material such as music and software.

The governments of Australia, Canada, the members of the European Union (E.U.), Japan, Mexico, Morocco, New Zealand, the Republic of Korea, Singapore, Switzerland, and the United States (U.S.) negotiated ACTA. Other countries, including developing countries, will be invited to sign on to the agreement.   In fact, Wikileaks documents suggest that ACTA is primarily intended for developing countries and emerging economies such as China which are perceived to be key sources of pirated and counterfeit goods.

Japan proposed the idea of an international IP enforcement treaty at the second “Global Congress on Combating Counterfeiting and Piracy” in 2005. At the 2006 meeting of the G-8 Group in Russia, the G-8 member countries issued a statement affirming their commitment to combating piracy and counterfeiting and agreeing to undertake measures in support of this goal. One measure was to explore the possibility of strengthening the international legal framework for the enforcement of intellectual property rights.   In 2006 and 2007, the U.S., Japan, the E.U., Canada and Switzerland undertook preliminary discussions. In October 2007, these countries, as well as South Korea, Mexico, and New Zealand announced plans to negotiate ACTA. Official negotiations were launched in June 2008, in Geneva, Switzerland. In total, twelve rounds of formal negotiations were held between 2008 and October, 2010. A subsequent meeting was held in December 2010 to ensure the text followed appropriate treaty drafting conventions. The French and Spanish versions of the document are being finalized.  

Negotiators have stated that the purpose of the Agreement is to establish international standards for enforcing intellectual property rights, in order to fight piracy and counterfeiting more efficiently and effectively. The negotiators have also stated that the agreement is intended to focus on large-scale infringement and is not intended to negatively affect consumers. It is not intended to interfere with a member country’s ability to respect its citizens’ fundamental rights and civil liberties.

Supporters of ACTA state that enhanced enforcement of IP rights is necessary because piracy and counterfeiting have negative economic as well as health and safety impacts, and there are indications that these activities are growing.

The sale of fake goods reduces the sales of legitimate goods, costing legitimate businesses and workers revenues and jobs. Counterfeit pharmaceuticals, food products, cosmetics, toys and other imitation products can pose risks to consumers, since they may not meet the same safety standards as the genuine articles. Counterfeit music CDs, DVD movies and software are a less serious risk, but still often do not meet the quality standards of most consumers. Finally, the sale of pirated or counterfeit goods can provide an easy source of funding for organized crime.

Counterfeiting and piracy is illegitimate and organizations involved in these activities do not tend to report the nature and size of their activities. It is, therefore, very difficult to accurately measure the extent of the problem and its economic impact, and a wide range of estimates can be found. The OECD’s Project on Piracy and Counterfeiting has issued several reports on the impact of IP infringement. However, the methodology has been critiqued for offering only a ‘best guess’ of the impacts of piracy and counterfeiting rather than a reliable measure.   ‘Pro-IP rights’ groups (like the ones who have been lobbying for ACTA) and law enforcement agencies have published their own estimates of the extent of piracy and counterfeiting, as well as the economic impacts. However, these reports have been critiqued for adopting methodologies that overstate the impact of piracy and counterfeiting. For example, the Business Software Association’s reports assume that consumers of pirated software would switch to legitimate copies, where the reality is that many consumers would refrain from purchasing legitimate copies because of the higher cost.   In Canada, a 2005 report by the RCMP estimated the cost of intellectual property crime to the Canadian economy at $10-30 billion, but this figure was later discredited as originating from industry sources. The RCMP’s most recent report avoids quantifying the value of IP crime. A 2007 report by the Ontario Chamber of Commerce estimating the cost of counterfeiting in Canada at $22.5 billion was criticized for using poor statistical techniques.

Organizations that represent intellectual property rights holders are supportive of the Agreement. For example, the International Trademark Association, the Entertainment Industry Guild Union, the U.S. Chamber of Commerce, and the Business Software Association have all issued letters or statements in support of the Agreement.

Many public interest groups, law professors, and law makers oppose ACTA.  Their principal concerns are, first, that ACTA establishes new rights and higher degrees of IP protection and enforcement than is required by current international agreements governing IP rights, despite the fact that negotiating parties said that ACTA would not set out any new rights. They are also concerned with the secrecy and speed of the negotiations, as well as the possible threat to fundamental civil rights that the agreement represents in their view.

The negotiations were conducted behind closed doors, and negotiation texts were kept secret until very late in the negotiating process. Draft versions of the Agreement were not released to the public until after the 8th round of negotiations, following a petition which sought publication of the text, and the circulation of a leaked version of the text. Public interest organizations were of the view that participating governments did not sufficiently consult with the public, particularly in light of the fact that large corporate rights holders had access to the ACTA documents as members of advisory committees to the U.S. Trade Representative.   Several governments, including the Canadian government, indicated that it is standard practice not to release negotiating texts to the public at large while negotiations are underway. The EU stated that negotiations were not public for reasons of efficiency, and pointed out that the negotiating parties publicly announced their intention to start negotiations, never attempted to conceal the goals of the Agreement, and always issued press releases following each round of negotiations. The U.S. stated that the negotiations, and the text, were kept secret for national security reasons.

Public interest organizations expressed concern that the rapid pace of negotiations reduced the opportunity for open and thoughtful debate - especially since many important stakeholders were effectively excluded. International agreements usually take many years to negotiate. In the case of ACTA, a U.S. trade official indicated that they hoped to complete the agreement in just over one year of negotiations. A European Commission budget draft suggested that Europe expected to begin implementing the treaty in 2009. During the round of negotiations held December 15-17, 2008, participants resolved to complete the agreement as soon as possible. All told, the negotiations took three years to complete.

Public interest organizations, law professors, and members of the European Parliament were concerned that some proposals would negatively impacts freedom of expression and the right to privacy. For example, early drafts called for a graduated response or “3 strikes” provision whereby Internet Service Providers (ISPs) would be required to terminate the internet account of suspected infringers after several alleged infringements. Early drafts also called for a provision which suggested that citizens could be subject to search and seizure of their personal computers and portable devices if they contained unauthorized copies of copyright material. These proposals were dropped prior to the final agreement. However, the final agreement contains provisions on the sharing of information between countries. These provisions may negatively impact on individual civil liberties and privacy rights (see below).

ACTA establishes a new international legal framework for the enforcement of IP rights, and a new governing body for the Agreement. As a result, ACTA will be implemented separately from the principal international forums for IP issues such as the World Intellectual Property Organization (WIPO), the World Trade Organization (WTO) and the World Customs Organization (WCO), to which all ACTA parties are currently members. The member states of these organizations have already negotiated agreements which set out international norms for trade-related intellectual property concerns. The most recent and important of these agreements are the WTO Trade-Related Aspects of Intellectual Property (TRIPS) agreement, the WIPO Internet Treaties, and the Johannesburg Convention on customs cooperation.

Negotiating parties pursued an autonomous arrangement for ACTA because, according to the U.S., an agreement that was independent of a particular organization was the “appropriate means to pursue the project among interested countries.” The EU stated that the arrangement provided “flexibility” and that "the membership and priorities of those organizations (G8, WTO, and WIPO) [were] simply not the most conducive to this kind of path breaking project.

Critics claim that the arrangement is an attempt by the participating countries to impose stricter rules than could ever be agreed upon in multi-lateral forums, in which developing countries have a greater say. By way of example, the WTO’s most recent negotiations have been labeled “the development round”, and WIPO is implementing a development agenda. Others make a similar argument that civil society groups have a presence in WIPO, WTO and WCO negotiations, whereas in ACTA, civil society was marginalized and only business interests had a prominent voice. As will be highlighted below, critics charge that ACTA does establish new rights beyond those provided for in TRIPS.

ACTA consists of a three-pronged approach to intellectual property rights enforcement: a common legal framework, standardized enforcement practices, and norms for international cooperation. The Agreement consists of a Preamble and six sections which set out the parties’ commitments and obligations under each of the three prongs.

The Preamble sets out statements on the various challenges of counterfeiting and piracy that the parties seek to address. It recognizes the need to support the international enforcement of intellectual property rights and to cooperate with relevant international organizations. It recognizes the Doha Declaration on the TRIPS Agreement and Public Health, and it recognizes the need for parties to respect their laws protecting privacy rights. The Preamble is not binding on the parties, but it will provide a contextual backdrop for the specific obligations outlined in the agreement.   Critics observe that the Preamble fails to recognize the limitations and exceptions to exclusive intellectual property rights which are found in many treaties and agreements dealing with intellectual property rights, including TRIPs, the WIPO Copyright Treaty, and the Berne Convention for the Protection of Literary and Artistic Works. They also point out that the Preamble contains a statement promoting cooperation between rights holders and service providers to address infringement in the digital environment. This statement implicitly supports the graduated response/”three strikes” arrangement described above.

Chapter Two of ACTA sets out the legal means to enforce IP rights that member countries will be required to adopt. The chapter requires member countries to offer new and more extensive legal measures to enforce IP rights. It includes general obligations, civil enforcement measures, border measures, criminal enforcement measures, and enforcement measures for IP infringement in the digital environment.   General Obligations: Member countries will be required to provide:  

• Enforcement procedures that will permit effective action against any IP infringement covered by ACTA, including remedies to prevent and deter infringement;
• Fair and equitable procedures which are not unnecessarily complicated and do not entail unwarranted delays;
• Proportionality between the seriousness of the infringement, third party interests, and the applicable measures, remedies and penalties.

Civil Enforcement: Member countries will be required to provide their judicial authorities (usually their courts) with the authority to:  

• Order interim measures such as injunctions or the seizure of goods, materials, or evidence from both infringing parties and third parties;
• Order infringers to pay damages, including pre-established damages or any legitimate value submitted by the right holder including recovery of potential lost profits;
• Order infringers to order the losing party in a court action to pay court costs or fees, lawyers fees and other expenses provided for in domestic law;
• Order the destruction of pirated or counterfeit goods as well as the tools used to make the goods;
• Act without delay in ordering interim measures, including hearing, in private, from only of the parties (the party alleging an infringement) where appropriate.

ACTA supporters are of the view that interim measures are necessary to protect legitimate markets for IP protected goods, that payment of damages, lost profits, and court costs are necessary to deter infringers, and that private hearings are necessary to prevent infringement or the destruction of critical evidence of infringement.   Critics of the agreement suggest that these provisions establish a “TRIPs plus” framework: in contrast to TRIPs, ACTA allows for interim measures against third parties such as ISPs; ACTA favours rights holders at the expense of other stakeholders in the awarding of damages because the calculation of damages, in particular lost profits, is extremely difficult to calculate and often inflated; and ACTA requires the awarding of lawyers fees against the losing party, regardless of any special circumstances.     Border Measures: Member countries will be required to ensure that their laws will:

• Include small consignments of a commercial nature within the scope of this section of ACTA, but exclude from liability small quantities of a goods of a non commercial nature in travelers’ personal baggage;
• Provide customs officials with the authority to seize import and export shipments of goods at the border on their own initiative and based on their own judgment, as well as on request of a rights holder;
• Provide customs officials with the authority to disclose to rights holders information about shipments of goods as well as contact information for the importer, exporter or manufacturer of the suspected goods, to assist in the determination of infringement;
• Include provisions to ensure that infringing goods aren’t released without the rights-holder’s permission;
• Provide procedures for rights-holders to request that goods they suspect are infringing be suspended from entry into the country;
• Provide procedures by which competent authorities may determine whether suspect goods infringe IP rights within a reasonable period of time.

ACTA supporters are of the view that these measures are necessary to improve the detection and removal of infringing goods at the border. Currently, in Canada, rights holders must be aware that a particular shipment may contain infringing goods and obtain a court order to detain suspect goods; border officials may suspect a shipment is infringing but are unable to notify rights holders of the shipment or the identity of the suspected infringer, or stop the shipments of their own initiative; and infringers may ship infringing goods in multiple small quantities to avoid detection. Critics argue that it is inappropriate to require customs officers to decide what goods are or aren’t infringing – this is the job of courts. ACTA enhances TRIPs protection because TRIPs permits, but does not require member countries to allow customs officers to act on their own initiative to seize goods. While TRIPs requires border officials to have some evidence that an IP right is being infringed, ACTA lowers this burden of proof. Finally, by providing border officers with the power to seize goods of their own initiative, critics are of the view that private rights holders have effectively transferred to public authorities the burden and costs associated with protecting their IP rights.   Criminal Enforcement: Member countries will be required to ensure that their laws will:  

• Impose criminal sanctions on, at minimum, willful trademark counterfeiting and copyright piracy activities, including importation, where these are undertaken on a commercial scale.;
• Impose criminal sanctions on aiding and abetting the offences outlined in this section;
• Impose liability on legal persons (e.g. corporations) for the offences outlined in this section;
• Contain penalties including imprisonment as well as monetary fines sufficiently high to provide a deterrent effect;
• Provide the relevant state authorities with the ability to allow the seizure and destruction of infringing goods, and the equipment used to make them;
• Provide the relevant state authorities with the ability to seize assets directly or indirectly derived from or obtained through the infringing activity;
• Provide the relevant state authorities with the ability to charge individuals with infringement and take authorized actions without a complaint by the rights holder.

ACTA supporters are of the view that criminal sanctions and penalties are necessary to punish and deter, at minimum, commercial scale IP infringing activities.  Critics of ACTA contend that the agreement expands the scope of criminal behaviour and the remedies available for criminal acts beyond that agreed to in TRIPs, in particular because ACTA adopts an expansive definition of “commercial scale” - commercial scale is defined as “commercial activities for direct or indirect economic or commercial advantage”. There is concern that “indirect advantage” may include, for example, the revenues that a shipping company earns by unknowingly shipping infringing goods, advertising revenues derived from infringing goods, or simple interference with commercial revenues. ACTA allows criminal authorities to act without a complaint from rights holders which also exceeds TRIPS. Finally, the imposition of criminal sanctions on aiding and abetting, combined with the provision of liability on legal persons, will allow for the criminal prosecution of companies such as Google or Facebook, for infringement by their members.      Enforcement in the Digital Environment: Member countries will be required to:  

• Ensure that the civil and criminal enforcement procedures they adopt permit effective action against IP infringement in the digital environment,
• Provide that enforcement procedures apply specifically to the infringement of copyright and related rights over digital networks, which may include unlawful widespread distribution for infringing purposes;
• Promote cooperative efforts within the business community to address copyright and trademark infringement while preserving fundamental principles including freedom of expression, fair process and privacy;
• Provide legal protection and remedies against the circumvention of digital security measures adopted by rights holders (digital locks and digital rights management information);
• Provide legal protection against the manufacture, importation, or distribution of devices or services that are primarily designed or produced to circumvent TPMs and have limited other commercial purposes.

ACTA supporters are of the view that enforcement procedures must apply specifically to the digital environment. They consider it necessary to adopt legal tools tailored to the specific challenges of the digital environment, given the ease with which copyright material can be interfered with, copied and shared on a large scale.   Critics are of the view that the provision requiring parties to encourage cooperation in the business community to address copyright and trademark infringement on the Internet is a thinly veiled attempt to encourage parties to adopt a graduated response / “three strikes” approach. They point out that the anti-circumvention measures provide rights holders with a new set of rights distinct from copyright. These measures give rights holders a new exclusive right to control access to works, as well as to control copying. Critics point out that copyright was intended to facilitate access to works, not to limit it. They also point out that this measure overrides the exceptions to, and limitations on copyright, such as fair dealing (e.g. the ability to copy a work for). Thus, even if a consumer wants to make a copy of copyright material for the purpose of research or private study, criticism, review or news reporting, they will infringe the ant-circumvention rules if they break the digital lock in order to do so.

Chapter Three sets out practices that the parties will promote in order to enforce the law more effectively. Member countries will be required to:  

• Encourage the development of specialized expertise within its authorities responsible for IPR enforcement;
• Promote the collection and analysis of statistical data and information concering IP infringement, as well as information on best practices to prevent and combat infringement;
• Promote domestic coordination and joint actions by its authorities responsible for IP enforcement;
• Promote formal or informal mechanisms to hear the views of rights holders and other stakeholders where appropriate;
• Consult stakeholders and other ACTA parties to identify and mitigate the risks of IP infringement at the border
• Share appropriate information with ACTA parties to better identify and target shipments for inspection;
• Promote transparency in IPR enforcement by making information available on laws, regulations, judicial decisions, procedures, contact points pertaining to IPR enforcement.
• Promote measures to foster public awareness of the importance of IPR as appropriate.

ACTA supporters are of the view that these practices are necessary to effectively implement the new legal tools to fight IP infringement provided by Chapter Two.   Critics are of the view that these enforcement practices will increase the costs of enforcement that must be borne by the public, not the rights holder. Directing public resources toward enforcing private intellectual property rights will necessarily mean sacrificing efforts directed towards other areas, such as dangerous crimes. Furthermore, the benefits of these expenditures will mostly accrue to private rights holders such as large entertainment, software and luxury goods companies, rather than benefiting society as a whole. Critics are concerned that the provisions relating to information sharing will violate privacy laws.  

Chapter Four of ACTA sets out the international cooperation efforts that member countries will be required to undertake. These efforts focus on cooperation between law enforcement officials and include sharing of best practices, cooperative training and sharing of information.   Supporters are of the view that better cooperation will improve countries’ ability to catch and punish IP infringers. Critics are concerned that when information is shared with foreign governments, individuals face increased risks that their civil rights may be violated. For example, individuals could be stopped at a border crossing if they have been investigated for copyright infringement at home. There is also concerned that obligations under ACTA will clash with domestic privacy and copyright laws, such as Canada’s private copying levy.

The Agreement establishes an ACTA committee, which will consist of representation by each member country. The Committee will review the implementation of the agreement, approve new Parties to the Agreement as well as the terms by which they become parties, and consider any issue which affects the implementation and operation of the agreement.   The Committee may also establish ad hoc working groups on particular issues, seek outside advice, make recommendations relating to the Agreement, share information with third parties, and adopt the rules and procedures to manage the Committee. The Committee will make all decisions by consensus unless the Committee decides otherwise.   ACTA does not provide for a formal dispute resolution mechanism. However, it provides that where any issue arises regarding the implementation of the Agreement, a party may request consultations with another Party, and the responding party must provide a response.   

The government of Canada provided few details about its involvement. Leaked documents indicate that Canada was actively involved in debating specific provisions of the agreement. The position taken by Canadian negotiators on some issues was moderate compared to the EU and the USA. For example, Canadian comments in the leaked documents frequently proposed modifying the agreement so that provisions affecting domestic judicial authority and institutions use permissive rather than mandatory language. Canadian negotiators also took the position that the IP rights protected by the agreement should be restricted to copyrights and trademarks. Other Canadian proposals included establishing an observer role for civil society groups in the administration of the completed agreement.

In early 2008, the Department of Foreign Affairs and International Trade Canada (DFAIT) solicited submissions from the public regarding ACTA, but it is not known to what extent DFAIT relied on any responses. In June 2008, DFAIT issued a set of FAQs on ACTA. In November 2009 the Department issued a Summary of the key elements under discussion. Throughout the negotiations, DFAIT issued the Agendas for each meeting as well as the Joint Statement agreed by the parties at the end of each negotiating session.   On April 6, 2009, DFAIT held a roundtable consultation with a variety of stakeholders including public interest groups. During that meeting, government officials committed to pushing for greater transparency in the negotiations, including the release of the text of the agreement. However, the U.S. consistently opposed transparency.

While some countries were secretive about their involvement in ACTA, others were more open. Australia engaged in a public consultation process in late 2007, before negotiations commenced. New Zealand solicited early submissions and announced that it would hold public consultations after the final text of the agreement became available and before the government made a decision whether to ratify it or not.   As noted above, the U.S. provided access to ACTA documents to representatives of IP intensive corporations and industry associations who were members of advisory councils to the U.S. Trade Representative.    As the negotiations continued, the negotiating parties undertook some consultation with civil society representatives. At the outset of the 9th round of negotiations in Lucerne, Switzerland, the Swiss government hosted meetings with representatives of civil society to exchange views and during the 10th round of negotiations in Washington, the U.S. hosted informal meetings with stakeholders, representatives from non-governmental organization (NGOs), business leaders and the participants in the ACTA negotiating round.

The negotiating parties are finalizing the French and Spanish versions of the Agreements. Once the agreement is official in all three languages, the parties will establish a timeframe for signing the agreement. Once a minimum number of countries have signed the Agreement, it will become active as between these countries, as well as other countries once they sign on.   In the meantime, a number of countries have been consulting with stakeholders on the Agreement. Australia held three rounds of consultations in November, 2010; the US invited submissions until February 2011. In Canada, the Standing Committee on Canadian Heritage was to hold hearings on the agreement in March 2011.