New Nafta Pits Silicon Valley Against Hollywood Over Copyright

(Bloomberg) -- Online giants such as Alphabet Inc.’s Google and Facebook Inc. are facing off against Hollywood studios and record labels over how to update the North American Free Trade Agreement to protect copyright in the digital age.

Silicon Valley is pushing for exceptions to copyright rules for online platforms and Internet service providers it says are needed to keep content flowing on the web. Meanwhile, the U.S. government seems to be taking positions favored by companies such as Walt Disney Co. and Time Warner Inc., which are lobbying for stronger protections for copyright owners.

So far, neither side is declaring victory. Industry insiders say haggling over copyright could go down to the wire. While Nafta negotiators meeting this week in Washington are scheduled to discuss digital trade issues, intellectual property isn’t on the agenda, according to a copy seen by Bloomberg News. Negotiators are punting decisions on harder issues into 2018.

The U.S. wants to limit allowances for online use of copyrighted material in Nafta, according to two people familiar with the U.S. proposal. That could upset companies like Google and Facebook, which would see that as less supportive of online platforms than existing U.S. law.

Those so-called fair-use exceptions are seen to shield Google when it posts book excerpts in search results, for example. The U.S. Nafta proposal doesn’t spell out as many exceptions as the Trans-Pacific Partnership, which included the U.S., Canada and Mexico, said the people, who spoke on condition of anonymity because the talks aren’t public. But an entertainment-industry representative said TPP shouldn’t be the benchmark, since it made exceptions for online companies that weren’t included in previous U.S. trade deals.

Safe Harbor

The U.S. proposal also doesn’t offer ISPs the same level of protection they’ve received in past trade deals for unintentionally carrying pirated work over their networks, said two of the people. So-called safe-harbor clauses in U.S. law shelter ISPs from liability as long as they make “good faith” efforts to take down unauthorized work.

Tougher copyright rules would be a win for Hollywood and the music industry, which say their businesses are being ravaged by online piracy. But Internet companies are warning the U.S. position could undermine America’s advantage in digital trade, which accounts for a large part of the nation’s exports in services.

The U.S. Trade Representative’s office declined to comment.

Aggressive Proposals

The copyright debate has flown under the radar as Mexico, Canada and business groups such as the U.S. Chamber of Commerce push back against aggressive proposals by the U.S. aimed at reducing the nation’s trade deficit and rebuilding its manufacturing sector. The talks that began in August have failed to yield a breakthrough on the toughest issues. President Donald Trump has threatened to pull out of the deal if the U.S. doesn’t get what it wants.

Tech industry groups were pleased with the copyright provisions in TPP, a deal with 11 Asia-Pacific nations from which the U.S. withdrew in January. The agreement had committed the nations to striking “balance” in enforcing copyright, and providing safe harbor to ISPs.

America’s leadership in the digital economy and the nation’s digital-trade surplus depends “on policies that put American digital exporters in the best position to succeed,” said Ari Giovenco, director of trade and international policy at the Internet Association, whose members include Google, Facebook, Amazon.com Inc., Microsoft Corp. and Netflix Inc.

Appropriate Limits

In a submission to the U.S. government in June, the Motion Picture Association of America called copyright the “lifeblood” of the film and TV industry and said Nafta, which came into effect in 1994, isn’t equipped to deal with the growth of online commerce. The association cautioned U.S. negotiators against mimicking safe-harbor language in U.S. law, which it said has been erroneously interpreted by American courts. Instead, the U.S. should promote “high-level language” with “appropriate” limits on liability, the group said.

“Creators and innovators should be fairly rewarded for their work,” said Brian Pomper, executive director of Action for Trade, a coalition of trade associations representing companies including movie studios, music labels and pharmaceutical firms that want strong intellectual-property protections in Nafta.

“Canada’s longstanding approach on IP has been to ensure a proper balance between the interests of creators and users of copyright material, with due consideration to a broad range of objectives, including the need to account for the role of Internet third parties,” said Adam Austen, a spokesman for Foreign Minister Chrystia Freeland. The Mexican government declined to comment.

©2017 Bloomberg L.P.

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