The Trans-Pacific Partnership and IP Crimes

By Professor Jeffery Atik

True, we know little about the current form of the draft Trans-Pacific Partnership -- a regional trade agreement to involve the United States and ten other countries (Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam) -- but we can be certain that TPP will include an Intellectual Property chapter with a battery of TRIPS Plus features. We can get a hint at the IP content of an eventual TPP -- or at least at the negotiation goals of the United States -- by examining the IP provisions of recent U.S. Free Trade Agreements such as those concluded with Peru, Panama and South Korea. Or we could look back at the recently concluded ACTA, now abandoned by the European Union, one of ACTA's principal sponsors. Or we can look at the text of a leaked draft that may or may not be accurate. So let's apply all three approaches to create an amalgam for conversational purposes -- and explore the criminalization mandates found in the leaked TPP draft.

TRIPS introduced criminalization obligations to the international IP system. With the passage of years, these provisions are regarded as inadequate by crucial U.S. IP constituencies (along with TRIPS' enforcement more generally). The United States has included expanded criminalization mandates as part of its TRIPS Plus program. Additional activities are subject to criminal liability under the terms of recent FTAs and ACTA and in the leaked TPP draft.

Article 15.1 of the leaked TPP draft echoes TRIPS Article 61: "Each Party shall provide for criminal procedures and penalties to be applied at least in cases of willful counterfeiting or copyright or related rights piracy on a commercial scale." Ignore for a moment the insertion of the phrase "or related rights." The TPP leaked draft tracks the first sentence of TRIPS Article 61 word-for-word, including the problematic "on a commercial scale" limitation. It also replicates the language found in the recent FTA entered into with South Korea.

The WTO panel in China - Enforcement of IP Rights rejected the U.S. arguments that the phrase "on a commercial scale" should be read expansively. A willful infringer, argued the United States, engaged in commercial activities in order to make a "financial return" is by definition operating "on a commercial scale". Not so, decided the panel, as the U.S. position effectively eliminates the notion of "scale" in this interpretation of "on a commercial scale." While a WTO panel report lacks the force of a report of the Appellate Body, it is certainly the best guidance as to what the phrase "on a commercial scale" means, at least as used in TRIPS Article 61. And so it may be a surprise to find the troublesome phrase "on a commercial scale" retained in the TPP draft.

The leaked TPP draft restores the unsuccessful interpretation advanced by the United States in the China - Enforcement of IP WTO dispute. Within TPP (though not within TRIPS) '[w]ill full copyright or related rights piracy on a commercial scale' includes 'willful infringements for purposes of commercial advantage or private financial gain.' Note that TPP requires that any infringement (beyond de minimis) pursued for commercial advantage be criminalized. Note especially the use of the more easily tripped "infringements" replacing the term "piracy" used in the first sentence. Again, this is the same language found in the South Korea FTA, and hence would introduce no new obligations on the United States.

Further, the TPP draft also provides that "significant" willful infringements constitute piracy "on a commercial scale" even when there is no motivation of financial gain. Thus, TPP arguably turns a cumulative requirement (that the piracy be commercial in both object and scale) into two independent prongs: commercial object without regard to scale or commercial scale without regard to object.

Intriguingly, the bifurcated interpretation of the "on a commercial scale" limitation found in the TPP draft only applies to copyright infringement, and not to trademark counterfeiting. In contrast, the interpretive fix found in ACTA [... "acts carried out on a commercial scale include at least those carried out as commercial activities for direct and indirect economic or commercial advantage" ...] appears to apply to both copyright and trademark offenses. This puzzling limitation to copyright offenses is too found in the South Korea FTA. This permits an interpretation that the "on a commercial scale" limitation applies only to copyright offenses -- and that offenses involving trademark counterfeiting should be criminalized regardless of scale. This would certainly surprise the WTO panelists in China - Enforcement of IP, who clearly understood the TRIPS Article 61 "on a commercial scale" limitation to apply to both trademark and copyright offenses.

This is the second in a series of posts "IP Crimes in a TRIPS-plus World." The first was "Revisiting China's IP Conviction Thresholds."

Follow the author on Twitter @jefferyatik. The author wishes to thank Christina Perrone for research assistance.