Damages, Injunctions and Transparency key issues in ACTA negotiations

The decision to restart the ACTA negotiations makes it important to understand the nature and consequence of proposed agreement. Following a complaint about transparency, this note focuses on damages and injunctions.

1. It is astonishing that the US Congress, the Obama Administration, the EU Parliament, the European Union and its 27 member states, Australia, Canada, Japan, Mexico, Morocco, New Zealand, Singapore, South Korea, and Switzerland all think it is normal and acceptable to negotiate a global treaty on IP enforcement in secrecy, with no public access to proposed treaty texts, no transparency of the names of the country negotiators, and no ability of the public to attend negotiating meetings. It is as if years of pushing for transparency in multilateral fora is suddenly irrelevant. It surprising and discouraging USTR still defends the US system of clearing text for well connected corporate lobbyists, but keeping the public in the dark.

2. Based upon leaked documents, ACTA is proposing sweeping changes in the damages from intellectual property infringements. The norms for damages in TRIPS include Article 45, which include “damages adequate to compensate for the injury,” or “adequate” compensation or remuneration, in Article 44.2. Compare this to the more aggressive language proposed for ACTA.

Damages
(b) in determining amount of damages for infringement of intellectual property rights, its judicial authorities shall consider all appropriate aspects, inter alia, the lost profits, the value of the infringed good or service, measured by the market price, the suggested retail price, or other legitimate measure of value submitted by the right holder.

Such measures [Option J: shall][Option US: may] include the presumption that the amount of damages is (i) the quantity of the goods infringing the right holder’s intellectual property right and actually assigned to third persons, multiplied by the amount of profit per unit of goods which would have been sold by the right holder if there had not been the act of infringement or (ii) a reasonable royalty or (iii) a lump sum on the basis of elements such as at least the amount of royalties or fees which would have been due if the infringer had requested authorization to use the intellectual property right in question.

Why are damages important? You might ask Microsoft, which was paying $.04 per copy of Microsoft office for patent infringement, instead of the $2 per copy demanded by the patent owner. Or DirectTV, which pays $1.60 per set top box, or Toyota which pays $25 per Prius hybrid automobile, how those cases would have turned out under the ACTA standards. Or ask Google about its liabilities for youtube or Google Books. Or ask Marybeth Peters about ACTA and the US proposals for Orphan Works legislation, which depend upon a more reasonable standard for damages.

The issue of damages is very complicated, and it is dangerous to set simple-minded global norms. Standards that might make sense in one context may give an unjust or inappropriate result in another. We are aware of no analysis whatsoever by any government to justify changes in the TRIPS standards. Neither the USTR nor DG-Trade even think they are under any obligation to justify their positions with any type of analysis or evidence.

Obvious example of the bias, judicial authorities would be required (shall) to consider “other legitimate measure of value submitted by the right holder.” Missing from the proposed standard is a requirement to listen to the party who has to pay the damages.

By ratcheting up the liability for damages of intellectual property right infringements, the ACTA will reduce innovation in some important areas, particularly where products are complex and involve multiple patents (particularly software and information technologies, some medical devices such as new diagnostics for TB, HIV or Hepatitis C, new energy efficient automobiles, etc), where great uncertainly exists regarding the scope or validity of patent claims, where user generated content will often involve infringing copyrighted works, or where there is uncertainly regarding the extent that fair use extends to new innovative services such as search engines or distance education, or where the line between personal uses of products and commercial infringement is drawn (Tivo, Text-to-Speech in electronic book readers, backup devices, etc).

3. There is also the issue of injunctions.* They are not required under Article 44.2 of the TRIPS, where governments can completely eliminate injunctions if there is a system of “adequate” compensation or remuneration in place. This important flexibility in TRIPS would be eliminated in the most recent leaked ACTA text.

Article 2.7: Injunctions
Each Party shall ensure that, where a judicial decision is taken finding an infringement of an intellectual property right, the judicial authorities may issue against the infringer an injunction aimed at prohibiting the continuation of the infringement. Where provided for by domestic law, non-compliance with an injunction shall, where appropriate, be subject to a recurring penalty payment, with a view to ensuring compliance. The Parties shall also ensure that right holders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right.

Why is this important? Well, ACTA would make a half dozen US statutes illegal, including 28 USC 1498 and laws involving nuclear power and newspapers. It would force Canada to make injunctions apply to infringements of architectural works after buildings are under construction. It would run counter to the proposals by the US Library of Congress to deal with orphan copyrighted works.

If applied to all intellectual property, ACTA would also override Article 37 of the TRIPS, which prohibits the use of injunctions in cases involving certain infringements of integrated circuit layout-designs, and it would require changes in some national rules on certain industrial designs. There is also no exemption for goods in transit.

The possibility of obtaining an injunction is provided for in Article 44.1 of the TRIPS, and would continue to be consistent with many judicial decisions (subject to the related and important proposed changes in damages). But Article 44.2 of the TRIPS sets out the rule for cases where injunctions are not an option under national law. It is not a technical detail to eliminate the flexibility of Article 44.2 of the TRIPS. Neither the USTR or DG-Trade have investigated the degree to which the change would require changes in state practice.