On October 1, 2018, the United States, Canada, and Mexico announced that they had reached an agreement to “modernize” the 24-year old North American Free Trade Agreement (NAFTA). When NAFTA came into effect, it created the largest free trade region in the world. Since then, developments in virtually every sector and the advent of cross-border issues such as digital trade, financial data storage, and unfair currency practices have created room for improvement.
The intellectual property (IP) chapter of the new U.S.-Mexico-Canada Agreement (USMCA), in particular, reflects significant updates. While NAFTA included IP provisions – and was, in fact, the first trade agreement to do so – the USMCA reflects a more comprehensive approach to ensuring the United States’ most important trading partners respect and enforce IP rights at a high level.
The IP chapter of the USMCA is largely aligned with the IP terms agreed to by the United States, Canada, and Mexico in the Trans-Pacific Partnership (TPP) negotiations in 2016. Although the United States withdrew from the TPP, Canada, Mexico, and the 9 other remaining TPP countries ultimately adopted a modified version of that agreement, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), in March 2018. The USMCA builds on the updated terms reached by the United States, Canada, and Mexico as part of the TPP negotiations and final CPTPP agreement.
Protection for Undisclosed Biopharmaceutical Product Data
A key issue for the United States during the TPP negotiations was the term of protection provided to undisclosed test or other data concerning the safety and efficacy of biologic pharmaceutical products submitted to a government agency for marketing approval. That type of protection is known as “regulatory data protection,” or RDP. RDP precludes other firms, without the consent of the originally submitting party, to rely on that data to obtain marketing approval for a same or similar product for a specific period of time.
NAFTA provided a five-year RDP period for traditional chemical-based (“small molecule”) pharmaceuticals, but did not address RDP for biologics (medicines made from living cells), which were not yet in widespread development when NAFTA was being negotiated. The United States currently provides five years of RDP for small molecule drugs, and 12 years of RDP for biologics. Canada provides eight years of RDP for both small molecule and biologic medicines, and Mexico currently provides five years of RDP only for small molecule drugs.
The USMCA maintains the five-year RDP period for small molecule pharmaceuticals, but requires at least 10 years of protection for undisclosed test data related to biologics (Article 20.F.14). While this is short of the 12 years currently provided in the United States, it extends the term beyond the eight years of protection currently provided by Canada and agreed to by both Canada and Mexico in the CPTPP. The USMCA provision also provides the United States with a fresh enforcement mechanism, as the biopharmaceutical industry has long been concerned about the effective implementation of existing RDP rules in each partner country. Mexico and Canada both are granted a transition period of five years from the date the USMCA enters into force to fully implement this obligation.
Patentability Standards and Term Restoration
The USMCA reflects international norms by promoting a strong patentability standard for inventions in all fields of technology, including “new uses of a known product.” The agreement also promotes patent protection for small and medium-enterprises through adoption of a one-year grace period (Articles 20.F.1-20.F.2), and cooperation on processing patent applications and sharing search and examination work in each jurisdiction (Article 20.B.4). Similar provisions were previously adopted by Canada and Mexico in the CPTPP.
Inventors will also benefit from adjusted patent terms for “unreasonable” patent office delays, defined as a minimum of five years from the date of application filing, or three years after a request for examination, whichever is later (Article 20.F.9). This is particularly useful for biopharmaceutical patents, where examination typically takes several years. Patent term adjustment is currently provided in the United States, but had been unavailable in Canada and Mexico before each country agreed to provide patent term adjustment as part of the CPTPP.
Patent term adjustment for patent office delays is different than what is commonly referred to as “patent term restoration” for marketing approval time, which is a benefit specific to pharmaceutical products. NAFTA permitted parties to compensate a patent owner for unreasonable delays in the required marketing approval process for a patented pharmaceutical product, but only the United States had actually provided such additional protection before 2017. The USMCA (and the CPTPP) now requires parties to provide protection, equivalent to the rights conferred by the patent, to restore time lost for “unreasonable curtailment” by the marketing approval process (Article 20.F.11). Mexico has an additional transition period of 4.5 years from the date the USMCA enters into force to fully implement this provision.
Trademark and Geographical Indication Protections
The USMCA modernizes traditional protection against trademark infringement by requiring electronic trademark registration systems (Article 20.C.7). The agreement also expands trademark protection by (1) making non-visual marks, like sound and scent, eligible for protection, (2) providing remedies for domain name cyber-squatting, and (3) requiring recognition of geographical indications (GIs) protected under existing trademark regimes or other legal means (Section C, Article 20.E.1). Further, the USMCA adopts a new approach (in line with the CPTPP) in treating GIs as private IP rights, subject to IP rules and enforceable by private parties. This is a dramatic shift from the current global treatment of GIs as superior rights enforceable only by governments.
While NAFTA included limited provisions on the recognition of GIs, the USMCA follows the CPTPP in outlining procedures for both the protection of and cancellation or denial of GIs Articles 20.E.2-20.E.3). The USMCA, however, goes beyond the CPTPP by providing that imports of the product “in significant quantities” from a location other than the one indicated in the GI request is probative of whether the GI may be “customary in the common language” – a basis for denial, opposition, or cancellation of the GI. This gives more ground for common name users to oppose GIs applications related to goods for which there is already extensive cross-border trade. The USMCA does not require the application of these provisions to GIs that have been “specifically identified” and protected in prior international agreements (Article 20.E.7) – an apparent recognition of Canada’s obligations under its October 2016 trade agreement with the European Union. That agreement introduced over 170 new protected GIs for food and agricultural products with no mechanism for opposition.
Trade Secrets Enforcement
The USMCA establishes criminal procedures and penalties for the willful misappropriation or disclosure of a trade secret (Articles 20.I.1-20.I.2). As trade secret protection is not governed by statute or not uniformly covered across sub-national jurisdictions, the USMCA’s provisions – modeled on the United States’ Defend Secrets Act of 2016 and the Uniform Trade Secrets Act adopted by most states – will improve trade secret enforcement to varying degrees.
The USMCA, like the CPTPP, incorporates a copyright term of not less than 70 years after the death of the author (Article 20.H.7). That term of protection, which is the current term in the United States, is less than Mexico’s 100-year term, but extends the 50-year term in Canada (Canada has 2.5 years under the USMCA to implement this change). The USMCA does not include the provision from the CPTPP requiring parties to seek an appropriate balance through exceptions to copyright for legitimate purposes (criticism, news, education) that are also applicable to the digital environment. Also different from the CPTPP, the USMCA is stricter on the type of activity that will be considered permissible – and, thus, not subject to liability and civil and criminal remedies – as a circumvention of “technological protection measures” designed to protect authors’ rights (Article 20.H.11).
Committee on Intellectual Property Rights
While NAFTA had previously required cooperation and technical assistance among the United States, Canada, and Mexico on intellectual property issues, and the CPTPP also specifies that the parties to that agreement must “endeavour to cooperate” on IP commitments, the USMCA goes further in creating a Committee on Intellectual Property Rights (Article 20.B.3). The Committee is required to address a number of matters not previously considered part of IP chapter implementation, including study of the economic benefits to trade arising from the protection and enforcement of IP rights; work toward strengthening border enforcement of IP rights; and establishment of procedural fairness in patent litigation. The Committee will also serve as a vehicle for reaching “a mutually agreeable solution” in connection with a party’s recognition of a geographical indication before such measures are taken – thus, backstopping the United States’ interests in defending against more expansive GI protections.
As the USMCA is unlikely to come into effect until the second half of 2019, at the earliest, the level of implementation and compliance with these IP terms, particularly in Canada and Mexico, will take time to discern. Now is the time for input by stakeholders, including companies, trade associations, and industry coalitions, on the potential effects based on the agreed-upon text – for example, the U.S. International Trade Commission is seeking comment on the likely economic impact of the deal until December 20, 2018. Contact Kelley Drye’s International Trade practice for more information.