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NAFTA's Intellectual Property Provisions


NAFTA's Intellectual Property Provisions

Fran Smallson, an Oakland, California attorney specializing in intellectual property and international law, is coauthor of NAFTA: Protecting and Enforcing Intellectual Property Rights in North America (Shepard/McGraw-Hill, 1994).


On December 17, 1992 the leaders of the United States, Mexico, and Canada signed the North American Free Trade Agreement (NAFTA), which contains the most comprehensive multilateral intellectual property agreement ever concluded. NAFTA was initiated on January 1, 1994 and is expected to create the largest free trade zone in the world with an anticipated gross national product totaling over $6 trillion.

NAFTA's intellectual property provisions create the highest legal standards for protection and enforcement of intellectual property ever negotiated. NAFTA provides companies wishing to do business in Canada, Mexico, and the U.S. (and future NAFTA member countries) with the means not only to protect their intellectual property, but also with better laws for doing business in general. Prior to NAFTA, U.S., Canada, and Mexican standards for the protection and enforcement of intellectual property rights differed and inhibited the willingness of companies to risk business ventures in foreign countries.

NAFTA mandates minimum standards of intellectual property protection but does not prevent countries from establishing even higher standards. The Agreement requires each country to treat nationals of other countries in a manner that is no less favorable than that accorded its own nationals. In general, this "national treatment" means that intellectual property owed by a U.S. national and distributed in Mexico and Canada will receive, at a minimum, the same degree of intellectual property protection in those countries as would native products.

NAFTA's scope of intellectual property protection includes copyright, trademarks, trade secrets, and patents. In addition, NAFTA also protects semiconductors, geographical indications, satellite broadcast signals, industrial designs, and sound recordings. NAFTA's benefits are not limited to those industries whose primary goods rely on intellectual property rights protections, but rather for any company that seeks to protect its trademarks, logos, and/or trade secrets.

NAFTA was negotiated with the idea that other countries within the western hemisphere will join the Agreement. Thus, NAFTA will be used as the basis for negotiating with other Latin American and Caribbean nations to enact similar laws.

Copyrights

Copyright law protects original works of authorship that are fixed in a tangible medium. NAFTA addresses the problem of piracy by guaranteeing copyright owners exclusive rights similar to those provided under U.S. law.

Software companies and multimedia developers should be pleased by NAFTA's definition of computer programs as literary works. This definition increases the scope of copyright protection for the software industry in Mexico, where computer programs were previously not specifically defined as literary works. Thus, software will be accorded similar status as novels, plays, and other like works of authorship. NAFTA also provides copyright protection for databases by providing protection similar to that afforded other copyrighted works.

Another important feature of NAFTA's copyright protection includes legal recourse to prohibit the rental of computer programs in both Canada and Mexico. A milestone in NAFTA's copyright protections is that the Agreement provides owners with "rental rights" thus allowing the owner of software to either authorize or prohibit the rental of computer programs. Prior to NAFTA, neither Canada nor Mexico recognized rental rights. This change was particularly important to the U.S. software industry since Canadian "lending libraries" and other entities would "rent" software, which resulted in multiple simultaneous use of software programs without additional revenues to these U.S. manufacturers.

Another significant feature of NAFTA is that new subject matter discovered through technological innovation that qualifies as original expression will automatically receive protection. This provision takes into account the pace of continuing technological change in high technology and multimedia industries and obviates the need to amend NAFTA in the future to accommodate new technologies.

Patents

Generally, patent laws require governments to make patents available to any invention, products, or processes, provided that the invention is new, nonobvious, and useful. NAFTA requires that patents be available for any inventions in all fields of technology so long as they meet the above definition. NAFTA provides such protection for 20 years from the date of filing of the patent, or for 17 years from the date of the patent grant.

The main focus of the patent negotiations centered on Canadian compulsory licensing practices. One of NAFTA's major achievements was to severely limit these practices, which required American and other foreign industries to grant licenses to Canadian companies or individuals to use their patented products. This meant that U.S. manufacturers would only receive set royalties fixed by the Canadian government causing significant loss of potential income for U.S. companies.

Trademarks

Trademarks help the public distinguish and identify goods and services which are known to be from a particular source and are of preferred quality. Trademark law governs the use of a product, service, or tradename. NAFTA's trademark negotiations were not controversial because all three countries generally provided high standards of protection. However, NAFTA did create higher standards in the U.S. as well.

NAFTA harmonized the three members' laws and provided better trademark protection and enforcement especially for famous trade and service marks. Another achievement of NAFTA's trademark provisions was the end of certain special requirements which encumbered the use of trademarks overseas. One such practice is known as "trademark linking," which required that trademarks owned by foreigners be used in conjunction with a trademark owned by a national in that country. NAFTA ended this practice.

Trade Secrets

Trade secret law is designed to prevent the unauthorized use and disclosure of confidential information and to provide owners with a means to seek damages and injunctions. Both Canada and the U.S. have high standards for the protection of trade secrets. One problem for high-tech companies and other industries in trying to conduct international business, however, has been the lack of protection for confidential information in many foreign countries, including Mexico. In addition, various countries place limitations on how long proprietary information can remain confidential. This lack of protection can frustrate development projects and wreck strategic alliances when the disclosure of confidential information is critical to the transaction.

NAFTA is the first international agreement to afford protection for trade secrets. Due to NAFTA, Mexico has comprehensive national provisions for the protection of trade secrets. NAFTA requires each member country to provide legal means to prevent unauthorized disclosure of trade secrets that are in a tangible form. Under NAFTA, countries may not limit the duration of protection of trade secrets or discourage or impede the voluntary licensing of trade secrets. This feature, which is a first for any international agreement, should alleviate some of the reluctance to do business because of the lack of trade secrets protection.

Enforcement

One of the weakest links in the protection of intellectual property has been the lack of enforcement mechanisms. NAFTA is the most far-reaching bilateral or multilateral agreement on the enforcement of intellectual property rights. It establishes detailed obligations for enforcement procedures, provides for cooperation and technical assistance among the member countries, and reflects a heightened awareness of the importance of enforcement of these rights.

NAFTA requires member countries to have enforcement procedures that are similar to those that already exist in the U.S., including general due process, injunctive measures against infringing goods, and payment of damages for injury suffered. It also establishes criminal procedures and penalties in cases of willful trademark counterfeiting and copyright piracy for commercial gain, including imprisonment and monetary fines. Finally, Mexico must adopt procedures for the enforcement of intellectual property rights at the border. These procedures can be based upon either the U.S. administrative system or the Canadian judicial system of border enforcement.


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