Updated January 6 2020 USMCA Intellectual Property Rights IPR Background The United States-Mexico-Canada Agreement USMCA is a proposed free trade agreement FTA negotiated among the three parties to update and replace the 1994 North American Free Trade Agreement NAFTA On November 30 2018 President Trump and the leaders of Mexico and Canada signed USMCA Congress would need to pass the legislation to implement the agreement before it can enter into force On December 10 2019 the three countries agreed to a protocol of amendment to the USMCA which affects some IPR provisions USMCA would make notable changes to NAFTA provisions on intellectual property IP —creations of the mind embodied in physical and digital objects IPR are time-limited rights that governments grant to inventors and artists to exclude others from using their inventions and creations without permission IP is a key source of U S comparative advantage advancing IPR protection globally has been a U S trade negotiating objective since 1988 P L 100-418 IPR trade agreement provisions were first included in NAFTA and subsequently the World Trade Organization WTO Agreement on Trade-Related Aspects of Intellectual Property Rights TRIPS The 2015 Trade Promotion Authority TPA P L 114-26 retains prior U S trade negotiating objectives for U S trade agreements to “reflect a standard of protection similar to that found in U S law” “TRIPS-plus” and adds new objectives to combat cyber theft and protect trade secrets Select IPR Provisions in USMCA Several provisions in USMCA reflect new or updated issues not in current U S FTAs including the following Internet Service Providers ISPs Establishes flexibilities to address ISP copyright liability Geographical indications GIs Requires administrative procedures for recognizing and opposing GIs which protect distinctive products from certain regions including guidelines for determining “common” names Also includes transparency and due process procedures for GIs that parties protect through international agreements Trademarks Extends trademark protection to sounds and “collective marks” and removes administrative requirements to enable easier trademark protection and enforcement Trade secrets Requires criminal procedures and penalties for trade secret theft including cyber theft clarifies that stateowned enterprises must protect trade secrets Enforcement Extends IPR enforcement to the digital environment IP-intensive goods and services are an important part of U S trade with Canada and Mexico The United States has expressed concern over certain IPR policies in both countries in recent years IPR Chapter of USMCA The IPR chapter aims to support technological innovation to benefit both producers and users while promoting a balance of rights and obligations It is enforceable through government-to-government dispute settlement General obligations include upholding international agreements and providing “national treatment”—not discriminating against foreigners on IPR Some provisions in the IPR chapter have phase-in periods for Canada and Mexico IPR issues also arise in the USMCA investment chapter as a form of investment IPR benefits from USMCA investor protections See CRS In Focus IF11167 USMCA Investment Provisions by Christopher A Casey and M Angeles Villarreal Patents Patents protect new inventions such as pharmaceutical products chemical processes business technologies and computer software USMCA defines patentable subject matter as new products and processes Patent protection for new uses methods or processes of a known product were included in the USMCA but were removed by the amendment Under TRIPS patented inventions must receive a minimum term of 20 years of protection USMCA requires adjustments of patent terms for “unreasonable” delays in the patent examination or regulatory approval processes “Unreasonable delays” include a delay of more than five years from the date of filing or three years after a request for examination of an application whichever is later USMCA includes a notification system and procedures e g judicial or administrative proceedings to assert patent rights or to challenge a patent’s validity These procedures are more flexible than “patent linkage”—a provision common to many prior U S FTAs whereby regulatory authority cannot grant marketing approval to a generic drug without the patent holder’s permission Regulatory Exclusivities Some USMCA provisions specific to pharmaceuticals aim based on U S trade negotiating objectives to “encourage innovation and access to medicine ” Yet debate exists on whether USMCA appropriately incentivizes research and development for new medicines while also allowing affordable access to medicines through market entry of generic medicines In USMCA the debate has centered on regulatory exclusivity for biologic drugs—drugs made from living organisms see figure below Unlike most patented products pharmaceuticals must go through a regulatory approval process before they can be marketed Patent holders generally brand-name drug companies must submit test data to the regulatory authority—the Food and Drug Administration FDA in the United States—to make the case for a drug’s safety and effectiveness The market approval process runs https crsreports congress gov USMCA Intellectual Property Rights IPR concurrently with any applicable patent term Thus the monopoly protection afforded by the patent term effectively is shortened by the time it takes for marketing approval A follow-on pharmaceutical such as a generic drug or biosimilar biologic can obtain approval via an abbreviated process by relying upon the test data generated to support approval of the reference brand-name drug To balance interests in competition while encouraging innovation federal law establishes periods of exclusivity that limit FDA’s ability to approve marketing applications for followon pharmaceuticals under certain circumstances Regulatory exclusivity prevents a competing firm from relying on the reference product’s data to obtain regulatory approval of a generic drug or biosimilar for a set period of time In practice regulatory exclusivities may delay the development of the generic product during that time which may overlap with or in some circumstances run beyond the expiration of any applicable patents For chemical drugs U S law provides a general exclusivity period of 5 years which U S FTAs post-NAFTA have incorporated U S law currently provides a 12-year period of exclusivity for biologic drugs USMCA as originally negotiated would have required a period of protection of at least 10 years however this provision was dropped in the Amendment Figure 1 Regulatory Exclusivity in USMCA Countries Source CRS Note The biologics provision was contained in the USMCA as originally negotiated but it was dropped in the revised agreement Copyrights and Related Rights Copyrights provide creators of artistic and literary works with exclusive rights to reproduce publicly perform and display and distribute their works Debate exists over balancing copyrights and the free flow of information and digital trade raises new issues USMCA includes  Copyright terms of life plus 70 years or 70 years from publication for most works higher than the TRIPS minimum term of life plus 50 years  Civil and criminal penalties for circumventing technological protection measures such as digital locks  “Safe harbors” to allow legitimate online internet intermediaries to develop their business while providing enforcement against digital copyright infringement  “Notice and takedown” systems to address intermediary liability by which right holders notify online service providers of infringing content to request removal of that content while allowing alternative systems e g “notice and notice” in Canada U S law takes a “notice and takedown” approach Trade Secrets A trade secret is confidential business information e g formula customer list that is commercially valuable USMCA requires criminal procedures and penalties for trade secret theft including through cyber-theft and by state-owned enterprises Trademarks Trademarks protect distinctive commercial names marks and symbols USMCA among other things provides trademarks with a renewable 10-year period of protection as in U S law and removes administrative requirements to enable easier protection and enforcement of trademarks Geographical Indications GIs GIs are geographical names that protect the quality and reputation of a distinctive product from a region e g Chiapas coffee Florida oranges Canadian whiskey The United States aims to address GI protections that can improperly constrain U S agricultural market access in other countries by protecting terms viewed as “common ” such as parmesan cheese USMCA contains due process procedures for recognizing and opposing GIs guidelines for determining when a name is common and transparency requirements for GI protection in international agreements Industrial Designs Industrial designs are the ornamental or aesthetic aspects of a product USMCA provides a minimum term of 15 years of protection for industrial designs compared to 10 years in NAFTA It also requires parties to provide an electronic industrial design system for applications and information Enforcement USMCA includes commitments on civil criminal and other national enforcement for IPR violations such as copyright enforcement in the digital environment criminal penalties for trade secret theft and camcording and exofficio authority for customs officials to seize counterfeit trademark and pirated copyright goods Issues for Congress USMCA’s approach to IPR and U S trade policy is at the forefront of congressional debate and a potential vote on implementing the agreement A central issue is whether USMCA advances U S trade negotiating objectives and protects IPR and innovation and other interests such as affordability of pharmaceuticals Treatment of biologics is especially actively debated in this regard Some Members of Congress approve eliminating the 10-year regulatory exclusivity requirement for biologics in USMCA they argue that it would have restricted the ability of Congress to lower that period in future policy discussions Other Members decry the deletion of the exclusivity period claiming it is critical for innovation and development of biologics Additional issues include concerns over the implementation of IPR obligations by USMCA parties and USMCA’s potential precedent to enhance multilateral standards See also CRS Report R44981 NAFTA Renegotiation and the Proposed United States-MexicoCanada Agreement USMCA by M Angeles Villarreal and Ian F Fergusson and CRS In Focus IF10033 Intellectual Property Rights IPR and International Trade by Shayerah Ilias Akhtar and Ian F Fergusson https crsreports congress gov USMCA Intellectual Property Rights IPR Ian F Fergusson Specialist in International Trade and Finance Shayerah Ilias Akhtar Specialist in International Trade and Finance IF11314 Disclaimer This document was prepared by the Congressional Research Service CRS CRS serves as nonpartisan shared staff to congressional committees and Members of Congress It operates solely at the behest of and under the direction of Congress Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role CRS Reports as a work of the United States Government are not subject to copyright protection in the United States Any CRS Report may be reproduced and distributed in its entirety without permission from CRS However as a CRS Report may include copyrighted images or material from a third party you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material https crsreports congress gov IF11314 · VERSION 3 · UPDATED