Setting new standards

The intellectual property provisions of the Trans-Pacific Partnership Agreement (TPPA) are wide-ranging. They will bring about significant substantive changes in the laws of several signatory states, particularly in the area of pharmaceuticals, including through mandating the adoption of patent term extensions and minimum periods of data exclusivity. In other areas the changes will be incremental. The agreement lays down a comprehensive set of standards for trade mark and patent eligibility and related procedural matters, for example, and in these areas the TPPA will have an important harmonising effect across the 12 signatory states1. 

The TPPA is also the first international treaty to comprehensively address IP rights issues in the digital age. The IP chapter contains commitments from the signatory states to introduce minimum requirements for internet service providers (ISPs) to remove or disable copyright infringing materials, and to impose liability for interference with digital rights management measures. The Electronic Commerce chapter of the TPPA similarly aims to ensure the consistent protection of data in electronic commerce and the free flow of data in the digital economy. It will outlaw data localisation laws and prohibitions on overseas transfers of data that function in a discriminatory manner or as a disguised restriction on trade. Complementary to this, the IP chapter obliges TPPA signatory states to criminalise cyber theft of business and commercial trade secrets. 

Both chapters also lay down a general principal of national treatment. Namely, that signatory states will treat the nationals of other TPPA signatory states no less favourably than their own nationals in relation to the protection and enforcement of IP and dealings in digital products. Our earlier briefing here on investment protection and the investor-state dispute settlement explains how the TPPA’s disputes handling mechanism will operate.

Intellectual Property

ISPs' liability for copyright infringement

The TPPA tackles what has been one of the headline issues on the digital agenda for several years, namely the circumstances in which ISPs will be liable for copyright infringement committed by users of their platforms. Under the TPPA, signatory states will be required to provide safe harbours that preclude monetary damages from being awarded for copyright infringement against ISPs that store or host material or provide search or directory services. 

A minimum condition for the availability of these safe harbours will be that ISPs provide at least a passive takedown system for infringing content. Passive takedown systems involve the ISP removing or disabling access to allegedly copyright infringing material on their networks or systems after receiving notice of the infringement. ISPs will not be required to monitor or to affirmatively confirm infringement on their platforms. ISPs must also be exempted from liability for removing or disabling allegedly infringing materials, provided that they take reasonable steps to notify the alleged infringer. The TPPA leaves it up to signatory states to elect whether or not to implement a counter-notice system (but where they do, ISPs must restore material on receipt of a counter-notice unless the rights-holder claims judicial relief within a reasonable period of time). 

TPPA signatory states have also agreed to make available procedures to enable copyright owners to require ISPs to disclose information in their possession that identifies the alleged infringer. These procedures could be either judicial or administrative.

Digital rights management

Signatory states have agreed to provide effective legal remedies against the circumvention of technological protection measures (TPMs) that are designed to restrict unauthorised uses of copyright protected works. These include remedies against the manufacture and sale of devices for circumventing TPMs. Remedies will include criminal penalties for wilful acts done for commercial purposes or financial gain. Signatory states are also required to ensure that their courts have authority to impose provisional measures, including by ordering the seizure of circumvention devices.

Standardisation of copyright term

The TPPA will standardise the term of protection of copyright to either life of the author plus not less than 70 years or to a fixed period of not less than 70 years from the end of the year of first publication or fixation, etc.
Life of author plus 70 years is the general period of protection in Europe and the US, but is a longer period than is provided for in, for example, Japan, Mexico and New Zealand. This provision therefore has the potential in some signatory states to bring back under copyright protection works that may have already entered into the public domain. 

Fair use exemptions

The TPPA acknowledges the need to balance IP holders’ rights in the digital environment with ‘fair use’ exemptions facilitating the use of protected works for legitimate public interests, such as news reporting, teaching, education and research. Exemptions are to be confined to special cases that do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the rights holder. 
Many countries within the TPPA free trade area do not have an equivalent to the omnibus system of fair use exemptions provided for in section 107 of the U.S. Copyright Act, although Singapore did move to a similar multi-factor test for fair dealing in 2004. The fair use provisions in the TPPA are not prescriptive, and this ‘light touch’ approach could therefore continue to see significant divergences in approach.

Trade mark protection

For brand owners, the TPPA defines a high standard of rules for trade mark protection. For example, the agreement is intended to open up the scope for easier registration of non-traditional trade marks, such as sound marks, by removing requirements that a sign must be visually perceptible. Secondly the TPPA will give trade mark owners the right to prevent third parties from using identical or similar marks on ‘related’ goods or services to those in respect of which the mark is registered, where this would create a likelihood of confusion. A presumption of confusion is mandated in cases where an identical mark is used on identical goods or services.

In a direct nod to China’s sub-class system, the TPPA states that signatory states may not provide that goods or services should be automatically considered similar because they are classified in the same class of the Nice Agreement trade mark classification; nor should goods or services automatically be considered dissimilar if they are classified in different classes. TPPA signatory states will also be prohibited from requiring licensees to record trade mark licences in order to establish the validity of the licence.

Stronger protection for well-known trade marks

The TPPA aims to strengthen the protection for well-known trade marks. Firstly, TPPA signatory states will be prohibited from requiring marks to be registered or given prior recognition (either in that country or overseas) as a condition of qualification for well-known trade mark status. A case-by-case assessment should be made. Signatory states are also required to prevent the use of well-known marks in relation to any goods or services (even if dissimilar) if the use establishes a connection with the goods or services of the trade mark owner and is damaging to its interests. Signatory states are likewise required to provide for measures to refuse an application for registration, or cancel the registration of a trade mark, if it is identical or similar to a well-known trade mark.

The TPPA does not, however, address the differing standards that apply across the TPPA free trade area for the assessment of well-known trade mark status or the standard of evidence that is required. Nor does it address the relevance of global reputation to the assessment - in an era where information about brands is easily available on the internet and brands may have acquired widespread recognition in a country despite a relatively short (or no) trading history within the country itself.

International exhaustion of IP rights

An attempt to reach agreement on a general standard of ‘international exhaustion’ of trade mark rights permitting parallel imports of legitimately marketed branded products was not successful. The final agreement instead sidesteps the issue and preserves the freedom of individual signatory states to determine the conditions under which intellectual property rights are exhausted under their national laws.

Geographical indications

The TPPA does not seek to harmonise the substantive requirements for the recognition of geographical indications, and leaves open the question of whether protection should be by means of trade marks or through a separate system. But it does impose certain due process requirements to prevent practices that could otherwise result in protectionist outcomes. Administrative procedures for the protection or recognition of geographical indications are thus required to be open and private (and not require state support for an application), and should not involve overly burdensome formalities. 
TPPA signatory states must also provide systems for opposing or cancelling geographical indications2, including on the grounds of a conflict with an existing trade mark application or registration.

Enhanced protection for pharmaceuticals

The TPPA requires signatory states to make available an extension of patent terms for pharmaceutical products to offset the loss of the effective patent term as a result of the marketing approval process. No further details are given and the agreement does not lay down any minimum or maximum periods of extension. Nor does it lay down a deadline by which the patentee must apply for an extension. The provision is described in terms of an “unreasonable curtailment” of the effective patent term. This may allow for signatory states to provide for restoration only in limited cases involving unusual regulatory delays3. In the Asia Pacific region, the TPPA provision will require a change of law in at least New Zealand, Malaysia and Vietnam, we believe. 

As a ‘quid pro quo’ for the extension of patent terms for approved pharmaceutical products, TPPA signatory states are required to provide for a regulatory review exemption to patent infringement (i.e. a ‘Bolar’-style exemption for studies to support applications for approval of generics). Again, the agreement does not detail this requirement, perhaps reflecting difficulties agreeing the final text. 

The final piece of the bargain in relation to pharmaceuticals requires signatory states to provide for at least a modest form of patent linkage in the marketing approval system. At a minimum, the holder of a pharmaceutical patent should be notified before approval of a generic pharmaceutical product that relies for approval on safety and efficacy data submitted by the original applicant for marketing approval (or which relies on the earlier marketing approval itself). The system must allow the patent holder adequate time and opportunity to seek a preliminary injunction or equivalent provisional measures to prevent marketing of the product before it is put on the market. Alternatively, signatory states may adopt or maintain an administrative system of direct patent linkage that precludes generic products from being approved during the term of the patent. Such a system would be based on patent information submitted to the approval authority or provided by the applicable patent office. 

Lastly, the TPPA also sets out specific exclusivity periods to protect test or other data against use by third parties to obtain marketing approvals for pharmaceuticals, biologics and new agricultural chemical products. Where undisclosed data on safety and efficacy is required to be submitted, signatory states may not approve third parties to market the same or a similar product on the basis of that information or the earlier marketing approval for certain periods. These are periods of at least five years for pharmaceutical products that contain a new chemical entity, at least three years for secondary approvals for new indications, new formulations or new methods of administration, and at least five years for biologics (and up to a maximum of eight years). The periods of mandatory data exclusivity are to be independent of the expiry of any related patents. 

Similar data exclusivity requirements are to be provided for new agricultural chemical products (for a minimum of 10 years) and biologics (for up to eight years). Recognising that the regulation of biologics is still evolving, signatory states have agreed to review the period of exclusivity after 10 years with a view to not impeding the availability of bio-similar products. 

Unreasonable delays at patent registries

Signatory states undertake best efforts obligations to process patent applications efficiently and to avoid unreasonable and unnecessary delays. Signatory states are required to make available an extension of patent terms in cases of unreasonable delays at patent registries. In contrast to the term extension for pharmaceutical patents for delays in granting marketing approval, the TPPA defines an unreasonable delay at a registry as a delay of more than five years from the date of filing or three years after the applicant requests examination (whichever is later). Periods of delay that are attributable to the patent applicant are to be excluded from this calculation.

Electronic Commerce

Data privacy

Signatory states are required to adopt or maintain legal frameworks that provide for the protection of the personal information of e-commerce users and which take account of international standards. These measures may either be in the form of comprehensive data protection laws, sector-specific regulations, or laws that provide for the enforcement of voluntary undertakings. 

Ban on data localisation laws and prohibitions of cross-border data transfers
The TPPA prohibits the maintenance of measures that require an investor to use or locate data centres, servers and other computing facilities in a signatory state as a condition of conducting business there. The agreement also requires signatory states to permit the electronic cross-border transfers of data, including personal information, for the conduct of business. Proportionate exemptions will be permitted for legitimate public policy objectives that do not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade. 

These provisions may potentially have a wider impact on the availability of offshore and cloud data storage in Asia by encouraging non-TPPA countries to also abolish such restrictions as they compete to attract investors. However, the measures will only directly apply to investors from other TPPA signatory states. There is also a carve out for financial institutions and for cross-border supplies of financial services.

Source code

The TPPA prohibits measures requiring investors to transfer or grant access to source code of software as a condition of the sale or use of the software or related products in a TPPA signatory state. The effectiveness of this provision is, however, severely curtailed by being limited to ‘mass market’ software. Software used for critical infrastructure is also explicitly carved out.

Criminalisation of trade secrets theft

The TPPA recognises the value of unregistered know-how to technological development. In a significant development therefore, the TPPA requires all signatory states to introduce criminal penalties for unauthorised access to business and commercial trade secrets, including when held electronically. These provisions are contained in the IP chapter, and will thus have general application in real world situations as in relation to cyber crime. However, the public comments of trade representatives have framed the focus of the provisions as being cyber-directed in particular, including where cyber theft is state-sponsored. Signatory states are in fact permitted to limit the application of criminal procedures, or limit the level of penalties, to situations involving state sponsored cyber crime, or acts done for commercial benefit or which threaten national security. This is the first time such a provision has been included in a US trade deal. 
Signatory states are also required to ensure effective protection for trade secrets from being disclosed to or acquired by third parties (including state owned enterprises) in breach of contract or breach of confidence, or where disclosure is otherwise contrary to honest commercial practices. 

The TPPA provides that in civil judicial proceedings for the enforcement of an intellectual property right, courts are to have authority to order the alleged infringer to provide information about the infringement, including the identification of the persons involved and about the means of production and distribution channels. Signatory states must also provide for confidentiality orders to protect information disclosed in the course of court proceedings and to impose sanctions on parties and their counsel who violate these orders. These provisions apply to all types of intellectual property, but will be of special assistance in trade secret proceedings where difficulties of proof and concerns about protecting the secrecy of information during proceedings can deter holders of trade secrets from enforcing their rights.