The TPP is getting closer -- what does it mean for the tech sector

As this article is being written, chief Trans Pacific Partnership Agreement (TPP) negotiators and the trade ministers of the 12 negotiating countries are due to meet in Hawaii to progress negotiations on the TPP.

This follows the passing, at the end of June, of legislation in the USA (known as a trade promotion authority or TPA) that provides fast track authority for the TPP through the US Congress. The passing of the TPA means that, if US trade negotiators reach agreement on the TPP with the other TPP negotiating countries, Congress can only vote yes or no to the finalised agreement, but cannot amend it. The TPA is seen as a key step towards finalising the TPP, as it means that other negotiating countries can present "best and final" offers without fear that the TPP will be further amended when it gets to the US Congress.

So it seems that the TPP may be getting closer.

Despite the apparent nearness of the TPP, the contents are still largely cloaked in secrecy, with no official drafts available. It is therefore difficult to predict what the implications of the TPP will be for New Zealand's technology sector. Of interest however is the fact that, in May, more than 250 US technology companies released a joint open letter to the US Congress, urging Congress not to pass the TPA. Concerns raised included the lack of transparency regarding the TPP negotiating process and the threats that the TPP presents to free speech, innovation and access to information.

One thing that is clear is that the main touted benefit for New Zealand of the TPP, the removal or reduction of trade barriers such as quotas and tariffs, is likely to be of little benefit to the tech sector, where there are few current barriers of this type. However, the two negotiation drafts of the intellectual property chapter that have been leaked do raise some issues likely to be of concern.

Patentability of software

There appears to be a significant risk that New Zealand may have to back-track on the recently-introduced provision, in the Patents Act 2013, excluding software "as such" from patentability. In the most recent draft of the TPP IP chapter (dated October 2014), New Zealand (and eight other negotiating countries, but not Japan or the USA) supports a provision allowing member countries to exclude plants, animals and diagnostic, therapeutic and surgical methods for the treatment of humans or animals, but only Mexico has proposed a provision allowing member countries to exclude software as such.

Reverse-engineering of software

Section 80A of New Zealand's Copyright Act 1994 allows reverse engineering of software to enable development of other interoperable software, subject to certain conditions. The Copyright Act also prevents parties to a software licence contracting out of section 80A, the result being that a term in a software licence prohibiting reverse-engineering for this purpose has no effect.

Similarly, the European Union directive on the legal protection of computer programs allows decompilation for the purpose of achieving interoperability, and prohibits contracting out of this right.

By contrast, while the US Digital Millennium Copyright Act (DMCA) permits reverse-engineering, there is no prohibition on contracting out. US case law has held that, where an end-user license agreement specifically prohibits reverse-engineering, the contractual prohibition will override the copyright law which expressly permits it.

There are no express provisions in the October 2014 draft of the TPP IP chapter dealing with reverse-engineering. Any reverse-engineering exceptions in national law will therefore need to comply with the general principle, set out in the IP chapter, that exceptions to copyright must be confined so as to not conflict with normal exploitation of the work in question, and to not unreasonably prejudice the legitimate rights of the rights holder.

Due to the differences in approach between New Zealand and the USA in relation to contracting out, there is therefore a risk that a rights holder could challenge the approach taken in New Zealand's Copyright Act, on the basis that the prohibition on contracting out unreasonably prejudices the rights holder's legitimate rights.

ISP liability

There appears to be a significant level of controversy between negotiating countries regarding the proposed provisions relating to internet service provider liability for infringing material. The October 2014 TPP IP chapter requires countries to provide internet service providers with incentives to take down content following allegations of copyright infringement, along the lines of the notice and takedown provision of the DMCA. DMCA-style notice and takedown systems have been criticised as stifling innovation, access to knowledge and free speech, as well as imposing expensive and onerous obligations on companies to oversee users' activities and process takedown notices.

Read more:NZ IT spend to hit $11.4 billion, a slight decrease from 2014: Gartner

The ISP liability provisions in the October 2014 draft of the TPP IP chapter are heavily annotated, with many opposing positions from different countries, so where this section will end up will be interesting to watch.

Temporary electronic copies

The US does appear to have backed down from its original position that the TPP copyright rules should apply to both permanent and temporary electronic copies of works, such as the copies of software that are temporarily loaded into a computer's memory in order to use the software. The October 2014 TPP IP chapter now includes a footnote (that appears to be unopposed) stating that the term "copy" refers only to "fixed copies that can be put into circulation as tangible objects".

Where to next

Even after 12 years of negotiation, the October 2014 draft of the TPP IP chapter demonstrates that there are a number of contentious issues still to be resolved. Other reported areas of controversy include agricultural subsidies, access to medicines, currency manipulation, workers' rights and the proposed investor-state dispute settlement system (which would give private investors and businesses the right to initiate dispute settlement proceedings against foreign governments in their own right).

While some of the points discussed above may not be seen as favourable by the New Zealand tech sector, the apparent success of New Zealand's position in relation to temporary copies shows there is some ability to obtain concessions on IP issues. We will be watching the next steps with interest.

Averill Dickson is a senior lawyer at Simmonds Stewart, a boutique technology law firm providing corporate and commercial legal services focused on the New Zealand technology sector. With almost 20 years in the technology sector, Averill has extensive experience advising on the corporate and commercial aspects of technology businesses and transactions. Find out more at Simmonds Stewart, or follow Averill on Twitter @averilldickson. Simmonds Stewart has free online templates for tech companies, and a blog on IT legal issues.


Averill Dickson

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