September 19, 2019
USMCA: Intellectual Property Rights (IPR)
Background
IPR Chapter of USMCA
The United States-Mexico-Canada Agreement (USMCA) is
The IPR chapter aims to support technological innovation
a proposed free trade agreement (FTA) negotiated among
to benefit both producers and users, while promoting a
the three parties to update and replace the 1994 North
balance of rights and obligations. It is enforceable through
American Free Trade Agreement (NAFTA). On November
government-to-government dispute settlement. General
30, 2018, President Trump and the leaders of Mexico and
obligations include upholding international agreements and
Canada signed USMCA. Congress would need to pass the
providing “national treatment”—not discriminating against
legislation to implement the agreement before it can enter
foreigners on IPR. Some provisions in the IPR chapter have
into force.
phase-in periods for Canada and Mexico. (IPR issues also
USMCA would make notable changes to NAFTA
arise in the USMCA investment chapter; as a form of
provisions on intellectual property (IP)—creations of the
investment, IPR benefits from USMCA investor
mind embodied in physical and digital objects. IPR are
protections. See CRS In Focus IF11167, USMCA:
time-limited rights that governments grant to inventors and
Investment Provisions, by Christopher A. Casey and M.
artists to exclude others from using their inventions and
Angeles Villarreal.)
creations without permission. IP is a key source of U.S.
Patents
comparative advantage; advancing IPR protection globally
Patents protect new inventions, such as pharmaceutical
has been a U.S. trade negotiating objective since 1988 (P.L.
products, chemical processes, business technologies, and
100-418). IPR trade agreement provisions were first
computer software. USMCA defines patentable subject
included in NAFTA and, subsequently, the World Trade
matter as new products and processes, as well as new uses,
Organization (WTO) Agreement on Trade-Related Aspects
methods, or processes of a known product. Under TRIPS,
of Intellectual Property Rights (TRIPS). The 2015 Trade
patented inventions must receive a minimum term of 20
Promotion Authority (TPA, P.L. 114-26) retains prior U.S.
years of protection. USMCA requires adjustments of
trade negotiating objectives for U.S. trade agreements to
patent terms for “unreasonable” delays in the patent
“reflect a standard of protection similar to that found in
examination or regulatory approval processes.
U.S. law” (“TRIPS-plus”), and adds new objectives to
“Unreasonable delays” include a delay of more than five
combat cyber theft and protect trade secrets.
years from the date of filing or three years after a request
for examination of an application, whichever is later.
Select IPR Provisions in USMCA
USMCA includes a notification system and procedures
Several provisions in USMCA reflect new or updated issues not
(e.g., judicial or administrative proceedings) to assert patent
in current U.S. FTAs, including the fol owing:
rights or to challenge a patent’s validity. These procedures
Biologics. Requires a 10-year data exclusivity period for
are more flexible than “patent linkage”—a provision
biologics, large-molecule drugs developed from living organisms.
common to many prior U.S. FTAs whereby regulatory
Internet Service Providers (ISPs). Establishes flexibilities to
authority cannot grant marketing approval to a generic drug
address ISP copyright liability.
without the patent holder’s permission.
Geographical indications (GIs). Requires administrative
Regulatory Exclusivities
procedures for recognizing and opposing GIs, which protect
Some USMCA provisions specific to pharmaceuticals aim,
distinctive products from certain regions, including guidelines for
based on U.S. trade negotiating objectives, to “encourage
determining “common” names. Also includes transparency and
innovation and access to medicine.” Yet debate exists on
due process procedures for GIs that parties protect through
whether USMCA appropriately incentivizes research and
international agreements.
development for new medicines while also allowing
Trademarks. Extends trademark protection to sounds and
affordable access to medicines through market entry of
“col ective marks” and removes administrative requirements to
generic medicines. In USMCA, the debate has centered on
enable easier trademark protection and enforcement.
regulatory exclusivity for biologic drugs—drugs made
Trade secrets. Requires criminal procedures and penalties for
from living organisms (see figure below).
trade secret theft, including cyber theft; clarifies that state-
Unlike most patented products, pharmaceuticals must go
owned enterprises must protect trade secrets.
through a regulatory approval process before they can be
Enforcement. Extends IPR enforcement to the digital
marketed. Patent holders (generally, brand-name drug
environment.
companies) must submit test data) to the regulatory
authority—the Food and Drug Administration (FDA) in the
IP-intensive goods and services are an important part of
United States—to make the case for a drug’s safety and
U.S. trade with Canada and Mexico. The United States has
effectiveness. The market approval process runs
expressed concern over certain IPR policies in both
concurrently with any applicable patent term. Thus, the
countries in recent years.
https://crsreports.congress.gov
USMCA: Intellectual Property Rights (IPR)
monopoly protection afforded by the patent term effectively
Trade Secrets
is shortened by the time it takes for marketing approval.
A trade secret is confidential business information (e.g.,
A follow-on pharmaceutical, such as a generic drug or
formula, customer list) that is commercially valuable.
biosimilar biologic, can obtain approval via an abbreviated
USMCA requires criminal procedures and penalties for
process by relying upon the test data generated to support
trade secret theft, including through cyber-theft and by
approval of the reference (brand-name) drug. To balance
state-owned enterprises.
interests in competition while encouraging innovation,
Trademarks
federal law establishes periods of exclusivity that limit
FDA’s ability to approve marketing applications for follow-
Trademarks protect distinctive commercial names, marks,
on pharmaceuticals under certain circumstances.
and symbols. USMCA, among other things, provides
trademarks with a renewable, 10-year period of protection
Regulatory exclusivity prevents a competing firm from
relying on the reference product’s data to obtain regulatory
(as in U.S. law) and removes administrative requirements to
enable easier protection and enforcement of trademarks.
approval of a generic drug or biosimilar for a set period of
time. In practice, regulatory exclusivities may delay the
Geographical Indications (GIs)
development of the generic product during that time, which
GIs are geographical names that protect the quality and
may overlap with, or in some circumstances run beyond the
reputation of a distinctive product from a region (e.g.,
expiration of any applicable patents. For chemical drugs,
Chiapas coffee, Florida oranges, Canadian whiskey). The
U.S. law provides a general exclusivity period of 5 years,
United States aims to address GI protections that can
which U.S. FTAs post-NAFTA have incorporated.
improperly constrain U.S. agricultural market access in
Regulatory exclusivity for biologics was first addressed in
other countries by protecting terms viewed as “common,”
the proposed Trans-Pacific Partnership (TPP). U.S. law
such as parmesan cheese. USMCA contains due process
currently provides a 12-year period of exclusivity for
procedures for recognizing and opposing GIs, guidelines for
biologics. USMCA would require a period of protection of
determining when a name is common, and transparency
at least 10 years. This standard would require Canada and
requirements for GI protection in international agreements.
Mexico to raise their exclusivity periods by 2 and 5 years,
Industrial Designs
respectively, and would have no immediate effect on the
Industrial designs are the ornamental or aesthetic aspects of
United States (see Figure 1).
a product. USMCA provides a minimum term of 15 years
Figure 1. Regulatory Exclusivity in USMCA Countries
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 ex-
officio authority for customs officials to seize counterfeit
trademark and pirated copyright goods.
Issues for Congress
Source: CRS.
USMCA’s approach to IPR and U.S. trade policy is at the
Copyrights and Related Rights
forefront of congressional debate and a potential vote on
implementing the agreement. A central issue is whether
Copyrights provide creators of artistic and literary works
USMCA advances U.S. trade negotiating objectives and
with exclusive rights to reproduce, publicly perform and
protects IPR and innovation and other interests, such as
display, and distribute their works. Debate exists over
affordability of pharmaceuticals. Treatment of biologics is
balancing copyrights and the free flow of information, and
especially actively debated in this regard. Some Members
digital trade raises new issues. USMCA includes:
of Congress favor eliminating the 10-year regulatory
Copyright terms of life plus 70 years, or 70 years from
exclusivity requirement for biologics in USMCA; they
publication for most works, higher than the TRIPS
argue that if USMCA enshrines a 10-year period, it would
minimum term of life plus 50 years.
restrict the ability of Congress to lower that period in future
Civil and criminal penalties for circumventing
policy discussions. Other Members hold that exclusivity
technological protection measures, such as digital locks.
periods are critical for innovation and development of
“Safe harbors” to allow legitimate online internet
biologics. Additional issues include concerns over the
intermediaries to develop their business while providing
implementation of IPR obligations by USMCA parties and
enforcement against digital copyright infringement.
USMCA’s potential precedent to enhance multilateral
“Notice and takedown” systems to address
standards. See also CRS Report R44981, NAFTA
intermediary liability by which right holders notify
Renegotiation and the Proposed United States-Mexico-
online service providers of infringing content to request
Canada Agreement (USMCA), by M. Angeles Villarreal
removal of that content, while allowing alternative
and Ian F. Fergusson, and CRS In Focus IF10033,
systems (e.g., “notice and notice” in Canada). U.S. law
Intellectual Property Rights (IPR) and International Trade
takes a “notice and takedown” approach.
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
IF11314
and Finance
Disclaimer
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https://crsreports.congress.gov | IF11314 · VERSION 1 · NEW