USMCA: Intellectual Property Rights (IPR)

USMCA: Intellectual Property Rights (IPR)

Updated May 1, 2024
USMCA: Intellectual Property Rights (IPR)
The United States-Mexico-Canada Agreement (USMCA) is
obligations are enforceable through USMCA’s general
a comprehensive free trade agreement (FTA) that entered
government-to-government dispute settlement. (USMCA
into force among the three countries in 2020. It updated and
investor protections also apply to IPR. See CRS In Focus
replaced the 1994 North American Free Trade Agreement
IF11167, USMCA: Investment Provisions.)
(NAFTA). Chapter 20 of USMCA contains rules to protect
Patents
and enforce intellectual property rights (IPR). Congress
Patents protect new and useful inventions (e.g., medicines,
could have an interest in: overseeing implementation of
USMCA’s IPR commitments
chemical processes, business technologies, and computer
; examining the deal’s balance
software). USMCA defines patentable subject matter as
on IPR rules to promote innovation and other policy aims;
new products and processes. Unlike some U.S. FTAs,
and considering to what extent, if any, USMCA should
USMCA does not provide patent protection for new uses,
serve as a precedent for IPR rules in future U.S. trade deals.
methods, or processes of existing inventions.
IPR provisions of USMCA, particularly on patent and
Under TRIPS, patented inventions must receive a minimum
regulatory protections, were contentious for some Members
of 20 years of protection. As patents are usually filed before
of Congress and stakeholders after USMCA was initially
regulatory approval is granted, the effective term may be
signed by the three countries in 2018 (“original USMCA”);
less than 20 years. USMCA requires adjustments of patent
these provisions underwent changes. Some Members and
terms for “unreasonable” delays in patent examination or
civil society groups had criticized the provisions in the
regulatory approvals to restore some of the patent term.
original USMCA as contributing to rising drug costs. Other
“Unreasonable delays” include a delay of more than five
Members and pharmaceutical industry groups argued that
years from the date of filing or three years after a request
they fostered U.S. innovation. After negotiations between
for examination of an application, whichever is later.
Congress and the U.S. Trade Representative (USTR), the
United States, Canada, and Mexico agreed to a protocol of
USMCA has a notification system and procedures (e.g.,
amendment that changed some of the original USMCA’s
judicial or administrative) to assert patent rights or to
IPR provisions. These changes may support generic
challenge a patent’s validity. USMCA lacks the “patent
competition. The final USMCA, which entered into force in
linkage” required in some U.S. FTAs, whereby regulatory
2020 after enactment of implementing legislation (P.L. 116-
authorities (e.g., the U.S. Food and Drug Administration,
113), incorporated the changes made by the protocol.
FDA) cannot grant marketing approval to a generic drug
IPR and Trade Background
without the patent holder’s permission.
IPR are time-limited protections that governments grant to
Regulatory Exclusivities
inventors and artists to exclude others from using their
USMCA’s pharmaceutical provisions aim to “encourage
inventions and creations without permission. Advancing
innovation and access to medicine,” and the IPR chapter
IPR protection globally has been a U.S. trade negotiating
reaffirms the WTO Doha Declaration on TRIPS and Public
objective since 1988 (P.L. 100-418). NAFTA was the first
Health. Stakeholders debated USMCA’s balance on
U.S. FTA to include IPR provisions and served as a model
incentivizing innovation for new medicines while allowing
for the World Trade Organization (WTO) Agreement on
for affordable medicines through market entry of generics.
Trade-Related Aspects of Intellectual Property Rights
Regulatory exclusivity for biologic drugs (drugs made from
(TRIPS). While NAFTA was significant to the use of trade
living organisms), in particular, was a contested issue in the
policy to advance IPR internationally, it predated
USMCA negotiations. During a regulatory exclusivity
widespread internet use and other technological advances.
period, regulatory authorities cannot approve a generic or
The now-expired 2015 Trade Promotion Authority (TPA,
biosimilar version of a drug, regardless of patent rights (see
P.L. 114-26) reflected prior U.S. negotiating objectives for
text box). The original USMCA required at least 10 years
U.S. trade agreements to “reflect a standard of protection
of protection for biologics, but the amended version of the
similar to that found in U.S. law,” and it added new
USMCA dropped this provision. The 10-year exclusivity
objectives to combat cyber theft and protect trade secrets.
period would not have changed the 12-year exclusivity
Congress approved USMCA under the 2015 TPA.
period in U.S. law, but it would have increased the periods
in Canada and Mexico, eight and five years, respectively.
IPR Chapter of USMCA
Some Members of Congress approved eliminating the 10-
The IPR chapter of USMCA aims to support technological
year exclusivity period from the original USMCA, arguing
innovation to benefit both producers and users, while
that it would have restricted the ability of Congress to lower
promoting a balance of rights and obligations. General
that period in the United States in the future. Some also
obligations include upholding international agreements and
approved eliminating it to support competition in the
providing “national treatment”—that is, not discriminating
pharmaceutical market. Other Members opposed dropping
against foreign nationals on IPR. Some provisions have
the exclusivity period, arguing that it is critical for
separate phase-in periods for Canada and Mexico. IPR
innovation and development of biologics in North America.
https://crsreports.congress.gov

USMCA: Intellectual Property Rights (IPR)
USMCA has a five-year exclusivity period for new
renewable, 10-year period of protection (as in U.S. law) and
chemical-based drugs, like NAFTA. USMCA does not have
removes administrative requirements to enable easier
a three-year exclusivity period for new formulations of such
protection and enforcement of trademarks.
existing drugs; while the original UMSCA added this
Geographical Indications (GIs)
provision, the amended version dropped it.
GIs are geographical names to protect the quality and
Regulatory Approval and Exclusivity for Drugs
reputation of a distinctive product from a region (e.g.,
Unlike most patented products, pharmaceuticals are subject to a
Chiapas coffee, Canadian whiskey, Florida oranges). The
regulatory approval process before they can be marketed. Patent
United States aims to address GI protections that may
holders (typically, brand-name drug companies) must submit test
impede U.S. access to foreign agricultural markets by
data to the regulatory authority (e.g., the FDA) to demonstrate a
protecting terms viewed as “common” (e.g., parmesan
drug’s safety and effectiveness. The market approval process runs
cheese). USMCA has due process procedures to recognize
concurrently with any applicable patent term. Thus, the
and oppose GIs, guidelines to determine when a name is
monopoly protection afforded by the patent term effectively is
common, and transparency obligations for GI protection in
shortened by the time it takes for marketing approval.
international agreements.
A fol ow-on pharmaceutical, such as a generic drug or biosimilar,
can obtain approval via an abbreviated process by using the
Industrial Designs
reference (brand-name) drug’s test data. To balance interests in
Industrial designs are a product’s ornamental or aesthetic
competition while encouraging innovation, U.S. law sets periods
aspects. USMCA raises the minimum term of protection for
of exclusivity that limit the FDA’s ability to authorize marketing
industrial designs to 15 years, from 10 years in NAFTA. It
of fol ow-on pharmaceuticals under certain circumstances.
also requires parties to provide an electronic industrial
Regulatory exclusivity prevents the regulatory authority from
design system for applications and information.
approving a generic drug or biosimilar or precludes a competing
Enforcement
firm from using the reference product’s data to obtain regulatory
approval for a period of time. As such, regulatory exclusivities
USMCA includes commitments on civil, criminal, and
provide an additional form of protection that may overlap with,
other national enforcement for IPR violations, such as
or in some cases run beyond, the term of any applicable patents.
copyright enforcement online, criminal penalties for trade
U.S. law provides a general exclusivity period of 5 years for
secret theft, and ex-officio authority for customs officials to
chemical drugs and 12 years for biologics.
seize counterfeit or pirated goods.
Copyrights
USMCA Monitoring
Copyrights provide the authors of creative works (e.g.,
USTR monitors USCMA implementation by Canada and
books, music, fine art) with exclusive rights to reproduce,
Mexico. For example, Canada extended its general
publicly perform and display, and distribute their works.
copyright protection term from the life of the author plus 50
Debate exists over balancing copyrights and information
years to life plus 70 years, and Mexico amended its
flows. Digital trade and emerging technologies (e.g.,
copyright law to implement its commitments. At the same
artificial intelligence) raise new issues about infringement
time, U.S. government concerns persist about Canada and
and enforcement. USMCA includes:
Mexico’s IPR regimes. USTR’s 2024 “Special 301” report
•
identified both Canada and Mexico on its Watch List,
Copyright terms of life of the author plus 70 years, or 70
citing, for example, issues in their enforcement of IPR.
years from first publication for most works, higher than
the TRIPS minimum term of life plus 50 years.
Issues for Congress
• Civil and criminal penalties for circumventing
USMCA’s approach to IPR renewed issues raised in past
technological protection measures, such as digital locks.
FTA debates. These issues include whether USMCA’s IPR
• “Safe harbors” to allow internet service providers
provisions advance and appropriately balance the
(ISPs) to develop their business while enforcing against
promotion of innovation and other societal aims, such as
digital copyright infringement.
public health. Amid heightened interest in supply chains
• “Notice and takedown” for ISP liability—right holders
and economic resiliency, Congress could examine whether
notify ISPs of infringing content to request its removal,
IPR commitments in USMCA contribute to U.S.
while allowing for alternative systems (e.g., “notice and
comparative leadership in innovation and the North
notice” in Canada). U.S. law takes a “notice and
American trading bloc’s global competitiveness. Other
takedown” approach.
issues include continued implementation of IPR obligations
Trade Secrets
by Canada and Mexico and enforcement of USMCA by the
A trade secret is confidential business information (e.g., a
Administration. Congress also may assess whether USMCA
formula) that is commercially valuable because it is secret.
could set precedents on IPR rules for potential future U.S.
USMCA requires criminal procedures and penalties for
FTAs or executive trade initiatives, and/or shape
trade secret theft, including through cyber-theft and
multilateral IPR rules and standards. See CRS In Focus
misappropriation by state-owned enterprises. USMCA’s
IF10997, U.S.-Mexico-Canada (USMCA) Trade Agreement.
Digital Trade chapter protects against forced disclosure of
proprietary computer source code and algorithms, which
This In Focus was originally co-authored with our
could enhance trade secrets protection.
colleague Ian F. Fergusson.
Trademarks
Shayerah Ilias Akhtar, Specialist in International Trade
Trademarks protect distinctive commercial names, marks,
and Finance
and symbols. USMCA provides trademarks with a
https://crsreports.congress.gov

USMCA: Intellectual Property Rights (IPR)

IF11314

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