Intellectual Property Rights and Data Protection Rights Under The Transatlantic Trade and Investment Partnership

  1. Preface

The idea for the subject of this paper comes at an interesting time. First of all, because since last year opinion leaders and internet media outlets meddled themselves in the conversation surrounding TTIP, the Transatlantic Trade & Investment Partnership, a trade agreement that would lower tariff barriers between the United States and European countries and thus incentivize trade between both Western blocks. But also because the trade agreement is being drafted in total secrecy and sensationalism in the news media takes speculative forms, warning about lower food quality standards and privacy rights (especially since former NSA contractor Edward Snowden revealed that the US Prism program collected data from US tech companies Facebook and Google, European privacy and data protection rights were put back on the political agenda).

With total secrecy and solely being able to rely on the word of left-wing politicians as US Senator Warren and US Senator Sanders that TTIP would “destroy the foundation of our democracies,” the fundamentals for the subject of this paper that wants to objectively treat the implications on intellectual property and data protection rights under TTIP can only be considered as purely speculative, since there is no way the information can be verified according to the resolution that will potentially bind the United States and the European countries under one trade block. Therefore, first a framework from which possible outcomes can be step by step debunked is set up, according to GATT and WTO trade agreements that have lowered trade barriers and tariffs over the past 70 years. Furthermore, it must be understood how differences in attitudes between the United States and European countries over intellectual property rights and data protection rights have formed the framework from which these separate economies conduct in commerce. The most interesting part is finally on what basis political decisions concerning trade agreements are made; or, in short, how the hierarchical power structures interact according to their commercial and political goals. Who pulls the strings? What are their motives? These questions will be answered according to five sub thesis questions that work towards an open conclusion from which a speculative answer, though substantiated from secondary research sources, will be delivered.

  1. What is TTIP? And what are intellectual property rights?

Since the establishment of the GATT in 1947, trade agreements between countries have become common place. Since 1995 alone, more than 300 trade agreements have been signed by the successor organization of the GATT, the WTO. Countries benefit from the cooperation that reduces trade barriers, such as quotas and tariffs – usually put in place by domestic governments to protect their products and economies. The most notable trade agreements are of course the European Union / European Economic Area, now covering 28 members, but in 1951 first established under the European Coal and Steel Community, and later, in 1957 under the European Economic Community and the European Atomic Energy Community by six countries: Belgium, Germany, France, Italy, Luxembourg and the Netherlands.

The timing of the establishment was of course evidently linked to the end of WWII and the need for trade-oversight on war resources, namely coal and steel. Today, trade agreements between European countries are more financially bound than before under a federal political system, the European Union and a monetary system, the eurozone.

Countries of North America also established a trade agreement called NAFTA, or the North American Free Trade Agreement between the United States, Canada and Mexico, lowering trade barriers and therefore incentivizing on export products between countries.

TTIP, or the Transatlantic Trade and Investment Partnership, would in fact consist of an agreements between the US and EU on the lowering of tariff barriers and therefore incentivize the increase of export between both Western blocks. However, the more investigative journalists and researchers have tried to understand the binding factors of the agreement, the more they’ve come to find potential results that could become harmful to the economies of European countries; a quick Google search shows the extent to which these concerns are expressed. The further privatization of public services, the downgrading of food standards and environmental regulations and also banking regulations, labor standards and the to be discussed issues of (1) a US rapprochement to individual privacy laws and (2) the further establishment of private arbitration tribunals run by corporate lawyers, that allows companies to sue governments if those governments’ policies cause a loss of profit, also known as the Investor-State Dispute Settlement (ISDS). More on this later.

On to intellectual property and data protection rights. When it comes to individual rights and data protection laws, the EU has a better record score of policy development through the Council of Europe and enforcing this through the European Court of Justice. The 21st century has marked the start of a new phenomenon which is the ability of private persons to use social media channels and email services such as Facebook and Google to share personal information with a selected group of people from that person’s individual social network. Privacy protection and intellectual property rights have since 2009 been added to the EU Charter of Fundamental Rights under Article 8, stating that “everyone has the right to the protection of personal data concerning him or her” and that “such data must be processed fairly for specified purposes and on the basis of the consent of the person concerned or some other legitimate basis laid down by law” and that “everyone has the right to access to data which has been collected concerning him or her, and the right to have it rectified.” This part of the Charter was innovated following lawsuits concerning the issues of a company’s intellectual property and an individual’s right to privacy. In the case SABAM vs Netlog, the issue at heart was the introduction of a system for filtering information stored on Netlog’s social networking platform. It was concluded that the right to intellectual property can be regarded as the right to the protection of personal data (Fuster, 2012). On this occasion, the Court based its assessment of the unfairness of the balance between the right to intellectual property and the right to the protection of personal data on the fact that the filtering system would involve the systematic processing of information connected with the profiles of the social network’s users, considered “protected personal data”. This interpretation differs strongly with the idea of privacy protection in the US:

“ In the European view, the human right to respect for privacy, and its special relationship with the right to freedom of expression, provides the foundation for data protection regulation. In the United States, information privacy protection has not been given a similar constitutional status. Instead, a preference for market based solutions has prevailed, largely based on contractual agreements to permit data processing that are subject to the normal rules of consumer protection and selective statutory intervention.”

(Keller, 2011, p 333)

  1. How does the EU enforce its policies on intellectual property rights and what challenges does it have?

Since 2009, EU privacy rights, under the Treaty of Lisbon of 2007, have become enforceable under Article 8 of the European Convention of Human Rights, first drafted by the Council of Europe in 1950. The ideological liberal viewpoint that the democratic states of Europe hold is compelling to the extent that the economic liberties and political liberties are presented as a dual argument for the free flow of data to maintain (1) as an instrument for economic growth while also (2) protecting the intellectual property rights and privacy rights of individuals from engaged commerce.

In the European view, the human respect to privacy, freedom of expression and its relationship with intellectual property rights concerning data protection laws, provides a foundation to regulate commerce. Information privacy protection is not similar in the United States, in that it, again, does not have a constitutional status.

However, when it comes to international trade, Europe has a weaker hand in its business relations between both transatlantic trade blocks. Advocacy for greater freedom of process data have in trade relations an advantage over the use of legal action, since limiting the flow of data and protecting privacy interests slows down the economic processes and thus corporate growth (Keller, 2011).

Because commercial interests are sufficient for the regulations to loosen while at the same time require data privacy to be under constant innovation of rules to work effectively, the WTO oversees the adjudication of transborder disputes through private arbitral tribunals (Hale, 2015). Because the complex mixture of domestic laws and courts slowdown the judicial process and also the need to speed up arbitration for commercial needs, states have collectively backed private arbitration.

Private arbitration, is not as suggested a fully privatized court system, yet a hybrid political institution receiving distinctions between public and private to accommodate the complex regime like the transatlantic commercial arbitration system (TCA) in which both matters fuse. To understand the world of the global political economy, the TCA has been prominently studied from a sociological perspective on how the hierarchy and expertise within these hybrid regimes determine the rules of the game (Dezalay & Garth, 1996).

According to these researches, the field is not made up of only the passed resolution, but includes the “social space” and “area of practice” around these institutions, including lawyers and firms, motivations, patterns of behavior. In short, Dezalay and Garth (1996) highlight the arbitration community itself as the chief driver of the globalization phenomenon in which commerce and its arbitration are a useful practice that have the goal of becoming more lucrative and fuel commercialization. It should be asked, with regard to the state of business within domestic politics, if the international constellation of power and interests are becoming more relevant and smaller states are more easily pressurized; or the delegation of judicial authority may be more in desire of pro-trade firms and governments. Can this international arena of trade and judicial practices actually maintain its credibility?

When it comes to disputes in international trade, the WTO was born out of the GATT, the General Agreement on Tariffs and Trade, established in 1947. It set up a set of rules for nondiscrimination, transparent procedures, and the settlement of disputes. The Most Favored Nation clause (MFN), calls for each every other member country the most favorable treatment with respect to imports and export. In a sense, TTIP can at this point be regarded an ameliorated version of the MFN clause concerning European countries and the United States in that the agreement seeks to reduce high tariffs between these states and encourages free trade among both Western blocks. The GATT achieved the liberalization of trade and reduced barriers and improved dispute-settlement mechanisms to better provide dealings with government involvement such as subsidies and import controls. But with the GATT that became less effective over time due to the “natural” lowering of tariffs, the WTO was ratified, which is now responsible for overseeing the implementation of all multilateral agreements, such as the GATS, or the General Agreement on Trade in Services and Trade-Related Aspects of Intellectual Property Rights (TRIPS).

The TRIPS establishes minimum standards of protection for each category of property rights. It is expected for member-states of the WTO to implement these standards in their legislation and to be applied in accordance with the principles of the MFN clause, but also in the treatment of domestic issues. In short, TRIPS is the trade agreement with the most implications for the production of and access to drugs, in particular for developing countries (WHO, 2015).

The WTO – although it makes major contributions to improve trade and investment flows around the world – may well infringe on the sovereignty of nations. Streamlined dispute settlements mean that decisions are made more quickly and according to previous results, which quickly confronts nations in violations of these trade agreements. Negative WTO decisions affecting large trading nations are more and more likely to be received with resentment which may cause division within the WTO. Moreover, outside groups such as nongovernmental organizations and special interest alliances believe that international trade and the WTO represent a threat to their causes (Czinkota & Ronkainen, 2010).

It should now be stated that the US and the EU have been struggling in recent years over trade issues. The Safe Harbor Agreement, for example, has been ruled invalid in the Facebook vs EU ruling, with the result that US tech companies such as Google and Facebook have been deemed to have no right to use any of the data of European citizens for commercial purposes. But with TTIP, the intellectual property rights and data privacy rights discussion may direct future rulings in a different favor.

  1. How would TTIP influence the EU’s possibilities to enforce its laws?

First of all, the question should be raised to what initiative TTIP has been put on the political agenda of Brussels. Thinktanks, like the Center for European Policy Studies (CEPS) are currently the most influential instruments in the offices of the European Parliament due to their function of “rationalizing the debate and disprove emotional arguments based on facts and numbers,” according to liberal Belgium Europarliamentary Philippe De Backer (Vanheste, 2015).

The influence of thinktanks reaches both the European Commission and European Parliament to the extent to which standpoints are based on the formulated advised policies by the CEPS. TTIP in fact has promised to deliver 545 EUR extra income in every European household (Vanheste, 2015). However, the most influential thinktanks are both corporate-sponsored (300 companies sponsor only 7 thinktanks), and although (1) the rules state financiers can not influence their contents, and (2) CEPS its reputation towards Brussels policymakers is highly prioritized, correspondence between the national embassies and thinktanks should not be underestimated. Article in Dutch online newspaper De Correspondent offers insight in how the Dutch embassy in Washington pulled back its financing to the Bertelsmann Foundation due to the outcome of the research (Vanheste, 2015) (Bertelsmann-Buza, 2015).

Because of their involvement with governments and corporations, the credibility of thinktanks puts pressure on the discussion concerning the ISDS (Investment-State Dispute Settlement) and the potential outcomes of adjudications in these hybrid courts.

The enforcement of EU law, and therefore the protection of personal data, also outside the territorial limits of European public order, is dealt with by the Data Protection Directive. It attempts to ensure as much as possible that the processing of personal data that has its source in Europe remains under the Directive’s rules (Keller, 2011). Furthermore, it encourages non-EU governments to adopt European protection principles.

With GATS and TRIPS, the WTO contributes to an environment in which the European Commission and the Data Protection Directive of Europe can refuse the access to requested documents if the disclosure would undermine the protection of privacy and the integrity of EU citizens (Keller, 2011). As this is part of a general policy to encourage non-EU governments and businesses to adopt European data protection principles, the major public concern that the US its abuse of personal privacy in online services does not lead to a better and comprehensive data protection legislation, TTIP may well further encourage the pursuit of less restrictive data processing laws clearly serving its commercial interests; to the point even that the standard practices encouraged by the European Commission set out in article XIV of the GATS would be overrun; agreements serving the prevention of incompatibility with the “high level of protection in the EU and Article XIV of the GATS”, measures such as the protection of public morals, human health, the privacy of individuals in relation to the processing of personal data and confidentiality of individual records and accounts (WTO, 2015) (European Commission, 2013).

  1. How does the lack of transparency of the ISDS influence international policies?

The ISDS gives multinationals and national governments a legal expectancy framework of which the outcomes of legal disputes can be made. This was first enacted in 1994 under Chapter 11 of NAFTA (the North American Free Trade Agreement) in order to bypass domestic courts and regulatory agencies (Campbell, 2013). The rules and disciplines of the agreement are upheld by an impartial tribunal ran by corporate lawyers. But although Chapter 11 has no interference with public courts, it does not limit a government’s right to regulate in the public interest, such as to protect the environment, public health and consumers.

The ISDS is bound to the transnational agreements such as the Safe Harbor Agreement, as previously discussed. The invalid ruling of the agreement (EU vs Facebook) is principally based on the fact that the EU and the US have fundamentally different understandings of how privacy should work in the digital age. In the 1990s, European countries developed rules governing the collection and processing of personal information under the supervision and oversight and regulatory agencies known as “data protection authorities” (Farrel & Newman, 2015). The EU Charter of Fundamental Rights when adopted in 2009 at that point prohibited any transfer of data to countries that the EU considers to have weak privacy protections, among them the United States.

Also in the EU Parliament, a legal framework for the protection of personal data is being regarded as a key priority, again, based on Article XIV of the GATS. However, what complicates the discussion, is the role US tech companies such as Facebook and Google play in the national security debate as interdependence is exploited by the United States using the argument of national security for the economic exploitation of the advanced industrialized world. Under ISDS, then and moreover, the economic argument can be made that keeping customer data on European turf would jeopardize the transatlantic digital economy, costing US firms billions of dollars. This gives, under rules of the Investor-State-Dispute-Settlement, US tech firms ground for suing European countries over corporate profit losses.

The transformation of US-technology companies into tools of national intelligence has badly damaged the firms’ reputations and has them furthermore exposed to foreign sanctions, how big of an economic power the US is; the European Court of Justice ruling on Safe Harbor has forced the US government to decide on reforming its privacy rules, bindingly. Concluding, using interdependence of transnational relations between firms and states, the Safe Harbor case illustrates, could well backlash in the face of government as well as multinational firms when they threaten the fundamental rights of citizens.

  1. How does TTIP fit in with the GATS and WTO settlements?

The advocacy for the protection of EU citizens privacy rights has evidently gained momentum, to the extent US ambassador Anthony Gardner has pledged to “strengthen the Safe Harbor Frame and make it comply with the EU Protection Directive” (Gardner, 2014). But what makes TTIP then different from already established trade agreements and why would the US government insist in establishing this resolution?

The investor-state dispute settlements by transnational commercial arbitration are as previously explained sensitive to corruption (1) due to their institutional nature that relies on individuals and also prevents oversight from independent watchdogs and (2) due to the special relationship thinktanks have with their principal government or corporate client. TTIP is, more than other agreements, politicized by US Trade Representatives, such as M.Froman, who labeled the EU Data Protection Directive as a “localized” and “Schengen” network, regarding European rules as limitations for trade and commerce, while disregarding the constitutional status of the EU Charter of Fundamental Rights (Bendrath, 2014). The matter, therefore, is not purely commercial, rather leans on the fabric of more governmental power in favor of the US, enforced through tribunals specifically designed for its tech-firms to compete with foreign countries. With regard to the matter of intellectual property, the EU’s proposal for the drafting specifically mentions the “obligations under the GATT and TRIPS agreements” (EU, 2015).

At this time of writing, it is impossible to show how TTIP would manifest itself in the international arena next to the GATS and TRIPS resolutions regarding data protection rights and intellectual property rights. It will be interesting to see how the European Union can shift the argument over blocking commerce and limiting trade to an argument over protecting its national markets and economies with regard to intellectual property rights of its firms and citizens. Europe proved after WWII to be successful in overcoming the differences in views between nations when it was necessary for the coal and steel industries to trade freely across the continent. The United States will need to disentangle from the temptations of wanting to manipulate order to its national security advantage if it truly wants to form an equal trading block with its Western counterpart. To start to regard private and public goods to be maintained and nurtured at the benefit of the American economy would be a great start.

Literature list:

Bendrath, R. (2014) TTIP and TiSA: Big Pressure to Trade Away Privacy. Statewatch.

Bertelsmann-Buza (2015) Platform Authentieke Journalistiek. De Correspondent. https://www.documentcloud.org/documents/2646626-7-0-Bertelsmann-Buza.html

Campbell (2013) Investor-state dispute settlement: Let’s look at outcomes. Canadian Council of Chief Executives. http://www.ceocouncil.ca/blog-innovation-and-competitiveness/2013/12/investor-state-dispute-settlement-lets-look-at-outcomes

Czinkota & Ronkainen (2010) International Marketing. South-Western, Cengage Learning.

Dezalay & Garth (1996) Dealing in Virtue: International Commercial Arbitration and the Construction of a Transnational Legal Order. University of Chicago.

European Commission (2013). COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT ON THE FUTURE OF EU-US TRADE RELATIONS. Retrieved from: http://trade.ec.europa.eu/doclib/docs/2013/march/tradoc_150759.pdf

EU (2015) Article XX – Customs enforcement of intellectual property rights. EU-US TTIP Negotiations. Retrieved: http://trade.ec.europa.eu/doclib/docs/2015/july/tradoc_153672.pdf

Farrel & Newman (2015) The Transatlantic Data War. Europe Fights Back Against the USA. Foreign Affairs.

Fuster, G. (2012). Balancing intellectual property rights against data protection. Revista de Internet.

Gardner, A. (2014) Priorities of the US Mission to the EU. United States Mission to EU. Retrieved: http://useu.usmission.gov/covington_2014-06-18.html

Hale, T. (2015) The Rule of Law in the Global Economy: Explaining intergovernmental backing for private commercial tribunals. European Journal of International Relations.

Vanheste, T. (2015) Bij Deze Denktanks Bestellen Grote Bedrijven Hun Argumenten Voor TTIP.

https://decorrespondent.nl/3755/Bij-deze-denktanks-bestellen-grote-bedrijven-hun-argumenten-voor-TTIP/184599190765-c86f93f9

WHO (2015) Trade, foreign policy, diplomacy and health. WHO. Retrieved from: http://www.who.int/trade/glossary/story091/en/

WTO (2015) General Agreement in Trade and Services. Article I – XXVI. Uruguay Round Agreement.

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