Review of Draft Free Trade Agreement by Senator Kate Lundy

Open Source Special Interest Group
Sydney
20 May 2004

Australia's Cultural Identity and Intellectual Property under the proposed FTA

or "Sugar, Sheep and Shibboleths"

Why Howard's deal with the US sells out our unique strengths.

In the opening pages of Neal Stephenson's ode to the future, Snow Crash, he describes the US economy as only doing four things well: Music, Movies, Software and Pizza Delivery (this last one being a metaphor for distribution).

Stephenson's message is that, done well, only these four things are needed to stay at the top of the global economic food chain.  In other words, control over production and distribution of both cultural content and knowledge are the means to social, cultural and economic domination.

Sounds melodramatic?  Of course, that's Neal Stephenson's style. 

His choice of metaphor is also fascinating because it is so deeply rooted in the US market-centric culture.

History suggests that cultural and economic performance are deeply intertwined. The dominant economic power in the world today is the US, whose culture has been carried by its economic reach to all parts of the globe. Is it a coincidence that the great emergent economic power in the world today is China, a nation which has a rich and powerful culture with almost as broad a reach: think of the Chinatowns in every major city you can name.

I don’t think so. Nor do I think that it is a coincidence that both of these countries have during their economic development been called the greatest thieves of intellectual property laws in the world.

The US and China have demonstrated an ability to take what they need from the rest of the world, assimilating strengths without selling out their core character. Once in the ascendancy, it is only to be expected that they would seek to pull up the drawbridge behind them.

So for a whole range of reasons, Stephenson’s words came to mind as I prepared for today's presentation.  It is the control of music movies, software and its distribution that is precisely the subject of Chapter 17 and others in the proposed so-called, free trade Agreement between Australia and the United States of America.

It is what we stand to lose in relation to these issues that exposes the hidden truth that John Howard, with his forelock tugging approach to trade and foreign relations and 1950s cultural mores, is intellectually unequipped to understand.

Because his mind remains rooted in a time and a class when we were to all intents and purposes colonial, Howard does not understand that their might be things that are uniquely Australian that we stand to lose: our ability to create, innovate and use our intellectual property to advance social and economic goals – what I refer to as Shibboleths in the title to this presentation.  So it is not surprising his focus on sheep and sugar.

The Howard Government's participation in bi-lateral trade talks with America was inevitably going to lead to an imbalanced outcome.  This is because America is really big and Australia is really small.  

It is also because America has an aggressive and comprehensive bi-lateral agenda that has the growth of US-centric cultural content and US corporate-friendly intellectual property management at its core. Even the legislated copyright extension is called the Mickey Mouse Amendment, so complete is the corporate domination of the debate.

In contrast, Australia had a domestic political issue relating to our continuing reliance on primary produce and the marginal nature of certain National Party member's seats in the federal parliament. And sugar. And sheep. 

Culture, IP and copyright were brought to the table by the US.  One can only assume that the important issue of intellectual property did not rate at all in the Howard Government political motivation to do the deal.  In fact it seems that the Australians negotiators were led to believe that the U.S. IP agenda was wholeheartedly supported by at least some Australian interests, including the Business Software Association of Australia, which of course were really the interests of large US-based companies operating in Australia.

It seems that any further analysis of the fact that these interests were not necessarily Australia's at all, either did not occur, or were conveniently ignored.  Given the weight put on these issues by the US, alarms bells should have been ringing. Instead, the result shows lazy, irresponsible political expediency that will cost Australia dearly if it goes ahead.

The result is an Agreement that seeks to determine a new direction in Australian IP law.  It is an Agreement that is dictating legislative change, despite the fact that a programmed review of the Australian Digital Agenda Legislation has reached its own conclusion.

To date the Howard Government have not bothered to defend this interference in the Digital Agenda Review and recommendations.  This is despite this specific review, scheduled three years after the law came into effect, being in direct conflict in its recommendations with the direction the FTA will take intellectual property law.

For software and applications, the FTA effectively means that intellectual property law in Australia faces an ad-hoc morphing to conform with US law.  I say ad-hoc because the changes are only where it is favourable to the common interests in both countries, ie: those represented by the Business Software Association of Australia and those in the head offices of their member organisations back in the US.

Some counter-balancing features under US law, such as the 'fair-use' of copyright do no exist here, so claims that the FTA will bring 'consistency' or uniformity to Australian and US IP law have no credibility at all.

Getting to the bottom of all this complexity is therefore necessary if we are to assess the overall merits of the proposal.  Intuitively, these provisions represent bad news for  Australia.  This is why the Labor-initiated Senate Select Committee Inquiry into the Australia US Free Trade Agreement is so important.  It is not controlled by the Howard Government, so it creates a forum for transparent assessment.  The people of Australia were never going to get that from John Howard.

Not only has Labor created a forum for the airing of the real and likely impact of the proposed FTA, it has lifted awareness of intellectual property management and cultural independence generally.  With the political focus of the FTA deliberately on agriculture, ie: sheep, it has been a substantial challenge for the arts and IT community to respond with vigour and substance to the threat posed by the Free Trade Agreement to cultural independence and innovation.

But respond they have, and through the body of evidence already gathered by the Senate Committee, through written submissions and public hearings, a picture is taking shape.  This picture tells a story of how this Agreement and the related changes to our laws will stifle what is unique and interesting about Australian music, movies and software innovation.

Whether it is the importance of a having the largest, on a per capita basis, dynamic open source software sector or the need to be able to express ourselves in our cultural content, the bulk of non-(large) corporate evidence argues this FTA will have an inhibiting effect.

So I now turn to the topic that is the focus of today: Open Source software. 

For their first time, Parliament is gaining a clearer understanding of the impact Open Source software is having in Australia and around the world. But as open source software gains market share and challenges the anti-competitive habits of existing large software houses, like Microsoft, the FTA will potentially put the brakes on this momentum.

How? By insisting that Australia legislate to adopt the US software patent system.  Traditionally, patents do not cover things like music or mathematics.  Code is like mathematics, the Open Source Community argues.  The same basic rules apply – it is how you put the building blocks of software code together. 

However, under the US patents system, these building blocks of software code can be owned under patent and therefore not be available to software writers. Even independent discovery is not a protection from software patents.  The negative impact on Open Source includes the intimidation to writers the potential of being sued by patent lawyers from the US.

Large companies have the resources to police their patents by paying teams of lawyers to do it for them. Small companies do not. Large companies do deals with each other large companies to share patents.  Smaller companies have no choice but to pay licensing fees or go out of business for fear of endless, expensive litigation.   Software patents increase unfairness is the software sector, and ultimately make the market an uneven playing field by killing off the competition.

The Australian/Open Source community argues that Australia will be particularly disadvantaged because we have a higher proportion of, and greater future potential for, open source as a part of a growing software sector.

Another area of significant focus is the anti-circumvention provisions.  The Australian Linux/Open Source Community has articulated their concerns:

It is illegal under existing law to distribute Open Source software known as DeCSS, which permits DVDs to be played on Linux.  It is naturally, already widespread.  In the US, under the Digital Millennium Copyright Act, 'distribution of this code is actively suppressed and sites publishing it are taken to court.'  This is despite that playing DVDs on Linux in one's own home for one's own private use does not technically present a breach of copyright because of the 'fair use' copyright provisions in the US.

However, in Australia, we do not have the same 'fair use' provisions, and note none are proposed as a result of the FTA, and yet Australia will be required to create a new criminal offense for the use of DeCSS – even in one's own home for one's own private use! This will create the worst case scenario for consumers in Australia.  Australians will be denied to the right to write their own open source code to play their own DVD's on linux in their own home!  This is absurd but it is what the distributors of companies like Sony want to do. 

Even the ACCC has argued that the way in which DVD's are protected from copying (their technical protection measures or TPMs) also constitute anti-competitive behavior.

And then there is the ambiguity of the wording of the draft Agreement, which impacts on individual open source developers.  This crucial exchange during a public hearing at the Inquiry sums up the implications for many open source software writers in Australia:

Senator O’BRIEN—Article 17.4.7(a) provides that the parties shall—I emphasise ‘shall’:

... provide for criminal procedures and penalties against persons circumventing for commercial gain or profit technological protection measures.

It says the parties may—I emphasise that word—provide that such penalties do not apply to non profit libraries, educational institutions, archives et cetera. Does this mean that, unless the parties or one of the parties so provide specifically to exempt not-for-profit use, not-for-profit users could face criminal procedures for circumventing TPMs?

Mr Russell—That is definitely true. In this case I am not a not-for-profit user. I sell this software. I write this software. This is my living, this is what I do. I particularly point you to 17.11.26(a)(i), which says that ‘commercial’ includes certain wilful activities ‘that have no direct or indirect motivation of financial gain’. In other words, commercial covers non-commercial as well.

This is an example of some of the technical bear-traps that lie within the complex and ambiguous text of the free trade agreement.  In general witnesses have argued that the FTA represents a real threat to their livelihood in Australia.  While this seems over the top, experience has shown the tendency of large software companies to 'selectively enforce' intellectual property rights.  This involves a focussed legal campaign to victimise a single open source software writer in an endless nightmare of litigation.  This serves to 'warn' and intimidate others.

Anyone wanting a greater understanding of the issues, I urge you to research and read the submissions to the committee.  I congratulate contributors to date.

In conclusion, rumours are rife about organisations getting heavied by the Government to make favourable comment about the FTA or to say nothing.  This committee provides THE ONLY opportunity for the Australian people to delve into the detail and assess its impact.

It is important to note that Labor is not opposed to Free Trade, but we have reserved making a decision on whether we will support the Australia-United States Free Trade Agreement until after the Senate Select Committee reports on 12th August this year. 

The recommendations arising from this report will shape Labor’s position on AUSFTA and whether we will support changes to existing legislation required to implement the Agreement. Legislative change will be required to honour Australia's obligations under the FTA, therefore the passage of this legislation will determine if the Agreement can be entered into.  Even if Labor ultimately opposes the legislation and the FTA, the Howard Government may still be able to secure the support needed in the Senate through the independents, Democrats and Greens.

The Howard Government has not yet indicated when they propose to introduce these legislative changes.  The timing of the next federal election will also have an impact on this timing.

There is no doubt however about the trickiness the Howard Government has employed to get this deal to this stage.  What remains to be seen is just how much detail has been deliberately withheld from the Australian people.

I will conclude with a reminder of the history and motivation of intellectual property law, which was to create an incentive for writers by giving them some control over their work. Patent laws were designed to prevent monopolies by making public important technological innovations, providing inventors with temporary exclusive rights over their creation as a trade-off.

The underlying assumption was that innovation best occurred with free-flowing ideas in the public domain. It is with bitter irony that such laws have departed so dramatically from the original intent.