On February 27, 2017, the Intellectual Property (IP) Commission released an update to its 2013 report entitled “The Theft of American Intellectual Property: Reassessments of the Challenge and United States Policy.” The report finds that the annual cost of counterfeit goods, pirated software, and theft of trade secrets to the U.S. economy is between $225 billion and $600 billion. Since the IP Commission’s 2013 report, the U.S. has suffered over $1.2 trillion in economic damages due to theft of American IP rights. It is important that Congress strengthen enforcement efforts and that more voluntary initiatives emerge to combat the growth of IP theft and to encourage more innovation, investment, and creativity in the U.S. economy.
According to the report, in 2015, the U.S. imported counterfeit and pirated goods valued between $58 billion and $118 billion, and the U.S. exported counterfeit and pirated goods worth approximately $85 billion. An OECD study also estimated the sum of counterfeit goods imported into the U.S. and exported from the U.S. to be valued around $145 billion.
The proliferation of pirated software is a major problem because of the ease of downloading software. The IP Commission’s report finds that the value of pirated software exceeded $52 billion worldwide in 2015, costing the United States approximately $18 billion in economic activity. Furthermore, theft of trade secrets is difficult to measure because many companies do not even know that their IP has been stolen. The report estimates that theft of trade secrets cost the U.S. between $180 billion and $540 billion in economic activity in 2015.
The IP Commission’s report also outlines a number of actions taken by Congress and the Obama Administration since the 2013 report to help stop the theft of IP. Most recently, as I wrote in a December 2016 blog, the Office of the IP Enforcement Coordinator published a report which set four goals for FY 2017-2019 with regard to strengthening protections of IP rights. The goals are the following: (1) enhance national understanding of economic and social impacts from trade secrets misappropriation and IP rights infringement; (2) minimize counterfeiting and IP-infringing activity online; (3) secure and facilitate lawful trade; and (4) enhance domestic strategies and global collaboration.
Enforcing protections of IP rights and stopping online piracy are the deficiencies of United States’ robust IP policy framework. Despite the U.S. still leading the world in terms of strong protections of IP rights, GIPC’s 2017 International Index cites one of the United States’ weaknesses as “inconsistent enforcement against counterfeit and pirated goods, especially goods sold online.” As FSF scholars have stated for many years, theft of IP directly harms job growth in creative industries and discourages further innovation and investment by entrepreneurs. On the other hand, voluntary and governmental enforcement efforts restore the entrepreneurial spirit of creators by upholding strong IP rights protections.
In a February 2017 blog, Seth Cooper and I recommended two potential actions by Congress that could help increase enforcement efforts with regard to copyright. First, Congress should reform the Digital Millennium Copyright Act’s “notice and takedown system” under Section 512 to lessen the burden on copyright holders to monitor infringements of their content. Second, Congress should modernize the U.S. Copyright Office by updating the administrative technologies in order to maintain a searchable database of copyright registrations, to monitor infringements of IP rights, and ultimately to enhance the economic value of copyrighted works.
Voluntary initiatives also can have a large impact on combatting theft of IP online. The Copyright Alert System, TAG, and the Donuts-MPAA initiative all help notify large Internet companies when pirated content or counterfeit goods are being advertised or sold on their websites or networks. These types of initiatives often can have a substantial impact on reducing online piracy because websites and advertisers (in addition to the IP rights holders) have a monetary incentive to report IP rights violations.
A group of think tanks, organizations, and individuals recently submitted a letter to the Trump Administration and the 115th Congress asking them to continue to promote strong protections of IP rights. IP-intensive industries comprise roughly 38% of all activity and 30% of all jobs in the U.S. economy. Strong protections and enforcement of IP rights are necessary for creators and entrepreneurs to continue to provide consumers with innovated goods and services and to encourage investment and growth throughout the U.S. economy.