New IP Commission Report Shows Need for Strong IP Enforcement Efforts

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 115^th 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.

GroupM Will Require Partners to Become TAG-Certified

Today, WPP’s GroupM, the leading global media investment management company, announced that it will require all of its media partners to receive anti-piracy certification from the Trustworthy Accountability Group (TAG) by Q1 2016. TAG is a voluntary initiative which helps prevent ad placement on websites which facilitate the distribution of pirated content and/or the illegal dissemination of counterfeit goods. (Read more about TAG in this blog.)

Certification entails that TAG has approved an advertising agency’s ability to identify at risk websites, prevent advertisements on such websites, disrupt fraudulent or deceptive transactions, and eliminate payments to such websites that facilitate access to illegal content and/or counterfeit goods. John Montgomery, Chairman of GroupM Connect in North America and Co-Chair of TAG Anti-piracy Working Group made the following statement in a press release:

We’re in the business of giving the world’s most valuable brands marketing advantage with smart media strategies. This inherently means we’re vigilant for clients’ brand safety. Our work with TAG in the development and now full adoption of anti-piracy guidelines is a major leap forward. With IAB, 4As, and ANA, we’ve worked years to make the digital ecoSystem more trustworthy. Fighting pirates of copyrighted content required every ounce of our tenacity and ingenuity, but with the advent of TAG’s Brand Integrity Program Against Piracy, we have powerful new tools and safeguards.

TAG and other voluntary initiatives, such as WheretoWatch.com, Rightscorp, and CreativeFuture, have emerged to aid consumers in finding legal content and raising awareness about websites, enterprises, and advertisers that violate intellectual property rights.

Diminishing ad-supported piracy is important to help ensure that content providers, artists, innovators, and marketers can earn a return on their creative works - incentivizing more innovation, investment, and economic growth. 

FSF scholars applaud the work of TAG and support this decision by GroupM!

New Initiative Emerges with Goal of Diminishing Ad-Supported Piracy

The Trustworthy Accountability Group (TAG) recently launched what it is calling the Brand Integrity Program Against Piracy. The program will coordinate with companies in need of advertising and reliable advertising agencies in an attempt to diminish the number of advertisements that appear on websites which facilitate access to illegal content or counterfeit goods.

The Brand Integrity Program Against Piracy was supported at its launch by the U.S. Chamber of Commerce and a several organizations and companies involved in advertising, online publishing, advertising technology, media, and consumer protection, including: 

• Advertising: Association of National Advertisers (ANA), American Association of Advertising Agencies (4A’s), Interactive Advertising Bureau (IAB), GroupM Interaction

•  Advertising Technology: Collective, DoubleVerify, Integral Ad Science, L-3 and MiMTiD, sovrn, Veri-Site, whiteBULLET

• Media: Recording Industry Association of America (RIAA), Motion Picture Association of America (MPAA), Independent Film & Television Alliance (IFTA), CreativeFuture, Copyright Alliance

• Consumer Protection: International AntiCounterfeiting Coalition (IACC)

Any advertising agency that wants to participate in TAG’s new initiative can do so by using validated tools and services to identify and prevent advertising from running on websites which violate core IP principles.

TAG will also work with third party validators, such as Ernst & Young and Stroz Friedberg, to certify ad agencies as “Digital Advertising Assurance Providers” (DAAPs). In order to be certified as a DAAP, advertising agencies must be able to identify ad risk entities, prevent advertisements on undesired ad risk entities, detect, prevent or disrupt fraudulent or deceptive transactions, and eliminate payments to undesired ad risk entities. Once an ad agency is certified as a DAAP, it can work with companies to ensure that their ads do not end up on websites with illegal content.

This is a very important initiative considering there has been a rise in the number of ad-supported piracy websites. The Digital Citizens Alliance released a February 2014 report entitled “Good Money Gone Bad,” concluding that websites selling advertising against illegal content make roughly $227 million in annual ad revenue. The largest Bit Torrent websites are making more than $6 million a year, but even some of the smallest websites make more than $100 thousand a year.

While it is hard to estimate how much of this ad revenue is lost to the original artists and brand owners, even a $1 loss to innovators and entrepreneurs due to theft of IP is very unfortunate. This initiative and other private tools, such as WheretoWatch.com and Rightscorp, are a step in the right direction towards diminishing the size and scope of online piracy and the sale counterfeit goods and content.

Strong IP rights are important for ensuring that content providers, artists, innovators, and marketers can earn a return on their ideas and labor, incentivizing more innovation, investment, and economic growth.