GAO Reports on IP Infringement, Cannot Estimate Effects

The Government Accountability Office has issued a report to the House and Senate Judiciary Committees on efforts to quantify the economic effects of counterfeit and pirated goods.

Impact of Counterfeiting and Piracy Difficult to Estimate

GAO states that the illicit nature of counterfeiting and piracy makes estimating the economic impact of IP infringements extremely difficult, so assumptions must be used to offset the lack of data. However, research suggests that the problem is sizeable.

Health and Safety Issues, Lost Business Revenues, Etc.

GAO examined existing research on the effects of counterfeiting and piracy on consumers, industries, government, and the U.S. economy, and found that potential negative effects include damage to health and safety to consumers; lost revenues and increased IP protection costs for industry; lost tax revenue for U.S. government; and a slowed growth of the U.S. economy as a whole.

Most Counterfeit Products Seized by CBP are from China

According to CBP data, seized counterfeit goods are dominated by products from China. During fiscal years 2004 through 2009, China accounted for about 77% of the aggregate value of goods seized in the U.S., with Hong Kong, India, and Taiwan following.

With respect to the types of products seized, CBP’s efforts have been most prolific for footwear, wearing apparel, handbags/wallets and backpacks, and consumer electronics.

(GAO notes that another significant aspect of IP infringement is the piracy of digital copyrighted products, which is not captured by CBP seizure data. Sectors facing threats from digital piracy include the music, motion picture, television, publishing, and software industries.)

Eight Federal Agencies, TRIPS, and Various FTAs Support IP Rights

GAO notes that eight federal agencies undertake the primary U.S. government activities in support of IP rights: the Departments of Commerce, Health and Human Services, Homeland Security, State, and Justice, the International Trade Commission, the Office of the U.S. Trade Representative, the Copyright Office; and entities within them such as U.S. Customs and Border Protection, the U.S. Patent and Trademark Office, and the Federal Bureau of Investigation.

In addition to domestic efforts for protecting IP, the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which came into force in 1995, broadly governs the multilateral protection of IP rights. Under TRIPS, all WTO member countries are obligated to establish laws and regulations that meet a minimum standard for protecting various areas of IP rights. It also provides for enforcement measures for members.

GAO states that one of USTR’s priorities in recent years as part of efforts to protect IP has been negotiating free trade agreements. Since 2000, USTR has completed negotiations for free trade agreements that have entered into force with Australia, Bahrain, Central America, Chile, Jordan, Morocco, Oman, Peru, and Singapore. According to officials at USTR, these agreements offer protection beyond that required in TRIPS.

(The U.S. also has signed free trade agreements with Colombia, Korea, and Panama, but Congress must enact legislation for them to go into effect. See ITT’s Online Archives or 03/31/10 news, (Ref: 10033140), for BP summary of Congressional Research Service reports on these pending FTAs.)

(See ITT’s Online Archives or 10/16/08 news, (Ref: 08101620), for BP summary of the President’s signing of the Intellectual Property Act of 2008into law.

See ITT’s Online Archives or 02/26/10 news, (Ref: 10022620), for BP summary of the Intellectual Property Enforcement Coordinator’s request for comments in developing the Federal Government’s intellectual property enforcement Joint Strategic Plan.)

GAO report, entitled “Intellectual Property: Observations on Efforts to Quantify the Economic Effects of Counterfeit and Pirated Goods” (GAO-10-423, dated 04/12/10) available at http://www.gao.gov/new.items/d10423.pdf