IP Theft Breakdown
IP theft is on the rise. On August 6th, Senator Bob Casey, Chairman of the Joint Economic Committee (JEC), released “The Impact of Intellectual Property Theft on the Economy” – a report detailing the costly impact of IP theft on the U.S. economy.
Intellectual property intensive industries account for 20% of the U.S. workforce and were a third of the gross domestic product (GDP) in 2010. Further, compared to non-IP intensive industries, IP involved jobs have higher wages and generate greater sales per employee. So it’s to no one’s surprise that legislators find it imperative to study the factors that may negatively impact IP intensive industries, especially as counterfeiting and piracy become increasingly relevant problems.
IP infringement puts consumers at risk of using lower quality counterfeit goods which in the worst cases could pose potential health and safety risks. Seized goods represent more than $1.1 billion in lost sales. Counterfeit goods place a downward pressure on the price of the authentic product which further causes a decline in a firm’s revenue. Trade in counterfeit and pirated products –excluding online piracy – increased by 7.6% between 2000-2007. In 2011, the U.S. Customs and Border Protection seized 24,792 counterfeit or pirated goods, a 24.2 percent increase over the amount of goods seized in 2010. Of the counterfeit goods seized in 2011, consumer electronics constituted 22% of the goods, followed by footwear at 14%. Unsurprisingly, China accounts for the vast majority of pirated goods seized at the U.S. border. Goods from China accounted for more than three-fourths of the value of counterfeit products seized in the United States from 2004-2009.
Just how much does IP theft affect companies’ bottom lines? Beyond lowering sales, the firm’s profits are adversely affected by the additional costs undertaken to protect the business from future IP infringement. The report cites one critical study, which showed that the average large company loses $101.9 million in revenues and pays out an additional $1.4 million to identify and enforce intellectual property right, leading to an average decline in profits of $46.3 million.
Big business are not the only ones who are greatly affected from IP theft. The report highlights the added difficulties for small business to pursue enforcement actions given their limited resources. Despite representing 79% of U.S business, only 10.5 % of small businesses file IP theft complaints.
The report‘s concluding remarks note that the government must take active measures to strengthen IP enforcement and provide more timely resolution of foreign infringement complaints. In an effort to follow through, the Intellectual Property Enforcement Coordinator (IPEC) is preparing a new Joint Strategic Plan on Intellectual Property Enforcement.