New Report: IP Theft Costs U.S. Economy, Jobs

May 23, 2013

Photo: Natalie Behring for Bloomberg

A just-released report found that the U.S. economy loses more than $300 billion annually to intellectual property theft--an amount equal to the current annual value of U.S. exports to the entire Asian continent.

The 11-month study by The Commission on the Theft of American Intellectual Property provides the first definitive measure of piracy’s impact on the U.S. economy and details the devastating effects of copyright theft and the imminent need to raise the bar on enforcement.

The Commission found that there would be 2.1 million more jobs in the U.S. if intellectual property rights were strictly enforced and efforts to confront IP theft were better organized. 

Innovation and creativity play a vital role in our economy, underscoring the importance of strong IP rights. However, business sectors across the country have suffered from high volumes of IP theft.

One of the nation’s leading sectors, software manufacturers, loses approximately $10 billion each year through counterfeiting operations in China. And, although the report does highlight China as the most significant contributor to U.S. IP theft (between 50 and 80% of all IP theft is attributed to China), numerous other countries violate these rights, most notably Russia and India.

The report offers suggestions to address the crisis. Commission co-chairs former Utah Gov. Jon Huntsman and ex-Director of National Intelligence Admiral Dennis Blair advocated for changes to U.S. trade agreements (which don’t address IP theft. In addition, they called for stricter cybersecurity laws, and suggested making the President’s national security adviser respond to IP threats.

 In a joint op-ed in The Washington Post, Huntsman and Blair argued that the national response to this crisis has been “weak and disjointed”:

“Our commission was advised by some experts who said the U.S. should simply wait until lesser-developed economies mature and then find it important to protect their own intellectual property. Others counsel against antagonizing countries such as China, whose buying power is strong but where IP protection is especially poor.

“Many companies simply internalize the threats of IP theft by going on the defensive; in the process, they pay ever-greater sums for improved cybersecurity precautions without any real increases in security. The Obama administration has made some progress in raising this issue with foreign governments, but more needs to be done.”

The two former government officials offered prompt solutions to the national crisis:

“We recommend immediately: denying products that contain stolen intellectual property access to the U.S. market; restricting use of the U.S. financial system to foreign companies that repeatedly steal intellectual property; and adding the correct, legal handling of intellectual property to the criteria for both investment in the United States under Committee for Foreign Investment in the United States (CFIUS) approval and for foreign companies that are listed on U.S. stock exchanges. All of these recommendations will require strengthening the capacity of the U.S. government in these areas.”

Executive Vice President of the U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC) Mark Elliot released a statement saying the Chamber “commend[s] Admiral Blair and Ambassador Huntsman for their leadership of the Commission, and for their steadfast effort to highlight the growing ‘hemorrhage’ of intellectual property theft.”

“We agree that the scope of global IP theft is far-reaching, hitting every American state and a large swath of American industry, with damages causing what may be irreparable harm. It is crucial for America and the future of our knowledge based and innovative economy for U. S. policy makers and thought leaders to deal with this problem and we echo the report’s call to action.”

Hopefully these findings will push Washington to pursue tighter IP policies, like those introduced by Huntsman and Blair, and stricter enforcement. 

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