The paper indicates that in October 2008 the US Congress passed the Prioritizing Resources and Organization for Intellectual Property Act of 2008 (PRO-IP Act) in order to "improve the effectiveness of U.S. government efforts to protect intellectual property rights" and require the GAO "to provide information on the quantification of the impacts of counterfeit and pirated goods".
In response the GAO examined existing research on the effects of counterfeiting and piracy on consumers, industries, government and the US economy. It also "identified insights gained from efforts to quantify the effects of counterfeiting and piracy on the US economy". The research exercise drew on interviews with officials and subject matter experts from US government agencies, industry associations, nongovernmental organizations and academic institutions. It also involved study of literature that quantifies or discusses the economic impacts of counterfeiting and piracy.
The GAO concludes that -
counterfeiting and piracy have produced a wide range of effects on consumers, industry, government, and the economy as a whole, depending on the type of infringements involved and other factors. Consumers are particularly likely to experience negative effects when they purchase counterfeit products they believe are genuine, such as pharmaceuticals. Negative effects on U.S. industry may include lost sales, lost brand value, and reduced incentives to innovate; however, industry effects vary widely among sectors and companies.It goes on to comment that -
The US government may lose tax revenue, incur IP enforcement expenses, and face risks of counterfeits entering supply chains with national security or civilian safety implications. The US economy as a whole may grow more slowly because of reduced innovation and loss of trade revenue. Some experts and literature also identified some potential positive effects of counterfeiting and piracy. Some consumers may knowingly purchase counterfeits that are less expensive than the genuine goods and experience positive effects (consumer surplus), although the longer-term impact is unclear due to reduced incentives for research and development, among other factors.In discussing that uncertainty - the sky may not be falling or may not be falling at the same rate in all places - the paper notes that -
Three widely cited U.S. government estimates of economic losses resulting from counterfeiting cannot be substantiated due to the absence of underlying studies. Generally, 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. Efforts to estimate losses involve assumptions such as the rate at which consumers would substitute counterfeit for legitimate products, which can have enormous impacts on the resulting estimates. Because of the significant differences in types of counterfeited and pirated goods and industries involved, no single method can be used to develop estimates. Each method has limitations, and most experts observed that it is difficult, if not impossible, to quantify the economy-wide impacts. Nonetheless, research in specific industries suggest that the problem is sizeable, which is of particular concern as many US industries are leaders in the creation of intellectual property.The report states that -
data show that between fiscal years 2004 and 2009, the domestic value and number of U.S. seizures of counterfeit goods imported from other countries have fluctuated. These seizures have been concentrated among certain types of products. For example, seizures of footwear, wearing apparel, and handbags accounted for about 57 percent of the aggregate domestic value of goods seized in those 6 years. ...It goes on to note that -
The value of wearing apparel and cigarette seizures generally declined, while the value of pharmaceutical seizures generally increased. Several factors influence trends in seizure values. For example, values of seized goods can vary from year to year due to counterfeiters' responses to changes in marketplace demand or enforcement actions. For instance, in fiscal year 2006, a federal enforcement investigation resulted in the seizure of 77 cargo containers of counterfeit Nike Air Jordan shoes and one container of counterfeit Abercrombie & Fitch clothing. The estimated domestic value of these goods was about $19 million, representing about 12 percent of the total domestic seizure value that year. In addition, the level of federal border enforcement effort varies across ports, resulting in different seizure rates.
seized counterfeit goods are dominated by products from China. During fiscal years 2004 through 2009, China accounted for about 77 percent of the aggregate value of goods seized in the United States. Hong Kong, India, and Taiwan followed China, accounting for 7, 2, and 1 percent of the seized value, respectively.
CBP data indicate certain concentrations of counterfeit production among these countries: in 2009, about 58 percent of the seized goods from China were footwear and handbags; 69 percent of the seized goods from Hong Kong were consumer electronics and watch parts; 91 percent of the seized goods from India were pharmaceuticals and perfume; and 85 percent of seized goods from Taiwan were computers and consumer electronics. CBP data show that goods were also seized frequently from Russia, Korea, Pakistan, Vietnam, and certain Southeast Asian countries. Unlike imported counterfeits, there is little information on the extent and sources for domestically produced counterfeits. According to the Congressional Research Service, the United States is especially concerned with foreign counterfeits of U.S. intellectual property. Compared to foreign countries, counterfeits produced in the United States are estimated to be relatively low.
