Study: U.S. Piracy and Counterfeiting Data is Unsubstantiated

Seemingly every story on piracy or counterfeiting throws out figures of how such practices cost businesses XXX amount of dollars per year. For those who may have questioned the legitimacy of such figures, the results of a new government report validate taking such a “Doubting Thomas” approach.

The United States Government Accountability Office (GAO) has issued a report entitled Observations on Efforts to Quantify the Economic Effects of Counterfeit and Pirated Goods (PDF). GAO issued its findings as a directive emanating from 2008’s Prioritizing Resources and Organization for Intellectual Property Act (Pro-IP Act), in which the organization was asked to provide information on, and quantify, the impact of counterfeit and pirated goods.

GAO began by tossing out “three-widely cited” U.S. government estimates of losses due to counterfeiting. The first number to fail scrutiny was an FBI estimate that U.S. businesses lose $200.0-$250.0 billion per year to counterfeiting. This estimate was first used in a 2002 FBI press release, but FBI officials told GAO that it had “no record of source data or methodology” used to generate the numbers.

GAO also learned:

Commerce and FBI officials told us they rely on industry statistics on counterfeit and pirated goods and do not conduct any original data gathering to assess the economic impact of counterfeit and pirated goods on the U.S. economy or domestic industries.

A 2002 Customs and Border Protection (CBP) press release, which estimated that U.S. businesses lose $200.0 billion and 750,000 jobs per year to counterfeiting, was also rejected, after a CBP official said that the figures were of “uncertain origin, have been discredited and are no longer used by CBP.”

A third figure, used by the Motor and Equipment Manufacturers Association, estimated that the auto parts industry lost $3.0 billion in sales domestically each year due to counterfeiting, a number it attributed to the Federal Trade Commission (FTC). GAO contacted the FTC in order to substantiate the number, but the FTC was “unable to locate any record or source of this estimate within its reports or archives.” Additionally, FTC officials “could not recall the agency ever developing or using this estimate.”

GAO then wrote in its report that:

These estimates attributed to FBI, CBP, and FTC continue to be referenced by various industry and government sources as evidence of the significance of the counterfeiting and piracy problem to the U.S. economy.

The report also contains some insight into the most commonly counterfeited items by year, as provided by DHS (footwear has been the most common counterfeited item over the past four years) and a section that outlines some potentially negative and positive effects of IP infringements on consumers and businesses. One positive effect for the industry listed was, “Increased sales of legitimate goods based on consumer ‘sampling’ of pirated goods."

|Via Ars Technica|