Infringements of intellectual property – what’s the cost ?

Intellectual property rights are of fundamental importance to national and global economic growth. Illicit trade resulting from the trademark and copyright infringements contributes directly to massive losses in revenue and undermines modern globalised economies.

Particularly, patent violations in the pharmaceutical industry are not only impacting on companies’ ability to grow but also pose a significant health and safety risk to consumers. Both the EU and the US have been developing anti-infringement laws tackling the issues mentioned above. The US International Trade Commission has expressed its concern over the lack of an appropriate legal framework for the protection of intellectual property in China.

The United States

In the US alone nearly 28% of the overall US workforce is directly reliant on intellectual property. The biggest American movie studios, pharmaceutical concerns, car manufacturers and other companies base their business models around copyrights, trademarks and patents. Based on the above information it is estimated that IP-reliant businesses are worth as much as $5 trillion, what amounts to 35% of the entire US gross domestic product. IP has been identified as essential to as many as 75 different industries that directly and indirectly provide employment to 40 million American workers. Furthermore, the above mentioned IP-reliant industries generate 61% of all exports and on average fund 42% higher wages than in other sectors.

The European Union

In the EU, only between 2009 and 2010 in Germany and the UK value of detained intellectual property infringing goods amounted to €1 billion. It is estimated that over 84% of all counterfeit goods originate from China. On the other hand, nearly 93% of all fake drugs and medical products are made in India. The value of intellectual property infringement in the medical goods sector in the EU is estimated to amount to as much as €3.2 million. The margin of customs officers’ error is minimal with only 2.5% of all goods detained being subsequently classified as legitimate.

Digital Piracy

Although, much of intellectual property infringement in physical goods originates from China, digital piracy is common in most Western economies. IFPI/Nielsen estimate that nearly 1 in 4 Internet users globally accesses illegal content every month. Large saturation of infringers can be found in Spain and Brazil where the rate is at over 40%. In 50% of cases the content is accessed through Peer to Peer networks; however some channels such as blogs, private forums, streaming website and smartphone applications are of a rapidly growing concern. In 2008, the creative industries generated €860 billion and provided employment to 6.5% of the total EU’s workforce. The UK and Germany are clear leaders regarding both the revenues generated by and people employed in the creative industries. Both of these markets along with the French have already suffered job losses of approximately 40,000.00 persons. Current estimations in the EU predict that by the year 2015 the losses in creative industries such as music can rise to €240 million and result in 1.2 million permanent redundancies.

Piracy poses an enormous threat to global economies. Virtually all industries in modern Western economies are directly or indirectly dependent on intellectual property rights. Both the US and the EU need to improve their current regimes and, in particular, their ability to tackle piracy originating from abroad. In the digital context, it is crucial to cooperate more effectively with the Chinese authorities to ensure that websites and servers offering free access to digitally pirated content are efficiently removed. Although, current anti-piracy measures in force are effective against infringements relating to physical goods, the Internet is also main distribution channels for most physical counterfeits, and that should be more accurately addressed by the relevant regulations that were not originally designed with the Internet in mind.