Toll of counterfeiting and piracy predicted to top $2.3 trillion as call made for governments to do more

New research estimates that the global economic value of counterfeiting and piracy could reach $2.3 trillion by 2022, with job losses totalling in excess of 5 million. The research provides important data to policymakers. The challenge now is to ensure that they pay heed to it.

The report, The Economic Impacts of Counterfeiting and Piracy, was commissioned by the International Trademark Association (INTA) and ICC’s Business Action to Stop Counterfeiting and Piracy (BASCAP), and conducted by research firm Frontier Economics. The study follows on from a previous study that BASCAP commissioned Frontier Economics to conduct in 2011. That research estimated that the total global economic value of counterfeit and pirated goods was as much as $650 billion per year. Providing an updated picture, the new data suggests that, in 2013, the value of international and domestic trade in counterfeit and pirated goods was between $710 and $917 billion. In addition, the global value of digital piracy in movies, music and software in 2015 was estimated as $213 billion ($160bn in film, $29bn in music and $24bn in software), bringing the total value of counterfeit and pirated goods as high as $1.13 trillion. Further, it suggests that the outlook is gloomy, that number being expected to reach $2.3 trillion by 2022.

Drilling down into the wider economic and social costs, by 2022 it is expected that up to $1.24 trillion will be lost annually due to the displacement of legitimate economic activity, with an estimated $231bn reduction in foreign direct investment. Employment losses, meanwhile, could top five million.

As with all such reports, critics will argue that such ‘estimates’ are just that – seeking to place a value on an activity which, by its very nature, is hidden from view and often goes unnoticed. It is a challenge that will not be solved anytime soon, but what then becomes important is a robust, transparent methodology and that the resulting figures do not appear over-inflated. In its methodology, the researchers point to modelling based on customs seizures and publicly available data from reputable sources such as the UN Statistics Division, with industry bodies and stakeholders consulted to ensure that the sources utilised are reliable. Crucially, it adds: “To account for the significant uncertainty around the value of counterfeiting and piracy, we use conservative assumptions in our estimates, and provide ranges for our estimates.”

Interestingly, there has been a critical eye directed at the previous study and the report has changed its “previous strong assumption of minimum counterfeiting rates where data was missing”, which it notes resulted in an overestimate of overall counterfeiting. Therefore, the goal has been to provide a more realistic – and trustworthy – dataset than the previous study. As to transparency, the assumptions used are clearly set out, with changes in methodology presented in comparative table form (on page 16 of the 61-page report).

The key now is deployment of the findings, and in this regard it is policymakers that are the key audience that the data has to reach. Considering both INTA’s recent focus on impact studies and the applications of this particular report, in an exclusive interview with World Trademark Review (available now as a podcast), Joseph Ferretti, 2017 INTA president, explained: “The impact studies allow us to get metrics driven data. If we have data and evidence we can reach out to policymakers. We can talk about laws that are being implemented with specificity not just anecdotal evidence. And that is important in the world we live in today… By measuring the scale of counterfeiting and piracy it helps us in a number of ways. It helps us understand the size of the problem. It allows us to examine the related social cost. And – most importantly – it helps to inform policymakers. And once they have a greater awareness and appreciation of the enormous size of the problem, they are a lot better equipped to assign a greater priority to fight these crimes, and to allocate resources appropriately to combat counterfeiting and piracy.”

These sentiments were echoed by BASCAP director Jeffrey Hardy at the report launch today: “Measures to fight counterfeiting have not been sufficient. If governments hope to stabilise the economy, and stimulate economic growth and employment, they must do a better job to protect the central role that IP plays in driving innovation, development and jobs. We believe that reliable information on the scope and impacts of counterfeiting and piracy is critical for helping policymakers better understand that the trade in fake goods is damaging their economies, threatening the health and safety of their citizens, and stifling innovation and creativity.”

In this regard, the data related to job losses, lost taxes and the impact on economic growth will be most compelling to those tasked with economic development and policy. Studies that evidence the economic toll of counterfeiting and piracy will always have their critics outside IP circles but for policyholders – who are the key audience for such research – robust, transparently constructed data is a must if they are going to make informed decisions. The task now is for organisations such as INTA and BASCAP to ensure that the message is truly heard, and that the IP-sceptic lobby doesn’t derail efforts to combat illicit trade.