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Experts: Losses Due to Piracy Are Exaggerated

Estimates of monetary damages stemming from the affects of piracy came into question Tuesday during a two-day hearing with the U.S. International Trade Commission (USITC). The U.S. Senate's Finance Committee recently asked the USITC to investigate China's inability to protect and enforce the rights of intellectual property owners, and how that inability effects the US economy.

However skepticism seemed to fill the hearing as reports from the RIAA, MPAA, and other organizations became part of the overall discussion. How can the USITC effectively measure the influence of copyright infringement in China--or rather, "quantify and identify the size of the problem"--when industry numbers are inflated and misleading?

According to Fritz Foley, a professor in the Harvard University business school, U.S. industries assume that a pirated music CD, game or movie blocks the sale of an authorized copy, thus those numbers are factored into industry estimates. However that may not be the case at all.

"It seems a bit crazy to me to assume that someone who would pay some low amount for a pirated product would be the type of customer who'd pay some amount that's six or 10 that amount for a real one," he said. "Be careful about using information the multinational [companies] provide you. I would imagine they have an incentive to make the losses seem very, very large."

Earlier this year the Government Accountability Office told the U.S. Congress that there was no evidence of the million dollar losses claimed by the industries crying piracy. In fact, the firm argued that copyright infringements might actually benefit the entertainment industries and third parties.

Intellectual Property law professor Peter Yu echoed those findings yesterday during the hearing, saying that the U.S. economy benefits from counterfeit products made in China by employing U.S. workers and consuming U.S.-based materials. Some consumers even purchase counterfeit products at cheaper prices, bringing in revenue to the U.S. economy that may not have existed with the full-priced version.

Ohio State University law professor Daniel Chow added that the USITC should push for more concrete data from the industries--data that will actually back up their claims that millions have been lost due to piracy. He also said that Chinese officials are growing weary of raids, and that a different, more educational approach should be taken to reduce the amount of piracy taking place in China.

According to U.S. customs officials, nearly 79-percent of all counterfeit seizures at the U.S. border involve products from China.

Kevin started taking PCs apart in the 90s when Quake was on the way and his PC lacked the required components. Since then, he’s loved all things PC-related and cool gadgets ranging from the New Nintendo 3DS to Android tablets. He is currently a contributor at Digital Trends, writing about everything from computers to how-to content on Windows and Macs to reviews of the latest laptops from HP, Dell, Lenovo, and more. 

  • crazybernie
    I glad we had "experts" to tell is this information... 'cause there's absolutely no way we ever would have figured that out.
  • shiftstealth
    When do we get to sue the RIAA?
  • zodiacfml
    Yet, I do think those agencies are aware of that.
  • There's a HUGE difference between value of pirated material and what the owners of the material actually lost. They tend to assume that everyone who pirated something WOULD actually buy a legal copy if they couldn't pirate it...when it's actually a fairly small fraction who would. Yeah, most got something for free they shouldn't have, but those didn't cause a loss to the owner.
  • Tamz_msc
    Piracy is a big issue.But does this mean that Game developers will stfu and stop porting console games onto the PC?That's the real question since these guys are the first one who jump on to the "piracy hurts our sales" bandwagon.
  • Kelavarus
    Thing is, this works both ways. Yeah, you can't say everyone who pirated it would buy a legal copy if that was the only way, but on the other hand, you can't say how many would, either. So you can't make any real estimate at all.
  • littlec
    All the independent studies I've read point to users who pirate purchase more media overall per year than the average household to the tune of 20% more approximately. Most people I know that still torrent only do so to see if they really like it and then go buy it if they do. Not to mention it is a great way to gain more fans if you're a band and want to boost ticket sales or other merch sales.
  • anamaniac
    Yeap, the masses of geeks have been saying it for years now, nice to see people with more influence are saying it too.
    Sure, I'll admit, I do more than my share of file sharing, but then again, I have about 100 xbox/ps3 games, a ton of PC games, a decent movie collection etc.

    Give me a good product, and I will(and have) pay for it.
    Unfortunately though, DRM is a incentive to pirate. Nothing like using a crack on a game you legally own just to bypass the nuisance DRM...
  • Piracy my a$$. They should make worthy products and they will have sales. Sins of a Solar Empire had no copy-protection / DRM and was top seller.
    If the products su*k of course people will download them instead of wasting $ on nothing.
  • zmbcat
    oooh so now the comments have swung in favor of piracy xD