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.