IP Piracy Means Business
Intellectual property (IP) piracy often conjures up images of street vendors selling knock-off sunglasses and Gucci handbags. But large-scale violations of IP rights across virtually every industry are on the rise. The World Customs Organization estimates global trade in illegitimate goods totals more than $600 billion. Faced with mounting losses in jobs, sales and consumer safety, business leaders have joined forces to demand more aggressive enforcement of IP rights around the world.
To understand the magnitude of the problem, consider the data. The U.S. Trade Representative estimates U.S. companies lose about $250 billion per year and about 750,000 jobs as a result of IP piracy worldwide.
IP piracy includes commercial-scale unauthorized reproduction of software, movies, music, books, fashion products, industrial products, consumer goods, and other products protected by copyright, patent, trademark and trade secret laws. Counterfeiting compounds piracy when these unauthorized reproductions bear the logos and names of the original producers. In its most tragic cases, inferior parts and products resulting from piracy and counterfeiting have been blamed for property damage, injuries and even deaths.
The nation’s automotive industry alone has suffered an estimated $3 billion hit from illegally reproduced auto parts, according to the International Chamber of Commerce (ICC). In fact, in 2004, CBSnews.com reported, “The auto industry has found enough counterfeit parts to build a whole car, including brakes made of compressed grass and wood sold in American stores.”
The ICC reported in 2005 that in a survey of more than 1,100 corporate and academic economists in 90 countries, 83% “agreed or strongly agreed that counterfeit products and IP theft are among the more pressing problems facing business today.”
Companies Are Fighting Back
Leaders from more than 130 companies have joined forces to shine the spotlight on the global problem of IP piracy. Part of the group’s mission is to pressure governments throughout the world to better enforce intellectual property rights. Their platform is Business Action to Stop Counterfeiting and Piracy (BASCAP), and its membership list is a “Who’s Who” of the business world—Dupont, Johnson & Johnson, Microsoft, Pfizer, Astra Zeneca, Nokia, and Time Warner are just some of the participants.
“In our digital age, anyone who has a new invention, a creative idea or a technological breakthrough is at risk of a rip-off, whether it be in the automotive, entertainment, pharmaceutical, software or any other intellectual-property-dependent business sector,” stated BASCAP member Bob Wright, vice chairman of GE and chairman and CEO of NBC Universal, in an Op-Ed column in The Wall Street Journal last November.
In addition to lost growth opportunities, companies affected by IP piracy may face liability costs from inferior-quality products, loss of consumer trust, danger to the health and safety of their customers, a financial drain from product recalls, and an inability to earn compensation for the time and money invested in research and development. Businesses that violate IP rights may also gain an unfair advantage in the marketplace.
“Counterfeiters take full advantage of the fact that someone else paid the upfront money for research and development expenses; all counterfeiters have to do is to copy the product,” explains Pfizer on its Web site’s FAQ section about counterfeits.
Legislators React, Tighten Enforcement
While business leaders lobby countries throughout the world to tighten enforcement of IP rights, U.S. legislators are considering several bills to combat counterfeiting and piracy. In March, the “Stop Counterfeiting in Manufactured Goods Act” was signed into U.S. law to close a loophole in existing legislation. Previous laws banning counterfeit products failed to restrict fake labels and packaging of those products. The new legislation closes that loophole, and requires convicted counterfeiters to relinquish all profits from their illegal practices.
U.S. government officials have threatened trade implications against countries considered the worst violators of IP rights, such as China. In addition, they have included IP rights protection as a part of their Free Trade Agreement negotiations with other nations. Governments throughout the world are tackling the problem as well, from raids in the United Kingdom and India to new anti-piracy laws in France, to a commitment from Chinese leaders to prosecute offenders more aggressively.
How Can You Protect Your IP?
While government leaders address IP rights violations on a broad scale, there are measures your organization can take to better protect your own intellectual property. IP attorney Maury Tepper, a partner at Womble Carlyle Sandridge and Rice, PLLC, suggests five key steps:
1. Identify exactly what your intellectual property is.
2. Educate employees periodically about the importance of protecting your organization’s IP and about respecting the IP of other companies.
3. Provide additional training for frontline employees, such as sales and customer service representatives, on what to look for in customer complaints and sales trends to help detect counterfeiting in the marketplace.
4. Educate the public about the value of purchasing legitimate products, and about the fact that piracy costs jobs and has been traced to funding terrorism.
5. Engage your corporate counsel in the beginning stages of product development to anticipate any new intellectual property you may create and ways to register and protect it.
Tepper emphasized that IP piracy and counterfeiting is not an issue just for major companies. “If you have employees and you have ideas, you have IP,” he said. “It is as simple as a customer list, or trade secrets – some old family recipe or manufacturing process – these may not be high-tech, but they are subject to IP theft.”Read more tips from Tepper on ways to protect your intellectual property.
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