IP Should Not Be Used Freely

One of the major issues that the Washington Council on International Trade cares about is IPR – intellectual property rights. Whether in stand alone federal legislation on software piracy or codified into trade policy like the Information Technology Agreement (ITA), the issue of protecting intellectual property in international trade is key to Washington businesses…no surprise, with companies from Microsoft on down spending billions of dollars to develop new products and services, only to have them stolen in other countries. And this is not just an IT issue. Boeing has the same concerns about protecting their manufacturing technologies, and the third most counterfeited product after software and movies is apparel (which companies like REI and Eddie Bauer care about).

But IT is indeed a major focus of IP protection, and so it’s disappointing to see the recent statistic that 42 percent of world PC software is pirated. In fact, in 2010, the estimated commercial value of pirated software abroad was $51 billion, compared to only $35 billion in royalties & license fees to U.S. firms for software use. From the recent ProgressiveEconomy Trade Fact of the Week email:

“The Business Software Alliance’s annual software piracy report finds about 1.4 billion PCs operating worldwide, running about $155 billion worth of spreadsheets, word processors, and the like. In practical terms this is about half the global software industry, with the rest including another $160 billion in packaged software for servers and other specialized uses, plus customized programs developed to meet unique industry and government needs. BSA’s report finds the billion-plus computers operating about $95 billion worth of legitimate software programs, and a palindromic $59 billion – 42 percent of the market – in pirated programs…

This May, for example, the International Trade Commission study of piracy and counterfeiting in China found about $48 billion in likely IPR losses in China alone: $27 billion for copyright industries including books, movies and music as well as software, and $21 billion from counterfeited brands and infringed patents. Its computer simulation, conducted with wholly legitimate software, found this level of piracy startlingly damaging; raising Chinese copyright and patent standards to American levels would add:

  • (a) $21 billion in exports of goods and services, from a base of $100 billion in 2010;
  • (b) $87 billion in sales for American businesses operating in China, and
  • (c) As many as 2.1 million additional jobs in the United States.

This last statistic is a double whammy for Washington state, since we’re both one of the largest producers of IP in the country AND China is our largest trading partner. You can only imagine how significant a percentage of that lost economic impact would come to our state.

As the Washington Council on International Trade finalizes its 2012 policy priorities list, this issue comes up multiple times. For example, as the US considers its response to Russia’s likely WTO accession, there has been significant concern about Russia’s commitment to join the ITA:

Russia’s participation [in ITA] “is critical for ensuring that U.S. high-tech exports have competitive and guaranteed tariff-free access to the growing Russian market,” the 23 lawmakers said in a letter to U.S. Trade Representative Ron Kirk. “Not doing so would have significant commercial implications for American export companies as well as the U.S. firms doing business in Russia that use American-made IT (information technology) products,” the lawmakers said.

IPR is also a major focus of Trans-Pacific Partnership negotiations, another WCIT 2012 priority issue. As these and other IP trade issues develop, WCIT and the State of Trade blog will be there to highlight them!

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