Intellectual Property Theft: An Economic Antagonist

Congress is scheduled to reconvene for what is sure to be a historically busy fall session next week. With the creation of the Joint Select Committee on Deficit Reduction, and the president set to address a joint session of Congress this Thursday to lay out his plan for economic recovery, the next few weeks may set the political tenor for the months, and perhaps years, to come.

But one topic will likely not get much attention this fall, even though it poses one of the greatest drains on our economy: intellectual property theft.

There are a lot of misconceptions about intellectual property theft. Many perceive it to be simply kids illegally downloading music, or the occasional street vendor selling bootlegged DVDs to make a buck. These examples, however, make up a small minority of the type of theft as well as the scope of criminal activity often involved.

First, the big picture. The U.S. economy loses $58 billion annually due to copyright theft. Specifically, that makes up $16 billion in lost earnings and $3 billion in lost tax revenue to federal, state and local government. Intellectual property companies together make up more than a third of the U.S. economy and employ more than 19 million workers in all 50 states. An industry this big, taking loses this substantial due to theft, deserves far more attention.

A disturbing percentage of intellectual property theft poses a public health and safety risk. According to a report published in January 2011, 15 percent of the counterfeit goods seized by U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement posed a direct risk to the public. This includes everything from counterfeit cigarettes to goods used for a manufacturing, infrastructure and military purpose such as bearings used in machinery.  In Georgia, 18,000 smoke detectors were recalled earlier this year after they were discovered to be counterfeit.  In the past few years, the U.S. Consumer Product Safety Commission has issued warnings for counterfeit batteries, circuit breakers and even semiconductors.

In addition to being an economic drain and safety risk, intellectual property theft can be well-organized and is heavily influenced by transnational organized crime, threatening national security. This includes both physical trafficking as well as through online sales. In fact, a 2009 study by the RAND Corporation indicated that organized crime networks and terrorist groups use proceeds from intellectual property piracy such as counterfeit DVDs to fund other illegal activities like money laundering, drugs and human trafficking.

With the threat that intellectual property theft poses to both our economic and national security, it is no surprise that it is a bipartisan issue. In May, 42 attorneys general wrote to the U.S. Senate and House Committees on the Judiciary advocating for legislation to crack down on piracy. A chorus of advocacy organizations from across the political spectrum—from the U.S. Chamber of Commerce to the AFL-CIO—have called on Congress to act on this issue as well. Specifically, these organizations believe the PROTECT IP Act, legislation under consideration in the U.S. Senate, takes a substantial step in cracking down on Internet piracy. The bill would allow the Department of Justice to seek a court order against rogue sites, which would then be served on pay processors, advertising networks, search engines and Internet service providers and require them to not provide services or process transactions with the website deemed rogue by the court. The bill is narrowly tailored to go after the websites that exist for no other reason than to steal and deceive U.S. consumers. 

The PROTECT IP Act is gaining momentum in the Senate, but has yet to find its footing in the House. Given the wide bipartisan support for the bill, and the role of the intellectual property in the American economy, the PROTECT IP Act is the type of small, but important, legislative action that Congress could take to address the current jobs crisis. Whether it can emerge from the thicket of competing priorities as Congress wades through unfinished appropriations bills and reacts to the Super Committee remains to be seen. 

In a week where the jobs agendas of both parties will be front and center, it seems like a good place to start.