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Why The US Can’t Afford To Fall Behind In Intellectual Property Enforcement

Why The US Can’t Afford To Fall Behind In Intellectual Property Enforcement

This article was originally published in Forbes on April 17, 2017.

American leadership in intellectual property (IP) presents one of our economy’s greatest strengths and biggest challenges. Consider the evidence: from leading apparel brands and electronics to the production of movies, music and lifesaving medicines, IP supports more than 45 million American jobs in 81 different industries. Total merchandise exports of IP-intensive industries make up more than half of all U.S. exports, or $842 billion, and almost 40% of U.S. GDP.

Yet the prevalence of our IP is also what makes it particularly susceptible to theft in a 21st century global economy. According to the Organization for Economic Cooperation and Development (OECD), U.S. brands and patents are more likely to be infringed than those of any other nation, making up as much as 20% of all goods seized in the global counterfeit trade. Americans pay a dear price for this IP theft: the National Crime Prevention Council estimates that counterfeiting and piracy alone cost the U.S. as much as 750,000 jobs and $250 billion in revenue each year.

It’s not hard to see that the U.S. has more skin in the game when it comes to intellectual property. But that is why it might come as a surprise to some that America no longer leads the world when it comes to IP enforcement: the U.S. Chamber of Commerce 2017 International IP Index shows that the U.S. now ranks fifth, behind the U.K., Sweden, France and Germany. Given the high stakes, this is certainly not a new normal we should embrace.

So, how did we get here? The Chamber’s Index identified as a key weakness our: “inconsistent enforcement against counterfeit and pirated goods.” Understanding the behemoth that is the global counterfeiting problem is essential to effectively protecting American IP. Here’s what we know:

1. The counterfeit goods trade is exploding. Compared to previous estimates from 2008, the OECD’s latest numbers have almost doubled to a whopping $461 billion annually. That figure also represents more than double the 2014 profits of the world’s top ten companies, combined. Of that figure, as much as 86%is coming out of China and Hong Kong.

2. The same e-commerce phenomenon that has changed the brick-and-mortar marketplace has also dramatically changed the face of counterfeiting. Instead of massive shipments of fake goods arriving at U.S. ports, the online marketplace allows criminals to sell direct to consumer and ship in smaller, individual packages. This makes the job of identifying and seizing counterfeit goods even more difficult for customs agents tasked with combing through a seemingly endless stack of small parcels. In addition, the counterfeiters are the ones doing the hunting online: from ads leading to illicit sites selling fake goods, to a litany of spam emails phishing for clicks, consumers are constantly bombarded. It’s enough to fool and snag even the savviest of shoppers who have no interest or desire to purchase fake goods.

3. Despite their best efforts, customs officials are having a tough time keeping up. Another 2016 Chamber report, Measuring the Magnitude of Global Counterfeiting, revealed that worldwide customs officials are only seizing 2.5% of all counterfeit goods – just a drop in the bucket. This is a reflection of the fact that customs officials are being asked to do more and more to thwart the efforts of an evolving, exploding, ever-complicating threat.

This is the challenge that protecting American intellectual property presents in today’s global marketplace. If it sounds daunting, it’s because it is. But we simply cannot afford to concede to fifth place when it comes to protecting American IP. The good news is, U.S. leaders are already taking steps to move us in the right direction.

One such step was the Trade Facilitation and Trade Enforcement Act that became law in February of 2016. The passage of the bill itself represented the coordinated efforts of enforcement agencies and industry working together. The new law includes provisions for information-sharing between industry and government, additional training opportunities for customs officials and much-needed additional dedicated staff at U.S. ports of entry where counterfeits are streaming across in record numbers.

Another promising step was the release of the 2016 Joint Strategic Plan on Intellectual Property Enforcement. This comprehensive plan is the culmination of a multi-year process that brought together the expertise and input of industry as well as every government agency tasked with intellectual property, national security and consumer protection. Its wealth of recommendations can serve as a helpful resource as we seek to strengthen our border to seize counterfeit goods, use advanced electronic targeting of small parcel shipments, disrupt cyber-enabled theft, spread e-commerce best practices to ensure consumer safety and raise public awareness.

These are just a few recent successes the Trump administration and the new Congress can build on as they look for ways to improve enforcement of American IP. American businesses see early signs of promise from the Trump administration, in its tough talk against IP violators and in actions such as a recent executive order addressing IP theft as part of the fight against transnational criminal organizations. Future progress will require an all-in, coordinated, public-private partnership the likes of which the world has never seen. It will require a shared commitment from, and cooperation with, other countries around the globe. The Trump administration now has an unprecedented opportunity to take the counterfeiting problem head on. If it is seeking private industry partners in this fight, they won’t be hard to find.

ABOUT THE AUTHOR
Mark Elliot is executive vice president at the U.S. Chamber of Commerce Global Intellectual Property Center.