No IP, No Innovation

By Melissa Guay, USCCF Emerging Issues Researcher (Originally posted at the U.S. Chamber of Commerce Foundation for Emerging Issues Blog)

The economic impact of pirated and counterfeit goods in the United States is estimated to be between $200 and $250 billion. To put this into perspective, that number is greater than the national GDP of over a hundred countries, including New Zealand, Morocco, and Peru.

The purchase of these goods is not a victimless crime, but directly affects thousands of Americans. Approximately 750,000 jobs losses in the United States alone can be attributed to the market for counterfeit and pirated products, spanning nearly every industry.

The Chamber’s Global Intellectual Property Center (GIPC) recently hosted its inaugural Global IP Summit, where Tony Chen, president and CEO of Osiris Shoes, emphasized that buying counterfeit goods hurts the company that invested time, talent, and money into creating the original product. The copiers get all this benefit at no expense to them, creating a lack of incentive to invest in new technologies and designs. As Chen puts it, “It’s always frustrating and annoying when other people can benefit from your hard work and effort.”

Brian Keane, COO and executive vice president at Blue Sky Studios, which brought us full-length feature films such as Ice Age and Rio, explained that it took 4 years and 1.2 million labor hours to create the studio’s latest film, Epic. Worldwide, the film played in a part in roughly 12,000 jobs. When you think about all the work that goes into making these films, $10-$15 does not seem like a big price to pay for a DVD.

Aventyn, Inc., a health technology company founded by Navin Govind, is an innovator in the health care sector and recently created an app called Vitalbeat that allows clinicians and health care professionals to monitor patient vitals from anywhere, not just a hospital or doctor’s office. Govind said that a tremendous amount of effort and investment goes into health care technologies and clinical trials for new medicines. Without IP protection, the investment might not be worthwhile to pharmaceutical companies that deliver life-saving technologies to the public.

Innovation always involves risk, but that risk can be justified, particularly when there are well-enforced laws protecting firms against piracy. Rich Bagger, Senior Vice President of Corporate and Strategic Market Access at Celgene, stated this in simple terms: “You can’t be for innovation and against intellectual property because they are so fundamentally connected.” America appears to agree. 86% of Americans believe that innovation is encouraged when IP is protected. Strong IP protection is essential to inspire innovation and generate economic growth in the United States.

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