Consumers, legitimate producers, and governments are harmed by rampant trademark counterfeiting and copyright piracy. Consumers may be harmed by fraudulent and potentially dangerous counterfeit products, including medicines, auto and airplane parts, and semiconductors. Producers face the risk of diminished profits and loss of reputation when consumers purchase fake products, and governments may lose tax revenue and find it more difficult to attract investment. Infringers generally pay no taxes or duties, and often disregard basic standards for worker health and safety and product quality and performance.
An example illustrating the extent of the economic harm arising from such trademark counterfeiting and copyright piracy comes from India. In September 2013, the International Chamber of Commerce and the Federation of Indian Chambers of Commerce and Industry published a study analyzing seven key industry sectors vulnerable to counterfeiting, piracy, and smuggling, e.g., automotive parts, alcohol, computer hardware, mobile phones, packaged foods, personal goods, and tobacco products. The study concluded that rights holders in 2012 suffered lost sales in India amounting to 21.7 percent or approximately $11.9 billion due to these problems. Collectively, the Indian government's economic loss tied to these illicit activities totaled approximately $4.26 billion, according to the study.
Industry reports trends in counterfeiting and piracy that include:
- Sustained growth in the piracy of copyrighted products in virtually all formats as well as counterfeiting of trademarked goods. The involvement of criminal enterprises continues to rise, often because piracy and counterfeiting offer enormous profits and little risk. Such enterprises require little up-front capital investment, and even when they are detected and prosecuted, the penalties imposed on them in many countries are very low and therefore offer little or no deterrence against further infringements. Instead, the penalties are viewed merely as a cost of doing business;
- Continued growth in the online sale of pirated and counterfeit hard goods that will soon surpass the volume of such goods sold by street vendors and in other physical markets. Enforcement authorities, unfortunately, face difficulties in responding to this trend. Online advertisements for the sale of illicit physical goods that are delivered through express mail shipments or by small consignments are found in many places;
- A continued increase in the use of legitimate services to deliver infringing goods, making it more difficult for enforcement officials to detect these goods;
- An increase in the practice of shipping counterfeit products separately from labels and packaging in order to evade enforcement efforts; and
- The emergence of Media Box piracy, whereby those boxes, often with capability to play high definition content, are loaded with large quantities of pirated works or are configured to facilitate the user's access to websites featuring unlicensed content. This
19
