IPR infringement, or otherwise more popularly known as counterfeiting and piracy creates an exploding crisis that threatens the economic security of most nations all over the world. The United States is one of its greatest victims, losing about two hundred fifty billion dollars each year due to the pressing problem of piracy. Joiner (15) says that this number could still increase which could then result to the Americans losing their jobs, of whom seven hundred fifty thousand have already been victimized.
In the global setting, trade in counterfeit and pirated products accounts for five percent of the worldwide trade. Each and every time a person buys or cell a counterfeit, this threaten the reputation of the company who is producing the authentic ones which could then affect the incentive for the investment in research and development which could then generally hurt the company. This could also bring about health and safety problems to consumers of counterfeit products, as shown in Table 1.
Aside from this, counterfeiting also hurts the tax payers as these products are always “safe” from taxation. Because of this, less money is allocated for expenditure on government services such as roads, hospitals, schools and other public services in a given community. In New York City alone, Joiner (15) reports that about one billion dollars a year are lost in tax revenue due to the problem of counterfeiting and piracy. Table 2 summarizes the examples of products that are usually subject to IPR infringement, as cited in the report of the OECD (54).
Effects of IPR Infringement on the Economic Relationship between the US and China The United States of America and the People’s Republic of China is considered to be today’s superpowers (Cass 2). However, their economic relationship, although strong, is very threatened due to the problems brought about by problems regarding IPR infringement. This is due to the fact the products being exported by the United States are all protected by intellectual property rights which accounts for about ninety billion dollars of all U. S. exports.
These brand names surely have increased the popularity of all goods coming from the United States of America. On the other hand, the People’s Republic of China is not that concerned about the protection of intellectual property rights. As mentioned in the earlier parts of this paper, most of the products being sold and used in China are pirated. As a result, their top trading partner, the United States of America is losing billions and billions of dollars. True enough, the government of the People’s Republic of China expressed its commitment to the battle against IPR infringement.
They also got involved with the confiscation of counterfeit products in their hopes to end the usage of pirated software. The country also started to sign international treaties that would help them in reducing piracy. Table 3, on the other hand, summarizes the views on trends and developments in counterfeiting and piracy, by economy, based on the survey conducted by the OECD to its member countries whilst Figure 3 shows the share of counterfeit products in the global economy.
These figures only shows the pressing problems brought about by IPR infringement and how this has affected the economies of the world. Table 3. Views on Trends and Developments in Counterfeiting and Piracy, by Economy. (OECD 53). Infringement of Products from the Entertainment Industry Walking through the city streets of China could give enough evidence with regard to the production and distribution of pirated media, Kanji (1265) cites. Because of this, both the entertainment and software industries report a piracy rate of about eighty-five to ninety-five percent.
In 2004, US copyright associations reported that the total losses in China due to piracy exceeded 2. 5 billion dollars. These figures then show that virtually no legitimate market exists for the entertainment and software industries in China (Kanji 1265). Another evidence proving the popularity of counterfeit goods in China is the fact that it is the sixth-largest market for personal computer yet ranks twenty-sixth for legitimate software sales (Kanji 1265). This is then the reason software publishers are losing more and more revenue due to IPR infringement.
Table 4 summarizes the losses of the software and entertainment industries around the world due to counterfeiting. Figure 3. Share of Counterfeit Goods in International Trade (OECD 84). Table 4. A Summary of Losses in 2004 for the Software and Entertainment Industries as reported by the OECD (143). China’s commitment to the World Trade Organization under the GATS or the General Agreement on Trade in Services, allowed them to import twenty foreign films annually.
Due to the prevalence of IPR infringement, film producers from the United States of America export less than that number to the country. As a result, the counterfeiters supply the non-quota films which are high in demand. However, the pirates still supply the quota films before these pass the censorship processes. According to Kanji (1265), eighty-three government-licensed optical disc factories in China produce pirated DVDs. Because of the difference in price, people tend to buy the fake ones rather than the authentic CDs.