US gov cries foul on MPAA piracy claims

A Mickey Mouse operation


That massive amount of money that business groups such as the Business Software Alliance (BSA) and the Motion Picture Association of America (MPAA) claim is being lost due to piracy and copyright infringement? Well, fuggedaboutit.

Such is the conclusion of a 37-page report (pdf) by the US Government Accountability Office (GAO), the independent, nonpartisan agency that, as its mission statement explains, provides the US Congress "with timely information that is objective, fact-based, nonpartisan, nonideological, fair, and balanced".

That's "fair, and balanced" as in fair and balanced, and not as in the tagline of Rupert Murdoch's Fox News.

The GAO report, entitled "Intellectual Property: Observations on Efforts to Quantify the Economic Effects of Counterfeit and Pirated Goods," was commissioned by the US Congress in October 2008 with the passage of a bill with a convoluted title that reveals the viewpoint of the bill's sponsors: the Prioritizing Resources and Organization for Intellectual Property Act of 2008, or the PRO-IP Act - a bit of acronymage that follows the great American tradition of crafting legislative acronyms that carry not-so-subtle messages (cf. the USA PATRIOT Act).

The report acknowledges that the protection of intellectual property is a good thing: "The importance of patents and other mechanisms to enable inventors to capture some of the benefits of their innovations has long been recognized in the United States as a tool to encourage innovation."

It also goes out of its way to recognize that piracy and copyright infringement do, indeed, have negative effects upon US companies and citizens. However, the report does take issue with the damage figures being bandied about by business groups that seek to tighten intellectual-property enforcement.

Specifically, according to the GAO: "Three widely cited U.S. government estimates of economic losses resulting from counterfeiting cannot be substantiated due to the absence of underlying studies." It's worth citing the GAO's comments on those three studies in full:

First, a number of industry, media, and government publications have cited an FBI estimate that U.S. businesses lose $200-$250 billion to counterfeiting on an annual basis. This estimate was contained in a 2002 FBI press release, but FBI officials told us that it has no record of source data or methodology for generating the estimate and that it cannot be corroborated.

Second, a 2002 [US Customs and Border Protection (CBP)] press release contained an estimate that U.S. businesses and industries lose $200 billion a year in revenue and 750,000 jobs due to counterfeits of merchandise. However, a CBP official stated that these figures are of uncertain origin, have been discredited, and are no longer used by CBP. A March 2009 CBP internal memo was circulated to inform staff not to use the figures. However, another entity within DHS continues to use them.

Third, the Motor and Equipment Manufacturers Association reported an estimate that the U.S. automotive parts industry has lost $3 billion in sales due to counterfeit goods and attributed the figure to the Federal Trade Commission (FTC). The [Organisation for Economic Co-operation and Development (OECD)] has also referenced this estimate in its report on counterfeiting and piracy, citing the association report that is sourced to the FTC. However, when we contacted FTC officials to substantiate the estimate, they were unable to locate any record or source of this estimate within its reports or archives, and officials could not recall the agency ever developing or using this estimate.

Simply put, the GAO's fair and balanced investigation into these claims of damages discovered that they were - not to put too fine a point on it - indefensible.

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