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> From: Chris > Date: February 9, 2012 11:10:13 AM EST > Subject: Lamar Smith fact checked on SOPA > > From one of the newspapers in his own backyard. > > http://www.politifact.com/texas/statements/2012/feb/06/lamar-smith/lamar-smith-says-online-piracy-and-counterfeiting-/ > > > > > Lamar Smith says online piracy and counterfeiting costs the U.S. economy $100 > billion a year > > Share this story: > > > U.S. Rep. Lamar Smith, R-San Antonio, declared in an opinion column on > CNN.com: "The growing number of foreign websites that offer counterfeit or > stolen goods continues to threaten American technology, products and jobs." > > His Jan. 20, 2012, post continues: "Illegal counterfeiting and piracy costs > the U.S. economy $100 billion and thousands of jobs every year. Congress > cannot stand by and do nothing while some of America's most profitable and > productive industries are under attack." > > Say what costs that much? A reader asked. > > Smith’s $100 billion statement has weaknesses, we learned, partly because > estimates of the impact of online vending of counterfeit or pirated (as in > stolen) software, movies, recordings and other rip-off products ranging from > handbags to shoes are hard to corral. > > We’ll dip into Smith’s backup after some background. > > Smith is a chief sponsor of the stalled Stop Online Piracy Act, which he > described in a November 2011 Austin American-Statesman oped column as an > attempt to rein in "a vast virtual market online run by criminals who steal > and sell America's intellectual property and keep the profits for themselves." > > "Movies and music are not the only stolen products that are offered by rogue > sites," Smith’s column says. "Counterfeit medicine, automotive parts and even > baby food are a big part of the counterfeiting business and pose a serious > threat to the health of American consumers." > > Smith’s November column says too that the act is intended to target such > illegal activity by permitting the attorney general to seek an injunction > against a foreign website dedicated to it. > > Congressional action on Smith’s proposal, and a Senate approach pitched as > protecting intellectual property, stalled out in the wake of a public outcry > in January. > > Now let’s get back to Smith’s claim that counterfeiting and piracy costs the > U.S. economy $100 billion a year. > > His spokeswoman, Sally-Shannon Birkel, told us Smith’s figure originated in a > February 2011 reportcommissioned by the France-based Business Action to Stop > Counterfeiting and Piracy, an initiative of the International Chamber of > Commerce, whose declared mission is to promote trade and investment, open > markets and the free flow of capital. > > The report says: "We find that the U.S. consumption-based share of > counterfeit and pirated goods is between $66 billion and $100 billion (based > on 2008 data)." So that’s the origin of Smith’s $100 billion figure. It’s the > high-end part of this finding. > > Globally, the same report says, such goods had a 2008 value of up to $650 > billion. > > But Smith’s statement refers to how much counterfeiting and online piracy > costs the U.S. economy. Is the country’s "consumption-based share" of such > goods -- which the report calls relevant to U.S. businesses -- the same as > their cost to the economy? > > It’s unlikely. A portion of the report pointed out to us by Sanjay Jain, a > Texas A&M University professor of marketing, states that the "study has not > attempted to estimate business losses associated with counterfeiting and > piracy. This is primarily because the likely variations and other > difficulties associated with estimating substitution effects across > substantially different countries and industries introduces an additional > level/degree of variables which could undermine our aim to as accurately as > possible characterize the magnitude of counterfeiting and piracy." > > After presenting the $66 billion to $100 billion range, the report says this > represents "international trade in counterfeit and pirated goods, > domestically produced and consumed goods and digitally pirated products." > Broken down, the report says, this includes consumption of $45 billion to $60 > billion of internationally traded counterfeit and pirated products, $12 > billion to $14 billion in domestically produced counterfeit products and > between $9 billion and $25 billion in digitally pirated products. > > Jain and Julian Sanchez, a fellow at the libertarian Cato Institute who has > urged skepticism about cost estimates for online piracy, each pointed out to > us that the presented range questionably assumes that any pirated product > would otherwise be purchased at its retail price by the person who obtained > it. That’s not always or even often so, they said. > > Broadly speaking, Jain said, he has seen no convincing studies on the costs > of piracy and counterfeiting to the American economy — unsurprisingly so, he > said, because it’s not an easy problem. "I don’t know the right number," he > said. > > Sanchez, who told us he considers Smith’s proposal a "bad bill," raised > another issue, saying by email that most of the pirated and counterfeited > products included in the its $66 billion to $100 billion range have nothing > to do with online piracy targeted by Smith’s act. > > "People were manufacturing fake Nikes long before the Internet became a mass > medium," Sanchez wrote, "so while it might be an interesting factoid to know > the size of that market, it’s a red herring if we’re talking about a ‘Stop > Online Piracy Act.’" > > This "whole debate," Sanchez said, "has tended to lump together > ‘counterfeiting’ (trademark infringement, usually involving physical goods) > and ‘piracy’ (copyright infringement, encompassing both physical media sales > and online digital transfers). From a policy perspective, this is misleading, > if not outright deceptive. Whatever amount is spent globally on fake Nikes > imported in bulk by retailers, it has very little to do with the debate over > policy aimed at shutting down cyberlockers to reduce illicit downloads by > individual consumers. You might as well cite an estimate of the total > economic cost of ‘crime.’ " > > The debate aside, we asked Jeffrey Hardy, director of the international > chamber’s initiative, if its report’s $66 billion to $100 billion estimate > for the United States’ "consumption-based share" for counterfeit and pirated > goods is the same as the economic impact of such activities on the country’s > economy. > > It’s not, Hardy said, though he said the cost to the economy would be a > percentage of the $66 billion to $100 billion "share." He also stressed that > the report’s figures reflected the situation in 2008 and costs have increased > since then. His speculation: "We may already be to $166 billion" for the U.S. > share of consumed counterfeit and pirated goods, which could even turn out to > be the current annual cost to the economy. > > Hardy also confirmed that the range presented in the report is tied to the > retail value of goods though, he agreed, it’s incorrect to assume that in all > cases someone who purchases a pirated or counterfeit good would otherwise buy > the product at market cost. > > All told, Hardy acknowledged, there was no way to pinpoint costs to the > economy. The main point was to show that counterfeiting and digital piracy > are big problems. "There is a balance between overhyping or overcooking the > pie … and trying to present the fact that the magnitudes are enormous and > getting bigger, especially on the digital side of things," Hardy said. "It’s > a very complicated process when there’s not a lot of information and (there > is) a lot of educated guesses. That’s what economists do." Hardy said the > international chamber has taken no position on SOPA. > > Separately, Sanchez said he agrees with an April 2010 report by the U.S. > Government Accountability Office, which states that while counterfeiting and > online piracy may pose sizeable negative economic effects, they are hard to > quantify. > > A GAO summary of the report, "Intellectual Property, Observations on Efforts > to Quantify the Economic Effects of Counterfeit and Pirated Goods," says: > "Generally, the illicit nature of counterfeiting and piracy makes estimating > the economic impact of (intellectual property) infringements extremely > difficult, so assumptions must be used to offset the lack of data. Efforts to > estimate losses involve assumptions such as the rate at which consumers would > substitute counterfeit for legitimate products, which can have enormous > impacts on the resulting estimates. Because of the significant differences in > types of counterfeited and pirated goods and industries involved, no single > method can be used to develop estimates. Each method has limitations, and > most experts observed that it is difficult, if not impossible, to quantify > the economy-wide impacts." > > After we summarized much of this research, Smith objected to Sanchez as an > expert, saying in an email that because Sanchez is opposed to the > anti-online-piracy act, he "cannot provide an objective or unbiased > analysis." He stood by his CNN.com statement, telling us: "Since the U.S. is > the largest producer of (intellectual property) that is consumed around the > world, one can surmise that a significant amount of that total value is taken > from the U.S. economy." > > Our ruling > > Smith’s statement draws on a high-end estimate also based on flawed > assumptions for the U.S. "consumption-based share of counterfeit and pirated > goods" in 2008. The cited $100 billion figure doesn’t reflect the costs to > the economy, contrary to Smith’s claim; the 2011 study did not assess such > costs, which are understandably slippery. > > Maybe there is no solid estimate of the cost to the economy. Smith’s CNN.com > statement rates False. > --- Just because i'm near the punchbowl doesn't mean I'm also drinking from it. _______________________________________________ Infowarrior mailing list Infowarrior@attrition.org https://attrition.org/mailman/listinfo/infowarrior
