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Report: Large companies, feds combat soaring number of counterfeit goods

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Michael Bastasch Contributor
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The number of investigations into foreign infringement of U.S. intellectual property rights has risen in eight of the last ten years, according to a report by the Joint Economic Committee of the U.S. Congress.

The number of cases investigated by the U.S. International Trade Commission increased by 80 percent in 2010 and 23 percent in 2011.

“IP infringement harms companies through lost revenue, the costs of IP protection, damage to brand, and decreased incentives to innovate because of potential theft,” according to the report. “Consumers are harmed when they purchase counterfeit goods of lower quality, some of which, such as counterfeit medicines, may pose health or safety risks. Governments lose tax revenue and bear enforcement costs.”

“Decreased incentives to innovate resulting from IP infringement reduce economic growth, weaken the nation’s competitiveness, and decrease job creation,” the report continued.

Businesses in particular feel the pain as sales are diverted away from authentic goods toward counterfeit ones, said the report, which revealed that the U.S. Customs and Border Protection seized 24,792 counterfeit goods last year — a 24 percent increase over the amount of counterfeit goods seized in 2010.

The vast majority of businesses — 79 percent — that filed IP complaints are large and often public firms. Small businesses only make up about 11 percent of businesses filing complaints.

“This could be because small firms do not have the resources to pursue enforcement actions but could also reflect a bigger impact of infringement on larger firms,” the report notes.

Consumer electronics, footwear, pharmaceuticals and optical media, such as CDs and DVDs, made up over half the value of counterfeit goods seized by U.S. officials in 2011.

Furthermore, between 2004 and 2009 more than three-fourths of the value of counterfeit goods seized upon entering the U.S. came from China, according to the report.

“Foreign infringement of intellectual property harms businesses by raising their costs, lowering revenue, and eroding profits. Consumers can face health or safety hazards from counterfeit pharmaceuticals and automotive products, and pirated software presents a range of threats to computer security and personal privacy,” the report says. “As a result of counterfeiting and piracy, governments have to make do with less tax revenue.”

The report advocates for strengthening enforcement of intellectual property protections and making complaint resolutions less time consuming.

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