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Counterfeiting & Piracy - The Facts

Courtesy of the National Chamber Foundation.

Counterfeit & Pirated Goods, More Common Than You Think

It's almost guaranteed that in the last month you unknowingly bought counterfeit or pirated goods. Foreign counterfeiters, organized criminals, and even terrorists have infiltrated supply chains. Counterfeit and pirated goods are in legitimate retail outlets. It's everyday products you bought in everyday stores. The batteries in your smoke detector, the software on your computer, lifesaving drugs that may not work. Even the brakes on your car--counterfeiting and piracy are not victimless crimes.

And the problem is only getting worse. Since 1982, the World Customs Organization and Interpol estimate that the global trade in counterfeit goods has increased from $5.5 billion to approximately $512 billion annually and continues to grow. Approximately 5%-7% of world trade is in counterfeit goods. Counterfeiting and piracy can no longer be considered merely another cost of doing business.

Counterfeiters Threaten Public Safety

Counterfeiting and piracy lead to more indirect dangers--helping to fund terrorist groups. Seized al-Qaeda training manuals recommend the sale of counterfeit goods as a financing source for its illegal activities, according to Interpol. Additionally, U.S. News and World Report indicates that one counterfeit operation funneled money to an Egyptian sheik to help finance the 1993 World Trade Center attack.

• The Food and Drug Administration estimates that counterfeit drugs account for 10% of all prescription drugs sold globally, and U.S. Customs and Border Protection estimates that 14% of drugs sold through the mail are counterfeit, mishandled, or expired.
• The Federal Aviation Administration estimates that 2% of the 26 million airplane parts installed each year are counterfeit. This equals approximately 520,000 counterfeit airplane parts.
• The Motor and Equipment Manufacturers Association cites safety violations due to counterfeit car parts: brake linings made of compressed grass, sawdust, or cardboard; transmission fluid made of cheap oil that is dyed; and oil filters that use rags for the filter element.

A Business Week investigation found that counterfeit airplane parts played a role in at least 166 U.S. -based incidents and malfunctions during a recent 20-year period.

Modern Piracy Impacts Economy

It hurts businesses. The FBI estimates that counterfeiting and piracy cost U.S. businesses between $200-$250 billion annually, a number that is rapidly increasing.

It hurts government. Counterfeiting and piracy almost always escape taxation. It's lost sales tax, lost excise tax and lost income tax.

It hurts America. The International Intellectual Property Alliance estimates that U.S. companies suffer $9 billion in trade losses due to International copyright piracy. In 2004, China accounted for 63% ($87 million) of all counterfeit good seized by the U.S. Customs Service at ports of entry into the United States.

Losses to specific industries are large and growing:

• Apparel and footwear pirated goods-$12 billion
• Artistic recordings-$4.6 billion
• Motion picture-$3.5 billion
• Counterfeit drugs & pharmaceuticals-$32 billion
• Software piracy-$12 billion
• Counterfeit car parts-$16 billion

"Our ability to promote and secure an effective environment for intellectual properly rights in America will have a significant impact on our future economic growth, global competitiveness, and economic national security." - Attorney General Alberto Gonzales

Counterfeiters Take Jobs

Counterfeiting is directly responsible for the loss of more than 750,000 American jobs, according to U.S. Customs and Border Protection. From high-tech jobs in California to factory jobs In Michigan, the problem is real and growing.

• 35% of all software currently installed on computers is fake. A Business Software Alliance study shows simply cutting that to 25% could generate 2.4 million new jobs and $400 billion in economic growth worldwide.
• The Department of Commerce found that the auto industry could hire 200.000 additional workers if the sale of counterfeit auto parts was eliminated.

Globally, for every two dollars' worth of software purchased legitimately, one dollar's worth was obtained illegally.

Consumers Duped

The most highly regulated supply chains in the world are being infiltrated by foreign counterfeiters, organized criminals and terrorists. Even 10% of all prescription drugs, which are protected by extremely strict internal and external regulations, are believed to be counterfeit. Every product, every industry, and every country is vulnerable.

Counterfeit goods aren't just being sold on street corners. They're in our stores, in our pharmacies, and in our homes. A recent U.S. Chamber of Commerce survey shows that respondents, when presented with the facts, put concerns about counterfeiting and piracy on par with their concerns about illegal immigration.

Consumers are being duped by these modern-day pirates. Government, business, and the media can't continue looking the other way.