Intellectual Property Breakfast Club Tackles The Costs Of Global Piracy

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WASHINGTON April 13, 2011- Broadband Breakfast gathered key industry experts to discuss the costs of global piracy at its monthly Intellectual Property Breakfast Tuesday morning.

“It’s quite difficult to accurately measure the true level of global piracy, and it’s even harder to determine what the costs to the overall economy are,” explained Director of International Affairs and Trade for the U.S. Government Accountability Office Loren Yager.

Previously, industry would calculate the cost lost to the economy from pirated goods by pricing the pirated goods at their legal prices. This, however, is not an accurate method according to Yager. Due to the low cost of the counterfeit good, it is unlikely a person would be willing to spend the full price for the same item.

The Costs of Global Intellectual Property Piracy: How Can The Phenomenon Be Empirically Quantified? from Broadband Breakfast on Vimeo.

“Finding the cost in developing countries is even harder than in the developed world,” said Sean Flynn, Associate Director of the Program on Information Justice and Intellectual Property at the Washington College of Law at America University. “In the developing world many people cannot afford the legal good so they choose to pirate.”

Flynn went onto describe how the standardization of global pricing of goods often makes them too expensive for the average customer in the developing world. Companies will charge the same amount for a music CD in the US, India, and China. While the pricing is reasonable for the US market, a $20 CD is too expensive for most Indians and Chinese since it represents a much larger portion of their wages.

To combat price-based piracy Flynn recommended that companies price their goods in relation to the market they are selling them in rather than trying to set a single international price.

Morgan Reed, Executive Director at the Association for Competitive Technology, disagreed with Flynn's comment.

“Sure only 8 percent of the market in the developing world can afford a $20 CD but that is still over 200 million customers,” said Morgan. “There are enough high-end consumers in these markets for companies.”

Even though there is large number of potential customers in the developing world, Reed said that his group still found a very high level of piracy.

Stephen E. Siwek, Principal at Economists Incorporated, said that while figuring out how people would act without the option of pirated goods is difficult it is not impossible.

“We’ve been able to successfully conduct studies wherein we ask individuals how many movies they would see if they did not have the option of getting pirated copies and they actually gave us reasonable responses,” Siewek said. “This allows us to figure out if there is a 1:1 relationship between a pirated good and its legal counterpart and we’ve found that this is not always the case.”

According to Siewek a study conducted in 2005 showed that only one out of every ten people who pirated an item would pay for the item if they could not obtain a pirated copy. However, Siewek contends that with the increased availability and ease of access to low cost digital goods, this number would probably increase.

Matt Robinson President of Atributor, an anti-piracy software firm, echoed earlier findings about the rise of cyber lockers as the new haven for digital pirates. Cyber lockers allow users to anonymously host and share files on someone else's computer server.

“These sites allow users to download files in a single click and connect a single user with thousands of others anonymously,” Robinson said.

Rahul Gaitonde has been writing for since the fall of 2009, and in May of 2010 he became Deputy Editor. He was a fellow at George Mason University’s Long Term Governance Project, a researcher at the International Center for Applied Studies in Information Technology and worked at the National Telecommunications and Information Administration. He holds a Masters of Public Policy from George Mason University, where his research focused on the economic and social benefits of broadband expansion. He has written extensively about Universal Service Fund reform, the Broadband Technology Opportunities Program and the Broadband Data Improvement Act

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