One of the best ways to start a flame war online: make a claim about the costs of online piracy.

Some, of course, argue that online piracy isn't a problem. Free downloads are free promotion, the argument usually goes. Others, especially those in media industries that have found adjusting to the internet difficult, claim that online piracy is responsible for their woes.

One of the most widely-promoted claims: that intellectual property infringement is responsible for the loss of up to $250bn each year in the United States alone. Claims like this are often touted as truth, but are they?

According to the U.S. government's Government Accountability Office (GAO), not quite. In a Congressional report (PDF) that sought to quantify the impact of "counterfeit and pirated goods", the GAO came to a conclusion that is either surprising or not surprising, depending on where you stand:

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.

The GAO does say there's reason to believe the problem is "sizeable", but most of the figures that are used to back up specific claims are basically hogwash:

Three commonly cited estimates of U.S. industry losses due to counterfeiting have been sourced to U.S. agencies, but cannot be substantiated or traced back to an underlying data source or methodology. 

This statement applies to the $250bn figure mentioned above. According to the GAO's report, "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."

Which begs the question: if widely-promoted claims that purport to demonstrate the extent to which intellectual property infringement is causing significant economic harm, why are governments going to increasingly ridiculous lengths to cut off their noses to spite their faces?

Obviously, intellectual property infringement is a real issue worthy of discussion, especially as it relates to the internet, which has made infringement of certain kinds of products far easier, and has implicated consumers in behavior that, offline, is usually controlled in a for-profit fashion by organized crime.

But even if one assumes for argument's sake that online piracy costs businesses billions of dollars and economies hundreds of thousands of jobs, it's also undeniable that the opportunities created by the internet have generated untold billions of dollars and millions of jobs around the world.

Which gets to the final and most important point the GAO report raises: if politicians around the world are going to create regulations that will strangle individuals and businesses online, all in the name of fighting piracy, shouldn't they at least have the numbers to support their efforts? If they did, they might discover that they're basically trading economic gold for economic aluminum.

Patricio Robles

Published 14 April, 2010 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (1)



Great post Patricio.

For those interested in this topic Ben Goldacre wrote an interesting piece on his Bad Science blog last year about getting underneath the numbers which are bandies about in the media:

over 8 years ago

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