The ChamberPost

Weather for Super Bowl XLIV: Partly Cloudy With A 100% Chance of Counterfeiting

by Mark Esper

The weather in Miami leading up to this weekend’s Super Bowl has been erratic to say the least.  And while I’m no meteorologist, there’s one prediction I can make with confidence: one team will come out on top and thousands of vendors will be hawking counterfeit NFL merchandise to football fans in Miami, across the country, and around the world via the Internet.

As the epitome of American sports culture, the Super Bowl game is expected to attract the attention of over 100 million viewers across the globe. Many viewers will be tuning-in for one of the most anticipated games in recent memory, while others will be waiting for the breaks in the game to see what creative ads are thrown their way.  But let’s not forget that the allure of the Super Bowl game, and the fans that both teams draw, also attracts counterfeiters looking to make a quick buck (or a quick million) off of unsuspecting consumers.

NFL licensed merchandise—such as men’s jerseys—can sell for anywhere from $80 on up.  Thus, a price tag of half that much for a seemingly flawless replication seems like a steal for any fan—which is exactly what it is. Each year, as counterfeit vendors make their way to the playoff games to hawk NFL merchandise, the problem of fakes not only gets worse, it gets more sophisticated. Counterfeit jerseys, caps, and other paraphernalia are often mixed in with the real ones, and even the merchant may not know they're selling a fake. A closer look at some merchandise and the subtle discrepancies should become clear: the color is off, the stitching is sloppy, or sometimes players’ names are misspelled.

Counterfeiting costs U.S. businesses hundreds of millions in lost sales each year.  Indeed, the Customs and Border Protection service last year seized 14,841 shipments of counterfeit goods with a domestic value of $260.7 million---and this is only the stuff they caught!  All of this counterfeiting leads to job losses ranging from the workers who make the products, to those that package, market, distribute, and sell them.  The NFL and its franchises are surely affected as well, especially given the League’s popularity with the American people. 

And in today’s Internet era, sales of counterfeit goods are not just happening on street corners, back alley stores, or outside stadiums, it is occurring in increasingly higher numbers online, and in ways that fool consumers into thinking these goods are the real thing.

In 2009, intellectual property rights (IPR) enforcement operations at Super Bowl XLIII in Tampa, Florida, led to many arrests and seizures of counterfeit merchandise. Federal agents joined the Tampa Police Department, Hillsborough County Sheriff's Office and the NFL to work together in the operation leading up to the big event. According to the U.S. Customs and Immigration Enforcement this collaborative effort led to the seizure of more than 15,000 pieces of counterfeit merchandise with a retail value of almost $2 million.  Similar efforts this year have already resulted in seizure of 1,600 items—valued at $155,000—of fake Super Bowl-related memorabilia, along with other counterfeit items.

Counterfeiting has a much greater cost than just lost merchandise sales. Intellectual property theft—through counterfeiting—is NOT a victimless crime. Not only do these crimes eat away at our economy with job losses, but those involved in these crimes are often directly linked to organized crime in one way or another.

Although the U.S. government has made tremendous progress over the past couple years to address the worsening crime of counterfeiting, there are number of additional steps the Congress and the Obama Administration can take to substantively improve our IP protections efforts.  Domestically, the newly confirmed Intellectual Property Enforcement Coordinator (IPEC) will play a critical role in creating and implementing a comprehensive national IP strategy to promote and protect IP. 

Counterfeiting is a serious global problem that costs tens of thousands of American jobs each year, and eats away at our economic growth and vibrancy.  The only way to fight back is through stringent enforcement and consumer awareness.  So as we watch the game on Sunday, there will be a lot of activity going on behind the scenes that you’ll never see on instant replay. The cracking down on counterfeiting is just one step in stopping this illegal activity. Increased vigilance from law enforcement all the way to Congress and the White House is needed if we are to deal a serious blow to this detriment to our economy. And lastly, if you’re at the game this weekend or online in the coming weeks, and the price of that NFL cap or jersey seems too good to be true, it’s probably a fake; please don’t buy it, somebody’s job may depend on it.

New Report Highlights Intellectual Property's Value to Small- and Medium-Sized Enterprises

by Mark Esper

Last week, United States Trade Representative (USTR) Ron Kirk announced the designation of an Assistant USTR for Small Business, Market Access, and Industrial Competitiveness. The newly created position will help address the challenges facing small-and medium-sized enterprises (SMEs) that sell their goods abroad and promote the global export opportunities these businesses need to create jobs here at home. Why is this new position important?  Because these businesses employ just over half of all private sector employees and have generated 64 percent of net new jobs over the past 15 years. As a whole from 1998-2004, small businesses produced half of private nonfarm GDP.

This announcement also recognizes the importance of SME's and their dependence on trade, and its release couldn't be more timely. A recent report from the United States International Trade Commission (USITC) entitled Small and Medium-Sized Enterprises: Overview of Participation in U.S. Exports maintains that U.S. small and medium-sized enterprises accounted for approximately 30 percent of known U.S. merchandise exports between 1997 and 2007. The top merchandise export categories for SMEs in 2007 were electrical products, machinery, and chemicals, with wood products and apparel and accessories as the sectors with the highest concentrations of SME exports.

A major point of this study is the importance of protecting intellectual property—those inventions and creations of the mind that are protected by patents, copyrights, and/or trademarks—in our export markets.

The study found that, "SMEs are an important source of innovative processes, products, and services. One way to measure a firm's propensity to innovate is through patent filings. A recent study released by U.S. Small Business Administration Office of Advocacy demonstrates that small firms produce significantly more patents per employee than large firms and that their patents are more technologically important, according to patent impact metrics." The SBA study also found that small and medium sized businesses tend to be more profit-and cost-efficient, producing more innovations for a specific amount of R&D. These companies also hire 40 percent of high tech workers (such as scientists, engineers, and computer programmers). In short, their business processes can be more efficient in the innovative process. As a result, protection of their IP is absolutely essential to their livelihood, which in turn creates jobs and helps grow our economy.

Policies that help benefit small and medium-sized firms are an important component of any effort to reinvigorate our economy. The U.S. Chamber's Global IP Center (GIPC) has profiled over 100 American companies across the country that have a compelling story to tell about the importance of IP and innovation to their business. These "Profiles of IP" champion the American spirit of innovation and highlight the successes of SMEs that rely on strong intellectual property rights. These companies come from every industry highlighting the importance of patents, copyrights, and trademarks in driving economic growth and job creation. The GIPC's goal in this project is to educate the public, lawmakers, and government officials about the importance to our economy of protecting IP and enforcing IP rights for small and big businesses alike.

Earlier this month, in the U.S. Chamber's annual State of American Business address, Chamber President Tom Donohue spoke of the "ambitious goal of creating at least 20 million new jobs over the next 10 years." Donohue explicitly stressed the importance of seizing the potential of small and medium-sized businesses to export and bringing thousands of smaller firms into the international marketplace by assisting them with expertise, promotion, and financing. Most importantly, we cannot assure the expansion of SMEs in the global marketplace without guaranteeing the vigorous protection of IP for those businesses wishing to capitalize on their export potential and create jobs in the United States.

As SMEs are important to our economy, so too are IP rights important to SMEs. The two are directly correlated. So if 2010 is going to be the year of job creation and economic recovery, stronger IP protections must be part of this equation.

Urging Further Progress in Mexican ACTA Negotiations

by Mark Esper

The Anti-Counterfeiting Trade Agreement (ACTA) negotiations were launched in 2006. ACTA is a new plurilateral treaty to help fight counterfeiting and piracy through enhanced international cooperation and more effective international standards for enforcing intellectual property (IP) rights. It will build upon existing international rules, in particular the Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS), to address a number of enforcement areas where countries have identified the need to strengthen the current international legal framework.

The 7th Round of ACTA Negotiations are going on now in Guadalajara, Mexico and we are encouraged by the administration’s continued efforts to work with our trading partners towards a comprehensive and robust agreement. If fully implemented, ACTA has the potential to raise the bar for IP protection and enforcement around the world. It is our firm belief that concluding an agreement this year will help protect U.S. jobs, American consumers, and stimulate our economy.
 
Given the importance of this agreement to our economy and to consumers, we must not allow ACTA to be derailed by a minority opposed to protecting the rights of artists, inventors, and entrepreneurs. The U.S. Chamber has also been supportive of greater transparency in these talks. We recognize the constraints of international trade negotiations; however, we urge the administration to ensure the Congressional committees of jurisdiction—as representatives of the American people—are fully briefed on the scope of the ACTA negotiations and why concluding this agreement expeditiously is in the country’s best interests.

Recent Study Emphasizes Need for Anticipated IP Strategy

by Mark Esper

Online piracy represents ten percent of all U.S. books downloaded from the Internet, accounting for potential revenue losses to publishers of $2.75 - 3 billion according to a new study. These stunning numbers and other findings are included in Attributor’s U.S. Book Anti-Piracy Research Findings.

So what, you ask? It’s simple: this alarming statistic means that many peoples’ jobs and livelihoods are eaten away by the online theft of copyrighted materials. And we’re not only talking about the jobs of well known authors such as John Grisham or Stephen King, but the people who work behind the scenes—editors, printers, administrative assistants, and so on.

The theft of intellectual property (IP)—so called “creations of the mind” such as books, movies, and music—through online piracy is a serious problem that is only getting worse. In the music industry, for example, it is estimated that 95% of all downloaded songs are done so illegally. Yet in the eyes of many, these illicit activities are often viewed as “okay” because the books, movies, and music can be found easily online. However, when asked if it’s “okay” to walk into a store and steal a hardback or lift a CD, everyone agrees that’s a crime.

As with nearly every crime, there are victims. In this case, it is the jobs of many hard-working Americans who make their living in these industries. Jobs are jobs, and when 10 percent of an industry—in this case book publishers—finds 10 percent of their products stolen, it hurts, and something must be done about it.

Creative industries such as books and music are not the only sectors hurt by IP theft. Patent and trademark heavy industries that we rely on every day—from pharmaceuticals and automotive, to computer and apparel sectors—have also been harmed. Many Americans work—or at least used to—in these fields.

The U.S.-based Center for Medicine in the Public Interest predicts that this year, counterfeit drug sales will reach $75 billion across the globe—an increase of 90 percent over the past five years. In the auto parts industry, the Federal Trade Commission projects that counterfeiting costs the industry $12 billion a year in lost sales, and in America alone this correlates into potential job losses reaching 250,000.

Across all industries, counterfeiting and piracy cost the U.S. economy billions of dollars annually, are responsible for the loss of hundreds of thousands of jobs, and have resulted in a deluge of dangerous and defective products in the marketplace. These are serious threats that need remedying, not only if we are going to protect consumers, but also to save jobs and grow America’s anemic economy.

This, of course, accentuates the importance of Victoria Espinel and her role as the first-ever U.S. Intellectual Property Enforcement Coordinator (U.S. IPEC). The new U.S. IPEC has an opportunity to bring together anti-counterfeiting and piracy efforts into a comprehensive national strategy that the White House and Congress can rally behind, and hopefully, fund and support. Such a plan will need to address the rampant counterfeiting and piracy that is happening every day, especially the problem that today’s Attributor report draws out.

America is in a time of great economic unrest, and lawmakers and administration officials are looking for ways to save jobs and jumpstart the economy. When online piracy represents 10 percent of sales in a valued multi-billion dollar industry such as book publishing, enforcing IP laws is a good place to start.

Saving Jobs While Deploying Broadband

by Mark Esper

Yesterday, the U.S. Chamber's Global IP Center submitted comments in response to the Federal Communications Commission's Notice of Proposed Rulemaking (NPRM). The purpose of these comments was to express our strong belief that Internet Service Providers (ISPs) must retain the ability to manage illicit content (including pirated content such as illegally downloaded movies and music) in a reasonable and effective manner.

Why? The reason for this is simple. Through 2006-2007 alone, copyright industries provided more than 22% of the nation's total real growth, and in 2007 provided nearly 6 million jobs. Yet the distribution of illegal content over the Internet is not only clogging up the web and slowing it down—a problem ISPs wrestle with daily—it has also led to tens of thousands of lost jobs in some of America's most creative industries. And the problem is only getting worse.

The theft of this intellectual property—those creations of the mind, such as music, TV shows, blockbuster movies, and books—not only threatens the jobs of the millions of Americans who work "behind the scenes" (e.g. writers, sound technicians, and cameramen) in these fields, but it also affects our country's economic growth and competitiveness.

Nationally, IP theft costs the U.S. economy hundreds of billions of dollars each year and has led to the loss of hundreds of thousands of jobs in many sectors. Clearly this is an issue that must be addressed, and preserving ISPs' ability to manage illicit content is a step towards remedying this problem. Ensuring that ISPs retain this capability will not only save jobs and protect the rights of artists, it will also help them protect Americans from other illicit activities, from harmful malware that infects people's computers, and from the scourge of child pornography that's found a new venue online, for example.

Expanding broadband as far and wide as possible is important for a number of social, economic, and other reasons, and we stand fully behind that goal. Preserving ISPs this flexibility to manage their networks and stop illicit content simply makes sense, and any policy prohibiting reasonable measures to address these activities would not only stifle such innovative efforts going forward, but would also send the wrong signal to taxpayers, law enforcement, industry and others about the administration's commitment to enforcing the law, protecting consumers, and saving jobs. 

State of American Business: Intellectual Property and Jobs

by Mark Esper

Throughout time, innovation and creativity have been the catalyst for our economic and cultural growth and scientific advancements—from novel medicines that save lives and "green technologies" that will help protect the environment, to the movies, music and software that define America. We owe much of this to a robust system of intellectual property (IP) rights—the framework of laws and policies that encourage innovation, rewards entrepreneurs, protects one's ideas, drives economic growth and competitiveness, and creates and supports jobs. 

This week, in his annual State of American Business address, U.S. Chamber president and CEO Tom Donohue laid out a plan to help create jobs and revive America's economy. One key element of this plan is to continue promoting and defending the current global system of international IP laws and norms. As Tom noted in his address:

"We must also vigorously protect our intellectual property. The theft of IP costs our nation hundreds of thousands of jobs, threatens consumer safety, and puts our leadership in innovation at risk."

Tom couldn't be more spot on. America's economic growth depends on innovation and the strong intellectual property rights that safeguard it. America's IP is valued at over $5 trillion, more than the GDP of any other country. Intellectual property also accounts for more than half of all U.S. exports, helping drive 40 percent of U.S. economic growth. America's IP-intensive industries, such as pharmaceuticals, entertainment, computers, and electronics, have created jobs—over 18 million of them—and IP job creation is expected to grow faster than the national average over the next decade.

Intellectual property is equally critical on the state level as well. Nevada, for example, is home to a large number of innovative startup companies, and was ranked first nationally in job creation by the 2007 Kauffman Institute New Economy Index. 

In 2007 and 2008, film and television production in Louisiana contributed $316 million in local wages, and in 2008, the number of businesses that were involved with copyrighted works grew to almost 6,300—an increase of 12.1 percent from the previous year. Additionally, Louisiana hi-tech industry workers earn an average of $17,495— more per year than other private sector workers.

In Wisconsin, innovative industries employ more than 80,000 high-tech workers and nearly 10,000 doctoral scientists and engineers. The software industry alone employs nearly 4,500 people and contributes almost $300 million in wages to the Wisconsin's economy.

Finally, in Florida, the innovative economy supports 20,000 doctoral scientists and engineers and more than 276,000 high-tech workers, making the Sunshine State the 4th in the nation in terms of high-tech employment. 

It is a no-brainer that IP rights play an integral role in driving the economy of every state in the U.S., and they cannot be taken for granted. Innovation and creativity will continue to improve our lives and create jobs, contributing to America's economic recovery and global competitiveness. It is American ingenuity at its best, and it is one of our greatest assets.  

Note: For more information on how innovation, creativity and intellectual property impact your State, please visit the Chamber's Global IP Center at www.theglobalipcenter.com.

IP and Copenhagen – Final Thoughts

by Mark Esper

Despite the lack of real agreement in Copenhagen, there is clearly a consensus among the nations gathered that climate change must be addressed.  All agree as well that new and innovative technologies will be critical to helping nations deal with global warming adaptation and mitigation.  Most of these innovations will come from the private sector, which has been expending a great deal of time, effort, and resources—with much more to follow—on these cutting edge technologies.

Protecting the intellectual property (IP) rights of these firms and inventors will be critical to both incentivizing their continued investments, and helping spread the knowledge gained from such research and development.  Negotiators from the United States and other nations consistently reiterated this pro-IP position during negotiations over the past year, and worked together to protect IP from efforts to weaken existing laws and norms. Their steadfast support of IP rights and innovation should be commended.

Although no climate change agreement emerged from Copenhagen, efforts by some nations to craft political statements and treaty provisions s designed to weaken IP rights leaves much room for concern.  Efforts to undermine IP protections will not stop, and anti-IP activists already have their sights set on the next round of talks.  As such, it is important that we remain engaged and vigilant if we are to address climate change in a timely and effective manner.

To that end, the Chamber will continue to actively work to promote strong IP rights as a driver of innovation and a key part of the solution as climate change discussions move forward in other venues.  We will also work to remove the real barriers to technology transfer—such as high tariff and non-tariff barriers, and weak legal frameworks—so that critical technologies can be diffused widely and broadly in this global fight. 

But the value of protecting IP rights doesn't stop with the new green technologies it will bring to our climate change efforts.  Research shows that strong IP rights in sectors such as green tech can create millions of jobs in India and Europe, and most certainly for other developed and developing nations as well.  Conversely, research also shows that weakened IP laws will cost America over a million jobs in the next ten years, with that number increasing exponentially after 2020.   All of this will have a dramatic impact on each nation's economic growth and competitiveness in the years ahead. 

These are vital statistics that cannot be ignored, and the Congress and Obama Administration have demonstrated their continued support for strong IP rights. Whether it  is increased funding for enforcement, bipartisan legislative language urging IP protection in climate change negotiations, or direct intervention—such as Vice President Biden's recent IP roundtable at the White House—America's  political leaders remain spot on when it comes to intellectual property. 

This support will remain crucial as some nations and anti-IP activists regroup in the months ahead for the next opportunity to weaken the rights of inventors, undermine a time-proven system of incentivizing innovation, and sap America's recovery and competitive edge.

The White House Takes Aim at IP Theft

by Mark Esper

Tuesday’s White House roundtable discussion on the monumental problems of counterfeiting and piracy is another indication of the value being placed on intellectual property (IP) as a job creator, driver of innovation and creativity, and integral part of the American economy. I commend Vice President Biden and the Administration for holding this important and timely meeting.
 
The government has a clear interest in thwarting the growing and increasing complex problem of counterfeiting and piracy. Our economy is leaking jobs and opportunities like a sieve due to IP theft. The production and distribution of fake products ranging from consumer goods to replacement auto parts, coupled with the illicit distribution of movies, music, and software has cost the nation tens of thousands of jobs. At the same time, tens of billions of dollars in revenue that could have been re-invested into a struggling American economy and its workforce have been lost.
 
With a focus on enforcement, today’s meeting strikes on a topic that can play a vital role in turning the tide on counterfeiting and piracy. Enforcement works, as was evidenced just recently during a series of nationwide raids conducted by federal authorities. These raids netted more than $26 million worth or counterfeit clothing, electronics, DVD’s, holiday ornaments and other merchandise. Authorities recovered more than 700,000 products in a sweep of 41 cities in 26 states across the country. This coordinated effort involving federal, state and local authorities demonstrated the effectiveness of enforcement policies – when they are followed.
 
This meeting comes on the heels of positive developments orchestrated by the Congress, where passage of the omnibus spending bill meant good news for IP enforcement efforts. The bill provides $8 million for new FBI agents to bolster enforcement efforts, $2 million for prosecutorial activities through the Department of Justice, and $20 million for state and local enforcement grants.  
 
So with this roundtable discussion, the Administration continues to say the right things on counterfeiting and piracy. This, along with congressional actions, will hopefully empower Victoria Espinel, the nation’s first Intellectual Property Enforcement Coordinator, in her efforts to address the threats to innovation and creativity that are wreaking havoc in our economy.

Access to Copyrighted Materials

by Mark Esper

Recently, anti-intellectual property rights activists have misstated the U.S. Chamber of Commerce’s position on access to copyrighted materials for the visually impaired and other persons with disabilities.

The Chamber supports increased copyright access for the visually-impaired, including measures currently practiced under U.S. law that have proven effective in providing access, and promoting results-oriented solutions to the needs of blind and visually-impaired persons.

However, the treaty now being proposed would not be compatible with US copyright laws and norms, and would undermine the goal of expanded access that we all share. This overreaching treaty would also harm the rights of authors and other artists, and the incentives necessary for them to create and commercialize their works. We strongly believe improving access for one community should not mean that another loses its rights in the process.

The Chamber stands ready to work on practical ways to support more efficient and expedited access for the visually impaired, in partnership with all stakeholders, to achieve these important outcomes.

// Update: See also comments in response to the request by the U.S. Copyright Office and the U.S. Patent and Trademark Office

Congressional Action Impacts IP Both Here and Abroad

by Mark Esper

Intellectual property (IP)—those "creations of the mind" that result in new inventions and works of art, for example-- continues to be recognized as a job creator and a pivotal component of our economy. The latest example of this can be found in the Omnibus Appropriations Conference report—the means by which the Congress funds the government and its programs—that was just recently filed in the U.S. House of Representatives.

For starters, the report provides critical funding for personnel and programs authorized by last year's PRO-IP Act, which will greatly enhance IP protection and enforcement efforts.  Specifically, the report includes $8 million for new FBI agents to bolster enforcement efforts, $2 million for prosecutorial activities through the Department of Justice, and $20 million for state and local enforcement grants to be administered by the Office of Justice Programs at DOJ.

Internationally, the report recognizes the need to protect IP in any climate change agreement that may come out of the Copenhagen Summit. The foreign operations title of the Omnibus directs the Secretary of State to submit periodic reports detailing the actions taken by our negotiators to protect IP in the Copenhagen talks and beyond.

These provisions in the conference report come at a critical time for IP rights. Here in America, IP can play a leading role in job creation and spurring economic growth, and funding the PRO-IP Act is crucial to protecting consumers from counterfeiters and pirates whose fakes and illicit products steal jobs from people who work in legitimate businesses. Abroad, this news has great significance. Once again, Congress has demonstrated to the world in bipartisan fashion that using multilateral negotiations as an opportunity to undermine IP rights is simply a non-starter. Intellectual property must be protected in any international agreement—and any forum for that matter—and Congress has repeatedly taken a firm stand on this issue.

And from what we hear on the ground in Copenhagen, other players are making their pro-IP voices heard as well. This includes labor and its support of IP protection, especially in international technology transfer agreements.  

The continued endorsement of intellectual property highlights the value IP has to our economy, and the role it plays in job creation. Through increased enforcement, we help stop the practice of counterfeiting and piracy that costs this country hundreds of thousands of jobs. Through the protection of IP rights, we maintain a system of incentives that leads to the innovations that drive our economy and change peoples' lives.

So this is welcome news, and we look forward to Congress enacting these provisions, and the Administration implementing them, as another step in promoting and protecting intellectual property rights for inventors and creators of all stripes.