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US Government Acknowledges That Piracy Estimates Can't Be Trusted

by Amar Toor on April 14, 2010 at 10:05 AM

Quantifying the effect that online piracy has on businesses and copyright holders has always been an inexact science. For years, suspicion has been brewing over the accuracy of estimated losses claimed by software companies, the MPAA and even governmental agencies. Yesterday, though, the Government Accountability Office (GAO) finally admitted to the scientific shortcomings of many common estimates, and determined that it's generally "difficult, if not impossible, to quantify the economy-wide impacts" that digital piracy inflicts.

In a report that examined the "efforts to quantify the economic effects of counterfeit and pirated goods," the GAO found that even industry-specific studies are prone to significant quantitative uncertainty, simply because "the illicit nature of counterfeiting and piracy makes estimating the economic impact of IP infringements extremely difficult." The study also acknowledged the inherently problematic process of determining what exactly constitutes a "lost sale." The Business Software Alliance, for example, has long assumed equivalence between individual downloads and lost sales. As the GAO points out, though, this kind of presumptive substitution technique ultimately rests upon "assumptions... which can have enormous impacts on the resulting estimates."

The report went on to debunk three commonly cited estimates: a 2002 FBI estimate that US companies lose $200-$250 billion each year to pirates; a similar Customs and Border Patrol annual cost estimate of $200 billion and 750,000 jobs; a Federal Trade Commission report that the US auto parts industry hast lost $3 billion worth of sales because of counterfeiting.

The GAO's report, as Arstechnica says, contributes to a larger governmental initiative called the PRO-IP Act, which began under President Bush and has continued under Obama. Obama, in fact, has appointed Victoria Espinel as the nation's Intellectual Property Enforcement Coordinator, and has entrusted her with the job of gathering exactly the kind of data that the GAO, ironically, has proven inaccurate. It certainly doesn't make her job any easier, but it also tones down a debate that could otherwise escalate beyond the realm of reality. The GAO's findings certainly don't condone piracy from an economic perspective, but they also suggest that many industrial or governmental policymakers may have been misguided by exaggerated numbers. As deflating as it must be for Espinel to find out that years' worth of estimates can't be trusted, clearing the table and establishing firm statistical ground is an important first step for any serious approach to piracy and counterfeiting policy. [From: Arstechnica]

Tags: business, business software alliance, BusinessSoftwareAlliance, Economics, economy, estimates, figures, gao, government, government accountability office, GovernmentAccountabilityOffice, industry, intellectual property, IntellectualProperty, mpaa, obama, Obama Administration, ObamaAdministration, piracy, pro-ip-act, statistics, top, US government, UsGovernment, victoria espinel, VictoriaEspinel

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