How to Protect Intellectual Property

From Fair Trade to Legal Trade

Apple patents displayed at the World Intellectual Property Organization. (Denis Balibouse / Courtesy Reuters)

Every day, commercial transactions worth hundreds of billions of dollars and financial transactions worth more than a trillion dollars crisscross the world. From those activities flow the earnings of millions of companies, the wages of billions of people, the products most everyone everywhere buys, and the innovations that improve their lives. Although global trade, in that sense, hits very close to home, the problems that undermine it -- corruption and intellectual property theft -- can seem remote. And in many countries, corruption and disregard for intellectual property rights are just another cost of doing business.

But the damage is huge: in 2010, the United Nations estimated that corruption wipes out more than five percent of global GDP each year. That is the result of more than $1.5 trillion in bribes. According to a 2009 Transparency International survey, nearly two in five business executives have been asked to pay a bribe when dealing with public institutions; half of all businesses executives estimated that corruption raised project costs by at least 10 percent; one in five claimed to have lost business because of bribes by a competitor; and more than a third felt that corruption was getting worse. According to United Nations research, 61 percent of supply chain managers view corruption as the most significant risk to their business after product safety problems.  

Intellectual property theft is equally daunting. In 2008, the total worldwide economic value of counterfeit and pirated materials was $650 billion. By 2015, this number is expected to hit $1.77 trillion. To put that in perspective, the U.S. International Trade Commission has estimated that, if protections for intellectual property rights in China (the worst offender) were strengthened to a level on par with those in the United States, the U.S. economy could add as many as 2.1 million full-time workers, U.S. exports of goods and services could increase by approximately $21 billion, and sales to U.S. majority-owned affiliate firms in China could increase by

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