The Economic Effects of Intellectual Property Right Infringements

In this article, the authors use data from a small, but varied, sample of U.S. companies to examine the static welfare consequences of foreign infringement of U.S. intellectual property rights in five industry sectors. They estimate that infringement causes profit losses for the legitimate U.S. suppliers that are at least one percent as great as their total sales, that the static gains to consumers are more than half as great as the losses of legitimate producers (and might exceed these losses), and that the losses of the legitimate producers exceed the profits of infringers. They also find that legitimate producers spend relatively little to combat foreign infringement--less than 4 percent as much as their losses from such infringement.