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Howdy, I'm David Brancaccio, the public radio and TV guy. Ask me anything about the economy of the future! (self.IAmA)

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[–]offers_to_fuck 0 points1 point  (4 children)

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I think you're probably right that we have to solve our diplomatic problems first before scaling down the security state. Dismantling the NSA prematurely could lead to another attack that would rally the public around even more governmental overreach. And while I do not support Obama on most issues, he is certainly a man concerned with safety, and genuinely wants to do what is best for the United States. We can be sure of that.

But, I think you're miscalculating the economics of IP theft. When physical goods are stolen, the equation is simple. Each good has a cost, and that money is directly lost for each stolen unit.

For IP, each stolen unit cannot equal one lost sale. If a firm hadn't pirated 300 copies of windows, you cannot reasonably determine that they instead would have purchased 300 copies of windows. The indirect loss of revenue is by nature indeterminable, and using the (cost)x(number of stolen units) will give you the maximum possible loss of revenue, exaggerating the actual cost.

Additionally, there is no way to accurately account for some of the benefits of that theft. When people pirate an OS, they will buy proprietary hardware and perhaps software that they would not have been exposed to otherwise. When people pirate music, they're more likely to see a concert they wouldn't have seen otherwise, and they're going to need a physical mp3 player to listen to it.

In short, my point is that however you feel about IP theft, the traditional model of cost accounting cannot apply. Estimates of the cost of IP theft are always going to be far higher than they actually are. I also think that it is a corporation's job to protect their ideas and formulas, not the US government.

Lastly, while corporations like Microsoft and Apple are the main losers with IP theft, the beneficiaries are consumers, especially poor people that can't afford to buy Windows 8 for $100. Microsoft might miss out on a few million due to lost potential sales, but it's not like they're in any danger.

As for sensitive military weapons technology owned by the US government, I completely agree with you, and that's pretty worrying.

Also, and sorry for making this long and incoherent, the success of the US today is partly due to IP theft. Some of the most important inventions of the industrial revolution were stolen from Great Britain by American entrepreneurs.

Again, thanks for your thoughtful responses.

[–]silverence 1 point2 points  (0 children)

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All excellant points. Let me see if I can find some academic research on the issue, specifically about how IP theft loss is calculated. I certainly agree that traditional models of direct revenue loss don't apply, but I'd make the argument that IP is MORE costly than just taking a physical object, because of what I said before: being able to produce the final good that that IP is concerned with for a cheaper price because of getting to avoid the R&D costs. So like, if Hasboro is making actions figures in the US, and a Chinese firm comes along and steals the compound for the formula for the plastic that Hasboro uses, they can produce the same actions figures for cheaper (in addition to not having to pay the licensing fees, a big issue on it's own) because they didn't have to take the years to perfect that formula, the cost of which is factored into Hasboro's price.

Really, IP theft, in the realm of Industrial Espionage, is very different that pirating music or any type of media. I agree with you on that issue, I think the upside to free/very cheap music etc is greater than the cost, and the RIAA is being insane about it. However, when we're talking about actual, industrial IP theft, what we're talking about is intermediate goods, and R&D costs not being compensated, where as media is a finished good. It's not about the people who can't afford to buy windows 8 for $100, it's about the Chinese companies who use pirates Windows 8 copies to run their businesses without giving Microsoft a cent, and seeing artificially inflated profits because they lack a major business expense their competitors on the up and up have, AND the fact that they can then go and undercut those other companies in an unfair way.

But like I said, I'll find some some stuff to cite on the issue.

[–]silverence 1 point2 points  (0 children)

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http://www.rawstory.com/rs/2013/05/22/international-theft-of-u-s-intellectual-property-cost-300-billion-per-year-report/ - Just a story on it. I'll find academic stuff too. I'm an IPE grad student at the Woodrow Wilson school, I should have this kinda stuff tattooed to me.

[–]silverence 1 point2 points  (1 child)

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http://www.chicagotribune.com/news/sns-rt-us-usa-china-cyber-20130708,0,4956600.story - Just from today. This concerns me greatly about the unfolding situation, and I know, for a fact, that Snowden didn't fully think out the costs and ramifications of his actions. This, and the threaten EU-US free trade treaty, may not be worth the knowledge of the NSA's actions in the grand scheme of "what's best for the lives of the most people."

"We must begin to consider the true cost of IP theft; not by merely calculating the effects of lost revenues, but by assessing the competitive advantage that Chinese companies wrongfully acquire by paying pennies for the exact same tools and software that cost U.S. and other manufacturers thousands, and sometimes millions, of dollars." http://www.gpo.gov/fdsys/pkg/CHRG-109hhrg21217/pdf/CHRG-109hhrg21217.pdf - A house subcomitte report on the topic, talking about their estimates of value loss to IP theft, in 2005.

In the copyright industry alone, for instance, USTR estimates U.S. losses are between 2.5 billion and 3.8 billion annually -From dat last shit. Notice the "low" annual numbers.

The expansion of the breadth of the value transfer, over just the last 8 years, 100x over, show the rapidly increasing severity of the problem.

All hegemonic regimes end. Empires collapse. It's in their nature. IP theft will play a role in the end of this one, and I'd say likely played a role in the end of the last few as well.

[–]offers_to_fuck 0 points1 point  (0 children)

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Damn interesting read, the problem is definitely increasing. Hopefully the offending state owned companies will eventually be punished or at least shamed. I'm still not completely with you on the severity of IP theft of business software and ideas, but the Chinese are definitely getting a massive competitive advantage.

In the Hasbro example in your other post, Hasbro still retains the competitive advantage of having the formula first and getting an edge on production and distribution. Just a year of sales before the theft could completely makeup for R&D cost. I really don't think the mass IP theft is draining the effectiveness of R&D or seriously destroying their bottom line. What your risking is some extra profits and corporate transparency. And as for licensing, I'll bet Hasbro has the rights to plenty of characters and ideas created decades ago by dead men, and I can't possibly support some of the more outrageously long copyright claims.

What those companies are doing is illegal, but I also think US firms have been behind inane copyright and patent legislation all over the world, for decades. I mean, Life + 70 years for an artistic work? In 2013 when things move as fast as they do?! That's absurd to me. Sorry, I know you're beef is with industrial technology. Still though.