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The Pseudo-Science of the ‘IP Creates Jobs for America’ Report

The Pseudo-Science of the ‘IP Creates Jobs for America’ Report

We’ve recently been informed that the U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC) released a report entitled “IP Creates Jobs for America”. We decided to take a look at the report and it doesn’t take long to find a whole lot of red flags.

This last Sunday, we concluded our study series which pointed to 20 academic studies that discussed file-sharing and its impacts on the markets. It was in response to a study Phoenix study released earlier this year which contained numerous holes behind the numbers. The series we released was considered groundbreaking because of the pure volume presented all at the same time. The series was also mentioned by Cory Doctorow on BoingBoing (1, 2) and was mentioned on Slashdot and the Washington Post as well.

Of course, the series we published wasn’t meant as just a one time thing that was meant to be forgotten. Whenever something like this latest “study” by the GIPC, it helps to refer back to our series as a sort of point of reference. For instance, we used multiple sources from academic sources. The studies we used employed numerous methods to determine what effect file-sharing has on the general marketplace. Knowing the patterns of what science has found, it’s much easier to find all the flaws in the study we have decided to examine today.

The report came to us with a press release in an e-mail which contains the following:

“This first-of-its-kind study shows that intellectual property-intensive companies have a direct and significant impact on jobs, productivity, and competitiveness in every state of the union,” said Mark Elliot, executive vice president of the GIPC. “Intellectual property’s economic contributions are evident across all states, large and small. For instance, nearly 90% of Delaware’s exports originate from IP-intensive companies as do half of Iowa’s private sector jobs. In Kansas, IP-intensive companies produce $51.1 billion in output.”

IP Creates Jobs for America measures IP-intensive companies by inputs such as research and development (R&D) expenditures, the number of scientist and engineer (S&E) personnel, and by outputs such as patents, trademarks, and copyrights across all 50 states and the District of Columbia. The study finds that IP-intensive industries account for 55.7 million direct and indirect jobs, over $5 trillion in national gross domestic product, and 74 % of total U.S. exports. The IP Creates Jobs for America project is intended to be a resource for legislators, policymakers, and the public to better understand the vital role innovative and creative industries play in our broader economic well-being. An interactive map with fact sheets for each of the 50 states and the District of Columbia are located at: www.ipcreatesjobs.com.

“Recent research by the Department of Commerce has shown that innovation and creativity are key drivers for economic growth and prosperity, with intellectual property-intensive industries driving America’s jobs and productivity,” added Elliot. “Our study expands this data to capture the economic value of intellectual property outside the supply chain. This report makes the benefits of IP tangible, demonstrating that a wide cross-section of industries employing tens of millions of Americans reaching every corner of the U.S. hinge on intellectual property rights and enforcement thereof.”

This clearly doesn’t hide who this content is directed at and what these people hope to accomplish. Since there are rumblings that SOPA 2.0 be coming some time in 2013, it’s not unwise to at least examine now what could one day be used to promote SOPA 2.0 later.

No One Page for Examination

The study can be found on the GIPC website. When we clicked on it, we were treated to a map of the United States and various numbers if you click on each state. This is fine for presentation purposes, but where’s a nice large document that contains all of the data and information? There didn’t appear to be any.

This is suppose to be used by policymakers and treated seriously. It’s one thing to have a website displaying your content (I don’t think there’s anything wrong with that in and of itself per-se), but it’s another to have it all bundled into something like a PDF file so every piece of data can be examined thoroughly instead of broken up into tiny shards strewn about on a webpage. While I can’t say I’m an expert on academic publishing, I would be quite surprised if this website could be somehow published in an academic journal in its current form. While it may be nice eye-candy, it’s distinctly lacking a professional side to it as far as I’m concerned given that of all the studies I’ve examined, none of them where anything like this in terms of content delivery. No, I don’t thing that is necessarily a good thing.

What is “IP-Intensive” Anyway?

There isn’t a lack of PDFs on this website. If you, say, click on California, you can see some basic numbers and are presented with a PDF “factsheet”. Hoping to find something similar to the studies we have seen in the past, we were sorely disappointed. Instead of thorough definitions explaining the points being made, we are greeted with big flashy pictures and vague bar graphs that made the report look like an art project rather than a serious paper.

Here’s a common sight you’ll see in these PDF files:

Apart from what I’ve already discussed, I think what is critical in this small snippet is what you don’t see. Citation, definitions, sources used to put up these specific numbers. One could make a case that this is technically plagiarism. Still, is anything cited at all for these numbers? There is. Way down in the corner of the second page is the following tidbit:

DATA SHOWN VARIES FROM 2009-2011; FULL INFORMATION CAN BE FOUND AT WWW.IPCREATESJOBS.COM. DATA SOURCES: NATIONAL SCIENCE FOUNDATION, THE U.S. PATENT AND TRADEMARK OFFICE, THE U.S. COPYRIGHT OFFICE, THE U.S. CENSUS BUREAU, THE U.S. BUREAU OF ECONOMIC ANALYSIS, THE U.S. BUREAU OF LABOR STATISTICS, AND THE U.S. INTERNATIONAL TRADE COMMISSION

In other words, they are using multiple sources to describe the content while not citing what is used specifically throughout the PDF. The statistics gathered could have just about come from anywhere, but the report doesn’t specify what statistic was used where. I’ve spent plenty of time in an academic setting, so I know what professors look for. If this was a paper marked by any of the professors I know, there would be circles around a lot of these numbers and questions on where the numbers came from (and, in most cases, marks would be docked). Bottom line, this citation doesn’t fit any format or style that I am aware of and this is simply not good enough.

With barely a paragraph in sight and simply vague pictures used to describe the content, there’s plenty of ways to shred these PDFs. One of the biggest glaring holes in logic I see is the constant use of “IP-Intensive Industry”. What does that even mean anyway? There’s no quick definition in the PDF of what that even is let alone what industries are considered “IP-Intensive”, yet the term is thrown about as if its as common terminology as the word “vehicle”. So, we had to leave the PDF file and click around the website, trying to find a definition. First, we looked at the FAQ:

What is Intellectual Property?
Why is Intellectual Property Important?
Who is Affected by Intellectual Property?
What Industries are Affected by Intellectual Property?
What are the Major Threats to the Intellectual Property System?
What Can Be Done To Strengthen and Defend Intellectual Property
How Do Intellectual Property Rights Drive Innovation?

That is the complete list of topics covered in the FAQ. The topic of “IP-Intensive” is completely missing. We looked at Arguments for IP and the only thing you’ll get on that page is that IP-Intensive industries employ people and pay them. Still, no definition of what is considered “IP-Intensive”. We then looked at International Profiles of IP but all we get is a couple of random corporations around the world with no mention of “IP-Intensive”. Finally, we looked at the last page on the whole site which is the Facts about IP page. Once again, no definition or explanation of what “IP-Intensive” even is. Only that it employs lots of people and it pays people in the process.

So, apparently, as far as the GIPC “study” is concerned, what “IP-Intensive” even is is top secret. This definition seems to be as secretive as the Trans-Pacific Partnership! Fortunately, we have ways of drilling through and finding this kind of top secret information. One of the points in the Facts page is the following:

There are a total of 75 diverse U.S. industries classified as “IP-intensive.” (“Intellectual Property and the U.S. Economy,” Department of Commerce, April 2012)

The date here is particularly important. Why? Around this time, Ars Technica spent some time examining a study promoted by the MPAA. Coincidentally, Ars Technica looked in to what “IP-Intensive” even is in the first place. Here’s what they found:

The report has an extraordinarily broad definition of an “IP-intensive industry.” Thanks to the inclusion of industries that rely on trademark protection, the list includes the residential construction, “dairy product manufacturing,” paper, and grocery industries. That’s right”if you hang sheetrock, bag groceries, or answer phones at a paper mill for a living, you’re probably in an “IP-intensive” industry as far as the Obama administration is concerned.

Indeed, the report finds that trademark-intensive industries account for more than twice as many jobs as copyright-intensive and patent-intensive industries combined.

[...]

The report has an extraordinarily broad definition of an “IP-intensive industry.” Thanks to the inclusion of industries that rely on trademark protection, the list includes the residential construction, “dairy product manufacturing,” paper, and grocery industries. That’s right”if you hang sheetrock, bag groceries, or answer phones at a paper mill for a living, you’re probably in an “IP-intensive” industry as far as the Obama administration is concerned.

So, my question is, do people who hang sheetrock need websites used to download music for free censored just to protect their jobs? I’ve heard of stretching numbers and the truth, but this is ridiculous. It’s bad enough that the GIPC doesn’t see fit to provide you a definition of what “IP-Intensive” even is or what industries are involved, but when we do find a definition from a third party website, it makes the “study” substantially more uninspiring.

Sources of the “Facts”

This one source alone (the second) on the facts page may have come from the MPAA, but what are their origins? (For the TL;DR version, scroll down to the “Facts Page Round-up”)

The first:

IP accounts for 60.7% of the total U.S. merchandise exports for a total of $775B. (“Intellectual Property and the U.S. Economy,” Department of Commerce, April 2012.)

Prepared by the Economics and Statistics Administration and the United States Patent and Trademark Office

The second source is the same as the first.

The third:

Rogue websites selling counterfeit luxury goods receive nearly 36 million visits per year. (MarkMonitor, Traffic Report: Online Piracy and Counterfeiting, January 2011.)

Produced by MarkMonitor. The same organization that, according to BusinessWire, seems to have strong ties to anti-piracy activity:

SAN FRANCISCO–(BUSINESS WIRE)–MarkMonitor®, the global leader in enterprise brand protection, and The Steele Foundation™, a longtime provider of global investigative and risk management solutions, have formed a strategic alliance to provide businesses with a comprehensive solution to the surge of costly counterfeit, piracy and gray-market crime. By spanning both the virtual and physical marketplaces, this unique solution gives businesses a seamless set of tools to prevent, identify and combat threats to brand integrity both online and on the ground in countries around the world.

“Companies of all sizes are experiencing an increase of counterfeits in online auctions and gray-market diversions, which conspires to undermine channel distribution strategies, as well as consumer trust and safety,” said Irfan Salim, chief executive officer at MarkMonitor. “By joining service offerings, MarkMonitor and The Steele Foundation provide the means to identify illegal sales, validate the legitimacy of products sold online and the capability to launch international physical investigation teams to track and take down illegal product distribution activities associated with this type of brandjacking.”

This could be an indication of a conflict of interest in this case.

The three points after that all are derived from the same source.

There’s this next one:

G20 governments and consumers lose $125 billion annually, including losses in tax revenue, from counterfeiting and piracy. (Frontier Economics, Estimating the Global Economic and Social Impacts of Counterfeiting and Piracy, February 2011.)

Just looking at the first page, you can’t miss their connections on this specific report: BASCAP (Business Action to Stop Counterfeiting and Piracy).

According to Wikipedia it is one of many organizations pushing for the Anti-Counterfeiting Trade Agreement (ACTA).

Four sources after that are derived from work from the same organization. Another possible conflict of interest? Probably.

Next reference:

In 2008, IP-centered companies in the manufacturing and nonmanufacturing sectors generated nearly $7.7 trillion in gross output, accounting for 33.1% of total U.S. gross output. (Nam Pham, Employment and Gross Output of Intellectual Property Companies in the United States, NDP Consulting, January 2011.)

That paper came with one caveat:

The author would like to acknowledge the invaluable research and analytic support of Mark Schmidt, Principal at ndp|consulting. This research was supported by the U.S. Chamber of Commerce. The analysis and views expressed here are solely those of the author.

While it did cite Walt Disney as one source, that isn’t necessarily a reason to completely dismiss this particular source.

The next source:

Reducing the piracy rate in the United States by 10 percentage points in two years would add more than $52 billion to the country’s gross domestic product by 2013, an amount close to last year’s corporate profits for all US manufacturing of durable goods. It would meanwhile boost US tax revenues by more than $8 billion. (“BSA and IDC Global Piracy Software Study,” Business Software Alliance & IDC, May 2010)

Of course, the BSA is the software equivalent to the RIAA. Not an objective source. The next three sources was also from the BSA.

The three sources after that are also from NDP Consulting.

The next source is this:

Average wages stemming from IP-intensive industries are 42% higher than those in non-IP intensive industries. The average person in an IP-supported job makes weekly wages of $1156. (“Intellectual Property and the U.S. Economy,” Department of Commerce, April 2012)

This is from exactly the same source as the first two sources. So, this list of sources is starting to look like it’s doubling up sources and dispersing them among other sources to make it look like there’s more sources then there really are. The next two sources are also from this source.

The next source is this:

G20 economies have lost 2.5 million jobs to counterfeiting and piracy. (Frontier Economics, Estimating the Global Economic and Social Impacts of Counterfeiting and Piracy, February 2011.)

Sounds familiar? Yup, same source as we previously discussed. the same one with ties to BASCAP.

The next source is doubling up the previous BSA source.

The source after is this:

Counterfeit footwear was the top commodity seized in FY 2009 with a domestic value of $99.7M, which accounted for 38% of the entire value of infringing goods.(Customs and Border Protection, Intellectual Property Rights – Seizure Statistics: Fiscal Year 2009)

This source can be found here. You know what else that report said?

- The domestic value of IPR seizures in FY 2009 decreased 4% to $260.7M from $272.7M in FY 2008.

- The number of IPR seizures in FY 2009 decreased by 1% to 14,841 from 14,992 in FY 2008.

While the number of IPR footwear seizures declined by almost 50% in FY 2009, the domestic value only decreased by $2.5M or 3%.

This is a classic case of cherry-picking.

The next two sources doubles up on the previous NDP Consulting paper.

The two sources after that doubles up on the Customs and Border Protection report with basically additional examples of cherry-picking.

The next source is this:

In the UK, research from Harris Interactive in 2009 highlighted that nearly one in four P2P file-sharers (24%) typically spend nothing on music, while finding an overlap of legal and illegal downloading among some file-sharers. (International Federation of the Phonographic Industry, Digital Music Piracy Report 2010, January 2010)

they cited the IFPI which is the international version of the RIAA. Not an objective source. The next source also cited the IFPI.

the source after is this:

The cost of one product adulteration or counterfeiting incident averages between 2 and 15 percent of yearly revenues, depending on company size; this could translate to a $400 million impact for a large company, or a $60 million impact for a small company. (Grocery Manufacturers Association and A.T. Kearney, “Consumer Product Fraud: Deterrence and Detection”, January 2010)

This source can be found here. Take a look at the approach:

The study findings are based on approximately 100 interviews with senior managers in the food, beverage and consumer product industry, 50 responses to an industry-wide survey, a 150-incident repository, and A.T. Kearney research and expertise.

It gets better. The report also came with this disclaimer:

Disclaimer: As part of this overall project, A.T. Kearney worked with the steering committee to review current procedures to understand opportunities for the industry. Because of the size and diversity of the food, beverage and consumer product industry, these recommendations are not intended to represent a “one-size-fits-all” approach. Thus, some of the recommendations will be appropriate for some companies and segments of the industry but not for all.

So, my question is, what is this report doing in this study anyway if it was never intended as a “one-size-fits-all”? You could make the case that this might as well be thrown out.

The next source doubles up the MarkMonitor report which has ties with BASCAP. The source after that doubles up on the cherry-picked report. The next source doubles up on the Groceries Manufacturers report which had the disclaimer. The next source, again, doubles up on the cherry-picked report.

The fourth to last source is this:

International and domestic theft of sound recordings costs the U.S. economy $12.5 billion in lost revenue, approximately 71,000 jobs and more than $2 billion in wages to U.S. workers. (Siewick, Stephen E., The True Cost of Sound Recording Piracy to the U.S. Economy, Institute for Policy Innovation Report # 188, 21 August 2007.)

This report can be found here. The study contains the following:

For this study, the most important of these sources was 2006 Global Recording Industry in Numbers which is published by the International Federation of the Phonogram Industry (IFPI).

Not an objective source, yet used as a primary source here. What’s more, this study uses a variation of one download means one lost sale:

This amounts to one download means one lost sale. The only variation is that it’s a digital lost sale 90% of the time and a physical CD lost sale 10% of the time. There’s no scientific basis for this. On the contrary, our body of evidence pointed to precisely the contrary. Adding the fact that this study uses a non-objective source, this whole study needs to be, I would argue, thrown out.

The third to last source is this:

According to a report by the Federal Trade Commission counterfeiting is estimated to cost the global automotive parts industry $12 billion a year in lost sales; $3 billion of that total is in the United States. It is also estimated that U.S. auto parts industry lost sales correlates to potentially 200,000- 250, 000 fewer manufacturing jobs. (“Intellectual Property: Protecting Valuable Assets in a Global Market,” MEMA Brand Protection Council, 3rd Edition, June 2009.)

While we were able to find a site linking to the report, the report has been sealed off to members of the AASA only. So, there’s no way for us to verify it.

The second to last source is this:

According to the World Health Organization, up to 10% of medicines worldwide are counterfeit”a deadly hazard that could be costing the pharmaceutical industry $46 billion a year. (Balfour, Frederick, Amy Barrett, Diane Brady, Kerry Capell, Paul Magnusson, Carol Matlack, Dexter Roberts, William C. Symonds, and Johnathan Wheatley, “Fakes!,” Business Week, 7 February 2005.)

The article can be found here and it’s merely a quote from the WHO. Of course, this article dates clear back to February of 2005. More than 7 years ago. Why use such an old quote from a news article? Aren’t there more up to date data on this?

The final source is this:

The U.S.-based Center for Medicine in the Public Interest predicts that counterfeit drug sales will reach $75 billion globally in 2010, an increase of more than 90% from 2005. (“Counterfeiting Facts and Stats,” Protection from Brand Infection, CMO Council. 28 April 2009)

The CMO Council has a webpage featuring it’s sponsors and partners. Some of the underwriters for the organizations are are also members of the BSA. One of its affiliates is also non other than (if this doesn’t sound like a broken record) BASCAP.

That’s it, that’s the entire facts sheet and the sources revealed!

Facts Page Round-up

The facts page is an excellent exercise on how to make a handful of sources look like an endless supply of sources. There’s so loads of quotations spread throughout that were really coming from a few specific sources. After removing duplicate sources, here’s the sources in a nutshell:

1. Department of Commerce – Report prepared in part by the USPTO.
2. MarkMonitor – Strong ties with anti-piracy organizations.
3. Frontier Economics – Affiliated with BASCAP (anti-piracy organization).
4. NDP Consulting – The viewpoint of a single individual.
5. Customs and Border Protection – Heavily cherry-picked statistics.
6. BSA – Obviously not an objective source.
7. IFPI – Again, not an objective source.
8. Grocery Manufacturers Association and A.T. Kearney – Sample size: 100 interviews. Report recommended that it shouldn’t be used as a “one-size-fits-all” report. Therefore, has no business being used as a source for general policy making in the first place.
9. Siewick, Stephen E. – 2007 report uses the flawed methodology of one download means one lost sale and derived its data primarily from the IFPI.
10. MEMA Brand Protection Counci1 – Report sealed off and can’t be verified.
11. CMO Council – Has underwriters who are also members of the BSA and.

The material is mostly sourced from anti-piracy organizations and big businesses who are merely on one side of the copyright debate. If I were to try and find anything at all that is reliable and used even remotely properly, I would have to really stretch and say that only the Department of Commerce and NDP Consulting only. The rest of the entire list should be tossed on the basis of how it’s used and inherent conflicts of interest.

Concluding Thoughts

There’s really nothing more in this study outside of merely having differences of opinion on certain subjects (which would be a whole different can of worms entirely). After all of this, I would definitely say that this “study” is unreliable in its entirety. A lot of the material was put together in a very sloppy manner and the sources it did use properly were almost entirely unreliable. On the surface, everything looks slick and smooth, but this is an excellent example of how looks can be very deceiving.

Have a tip? Want to contact the author? You can do so by sending a PM via the forums or via e-mail at [email protected].

Drew Wilson
Drew Wilson is perhaps one of the more well-known file-sharing and technology news writers around. A journalist in the field since 2005, his work has had semi-regular appearances on social news websites and even occasional appearances on major news outlets as well. Drew founded freezenet.ca and still contributes to ZeroPaid. Twitter | Google Plus


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