A Note on Economic Losses Due to Theft, Infringement, and Piracy of Protected Works

Abstract

Enforcement of copyright and related intellectual property rights is designed to halt loss of economic value to the rights holders. This article explores the nature of losses when protected works are stolen, infringed, or pirated and how the losses differ significantly for materials in physical and virtual form. The author shows unauthorized uses create both supply and demand issues and reveals that different forms of illegitimate use produce varying types and levels of economic loss. The author shows how unauthorized uses potentially affect the producers' marginal and average costs, consumer demand, and revenues. The author considers those effects separately for theft, infringement, and piracy of physical and virtual products and shows that negative effects of losses are rarely inevitable and that less harm tends to occur when virtual rather than physical products are involved.