The Government Accountability Office's (GAO) release today of its Intellectual Property (IP) Report to Congress (Intellectual Property: Observations of Efforts to Quantify the Economic Effects of Counterfeit and Pirated Goods - PDF) reiterates what government officials, law enforcement, independent experts, and businesses of all sizes have been saying for some time now -- counterfeiting and piracy poses a serious threat to innovation, job creation, and economic growth in America, while putting consumers at risk from dangerous and faulty products.

The problem of counterfeiting and piracy is all the more urgent given GAO's clear recognition of the importance of IP to the American economy--identifying the U.S. as a longstanding "global leader" when it comes to innovation. As the GAO writes, "Among the factors attributed to creating the conditions for this explosion in economic growth [over the last two centuries] are the rule of law, including [intellectual] property rights and the enforceability of contracts." In other words, economies grow, societies advance, and mankind benefits when IP rights are established and enforced.

The GAO addresses in detail the negative aspects of counterfeiting and piracy, such as their impact on the government budget. Every dollar spent on a fake good results in lost tax revenue. In an era of historically high deficits, which create their own drag on economic vitality and force budgetary cutbacks in programs Americans value, the millions that could be collected from the billions lost from IP theft is nothing to ignore.

Even worse, the GAO reports that fake goods are working their way into government supply chains, including the Department of Defense. In fact, there has been well over a 100% increase in this problem in recent years, a troubling fact that could threaten the lives of our military personnel and impact the effectiveness of our armed services.

But the dangers of counterfeiting and piracy aren't just problems facing the general economy and government procurement; they are also reaching into our homes and hurting our loved ones, as the GAO acknowledges. According to other reports, fake consumer electronics have started fires; personal-use items like toothpaste have been found laced with harmful chemicals; and medicines that are easily bought online through official-looking websites have killed patients with their toxic ingredients. And this is only the tip of the iceberg.

For example, a news story just the other day noted that federal prosecutors are investigating the sale of counterfeit OneTouch® Test Strips diabetes testing strips, something millions of Americans rely on to monitor their blood-sugar levels. These strips were being brought into the country from a counterfeiting ring that allegedly extends from China to Pakistan. Needless to say, once these products find their way into the U.S. market, unsuspecting consumers could find themselves in danger from inaccurate readings that fail to tell them when to take their insulin.

And what of the real producer of these testing strips? They could face consumer backlash from a damaged brand--a loss of confidence that might result in reduced sells, which in turn could mean worker layoffs. There are larger ramifications as well. As the GAO reports, "to the extent that companies experience a loss of revenues or incentives to invest in research and development for new products, slower economic growth could occur" and "…companies may hire fewer workers." For business, weak IP laws or poor enforcement that allows counterfeiting and piracy to thrive create an environment that undermines their willingness to innovate and create. And the impact on job growth is all the more disheartening when one learns, according to the GAO, that "IP-related industries also pay significantly higher wages than other industries and contribute to a higher standard of living in the United States."

The GAO report also speaks to the difficulty of gathering data on the full scope and scale of counterfeiting and piracy, which is growing in size and sophistication. This is something everyone can agree on. After all, because IP theft by definition is criminal, it is conducted in the dark, hidden from researchers and statisticians. Yet most experts agree, as the OECD has reported, that this problem costs us hundreds of billions of dollars annually, affecting tens of millions workers globally. Indeed, the GAO says the counterfeiting and piracy problem is "sizeable," and that it is expanding as a result of the "rapid growth in Internet use"--a problem that will only increase as Internet access improves. The GAO was also right to point out that the effects of counterfeiting and piracy "goes beyond the infringed industry," damaging "…all other industries linked to those sales."

While measuring the impact of counterfeiting and piracy is challenging, we know for certain the critical role and positive impact that IP-intensive industries have on our economy. In the U.S. alone, IP is worth over $5 trillion--more than the GDP of any other country--and is responsible for the employment of over 18 million Americans. Moreover, intellectual property accounts for over one-half of all U.S. exports and drives 40 percent of our economic growth; and these numbers are only growing.

Innovation and creativity are the hallmarks of America, and have been since our nation's founding. It's no surprise then, that in order to incentivize these pursuits, and protect the rights of inventors and creators, IP rights are protected in our Constitution. The GAO report notes this and lays out the value of IP in America today, making clear that nearly everyone is hurt by the significant and growing problem of counterfeiting and piracy. And while collecting data on this illicit trade is hard to come by--something which the GIPC continues to work on--it is certainly not a reason for reducing our efforts. In an era of globalization and the Internet, protecting IP through stronger laws, enhanced enforcement, and better cooperation between business and government, as well as between international trading partners, is urgently needed. In bipartisan fashion, Congress and the Obama Administration have shown real support for this premise, and are pressing on a number of fronts. As the White House prepares the nation's first-ever, government-wide strategy this summer to combat counterfeiting and piracy, these facts should play a compelling role in their plans and aspirations.