Counterfeiting Accounts for $500 Million in Damages

Local counterfeiting activity led to $500 million in damages to local industry in 2005, according to data published by the Federation of Israeli Chambers of Commerce yesterday. The hardest-hit sectors are the pharmaceutical, software and entertainment (movies and records) industries.

The federation said that counterfeit copies and downloads of music led to damages of $39 million, or 32 percent of the record market, and $38 million, or 40 percent of the movie market. The software industry suffered losses of $84 million, or 32 percent of the market, due to illegal copying of programs. The local pharmaceutical industry, primarily comprised of foreign company representatives, suffered damages of $332 million, or 10 percent of the market, due to drug piracy.

The federation's president noted that these figures refer to direct damages from the sale of counterfeit products. However, it does not include losses resulting from patent and logo copyright infringement, which led to $91 million in losses for the state. The figure is based on an estimated $76 million loss in VAT, and a $15 million loss in income tax (assuming an average profit taxation rate of 10 percent).

Business Software Alliance (BSA) representative in Israel, Naomi Assia, quoted a recent study indicating that a 10 percent reduction in software piracy would create 3,800 new jobs in the information technology industry, generate $850 million in economic growth, and increase tax revenues by $400 million.

Government sources said that local legislation is very good regarding intellectual property, and that Israel is considered to be adequately protected based on international treaties, including that of the World Trade Organization.

"Naturally, members of the association have certain commercial interests, and these are not necessarily the only interests which the government should take under consideration," the Justice Ministry said yesterday. "In addition, the ministry had suggested maintaining ongoing working relations with the federation over the matter. But since the data contained was not presented to the ministry, it is unable to comment on its accuracy."

Given the continued infringement on intellectual property rights here, the federation has established an Israeli forum on intellectual property that includes associations for the protection of cinematography and music rights, representatives of foreign pharmaceutical manufacturers, and the union of software companies.