Discussion paper

Copyright protection and innovation in the presence of commercial piracy

26 Jun 2007

Commercial piracy, where a firm (hereafter referred to as the pirate) illegally reproduces and sells copies of legitimate products thereby competing with the original producer, has emerged as one of the leading global challenges faced by software businesses, entertainment industry, law enforcement agencies, and international trade partners. This issue assumes importance not only because of the high magnitude of the immediate loss in retail sale but also of its possible detrimental effects on the incentive to innovate. As a consequence, the government is often called upon to perform the duty of strengthening and enforcing copyright. The existing literature on commercial piracy and the general literature on end-user piracy treat cost of developing the product as a sunk cost. The focus is on pricing strategies and anti-piracy policies.

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