Counterfeit goods, software piracy and the theft of trade secrets cost the US economy as high as $600 billion a year, says a private American watchdog which labeled China as the “world’s principal IP infringer”.

The theft of Intellectual Property (IP) remains a grave threat to the United States due to lack of legal enforcement and national industrial policies that encourage IP theft by public, quasi-private, and private entities, according to the latest report by the Commission on the Theft of American Intellectual Property.

“We estimate that the annual cost to the US economy continues to exceed $225 billion in counterfeit goods, pirated software, and theft of trade secrets and could be as high as $600 billion,” the report said.

“It is important to note that both the low- and high-end figures do not incorporate the full cost of patent infringement—an area sorely in need of greater research. We have found no evidence that casts doubt on the estimate provided by the Office of the Director of National Intelligence in November 2015 that economic espionage through hacking costs $400 billion per year,” it said.

At this rate, the US has suffered over $1.2 trillion in economic damage since the publication of the original IP Commission Report in 2013, it said.

In 2015, the US imported counterfeit and pirated tangible goods valued between $58 billion and $118 billion, while counterfeit and pirated tangible US goods worth approximately $85 billion were sold that year worldwide, the report said.

The proliferation of pirated software is believed to be a much larger problem in scope than statistics suggest due to the ease of downloading software, ubiquitous use of software across industries and countries, and inadequate surveys.

The value of software pirated in 2015 alone exceeded $52 billion worldwide. American companies were most likely the leading victims, with estimated losses of at least 0.1 per cent of the $18 trillion GDP of the US, or approximately $18 billion, the report said.

On China, the report noted that the Communist giant, whose industrial output now exceeds that of the US, remains the “world’s principal IP infringer”. China is deeply committed to industrial policies that include maximising the acquisition of foreign technology and information, policies that have contributed to greater IP theft.

“IP theft by thousands of Chinese actors continues to be rampant, and the US constantly buys its own and other states’ inventions from Chinese infringers.