"Dramatic increases in online piracy in Europe and elsewhere threaten our industry’s growth," the Entertainment Software Association (ESA) reported in a filing submitted last week to the U.S. Trade Representative (USTR). The report highlights persistent problems in countries like Canada, China, Malaysia, Russia, and parts of Europe that thwart healthy game industry growth and development.

“Countries that support computer and video game piracy discourage publishers from establishing viable and legitimate markets. The Special 301 process sends a strong message to them to clean up their act to avoid damaging trade sanctions,” said Michael D. Gallagher, CEO of the ESA, the trade association representing U.S. computer and video game publishers. “In 2007, our industry had a record-breaking year with receipts totaling $18.85 billion, but piracy closes off promising markets, artificially limiting our industry’s ability to contribute even more economic growth to the American high-tech economy and economies of our trading partners.”

Online piracy is only one part of the challenge. The Special 301 Report from the International Intellectual Property Alliance (IIPA) identifies many other forms of commercial piracy, including factory production of optical discs (such as CDs and DVDs); CD-R and DVD-R “burning;” cartridge counterfeiting; Internet downloading and file trading; as well as Internet caf_ piracy as contributors to piracy levels in domestic markets that can exceed 80 and 90 percent in parts of Asia, Eastern Europe, the Middle East, and Central and South America.

Game industry challenges highlighted in the report include:

- Legal and enforcement deficiencies in Canada. Pirated copies of games and circumvention devices have permeated retail markets in Canada, due to legal deficiencies and that IPR enforcement remains a low priority for public officials.

- Pirate production for export in China and Malaysia. Pirated optical discs and cartridge games manufactured in China stunt legitimate game sales in many foreign markets. Pirated optical discs produced in and exported from Malaysia produce similar problems.

- Impediments to growth in the Chinese market. Excessive bureaucratic delays in title approval, coupled with easy access to pirated copies and a ban on the sale of home consoles artificially constrain industry growth in China.

- Saturation of Russian market. Factory production of pirated games in Russia has saturated what should otherwise be a rich market, particularly for PC game product.

- Online piracy explosion in Europe. Italy, Spain, Poland and Sweden are among the most problematic countries with respect to online piracy, particularly through the use of P-2-P protocols. Online piracy growth is not confined to Europe, with extraordinarily high online piracy noted in Brazil, Canada and China.

- Paraguay as pirate hub for Latin America. Paraguay continues to serve as a major transshipment point for pirated and counterfeit games from Asia, affecting many South American markets, including Brazil.

- Market access in Brazil and India. Legitimate game sales are virtually non-existent in Brazil and India, owing to high tariffs and additional taxes.

The ESA said countries identified in the Special 301 filing should bring their copyright and enforcement regimes up to international standards, and open their markets to legitimate products. ESA bases its estimates on local surveys of market conditions and other factors, including public and proprietary data on sales and market share and information from industry enforcement programs.

The ESA is the U.S. association dedicated to serving the business and public affairs needs of companies publishing interactive games for video game consoles, handheld devices, personal computers, and the Internet. ESA members collectively account for more than 90 percent of the $9.5 billion in entertainment software sales in the United States in 2007, and billions more in export sales of entertainment software.

Story filed 10.03.08