Why Would Companies Ignore Empirical Evidence Of An Opportunity?

Studies

from the change-is-hard dept

James Boyle continues to write fascinating articles for the Financial Times looking more deeply at issues involving intellectual property — the type of issues that most in the press cover very simply as a battle of companies against “theft,” when the reality is much more complex (and, in many ways, much more interesting). His latest piece is no exception. Boing Boing covers one aspect of his article, concerning a new study done by the European Commission, comparing intellectual property rights over databases in the US and Europe. The US has made a policy of saying you cannot copyright facts, and databases made up of facts are no exception. Europe, on the other hand, grants intellectual property rights to whoever compiles a database first. Some in the US have made efforts recently to make the US laws similar to the EU ones, granting intellectual property control over databases in order to (they say) generate incentives to create such databases. Unfortunately for those who support that point of view, the EC study found that the database industry in the US (without that protection) has done much better than the one in the EU. In fact, since the law in the EU was originally put in place to help “close the gap” with US database firms, it’s worth noting that the gap has actually widened considerably.

That, by itself, is quite interesting, but it’s worth reading further into Boyle’s article, because that’s where he explains the most fascinating part: the EC tried to “balance” out these results with another “study” that was simply them asking the EU database companies what they thought of the law. Those firms, not surprisingly, said they loved the law and that it needed to be kept for their own protection. This, of course, is not very different from the big record labels repeatedly ignoring detailed research suggesting that there are opportunities to make more money by embracing file sharing of free music. In both cases, it may seem odd to see companies effectively saying that evidence showing they can make more money should be ignored in favor of overly protective rules or actions that they simply “believe” are needed to protect their business. However, the real issue is that these laws protect an existing business model — and changing business models can be quite difficult. So, while there may very well be a much bigger opportunity with less restrictive intellectual property laws, it would open the door for competitors or more innovative firms to come into the market and capture that opportunity. It’s not about protecting the overall market, but protecting some risk-averse incumbents. Of course, that can be bad public policy. Generally, you would think, politicians should be facilitating policies that generate the largest overall benefit — which is why these incumbents have to spin the story to suggest that their way of doing business is the only way of doing business. One of these days, perhaps politicians will learn that protecting big incumbents isn’t the same as helping the economy — in fact, it can often make things worse.