We've talked a few times about how attacks on new innovations in the name of protecting copyright can create massive chilling effects. For example, the increasingly questionable
arguments against Megaupload have created a real chill
for online cloud storage providers. That was likely manifest last week in the news that Dropbox was killing off its "public folders" feature
in deference to its link feature, basically making the product less useful.
Matt Schruers, from CCIA has an interesting blog post up which ties actions like those done by Dropbox here with a new study showing how the chilling effects of bad copyright law can impact innovation
. The full study
(pdf) is actually something of a follow up to an earlier study we wrote about, which showed how good
judicial rulings on copyright which allowed for greater innovation (such as the Cablevision ruling
, which allowed cloud-based DVRs to exist) contributed directly
to greater funding
This new study, also by Harvard professor Josh Lerner, highlights the unfortunate opposite impact: the chilling effects on investment in innovation that comes as a result of anti-innovation judicial rulings. In this case, Lerner looked at specific rulings in the EU:
We analyze the effects of a court
ruling in France and several court rulings in Germany on VC investment in cloud computing
firms in these countries. These court rulings were seen as negatively affecting the development
of cloud computing, and our findings confirm this view by showing that these rulings regarding
the scope of copyrights had significant, negative impacts on investment. Specifically, we find
that VC investment in cloud computing firms declined in Germany and France, relative to the
rest of the EU, after the French and German rulings. Our results suggest that these rulings led to
an average reduction in VC investment in French and German cloud computing firms of $4.6 and
$2.8 million per quarter, respectively. This implies a total decrease in French and German VC
investment of $87 million over an approximately three year period. When paired with the
findings of the enhanced effects of VC investment relative to corporate investment, this may be
the equivalent of $269.7 million in traditional R&D investment.
Combine these two studies and you can see how these chilling effects can be quite massive in terms of investment in innovation. Of course, investment alone is not the sole determinant of the pace or success of innovation, but it is a key factor. And scaring investors away from innovations can have a major impact on the public and the economy.