[A2k] Matt Schruers: Trans-Atlantic Differences in Cloud Computing Investment

Manon Ress manon.ress at keionline.org
Wed Jun 20 13:45:41 PDT 2012

Trans-Atlantic Differences in Cloud Computing Investment

by Matt Schruers on June 18, 2012


A year and a half ago, I gave a presentation on fair use in Tokyo and
was asked to email my slides ahead of time.   To my dismay, the
recipients’ email server repeatedly bounced my email.  It took some
time to figure out that this was due to the size of the attachment.  I
needed to upload my file somewhere that conference organizers and
attendees could always download the latest version at the time and
place of their choosing: a typical use case for a cloud file storage

I first turned to Rapidshare, only to discover that its antipiracy
‘features’ – installed to placate copyright holders – were not
conducive to sharing a file with an indeterminate, anonymous group for
an indefinite period of time.  I thus turned to Dropbox, another
leading cloud storage service.  With Dropbox, I could upload my slides
and any revisions to the Public Folder and anyone, Dropbox user or
not, could retrieve them.  Problem solved.  I’ve since become a great
fan of Dropbox for sharing photos, and syncing working files across my
office, home office, and laptop computers.  In the intervening time,
cloud storage has become even more ‘mainstream’ with Amazon and Google
introducing their own end-user oriented cloud storage solutions, and
Microsoft introducing a desktop-syncing application for its existing
storage service.

On Friday, news broke that Dropbox was axing the public folder feature
[see 1, 2, and 3] in favor of its public link tool (although
apparently grandfathering in old users), even though public folders
are a popular feature.  Dropbox has not commented on the motivation
for this change, other than to say that it is more ‘scalable.’  One
could speculate that as the current direct-download function of the
public folder was popular for hotlinking, site hosting, and content
delivery, copyright concerns may have played a role in the policy
change.  (Dropbox does do DMCA compliance, and so the decision may be
a function of other factors; we may never know.)   If copyright issues
motivated this decision, it would be another unfortunate example of a
helpful product feature being removed due to legal uncertainty.
Between persistent civil copyright litigation and the Department of
Justice’s campaign of domain name seizures and zealous prosecution of
MegaUpload, the cloud sector far more uncertain than it was a year

Today, we have further confirmation that uncertainty affects
investment in technology innovation.  This morning, CCIA released a
study by Harvard Business School Professor Josh Lerner, titled “The
Impact of Copyright Policy Changes in France and Germany on Venture
Capital Investment in Cloud Computing Companies.”  Like Lerner’s
previous study in this area, this analysis reviews the impact of
copyright law decisions on venture capital investment.  Whereas the
first study found a positive effect on U.S. VC investment after the
2008 Cablevision decision, which increased certainty for cloud
services, Lerner’s most recent study finds a negative effect on VC
investment in Europe after decisions imposing copyright liability on
online services in France and Germany.  Specifically, Lerner finds a
$4.6 million dollar decline in venture capitalist investment in France
per quarter and a $2.8 million reduction in VC investment in Germany
per quarter – declines equivalent to $113-156 million in traditional
R&D investment.

We now have fairly compelling evidence that short term legal changes
can alter the rate of investment in disruptive innovation: Cablevision
improved the U.S. investment landscape, whereas this latest evidence
suggests that European decisions have undermined the investment
landscape across the Atlantic.  European policymakers need to ask what
they are getting in return for this sacrificed investment.

Manon Anne Ress
Knowledge Ecology International
1621 Connecticut Ave, NW, Suite 500
Washington, DC 20009 USA
manon.ress at keionline.org

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