Study Finds EU Copyright Law Harms Investment In Cloud Computing

A technology industry-friendly economic study released today found that changes to European copyright laws in recent years have negatively impacted venture capitalists’ investments in cloud computing companies. This followed several French and German court rulings, it said. But a tech industry group said the study results are more evidence of a bigger trend in copyright concerns undermining investment.

The study, by Harvard Business School Professor Josh Lerner, is entitled, “The Impact of Copyright Policy Changes in France and Germany on Venture Capital Investment in Cloud Computing Companies.” It looks at what it considers key junctures in European copyright policy, such as a November 2008 ruling by the Tribunal de Grande Instance de Paris in France, and analyses historical investment figures to show a decline of $4.6 million dollar 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.

“Venture funding appears to have both a strong positive impact on innovation and a strong relationship with job creation,” Lerner said in a release issued by the Computer and Communications Industry Association (CCIA). “Our findings suggest that decisions around copyright scope can have significant impacts on investment and innovation. We have tested a number of models and consistently find that the French and German rulings led to reduced investment in French and German cloud computing companies compared to the EU experience.”

CCIA Vice President Matthew Schruers today blogged about the study as part of building evidence of negative effects. He pointed first to cloud storage services RapidShare and DropBox, which appear to be shifting practices out of concern for copyright and despite user popularity.

CCIA President and CEO Ed Black issued a statement on the Lerner study. “This research is useful as policymakers and trade negotiators consider measures that would increase copyright liability for innovative companies and services that allow user generated content and respond to consumer demand for more choice in delivery and device for online content,” he said. “Lerner’s analysis helps us better understand how much investment can flourish in a rapid growth area like cloud computing – when companies and their investors are not spooked by legal clouds.”