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Monday, 14 November 2011 16:14

Clouds, copyright and venture capital: a multibillion dollar nexus?


A US court found that TV content stored in the cloud through remote personal video recorder functionality did not breach copyright, and this lead to significantly increased venture capital funding for cloud computing, according to a US academic. The findings could be relevant to Australia where Optus is facing a similar legal challenge.

In 2006 US pay TV operator Cablevision introduced a service that allowed customers to record, pause, and replay television content from servers located in Cablevision data centres rather than from hard drives in their living rooms.

Cablevision was challenged by Twentieth Century Fox and, in March 2007, a district court found in favour of the copyright owner but this decision was reversed in August 2008 by the Second Circuit Court of Appeal. That decision was seen as highly significant for cloud computing providers because the earlier decision could, it was argued have rendered them liable for any copyright infringing material stored in the clouds, even though they may have merely provided the storage.

The Cablevision service is analogous to the service launched by Optus in July, Optus TV Now, that allows customers to record and watch free-to-air television from their mobile phone or computer. Optus, also, is facing a legal challenge: from owners of the copyright of some free to air TV content, specifically the AFL, NRL and their exclusive Internet and mobile network delivery partner, Telstra. The copyright owners claim that Optus' recordings breach their copyright. Optus argues that what it offers is equivalent to customers recording the content on their own hard drives for personal use, which does not breach copyright.

In a study: 'The Impact of Copyright Policy Changes on Venture Capital Investment in Cloud Computing Companies' Josh Lerner, a professor of investment banking at Harvard Business School, claims to have found that the second court decision had a significant positive impact on venture capital investment in cloud computing in the US.

"Our findings suggest that decisions around copyright scope can have significant impacts on investment and innovation," he says, "We have tested a number of models and consistently find that the US Second Circuit Court of Appeals' decision led to additional incremental investment in US cloud computing companies compared to the [European Union - where the decision had no bearing] experience'¦ estimates of increased VC investment in US cloud computing from our seven models range from $728 million to approximately $1.3 billion, with an average of $936 million."

He adds: "When paired with the findings of the enhanced effects of VC investment relative to corporate investment, this may be the equivalent of $2 to $5 billion in traditional R&D investment."

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