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Will Intellectual Property Fears Chill Start-Up Investments?

In the wake of the national debate over SOPA and PIPA and the arrest of Megaupload founder Kim Dotcom, a lot of attention is being paid to issues surrounding intellectual property.

Much of the discussion centers on the rights of movie producers, actors, musicians and others to be able to profit from their work. Others are concerned with internet privacy, arguing that the potential harm from intellectual property or copyright violations is greatly outweighed by the need to protect free speech and the unencumbered flow of information.

However, there is one important conversation that is largely being ignored - what impact would a government crackdown on intellectual property have on emerging technology entrepreneurs?

Colorado has long been a hub for tech start-ups and information companies. Getting these companies off the ground requires a significant amount of capital. Will investors be willing to invest in great ideas that could potentially go bust if users decide to misuse the infrastructure?

Take, for example, the case of Dropbox. The company, which started in 2007, revolutionized cloud-based data storage. Their service allows users to store files online and access them from any computer. It can also be used to share files amongst several different users.

Most people use Dropbox for legitimate file storage - schoolwork, business documents, collaborative projects, family photos and the like. However, there are likely some who use it to swap copyright-protected files like songs and television shows.

It is worth considering whether the investors who funded Dropbox when it first started would be willing to take the same action if the company was just starting out today. Would the fear of government reprisal for some users' copyright violations scare investors away?

Source: Bloomberg Businessweek, "Megaupload Gets Busted; File Sharers Are Frazzled," Robert Levine, Jan. 26, 2012.

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