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Using the Law Against Innovation Never Works

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A strategic management paper [registration required] by a Wharton School legal studies professor says suing your customers is a less than ideal marketing strategy. He also finds a fascinating parallel from exactly 100 years ago:

    having a strong legal claim on the merits is only one factor in legal strategy success. Indeed, this factor is often the least important one from a business point of view. Other key strategic considerations include the public legitimacy of an industry’s legal attack (i.e. how the move will play in the court of public opinion), the vulnerability of an industry’s strategic position in its market, the resources it has available to sustain a legal war, and the access an industry has to important legal decision makers such as regulators and legislators who can make new rules in the industry’s favor.

    ….The recording industry, however, has gone one step too far with its latest legal move. Suing your customers is not a winning business strategy. Industries have a completely different strategic relationship with customers than they do with rivals. And this sort of strategy does not play well in the court of public opinion.

    But it’s hardly the first time an industry has tried to solve strategic problems using litigation against its customers. And the strategy is no more likely to work today for the recording industry than it did 100 years ago, when the leading automobile manufacturers in 1903 tried to put down the threat of cheap, mass-produced cars by suing consumers who bought Henry Ford’s automobiles.

    ….In 1903, when Henry Ford launched the Ford Motor Company, his third attempt at making cars, automobiles were high-priced, custom-made playthings for the rich. What’s more, the major manufacturers had figured out a way to keep it that way. They had acquired a strategic property right very much like the recording industry’s copyrights on recorded songs. It was called the Selden Patent and it gave its owners the exclusive right to sell a very basic invention: self-propelled vehicles powered by internal combustion engines.

    ….What can the Recording Industry Association of America take from Henry Ford’s story? First, you will never win your market by suing your customers. Quite the opposite: you will rally ordinary people to your opponents and alienate a generation of buyers. Exactly what has the industry gained by suing, among others, a 12-year-old girl in New York for downloading songs? A raft of bad publicity, a reputation for being a bully, and a new litigation insurance scheme devised by peer-to-peer software companies who can now cloak themselves in Robin-Hood green. [Wharton]

I have neither an MBA not a JD, but I figured this out some time ago. Move to the future as quickly as possible and stop wasting time and money – earn back your customer’s good will, don’t try to bludgeon them into acquiescence.

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