The Big Story: EARN IT Act moves forward despite concerns from lawmakers, advocates, and industry
A bill moving through the Senate would amend critical Internet legal frameworks that startups rely on to host user-generated content and disincentivize startups from using privacy and security-enhancing measures like encryption.
This week, the Senate Judiciary Committee advanced the recently re-introduced Eliminating Abusive and Rampant Neglect of Interactive Technologies (EARN IT) Act despite growing concerns from industry groups and tech policy and civil liberties advocates. The bill—which is aimed at curbing the spread of child sexual abuse material online—would create a carve-out in Section 230 and open interactive websites and services up to lawsuits under a patchwork of state laws. As Sen. Mike Lee (R-Utah) explained at the markup, if the EARN IT Act becomes law and amends Section 230, states could pass their own laws with different standards of what a company needs to know about user activity on their website or service to be found liable. If startups could be sued over user content under a patchwork of state laws, they're going to have to monitor and remove more user content, and they might have to forgo privacy and security measures—like encrypting their users' data—so they can do that monitoring.
Section 230 creates a critical legal liability framework that prevents startups from ruinous lawsuits over their users’ speech. As lawmakers consider policy changes to curb the spread of harmful content online, they must address the concerns like those raised by Lee and several other members of the committee and grapple with the content moderation realities that startups face.
Policy Roundup:
America COMPETES Act passes House with problematic amendments. Last Friday, the House passed the America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength (COMPETES) Act with dozens of amendments. Created as the companion bill to the Senate’s U.S. Innovation and Competition Act (USICA), America COMPETES Act would fund billions of dollars for domestic research and development and would create a class of visas for startup founders and employees. However, the House-passed legislation also includes the SHOP SAFE Act that would place high compliance burdens on e-commerce startups and an amendment that would burden startup capital formation. As they reconcile the two chambers’ bills, lawmakers should remove these provisions before sending the legislation to the president’s desk.
Advisory Committee weighs in on accredited investor definition. The Securities and Exchange Commission’s (SEC) Small Business Capital Formation Advisory Committee this week held a meeting examining investment issues related to small businesses, including the financial thresholds of the accredited investor definition, which the SEC is considering updating. Advisory Committee members opposed narrowing the definition and reducing the number of individuals that could meet the financial thresholds and highlighted that doing so would reduce the opportunities for investment by underrepresented communities and locations outside of major tech hubs.
Another EU privacy authority takes issue with data transfers. France’s data protection regulator, CNIL, this week ruled that a local website’s use of Google Analytics ran afoul of the EU’s General Data Protection Regulation because it transferred data outside of the EU without sufficient protections to keep the data from U.S. intelligence agencies. The case is similar to a ruling by the Austrian data regulator last month involving a small Austrian medical news website that used Google Analytics. The recent cases underscore the uncertainty surrounding transatlantic data flows that are critical to commerce on both sides of the Atlantic and the urgent need for a replacement data transfer framework.
Copyright Office’s “small claims” copyright court could harm startups and their users. This week, Engine filed comments with the Copyright Office as it writes rules to implement the Copyright Alternative in Small-Claims Enforcement (CASE) Act, a law that created a new board within the Library of Congress to adjudicate claims of alleged copyright infringement and award up to $30,000 per case. Our comments reiterated concerns about the Copyright Claims Board (CCB), explaining how inadequate or unbalanced CCB procedures would harm startup ecosystems as well as the creators and entrepreneurs who rely upon digital services. While the CCB has been described as a small-claims court where parties can appear without attorneys, the potential for high damages awards and the fact that copyright law can be quite complex and fact-intensive, emphasizes the need for processes that protect startups and their users from confusion or abuse.
New study highlights importance of digital trade, including for startups. The U.S. Chamber of Commerce published a study this week highlighting the importance of digital trade as a driver of economic growth and underscoring the ability of an Indo-Pacific digital agreement to lower barriers to markets abroad, especially for small businesses like startups. The study concludes that a digital trade agreement in the Indo-Pacific is needed to overcome troubling trends like data-localization that erect barriers to trade. As the Biden Administration engages with regional partners on trade issues, Engine continues to advocate for digital trade policies that lower barriers to trade for startups, including promoting cross-border data flows.
Balanced standards-essential patent policy will help startups, Engine tells DOJ. Last week, Engine filed comments to the Department of Justice (DOJ), National Institute of Standards and Technology (NIST), and Patent and Trademark Office (PTO) in response to the agencies’ recent draft policy on the treatment of standards-essential patents (SEPs)—patents that have a purported connection to some standard technology, like WiFi or 5G, that facilitates interoperability and allows startups to connect their innovations to existing products and platforms. The agencies’ draft policy statement would replace a 2019 statement which, as we noted in our comments, had “erroneously minimized the potential anticompetitive effects of SEP lock-in and . . . tipped the balance of power in” licensing negotiations to favor certain large patent holders. We explained why the more recent draft policy’s stance is a step in the right direction, promoting certainty and fairness around SEPs that would mean startups can better “innovate and develop standard-compliant technologies and enable consumers to access their contributions.”
Startup Roundup:
#StartupsEverywhere: San Francisco, CA. Griot is a first-of-its-kind communication and knowledge sharing tool specifically designed to streamline field technicians’ work. Co-Founder & CEO Sean Miller met with us to explain the importance of user privacy and illustrate how Griot addresses field technicians’ most common work-related problems.
