Big story: New copyright bill would increase cost, risk for startups that host user content
Last week, Senators Thom Tillis (R-N.C.) and Patrick Leahy (D-Vt.) introduced the Strengthening Measures to Advance Rights Technologies Copyright Act of 2022—legislation that would amend Section 512 of the Digital Millennium Copyright Act (DMCA). While the bill is ostensibly aimed at large Internet platforms, it would tee up complex and costly frameworks for Internet startups that encounter user-generated content like comments, reviews, or original artwork.
The proposed bill would create many changes to how startups and online services across the country are expected to handle potential copyright infringement online. Currently, the DMCA allows startups to remove user infringement once they know about it or once they receive a notice of alleged infringement. By contrast, the bill introduced last week would authorize new requirements for startups to adopt certain upload filtering technology to review all user content and try to identify potential infringement on their own. We’ve explained the bill in more detail here, but it would make several key changes. For example, it would redefine the concept of “standard technical measures”—currently things copyright owners use to identify and protect their works—with a shift towards forcing service providers to affirmatively adopt a constellation of technologies. The bill would also authorize the Copyright Office to create a new class of “designated technical measures”—different technologies that online service providers would have to adopt. And if companies didn’t deploy the right designated technologies (regardless of any infringement) they could be sued for statutory damages. All of this would also be accomplished through a series of rulemakings, technical mandates, and lawsuits that startups would have to navigate—something that is, in and of itself, oftentimes unclear, complicated, and expensive.
As we said in a statement this week, these changes would erect new barriers to entry and discourage investors interested in funding early-stage online service providers. For a healthy innovation ecosystem where startups can create places for users to gather, create, and share online, it’s vital that policymakers ensure any new law—or amendments to prior ones—considers the impact on startups.
Policy Roundup:
Privacy Shield replacement agreement in principle announced. This week—following pressure from EU court rulings earlier this year further restricting data flows and the EU and U.S. working together to respond to the Russian invasion of Ukraine—President Biden and European Commission President Ursula von der Leyen announced a replacement to the Privacy Shield agreement that was invalidated in 2020. That data transfer pact between the EU and the U.S. had allowed U.S. companies to process and store EU user data in the U.S.—and was overwhelmingly relied upon by startups and other small businesses. The announcement marks a critical step forward, but the details of the replacement pact will still need to be worked out over the coming months. As the new agreement is likely to be challenged by EU privacy advocates, a robust agreement that addresses EU courts’ underlying concerns about U.S. government surveillance is necessary to ensure certainty for startups looking to serve users on the other side of the Atlantic.
SCOTUS confirmation hearing questions relevant for startup policy. As part of her confirmation hearings this week to be a Supreme Court Justice, Judge Ketanji Brown Jackson was asked about key tech issues that may impact startups and innovation—such as Section 230, antitrust, and intellectual property. In response to a question about proposals to condition Section 230’s liability limitations—which allow companies of all sizes to host and moderate content as they see fit, without fear of ruinous litigation—on whether companies moderate specific viewpoints, Jackson answered that “seeking to regulate along viewpoint lines” is “generally impermissible.”
A playbook for fighting patent trolls. In a recent piece, Coinbase’s Chief Legal Officer and former federal magistrate judge, Paul Grewal, discusses the damage that abusive, meritless patent lawsuits can do to domestic innovators and the U.S. economy. He also discusses strategies companies can use to fight back—for example, working together to prevent abusive assertion, ensuring companies with enough resources take the time to challenge so-called patent trolls, and the use of second-look patent review at the patent office to cancel invalid claims. With less abusive litigation, the money companies currently spend to defend or settle over invalid patents could instead be used “to hire talent or invest in research and development.”
New study looks at consequences of antitrust proposals, including on startups. A new study from National Economic Research Associates (NERA) and the Computer & Communications Industry Association (CCIA) points to the harms that a package of proposed antitrust laws would cause the startup ecosystem. The study highlights the increased costs startups may encounter for what are now free or low-cost services and examines the detrimental effects that the bills’ undermining of startup exits via acquisition would have, finding the bills will lower exit values by 22 percent, reduce acquisition demand by 21 percent, and reduce investment by 12 percent.
EU officials finalize Digital Markets Act. On Thursday, EU officials finished negotiations and announced an agreement on the Digital Markets Act (DMA), with sweeping provisions designating large, mostly American tech companies as ‘gatekeepers’ and regulating their conduct. While the legislation is aimed at large companies, the legislation threatens to increase costs for startups, hamper their ability to reach customers, and limit their exit opportunities. The law is expected to pass and come into force by the end of the year. As European policymakers move toward implementation, they must seek to minimize the negative impact on those the law is intended to help.
U.S., UK trade officials meet in Baltimore. U.S. Trade Representative Katherine Tai met with her U.K. counterpart, Secretary of State for International Trade Anne-Marie Trevelyan this week to reignite and chart a path for the trade relationship between the two countries. The two leaders' outlined future priorities include engagement on digital trade issues, and they visited the Baltimore software company Fearless Tech. The renewed engagement between the two countries creates an opening for trade policy to increase opportunity for U.S. startups.
Join us for our first event in our Nuts and Bolts of Content Moderation series. Join us for the first event in our Nuts and Bolts of Content Moderation series: The Role of Technology, on Thursday, March 31 2022, 12:30 pm ET. The event, co-hosted by Engine and Stand Together Trust, will feature a panel of experts discussing the realities of content moderation technologies, their capabilities, limitations, and costs, as well as the consequences of under—and over—removal of content for online communities. Register today.
