The Big Story: Congress is taking another crack at data privacy legislation
On Sunday, key committee chairs Rep. Cathy McMorris Rodgers (R-Wash.) and Sen. Maria Cantwell (D-Wash.) released a discussion draft of a federal privacy law, the first significant movement on bipartisan comprehensive privacy legislation this Congress. The law, called the American Privacy Rights Act, would create new data privacy rights for consumers, preempt state laws, allow individuals to sue over alleged violations, and exempt some small businesses. Startups have encountered increasing burdens from a growing patchwork of unique state privacy laws, and the uniform national standard to be created by this legislation would be a welcome step.
The draft privacy law holds substantial implications for startups, particularly amidst the ever-growing patchwork of unique state privacy laws, as we explore in a new blog post this week unpacking the draft. Currently, differing rules about the same issues are creating headwinds for startups—they already spend hundreds of thousands on privacy compliance, and each additional state tacks on $15,000-$60,000 in costs. The draft released this week could help alleviate those burdens by creating one national standard, but it may also create new ones as well. The draft’s small business exemption will likely scope-out most conventional small businesses but scope-in many startups, including those in their early stages—leading to new compliance challenges and costs. And the draft would empower individuals to sue alleging violations of the law, opening startups to threats from abuse of that provision.
The discussion draft will get its first legislative hearing next week in the House Energy and Commerce Innovation, Data, and Commerce Subcommittee, alongside several other bills addressing privacy and content online. Startups will be watching to see how members evaluate provisions that could create new regulatory costs and legal threats for them. Creating a uniform national data privacy standard that ends the patchwork has long been a priority for startups. As this draft gets introduced and moves through the legislative process, lawmakers should continue to improve it so that U.S. startups can thrive and remain global leaders in innovation.
Policy Roundup:
Maryland passes privacy, kids’ Internet legislation, growing patchwork in new direction. Over the weekend, Maryland passed a data privacy law and the “Maryland Kids Code,” bringing the total of unique state privacy laws startups must contend with to over 16, and becoming the first state to pass a new-look “Kids Code” since the California Age Appropriate Design Code was enjoined last year. Both are expected to be signed by the governor. Notably for startups, the Maryland data privacy legislation departs from common themes found in other state privacy laws, with novel elements on data minimization, treatment of sensitive data, and knowledge standard for treatment of data that entities “knew or should have known” was a minor’s (emphasis added). Those provisions and low applicability thresholds will provide costly new headaches for startups, and Congress should instead pass one consistent set of federal data privacy rules.
Section 230 remains essential for startups, promoting competition online. On Thursday, a House Energy and Commerce subcommittee held a hearing to discuss Section 230, with many members focused on the law’s relationship to “Big Tech.” Section 230, however, is incredibly important to startups that host a wide variety of user-generated content—comments, reviews, question-and-answers, messages, photos, videos, and more—but do not have the resources of their large competitors to constantly navigate expensive litigation or even the threat of litigation any time one user is unhappy with another user’s content or with a platform’s content moderation decisions. As we shared with the committee ahead of the hearing, conversations about potential changes to foundational Internet intermediary liability frameworks like Section 230 should include the perspective of startups that navigate the already expensive and time consuming task of hosting and moderating user content.
White House shares plans to forgive student loans for millions of Americans. This week, the Biden administration announced new efforts to forgive student debt for millions of borrowers. The proposal would address multiple classes of borrowers, including cancelling up to $20,000 in student debt resulting from “runaway interest.” Student debt can stifle entrepreneurship, deterring many potential founders from entering the innovation ecosystem. Policymakers should address the student debt crisis to ensure fair access to entrepreneurship as a career option for all.
House considering reauthorization for imminently expiring government spying program. After 19 House Republicans tanked efforts earlier in the week, Friday morning, the House began considering a bill to reauthorize Section 702 of the Foreign Intelligence Surveillance Act. Section 702 is a controversial spying authority that lets the government collect Internet communications en masse, both from Internet infrastructure providers and companies that service a surveillance target directly. The program is only supposed to be used on non-U.S. persons, but has been abused on past occasions, leading to calls for reforms, including a warrant requirement. Section 702 has also featured prominently in legal challenges that ultimately disrupted transatlantic data flows, meaning the issue impacts startups as well. Reauthorization of the program set to expire April 19th presents the opportunity to mitigate its potential threat to data flows to avoid the potential for future disruptions to digital trade.
AI doesn’t merit new intellectual property rights. On Wednesday, the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet held a hearing on AI and intellectual property to discuss whether changes are needed to the provision of patents or copyrights with respect to AI. Witnesses urged Congress to avoid making statutory changes, highlighting how current frameworks are already poised to parse the role of AI in the creative process. Intellectual property rights like patents and copyrights are fundamentally intended to “promote the progress of science and useful arts,” and balanced frameworks are essential to successfully achieve those ends without impeding innovation.
Startup Roundup:
#StartupsEverywhere: #StartupsEverywhere: New York, New York. MegaMinds was created out of a need to make learning more creative, fun, and hands-on for students. In our conversation with Co-Founder and CEO Eric Tao, we learned about the growing popularity of immersive learning, the tricky regulatory landscape for a product like MegaMinds, and what it’s like for many first-time entrepreneurs to build businesses.
