The Big Story: Global leaders land on tax deal that would create certainty for tech
Negotiations on a global tax regime came to a close on Thursday, with 130 countries and jurisdictions—including India, China, and Switzerland—agreeing to a deal supported by U.S. policymakers and technology companies that targets the world’s largest companies. The deal sets a global minimum tax rate of 15 percent, and requires the world’s biggest companies to remit taxes based on where they generate business. However, according to a joint statement from the Organisation for Economic Co-operation and Development (OECD), the deal avoids a patchwork of country-by-country tax frameworks targeted at American tech companies that would have had downstream effects for the tech sector.
As talks continue—with technical details in negotiation through October—it is expected that the new regime will preempt unilateral digital services taxes (DSTs) that many countries have adopted, which target American digital giants. Though large American tech companies will still pay more tax overseas, the new regime captures all global companies of a certain size across multiple industries. Though European leaders claimed U.S. tech firms unfairly benefited from the COVID-19 pandemic, “U.S. tech companies argue it’s unfair to single out the sector as the entire economy becomes more digitized every year.”
The global tax deal would avert a trade war. In response to other country’s DSTs, the U.S. has issued—and then suspended—tariffs set to go into effect if officials failed to reach a deal. And as final details of the tax regime continue to be hammered out and agreed upon, the Biden administration has requested the EU delay its impending DST expected in July. While participating countries, including the U.S., still need to pass the necessary legislative changes, the agreement is a win for U.S. policymakers and technology companies. A uniform deal with a predictable tax framework, as opposed to a patchwork of worldwide digital taxes, could create downstream costs for startups and consumers.
Policy Roundup:
Judge puts Florida’s social media law on hold. A federal judge in Florida issued a preliminary injunction this week, preventing Florida’s recently passed law—which would have penalized Internet companies that “deplatform” politicians—from going into effect on July 1. In May, two tech trade associations challenged the law in court, and Engine joined other organizations in filing a brief arguing that the law would harm consumers and the entire Internet ecosystem.
FTC rescinds 2015 policy statement at open Commission meeting. The Federal Trade Commission held an open meeting this week, which included a vote along party lines to rescind a 2015 bipartisan policy statement on unfair methods of competition that established principles for agency challenges regarding violations of antitrust law. Members of the technology community have expressed concern about the uncertainty created by the vote to rescind the policy statement.
Supreme Court narrows doctrine that prevented some startups from challenging weak patents. The Supreme Court issued its final patent-related decision of the term in Minerva v. Hologic, which revolved around “assignor estoppel,” a doctrine that prevented inventors from challenging their own patents. In practice the doctrine was often invoked against inventors who had left one company to found another—a former employer could use weak patents or overbroad infringement theories to sue a new competitor where the startup was left without key defenses in the litigation. In amicus briefs, Engine had urged the Supreme Court to get rid of assignor estoppel. Instead, a 5-4 majority of the Court upheld the doctrine but narrowed its reach. This week’s ruling is a positive development for the startup community, but will be subject to (likely substantial) litigation in the future.
New campaign will shed more light on the problem of patent abuse in Europe. IP2Innovate and the European Entrepreneurs CEA-PME have launched a campaign to better illustrate the problems of abusive patent assertion—especially by patent assertion entities (PAEs), also known as patent trolls, which often target small businesses and startups. The campaign seeks to ensure Europe’s patent laws are tightened-up to work for small entities, and aims to gather concrete, real-life examples in support of that goal. Read more, or confidentially submit your stories, here.
Startup Roundup:
Recognizing the contributions of LGBTQ+ entrepreneurs. This week marks the end of Pride month. As the nation celebrates the significant contributions of the LGBTQ+ community as a whole, it is important to uplift the stories of LGBTQ+ entrepreneurs and also recognize the challenges these founders face. For example, LGBTQ+ founders have been historically excluded from venture capital funding, and it is difficult to break into those opportunities when there isn’t LGBTQ+ representation among the decision-makers. Indeed, investment in high-growth entrepreneurs identifying as LGBTQ+ remains at less than half a percent of all VC investment, which inhibits the ability of these innovators to get their ideas off the ground.
Over the years, Engine has had the opportunity to connect with LGBTQ+ founders through the #StartupsEverywhere series—and these founders reveal how and show why it is vital to make our ecosystems more inclusive. For example, Robyn Exton is the founder of HER, a social media app built for queer womxn to find community anywhere in the world. Filling a gap where “there wasn’t a single app that had been built specifically with queer womxn in mind,” HER connects millions of members and houses LGBTQ+ news, events, and other content. And Out in Tech is focused on uniting the LGBTQ+ tech community, seeing opportunities to democratize innovation in leverage tech for social change. Executive Director, Andrew Lowenthal, discussed with us how there’s now a greater “recognition that diversity is good for the bottom line,” and flagged the importance of mentorship as we work to increase diversity in the tech sector—including gender identity, sexual orientation, and race. In addition to creating a more inclusive and equitable startup ecosystem, investing in these entrepreneurs could create an additional 430,000 jobs, according to StartOut, a nonprofit dedicated to supporting LGBTQ+ founders. Members of the startup ecosystem and policymakers must encourage the participation of LGBTQ+ innovators and break down barriers that have excluded this community.
#StartupsEverywhere: Mountain View, California. Rishi Ranjan is a co-founder and the CEO of GridRaster, a startup providing the underlying infrastructure needed to support immersive augmented, virtual, and mixed-reality experiences on mobile devices and in the enterprise market. We spoke with Rishi to learn about his path to launching this cloud-based XR platform, his experience navigating the patent and immigration systems, and his goals for GridRaster going forward.
Startup Policy Seminar Series: Patent Policy & Your Startup. Join Engine on July 20 at 4 p.m. ET where, together with an expert panel, we will explore topics related to patent policy. We will discuss how patents can impact any startup—whether or not it applies for its own patents. And we will highlight how startups can get involved with policymakers, both to ensure balanced, commonsense frameworks continue to govern patent law and to promote improvements in patent quality. The event will feature a panel discussion moderated by Engine’s IP Counsel, Abby Rives. You can RSVP here.
