The Big Story: EU court strikes down transatlantic data transfer pact. The Court of Justice of the European Union this week struck down Privacy Shield, a transatlantic agreement that lets U.S. companies process and store European users’ data in the U.S. The ruling creates uncertainty for many U.S. and EU companies by jeopardizing the flow of data between Europe and the United States. The case, known as “Schrems II,” evolved out of Austrian privacy activist Max Schrems’ 2013 lawsuit following the revelations about the U.S. government’s surveillance programs by NSA whistleblower Edward Snowden.
Europe’s top court said in its decision that current U.S. law is too weak to adequately protect EU citizens’ data, warning that the flow of data could be intercepted by U.S. law enforcement and national security agencies. The decision could make it more difficult for tech firms to transfer data across the Atlantic, and threatens to jeopardize hundreds of billions of dollars in digital trade. Prior to the ruling, however, EU Justice Commissioner Didier Reynders said that the bloc was already working to mitigate the fallout by updating existing standards to comply with the General Data Protection Regulation—Europe’s sweeping privacy rules.
U.S. tech firms, such as Microsoft, issued statements saying that the court ruling will not substantially change their current European operations or the transfer of data between the EU and the United States. Many companies rely on individual data transfer agreements outside of the Privacy Shield, known as Standard Contractual Clauses. But Privacy Shield provided startups—and others without significant legal resources—a streamlined way to handle European user data. This week’s decision will likely have an outsized impact on startups and other small U.S. tech firms that operate in Europe. It’s critical for U.S. and EU regulators to quickly work on a new agreement governing the transfer of data across the Atlantic.
Policy Roundup:
Weakening encryption will harm U.S. consumers and companies. In an op-ed this week for the Orange County Register, NetChoice’s Carl Szabo—the association’s vice president and general counsel—explained how the Eliminating Abusive and Rampant Neglect of Interactive Technologies (EARN IT) Act threatens the use of secure encryption and “will undermine the best tool we have to protect our kids and ourselves from surveillance online.” And, as the Information Technology & Innovation Foundation underscored in a report this week, weakening encryption in the name of law enforcement efforts is likely to weaken the online security and privacy of all U.S. businesses and consumers.
Suspension of H-1B visas could drive jobs overseas. Academic experts, immigration lawyers, and tech firms say that the Trump administration’s decision last month to suspend the issuance of work visas for high-skilled workers—including those issued under the H-1B visa program—is likely to drive more jobs overseas. With the coronavirus pandemic forcing many employees to work remotely, experts say that companies are increasingly likely to hire high-skilled workers in foreign countries. Last week, Engine sent President Trump a letter signed by 118 startups, entrepreneurial organizations, and other firms—including GitHub, Postmates, and Twitter—that said the administration’s move would force companies “to shift operations to countries with better access to the labor force they desperately need."
President Trump says phase two China trade is unlikely to happen. President Donald Trump told reporters that a phase two trade deal with China is unlikely, saying that “the relationship with China has been severely damaged” by the coronavirus pandemic and other ongoing disagreements between the two countries. President Trump signed a phase one trade deal with China in January that in part required the country to end forced tech transfers, and the phase two trade deal—which would have been worked out after the 2020 presidential election—would have addressed a host of remaining technology and cybersecurity concerns.
Trump administration expected to take action on Chinese apps. White House Chief of Staff Mark Meadows told reporters this week that the Trump administration is examining the national security risks of popular social media apps, such as TikTok and WeChat, and is planning to take some form of action on them in the coming weeks. Federal officials are concerned that the Chinese-developed apps give Beijing access to vast amounts of Americans’ personal data, and the White House is reportedly considering using the Emergency Economic Powers Act to penalize TikTok.
Study says discrimination hampered Black entrepreneurs’ access to PPP loans. The National Community Reinvestment Coalition released a study this week that found that white applicants for Paycheck Protection Program loans were more likely than similar Black applicants to receive the support they needed from banks to apply for and receive emergency funding for their small businesses.
Patent trolls exploiting COVID-19 outbreak. Karen Kerrigan, the president and CEO of the Small Business & Entrepreneurship Council, said in an op-ed for Morning Consult that patent assertion entities—also known as ‘patent trolls’—are taking advantage of the coronavirus pandemic to threaten tech firms that are helping small businesses weather the economic uncertainty. Patent trolls are entities that do not make anything, but are instead set up to use low-quality patents to extract quick legal settlements from other firms.
Startup Roundup:
#StartupsEverywhere: Washington, D.C. The Inclusive Innovation Incubator (In3) is the first ecosystem builder focused on cultivating and supporting underrepresented entrepreneurs in the nation’s capital. Launched three years ago to improve diversity and inclusion in D.C.’s emerging tech space, In3 has held hundreds of events and supported more than 1,500 entrepreneurs looking to launch new businesses.
