The Big Story: Digital replica legislation could threaten startup innovation
Policymakers across the government are pursuing policies to address digital replicas that have the potential to chill startup innovation, competition, and expression. Digital replicas are videos, images, or audio recordings generated or modified using artificial intelligence (AI) to produce realistic depictions of individuals' name, image, and likeness (NIL)—which startups may develop to enhance user experiences or create new content innovations. In a blog post this week, Engine explores how the proposed NIL frameworks aiming to address possible misuses of AI in creating digital replicas of individuals chill legitimate speech and overlook startups’ beneficial uses of the tool to facilitate employee training and customer service.
Last month, the Copyright Office called for new federal legislation to give people the right to control their NIL both during their life and post-mortem. That would create a new IP right, which could open new challenges for startups. The Copyright Office also suggested amending Section 230, a foundational Internet law that promotes startup competition by shielding them from potentially ruinous litigation over their users’ content. Additionally, lawmakers in Congress have introduced four bills on the issue, including the NO FAKES Act of 2024, which aligns with the Copyright Office's recommendations. The bill, which aims to hold not just individuals but also companies accountable for creating or sharing unauthorized digital replicas, creates hurdles for both generative AI and content-hosting startups.
These moves pose significant challenges for startups through developer and platform liability, leading to nuisance litigation and chilling innovation. Engine highlighted these concerns at a recent U.S. Patent and Trademark Office public roundtable, emphasizing the need for policies that do not inadvertently stifle innovation within the startup ecosystem. It is crucial for policymakers to take a balanced approach when considering federal NIL legislation as the outcome of these efforts will influence how startups compete and succeed in the AI space and beyond.
Policy Roundup:
Appeals court finds parts of California design code law likely unconstitutional. Last Friday, the 9th Circuit ruled for NetChoice in their ongoing challenge to the California Age-Appropriate Design Code Act, saying the law’s impact assessments likely violate the First Amendment by compelling speech, incentivizing censorship, or both. California’s law has inspired similar laws enacted in other states, and one that passed the U.S. Senate last month, which could likewise run afoul of the First Amendment. Other parts of those laws are also problematic for startups because they must determine the age of their users which could, in practice, require them to use unworkable age verification technologies.
Prominent opposition to proposed California AI regulation. Last Friday, former House Speaker Nancy Pelosi (D-Calif.) voiced strong opposition to California's SB 1047, a controversial AI safety bill that would negatively impact startups. While acknowledging the need for AI regulation, Rep. Pelosi criticized the bill as “well-intentioned but ill-informed,” arguing that it could stifle innovation and harm the state's tech economy. It is somewhat unusual for Members of Congress to weigh in on state legislation, making her opposition particularly notable. The bill proposes stringent measures that could burden startups and deter AI development. Rep. Pelosi's stance adds to the chorus of voices opposing the bill—including startups, academics, other lawmakers, and more.
Federal court strikes down non-compete ban. On Tuesday, a federal judge in Texas ruled against the Federal Trade Commission’s (FTC) ban on non-compete agreements, arguing the agency lacked the authority to implement the ban which was set to take effect on September 4th. The ruling poses a significant blow to the startup ecosystem because non-competes limit worker mobility, restricting startups’ ability to hire new talent and would-be founders’ ability to launch competing companies. While the FTC plans to appeal, this decision threatens the future of the noncompete ban. This development underscores the need for federal legislation, like the Workforce Mobility Act, to broadly ban non-competes nationwide.
Startup Roundup:
#StartupsEverywhere: St. Louis, Missouri. Hire Henry is leading the charge in revolutionizing industrial operations with cutting-edge autonomous software and robotics. The company’s flagship product, a robotic lawn mower designed for industrial application including airports, city parks, and military bases, seeks to transform the relationship between industry and robotics. We heard from co-founder and CEO George Holmes about the role of AI and automation in new technology, the importance of government funding programs for startups, and the future of Hire Henry.
