The Big Story: The importance of balanced copyright rules for startups. Startups need balanced, commonsense copyright rules in order to effectively operate at home and abroad. And several ongoing, international discussions about copyright policy are putting this issue in the spotlight. Especially given the outsized role startups play in innovation and economic growth, it is critical to ensure that the startup voice is heard when it comes to crafting policies dictating whether and when platforms can be liable when their users are accused of copyright infringement.
For one, this week, the European Commission accepted comments on Article 17 of the Directive on Copyright in the Digital Single Market—a section of the European Union’s sweeping overhaul of copyright rules adopted last year that would hold certain platforms liable for user-generated infringing content. The rules would force startups and other digital platforms to rely on expensive and largely ineffective content moderation tools to monitor user content for allegedly-infringing posts. As we previously explained, the Directive would create “unreasonable obligations for any platform that hosts third-party content” and would force startups to “reimagine their global presence.”
In comments that Engine filed to the Commission, we explained how forcing early-stage startups to develop expensive and imperfect filtering technologies and negotiate with rightsholders over allegations of infringing content would place smaller platforms at an inherent disadvantage. Engine argued for EU countries to implement Article 17 in a way that ensures fair, balanced, and proportional implementation of the copyright rules.
This dramatic shift in copyright policy abroad comes as U.S. policymakers are considering the Digital Millennium Copyright Act (DMCA), a foundational Internet law that allows platforms which host user-generated content to make certain efforts to remove infringing content when they become aware of it, and thereby avoid being held liable for users' copyright infringement. A Senate panel is holding a series of hearings this year examining the 20-year-old law, which represents a carefully balanced compromise, and has been a major contributor to the success of U.S. platforms of all sizes. As we’ve previously explained, any changes to this balance must take into account the perspective of the startups who rely on it.
Whether it’s at home or abroad, efforts to change existing copyright rules could have a detrimental impact—one that would disproportionately fall on the startup community. Proposed changes to DMCA, such as forcing platforms to monitor everything their users post for potentially infringing content, would make it prohibitively expensive for most startups to exist and grow. Policymakers need to take into account the realities of today’s digital ecosystem, and ensure that changes to existing copyright rules do not unfairly harm the platforms that content creators depend upon in order to reach a global audience.
Policy Roundup:
Irish privacy regulator looks at Facebook over data transfers. Ireland’s Data Protection Commission reportedly sent Facebook a preliminary order last month seeking to block data transfers from the European Union to the United States. The order follows a decision from the EU Court of Justice in July that opened EU-US data transfer mechanisms up for more scrutiny—including standard contractual clauses like those used by Facebook—and suspended the EU-U.S. Privacy Shield, a streamlined framework which allowed U.S. firms, especially startups, to process and store European users’ data in the U.S. In a blog post, Nick Clegg—Facebook’s Vice President of Global Affairs and Communications—said in a blog post that the decision to limit international data transfers “would damage the economy and hamper the growth of data-driven businesses in the EU.”
France accuses U.S. of “making obstacles” to block global digital services tax agreement. The French Finance Minister accused the United States of trying to undermine an international agreement on a digital services tax (DST), telling journalists that the U.S. is “making obstacles that prevent us from reaching an agreement.” Despite the White House reportedly pulling out of the talks, U.S. officials have still been involved in the discussions. While some countries have already implemented their own DSTs targeting larger U.S. tech firms, most countries have withheld imposing their own levies in order to give the Organisation for Economic Co-operation and Development (OECD) time to reach an agreement on a global tech tax before the end of the year. If an agreement is not reached, other countries may implement their own patchwork of DSTs, which would likely cause tech firms to pass the additional financial and administrative burdens on to the startups and users that rely on their platforms.
Senate bill targets platforms’ ability to moderate user content. Republican Sens. Roger Wicker (Miss.), Lindsey Graham (S.C.), and Marsha Blackburn (Tenn.) introduced legislation this week—the Online Freedom and Viewpoint Diversity Act—that would remove liability limitations for Internet firms that moderate user-generated content without having an “objectively reasonable belief” that the offending post violates their terms of service. Online companies of all sizes rely on Section 230 of the Communications Decency Act to host and moderate user content without the fear of potentially ruinous lawsuits, and the law makes it possible for early-stage startup platforms to attract funding, launch, and grow.
Restoring the patent review process. In an op-ed for Law360, High Tech Inventors Alliance Executive Director David Jones discusses how the U.S. Patent and Trademark Office (USPTO) has limited the availability of inter partes review (IPR), a process that lets startups push back against frivolous lawsuits brought by so-called “patent trolls.” Last week, four tech companies—Google, Intel, Cisco, and Apple—filed a complaint against USPTO challenging the agency’s efforts to dismantle IPR. As we noted last week, the lawsuit—if successful—would restore IPR as a means of challenging low-quality patents and allow startups to more effectively respond to patent troll litigation.
Senate fails to move forward with pared-down relief bill. The Senate this week failed to advance a slimmed-down coronavirus relief package that would have offered $500 billion in federal relief—significantly less than a $3 trillion package passed by House Democrats in May and a $1 trillion package previously introduced by Senate Republicans in July. The largely party-line vote came after Democrats, Republicans, and White House officials failed to reach an agreement on what to include in the next phase of relief, despite months of bipartisan negotiations. Startups are in need of additional relief to weather the pandemic’s economic uncertainty, and policymakers should unite around a viable package that ensures the long-term survival of small businesses.
Survey finds majority of small businesses have exhausted federal relief. A recent survey from Goldman Sachs found that 88 percent of small businesses have expended all emergency federal funding they received from the Paycheck Protection Program (PPP), with 32 percent of businesses that received loans reporting that they had to lay off employees or cut wages as a result of the economic uncertainty caused by the pandemic. Thirty-six percent of the respondents said that they will have to lay off workers or cut back their hours if Congress does not allocate additional funding for struggling small businesses in another coronavirus relief package.
