The Big Story: SHOP SAFE is back despite threats to startups
This week, policymakers in Congress and the administration dove into possible trademark infringement online, exploring policy solutions that could create substantial costs and risks for e-commerce startups. On Tuesday, the U.S. Patent and Trademark Office held a roundtable on “anticounterfeiting and antipiracy” while across town, a Senate Judiciary subcommittee held a hearing on the recently reintroduced SHOP SAFE Act, a bill focused on online counterfeits. Policymakers and participants at both events suggested that Internet companies should be held liable if they don’t take every possible step to prevent online trademark infringement. That change in the law would catch little additional infringement, but it would create legal risks for e-commerce startups and undermine their competitiveness.
The SHOP SAFE Act would amend trademark law with the purported goal of combatting unsafe counterfeit goods sold online, holding companies liable if they don’t adequately sift through third-party content on their platforms for infringing counterfeits. Keeping track of or pre-screening user postings would be a massive burden for startups—who see little or no infringement to begin with—while larger platforms already utilize large teams of content moderators and filtering technologies. The proposed legislation doesn’t account for the impact on startup competitiveness. Instead, it includes broad language encompassing services that "allow for, facilitate, or enable third-party sellers to engage in the sale or purchase of a consumer product." This applies to those with just $500,000 in annual transactions or who receive 10 complaints of infringement. That's much broader than large platforms like eBay and Amazon and could easily include everything from the neighborhood listserv where people sell used childrens' clothing to a startup like hobbyDB.
SHOP SAFE has failed to pass in previous Congresses, and this iteration of the bill does not include necessary improvements to protect startups and small sellers, as one witness at this week’s hearing pointed out. Additionally, the reintroduced bill comes on the heels of the less problematic INFORM Consumers Act coming into full effect, which passed last Congress and seeks to tackle the same issue. Instead of layering on liability that won’t produce desired results, Congress should give time to evaluate whether the legislation they’ve already passed is effective.
Policy Roundup:
New paper refutes exaggerated claims of so-called “killer acquisitions.” In a new paper out this week, Utah State research fellow Will Reinhart highlights the inapplicability to the technology sector of a paper finding evidence of so-called killer acquisitions in the pharmaceutical industry. The flawed killer acquisitions theory has been misapplied in recent competition policy efforts, threatening to harm, rather than help startups. Acquisitions are a key exit path for startups and promote positive cycles of capital and knowledge through the startup ecosystem, ultimately spurring innovation and competition.
Underfunding of CHIPS and the Science Act risks the STEM talent pool. Ahead of the Senate’s hearing this week on the implementation of the CHIPS and Science Act, the Federation of American Scientists released a report highlighting the funding shortfall for programs authorized under the Act, including the Regional Technology and Innovation Hub program. Some of the biggest funding shortfalls are to programs designed to boost the STEM talent pipeline, with significant shortages in STEM education programs. Engine has long called for the U.S. to strengthen the STEM talent pipeline to support the startup ecosystem, including through funding streams that support education and teacher training in underserved communities. And Engine earlier joined a letter calling for adequately funding programs authorized under the CHIPS and Science Act, including the Tech Hubs program, which stands to drive U.S. innovation in diverse regions. Policymakers should work to provide the necessary funding to these initiatives, strengthening the U.S. talent pool and boosting startup activity.
Telecom agency confirmations clear way for net neutrality rulemaking. On Saturday, the Senate unanimously re-confirmed Commissioners Brendan Carr (R) and Geoffrey Starks (D) to the Federal Communications Commission (FCC), securing a fully seated Commission with a 3-2 Democratic majority. Starks—who would have needed to leave the Commission at the end of the year absent re-confirmation—is a critical third vote needed for the FCC to move forward with startup priorities, like the recently launched effort to restore net neutrality rules. Net neutrality is critical to ensure startups encounter a level playing field where they can grow and succeed.
Watchdog report outlines needs for changes to controversial spying program. Late last week, the Privacy and Civil Liberties Oversight Board released their long-awaited report on Section 702 of the Foreign Intelligence Surveillance Act, requesting for changes to how the surveillance program operates. The program enables mass collection of Internet communications and has long sparked concerns for privacy and civil liberties organizations, but for startups, the program threatens cross-border data flows critical to their ability to compete abroad. U.S. government surveillance played a central role in the downfall of previous data transfer pacts relied upon by startups, and their replacement is already under threat for similar reasons. Without reform to Section 702 programs, it is possible that startups will again be left without a legal mechanism for certain cross-border data transfers.
President Biden's implements $9B in student loan debt relief for certain borrowers. This week, the administration forgave $9 billion in student loans, aiding 53,000 borrowers under Public Service Loan Forgiveness, 51,000 under income-driven plans and 22,000 borrowers with disabilities. While this tranche of forgiveness is a welcome step, student debt has reached crisis levels in the U.S., with broad loan forgiveness yet to be reached to unlock entrepreneurship as a pathway for many borrowers. Policymakers should explore student debt relief initiatives to catalyze innovation, support emerging founders, and boost startup talent, including through entrepreneur-specific relief modeled on the Public Service Loan Forgiveness program.
Rightsholders call for halt to innovation at competition agency event. This week, the Federal Trade Commission held a forum for creators of copyrighted works to discuss the implications of AI, leading to policy suggestions unworkable for startups. Rightsholders complained that training AI models on their works should be considered copyright infringement and that AI companies should be required to obtain a license before including them in training data. Instead, ingesting data and works of all types to train AI models should be recognized as noninfringing, as changing the law to require licensing in response to large AI companies would be prohibitively expensive, boxing startups out of the AI space and harming innovation.
Startup Roundup:
#StartupsEverywhere: Austin, Texas. Bodhi is devoted to enhancing the connection between individuals and the energy that powers their lives. Bodhi automates communication, tailoring the homeowners’ experience, allowing installers to concentrate on project execution, boosting sales, and catalyzing community transformation through energy. In our conversation with Co-Founder and CEO Scott Nguyễn, we explored the current challenges surrounding green tech, the pivotal role of workforce development, and the impact of diverse laws governing privacy, both in the U.S. and internationally.
