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It seems that every year has gotten busier and busier in the world of tech policy -- and that’s generally a good thing. This morning’s news that a federal court has struck down FCC net neutrality rules is a battle we will have to fight, but we should still take heart from the fact that the issues we have cared about for years are becoming more mainstream, and policymakers around the world are starting to listen. While we haven’t forgotten that 2014 is an election year, we’re confident that on the federal level there is room for improvement in a number of areas close to the hearts of innovators and entrepreneurs. So here’s a quick, early roundup of what we expect to be watching in 2014.
Patents
In the last weeks of 2013, the U.S. House of Representatives passed the Innovation Act, a litigation reform bill targeting patent trolls and their extortive, anti-innovation practices.
This year, we’re pushing for a companion bill in the Senate, a body that has signaled stronger wariness than we encountered in the House. It’s going to be an uphill battle, but we must make certain that 2013 was the last good year for patent trolls. Similarly, the House and Senate Commerce committees have both expressed an interest in demand letter reforms to tackle the current anonymity and vagueness.
Together with our many friends -- retailers, real estate agents, and others -- we will be working closely with the House and Senate to build legislation that is beneficial but does not risk being overturned by the courts on First Amendment grounds. But to lay the foundation for everything we do, we must remind Congress that we are the inventors driving our economy.
User Privacy
The technology we love makes information more accessible and useful. Usually that’s a good thing, but unfortunately it also means that private information sometimes gets out against our wishes. With some high profile breaches (think Target and Snapchat) at the end of 2013 we expect to see more political appetite for privacy “reforms”.
While we have yet to see any formal bills, we expect both federal and state-level reform efforts to tackle the big question of protecting consumer privacy without threatening needed innovation. Up until now, a lack of understanding on the part of lawmakers has often meant that reforms can do more harm than good by threatening to limit the free exchange of data and ideas. We need to be more mindful here, and at the same time we must work within the tech industry to safeguard user data, develop better security practices, and create easy-to-use tools that are available for the average user to help them monitor and protect their data.
Data Localization
We’re already seeing foreign governments use the Edward Snowden revelations as an excuse to slow the growth of US-based technology companies. Most concerning is a push toward what insiders are calling “data localization” -- a requirement that all country-specific user data must be consistently maintained within that country. For example, French user data must only be analyzed or stored in France. That means service providers -- since that data is used to provide a useful service -- will be forced to maintain a duplicate set of infrastructure in every country. This is a problem because most countries lack the intellectual property and security standards we enjoy in the United States. And after all, it’s those policies that have long contributed to this country’s incredible record of innovative success.
Just this week, I had the opportunity to talk to new Commerce Secretary Pritzker about the challenges the U.S. will face should governments such as Brazil and France go ahead with mandated localization. It's something credit card companies have faced for years, but now it’s a growing threat to technology companies whose businesses and users rely on the borderless functionality.
Forced data localization will drive up costs, slow deployment times, reduce innovation, push U.S. jobs overseas, and generally threaten our safety and security. The administration should make time for the right discussions with individual nations, and the U.S. Commerce Department should take the opportunity to caution against such moves, making certain that the legacy of this episode is one of increased freedom and actual security, rather than a paranoid, reactive clampdown on the free flow of information.
Copyright
We’ve been excited to see content distributors updating their revenue models and making more of their content libraries available through new and innovative channels. But we’re always cautious of the incumbent interests that troll the halls of government in the name of protecting creators. Data has shown that often these incumbents are misguided in their assertions.
While no one has offered-up a policy solution -- lest it becomes the next SOPA -- Representative Goodlatte wants to undertake a multi-year, multi-stakeholder process aimed at comprehensive reform. And it all last week with a Congressional copyright hearing.
Immigration
An outdated immigration system continues to be one of the greatest threats to American entrepreneurship and business growth. As we demonstrated in 2013, high-skilled immigration creates jobs and raises wages, and it is disappointing to have to use this year to continue to build our case.
With the mid-term Congressional elections ahead of us in November, the conventional wisdom in Washington generally holds that getting a deal on something as broad and controversial as immigration reform would be a non-starter. But as the pressure continues to mount on Congressional Republicans to take charge and fix our broken immigration system, there may be opportunities to advance that debate -- and even pass legislation that would address the crisis. Having spent much of the last two years making the economic case for immigration reform, it’s up to all of us to keep the pressure on and make sure that an achievable fix becomes law. It’s a long shot this year, but we remain hopeful that as opportunities present themselves, we can all rise to meet the challenge.
Research
Not to be relegated to a footnote, this year, the Engine Research team will keep producing great research as we did in 2013, highlighting the role startups play outside the United States, the importance of access to high-speed connectivity, and user privacy. It is clear that to accomplish all the goals we have set for ourselves -- and for our community -- we must continue to be rooted in the facts: hard data that makes our path clear, our points incontrovertible, and our needs readily apparent. We don’t have the ability to be patient and try “politics as usual”. Jobs remain on the line.
With momentous bipartisan support not often seen from Congress these days, the Innovation Act, targeting patent trolls and their abusive practices, passed the House of Representatives with 325 votes to 91. That this Congress, with its historic levels of impasse, was able to come together to pass this bill speaks volumes about the extent of the patent troll problem. As some of us know all too well, patent assertion entities have cost US businesses time, talent and money -- not to mention the incalculable chilling effect their tendencies for extortionist litigation have had on innovation.
Now, the patent reform effort moves to the Senate with the Patent Transparency and Improvements Act introduced by Senators Leahy and Lee. The Senate bill reflects some provisions from the House bill, including fee-shifting and a system that would allow stays in lawsuits against customers and end users -- but this bill definitely is more narrowly focused on egregious litigation abuses.
This bill suggests new guidelines for dealing with demand letters. Under Senator Leahy’s Act, demand letters must include a statement of the patent asserter’s identity, the patent being asserted, and the reasons for the assertion. Additionally, the Senate bill would authorize the FTC to act against unfair and deceptive practices associated with the sending of fraudulent or materially misleading demand letters. With a nod to the root of the problem -- poor quality patents -- this bill would also improve patent review procedures requiring that the PTO apply the same claim construction used in court, rather than the “broadest reasonable interpretation.”
While Democratic leaders on the House Judiciary Committee announced their support for the Leahy-Lee approach over Representative Goodlatte's House bill, a number of Senators are urging general restraint after pushback from the university community and unease over loser-pays provisions.
We hope the Senate will act, as the House already has, with determination and all speed to remedy this issue. While there is also hope on the judicial front with the Supreme Court is set to consider the validity of software patents, every day we wait to address the scourge of patent trolling we’re wasting millions of dollars combatting a problem we can begin to remedy with the stroke of a pen. We look forward to working with our allies in the Senate to bring this bill up for a speedy resolution.
Photo courtesy of Talk Radio News Service.
Fee shifting, or "loser pays," is already in the Patent Act but the current wording -- only in “exceptional cases” can the court award attorney fees to the prevailing party -- left the door open for the Federal Circuit to define exceptional so narrowly that fees are only granted in a fraction of cases.
Engine Advocacy, and our nationwide network of startups, entrepreneurs, investors and allies, welcome this action taken by the House as yet another step in neutralizing the threat of patent trolls and the daily harm they cause to our economy. We commend leaders from both sides of the aisle including House Judiciary Chairman Bob Goodlatte (R-VA) and Rep. Zoe Lofgren (D-CA) among others in moving this bipartisan legislation through committee, onto the floor and ultimately working to ensure a sweeping majority in favor.
This Thursday, the House of Representatives will vote on the Innovation Act -- the best bill yet that aims to remedy the growing patent trolling problem. We cannot wait to enact meaningful patent reform, and this is our opportunity. We need you to call your Congressional Representative to urge a yes vote on this bill.
If you’ve been following the patent troll epidemic in the news at all, you’ve probably also heard of the company I work for. Six months ago, I started working at FindTheBest. Two days after I started, we were served with our first demand letter from Lumen View Technology LLC. The next A day, Lumen View Technology filed a lawsuit in the U.S. District Court for the Southern District of New York.
In the name of “individual rights and free expression,” WikiLeaks has released the draft text of the Trans-Pacific Partnership Agreement. Negotiations over this trade agreement began in secret between 12 Pacific Rim countries in December 2012, and despite the secrecy, we know (from a previous leak) that discussions have covered intellectual property, competition and State-owned enterprises, environmental policy, services and investment, and government procurement, among other issues. But how will this impact startups?
Today, 39 prominent venture capitalists sent a letter to Congress urging comprehensive legislation to address the patent troll problem. Together, the signatories have aided the success of companies such as Netflix, Twitter, and Kickstarter, and they invest upwards of $1 billion annually to ensure that even more young, high-tech companies continue to grow and fuel job creation in the United States.
Entrepreneurs, young businesses, and emerging, high-growth technologies are powering what resurgence there is in the American economy. But these businesses are subject to an arcane, onerous system of patent regulation that leaves them vulnerable, and that vulnerability is abused by patent assertion entities and their allies to leverage that system against innovators. With this reality, we are faced with two options: a broken system, or the chance of a reformed system that champions innovation and growth.
On Friday afternoon, the Federal Trade Commission announced its intention to launch a study of Patent Assertion Entities, commonly referred to as “patent trolls.” While a host of interesting research on the patent system has surfaced over the summer, the FTC’s involvement could lead to the evaluation of brand new information that will aid legislative efforts.
A new study from the Progressive Policy Institute puts the economic cost of patent trolls at $83 billion. Patent trolls are capitalizing on a system which, as currently constituted, does not adequately service our growing economy. It is a system within our power to reconstruct, and while that work is underway, we need this community to continue to support those efforts to bring them to fruition.
In banning software patents, New Zealand has done the equivalent of amending section 101 of the Patent Act that helps define what is, and is not, patentable. As a refresher, this oft-cited section is intended to preclude patent protection for laws of nature, natural phenomena, and abstract ideas. Can the U.S. do the same?
Today, we’re excited to partner with the Electronic Frontier Foundation and a coalition of organizations and law schools to launch Trolling Effects, a resource to empower entrepreneurs targeted by patent trolls. Patent troll lawsuits represented 62 percent of all patent litigation in 2012, and the costs associated with these suits amount to billion of dollars, stalling business growth, delaying products, and robbing startups of precious resources.
The best trade agreements strengthen relationships with nations and regions vital to United States foreign and economic policy. When it comes to the secretive discussions around the Trans-Atlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP), however, any benefits might also come with now-unseen costs to startups and the tech industry as a whole if negotiators do not consider unintended consequences.
Today the White House Task Force on High-Tech Patent Issues issued a statement with a clear message: it’s time to tackle patent reform. While Washington as a whole has been slow to embrace new proposals after the passage of The America Invents Act in 2011, a steady drumbeat from advocates, startups, and tech companies alike has pushed policy makers to do more to end the economic drag caused by frivolous patent litigation. The Obama administration announced seven legislative recommendations and five executive actions that are a material step toward fixing the broken patent regime.
The executive actions make clarity a top priority. The requirements include ordering the patent office to work on rules that will make the real owner of a patent more apparent, requiring the office to tighten patent examiners’ scrutiny around what a given patent claims to do, and compelling the office to provide clear, plain-English answers for consumers and businesses about demand letters from patent trolls.
The administration's legislative recommendations also meet key startup needs. The White House is calling on Congress to empower and protect individuals and businesses facing legal demands from patent trolls. This includes proposals to further increase patent owner transparency, shift incentives to discourage predatory litigation, expand the patent reviews from the America Invents Act, end-user protections from patent troll suits, and increase incentives to encourage public disclosure of demand letters from trolls.
We are excited that the White House is taking action in the patent debate. While Washington has been divided along partisan lines of late, members of both parties are unifying to right some of the apparent wrongs in the system. Today’s announcement should encourage further dialogue about what the right fixes are, and how Congress can most effectively protect startups and ultimately all businesses from unwarranted lawsuits.
You can read White House fact sheet here. We will continue to post updates on patent reform proposals from Washington.
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Picture courtesy of Alan Kotok.
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