SCOTUS Decision in Octane Fitness: A Good Step But Fee Shifting Legislation Still Needed

With today’s decision in Octane Fitness v. Icon, and a companion case, the Supreme Court became the latest branch of government to state unanimously that abusive patent litigation and patent trolling needs to be curtailed. The White House and a large bipartisan majority in the House of Representatives have also been unequivocal on this point. Patent litigation abuse is a complex problem requiring a multi-pronged solution that must include legislation as well as administrative and judicial action.

The Supreme Court’s unanimous decision recognized the burden that abusive patent litigation places on productive U.S. companies and the need to address the problem. It also took an important step in articulating what advocates of reform have been saying all along: the litigation playing field is tilted in favor of plaintiffs and has enabled patent litigation abuse.

The Court’s decision will make it easier to shift fees to the loser in “exceptional” cases, but that is only one part of the solution. Courts must have the discretion to fee shift not only in “exceptional “ cases, but also in cases where the Court determines the conduct or position of the non-prevailing party was objectively unreasonable. Legislation to this effect is essential if we are to discourage abusive litigation in any meaningful way.

The Innovation Act passed by the House establishes a rebuttable presumption of fee shifting in favor of the non-prevailing party whose conduct or behavior was found to be unreasonable. Now the Senate must act too. The heavily negotiated Schumer-Cornyn compromise is a balanced bill after years of discussion about how to address the patent troll problem. It strikes the right balance on fee shifting. It’s time for a markup of this bill.

Every day that goes by without legislation hurts innovation and costs the economy millions of dollars, as evidenced by the news reports of trolls launching a flurry of suits last week in anticipation of legislation.

The Court is to be commended for lowering the very high bar that previously existed for awarding fees in exceptional cases, and for recognizing the important role that fee shifting must play in deterring patent litigation abuse. The Senate must act to empower the Courts to fee shift in all cases where the non-prevailing party’s conduct or position was unreasonable – not only in “exceptional cases” which is all that the current law allows.

Big Day for Open DATA

The Federal Government has taken a big step towards reforming the way it buys, uses, maintains, and publishes data with the unanimous passage of the Digital Accountability and Transparency or DATA Act.

The bipartisan measure, which now goes to President Obama for his signature, would open up the way we track spending across government agencies, and was sponsored originally in the House by Oversight and Reform by Chairman Darrell Issa (R-CA) and Ranking Member Representative Elijah Cummings (D-MD). A companion Senate measure was sponsored by Senators Mark Warner (D-VA) and Rob Portman (R-OH).

What does this mean in practice? Hudson Hollister, Executive Director of the Data Transparency Coalition, explained what the DATA act will do for government transparency in Forbes earlier this month:

If the DATA Act is fully enforced, citizens will be able to track government spending on a particular contractor or from a particular program, payment by payment. Agencies will be able to deploy sophisticated Big Data analytics to illuminate, and eliminate, waste and fraud. And states and universities will be able to automate their complex federal grant reporting tasks, freeing up more tax dollars for their intended use.

This sort of transparency in government allows ordinary citizens to better track how government is using technology, and it will also allow government to better source information technology projects, and understand how tax dollars are being spent in an effort to streamline those multifaceted processes.

Of course, there will also be benefits for the startup community. Understanding how government money is being spent could make it easier for our most innovative companies to break through the procurement process.

We applaud the work of Chairman Issa, Ranking Member Cummings, Senators Warner and Portman, and everyone else who helped shepherd this vital legislation through the Congress. We look forward to continued efforts to leverage data in productive ways. 

Setting the Record Straight on Patent Reform

I’ve been involved in the debate about patent reform for a long time, and I’m thrilled to see that we are close to finally passing real legislation that will combat the patent troll problem. A Senate compromise is imminent, and we cannot let those who benefit financially from a broken system derail these efforts. Now is the time for real reform to curb the impact of patent trolls on America’s startups and our economy.

The widely reported Schumer-Cornyn compromise would provide a clear path forward against behavior that costs small businesses and the U.S. economy at least $29 billion a year (or more) in lost capital. These shadowy entities make nothing, provide no benefit to the wider economy, and do not advance America’s innovative, entrepreneurial spirit.

Claims that the current Senate compromise would gut the ability of “small inventors” to assert their rights as patent holders lack a fundamental basis in fact, but they are being levied loudly and distractingly by groups backed by large-scale assertion entities and multinational corporations with large patent portfolios. To be clear, there is nothing in the current proposal that would stop a legitimate patent holder from bringing a meritorious case for infringement. More than 6,000 patent holders and allies agreed by signing a letter; making it harder to patent owners to assert their legitimate claims for infringement is counterintuitive and not something our organization would fight for. Assertions to the contrary, made by those seeking to retain their rights to make offensive use of their patent portfolios, are wholly without merit.

Let there be no doubt: the startup community needs real patent reform. As a whole, it endorses the kind of strong reforms found in the Schumer-Cornyn compromise. Small, innovative startups bear the brunt of the patent trolling trend.Those startups who are targeted often have less than $10 million in revenues, and they are in no position to hire a patent lawyer to understand the scope of the threat they face — let alone pay the millions of dollars it would cost to take case to court. Even worse, startups are too often short on talent, so they do not have the luxury of using their current employees to read and understand vague patents with “fuzzy boundaries”.

We are asking the United States Senate to seize this opportunity. Let’s make this the week we beat back patent trolling. We are looking at serious, well-ordered compromise legislation -- worked out tirelessly by staff and Senators. We urge you to pass it on to the President, and let American innovation continue to lead the charge in rebuilding our economy.

The Senate and Patent Reform: The Time Is Now

This post originally appeared in RollCall.

Recently, word from the Senate Judiciary Committee is that negotiators have reached a bipartisan agreement in principle on the key elements of a comprehensive patent reform bill. They are reportedly vetting and nailing down language and preparing the package for mark-up when the Senate returns. A deal appears close to being done, and it’s looking more like the House’s Innovation Act, which bodes well for final passage.

Yet time is of the essence as the clock is ticking on this Congress. Patent litigation abuse by trolls, entities that acquire patents for the sole purpose of shaking down actual inventors with dubious infringement claims, is a very real tax on innovation. A New York Times editorial calling on the Senate to move forward with robust legislation made it clear that abusive patent litigation costs the US economy billions of dollars a year. And, although we can debate the exact scope of the problem, there is no question that the patent trolling phenomenon is growing, and that it now targets retailers, small businesses, independent inventors,start-ups and consumers. Moreover, it has tarnished the reputation of the patent system at a time when innovation is such a critical driver of economic growth and global competitiveness.

Recognizing that patent trolls leverage the high risk and high cost of litigation to extract nuisance settlements, the House passed the Innovation Act by a lopsided 325-91 margin in December.

As the Senate Judiciary committee struggles to come to terms on some thorny provisions, they should bear in mind what Chairman Leahy said just last week: Patents are government-issued monopolies and the abuse of patents in litigation is qualitatively different and consequently warrants a higher level of congressional scrutiny. When bad actors send demand letters or file suits without any real basis for believing that their patent is infringed, they are abusing the system. This problem is exacerbated when many of the patents being asserted by trolls are vague or abstract software and business method patents that should not have been issued in the first place.

Current law and practice stack the deck in favor of trolls, who typically send out scores of form demand letters which make vague and unspecified assertions of infringement and request “licensing fees” while threatening litigation. The troll renders itself litigation-proof by creating shell companies with no assets, but a threatened start-up is faced with a dire choice: give in to what President Obama aptly called ‘extortion” or risk litigation, which would drain critical energy and resources from a fledgling business which can ill afford the cost or distraction of litigation.

To stem this tide, the committee should press ahead to finalize a package that will redress the existing imbalances in the patent litigation system. The bill must include provisions for:

• Transparency of ownership post-issuance and throughout the life of the patent
• Specificity in demand letters
• Heightened pleading standards that require the identification of claims asserted to be infringed. Any bona fide claim of infringement should be able to meet these reasonable standards, which even provide an exception in cases where the plaintiff is unable to access all the information
• Capping discovery costs by enabling the court to determine what the disputed patent covers and the scope of the claims before allowing broad-ranging, expensive, and potentially irrelevant discovery. This will prevent trolls from driving up costs in order to gain leverage in litigation
• End-of-case fee shifting in favor of a prevailing party while maintaining the court’s discretion to deny fee shifting if the losing party’s actions and conduct were objectively reasonable
• Provisions that enable the real party in interest to be held liable for any costs assigned to shell entities.

To be sure, infringement is also a very real threat to inventors and startups, so the Senate should take care to ensure that nothing in the legislation prejudices the ability of patent holders to commercialize patents or assert legitimate claims. The proposals that have been reportedly agreed upon reflect a keen sensitivity to balancing these interests and the bipartisan negotiators should be commended for taking such care in walking that fine line.

This legislation needs to be balanced but it also needs to be effective, so potential unintended consequences should not be exaggerated in an effort to water down or derail the bill. The bill, like any legislation, should be evaluated by its intended and likely effects, not by reference to potential consequences which are exceptional or unlikely.

It is clear that the current state of affairs enables abuse and is tilted too far in favor of litigation plaintiffs, who can essentially sue on a wholesale basis with impunity. The fulcrum needs to be restored to a position of balance so that the patent playing field is level for all innovators. The Senate Judiciary negotiators appear to have arrived at a fair and balanced set of reforms. Let’s hope the Senate seizes this chance to improve and strengthen the patent system.

New FCC Proposal on Net Neutrality is Disastrous for Startups, Consumers and the Economy

“According to recent news reports, the Commission is considering adopting a rule that authorizes discrimination by ISPs and permits them to charge terminating access fees to technology companies. We believe such a rule, if adopted, would crush startups,and therefore undermine American technology entrepreneurship, innovation, and job creation.”

This is the first paragraph of comments we filed with the FCC today. The FCC’s widely reported net neutrality proposal authorizes web-content discrimination by enabling companies to pay Internet Service Providers for access to a faster lane, whole relegating those without the ability to pay to the slow lane.

This proposal marks a significant departure from the principle of Net Neutrality, which grants all content providers the equal ability to provide their offerings to consumers, and gives Internet users the equal ability to see any content they choose.

This proposal would place an incredible burden on small, high-growth companies. In so many ways, the deck is already stacked in favor or larger, well-funded business, and this is yet another barrier to entry. This framework will unequivocally empower the companies that can pay, at the expense of the next generation of disrupters.

As Fred Wilson pointed out back in January, in this new world order “telcos will pick their preferred partners, subsidize the data costs for those apps, and make it much harder for new entrants to compete with the incumbents.”

The innovation ecosystem -- so essential to job creation and economic growth -- benefits from low costs of innovation, not an environment where multiple ISPs can impose above-cost, unconstrained access fees on startups. Entrepreneurs rely on an open internet to build their companies, and investors rely on the certainty of an open internet to invest billions of dollars in edge providers to power the innovation ecosystem.

Startups rely on not being blocked, discriminated against, or subject to fees for access and preference. If some or all ISPs block a startup, the startup would be unable to reach a portion of users in the market. This is a particular problem for startups whose products rely on network effects -- those that become more valuable with more users -- such as social networks, e-commerce platforms connecting buyers and sellers (or drivers and riders), sites for user-generated content (including reviews, photos, or micro-blogs), and payment networks. If blocked by some ISPs, these companies will be less likely to win in the market, even if consumers would otherwise prefer their services.

Any arguments that suggest startups welcome the “right” to negotiate to pay fees for access or outbid giant incumbent edge providers for special preferences are divorced from the reality of entrepreneurship

For the last decade, the largest cable and phone companies have argued that network neutrality is “a solution in search of a problem.” That assertion is false.

We know that net neutrality solves a real problem. In countries without net neutrality, including several European nations, there has been widespread discrimination and blocking for many years. And even in the US, where the FCC has to this point supported net neutrality in principle, there have been violations. These include:

• Comcast interfering with peer-to-peer technologies, including some of the most popular technologies online;
• Apple blocking the application Skype on the iPhone, which was subject to a contract with AT&T, a carrier that competes with Skype;
• Verizon, AT&T, and T-Mobile blocking Google Wallet, while all three companies are part of a competing mobile payments joint venture called Isis; and
• Comcast’s disputes with Level 3 and Netflix over termination fees and congested transit.

We cannot overstate how devastating this pay-to-play model will be for startups, the innovation economy, the open internet, and for consumers.

In our comments to the FCC, we support the Chairman’s previously stated desire to adopt strong rules on disclosure, blocking, and discrimination, but we believe the Chairman cannot adopt such rules under the jurisdictional theory he favors: Section 706 of the Telecommunications Act that grants the FCC jurisdiction over “deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans.”

We now know the obvious: he cannot pursue real nondiscrimination rules under Section 706.

Rather than permit widespread discrimination and fees that would crush entrepreneurship, he should choose a different jurisdictional theory known to legal eagles as Title II. Title II would reclassify Internet service as a public utility much like phone lines. Reclassification must be remain on the table and be seriously considered.

We are following this issue closely, so sign-up for our newsletter (it’s just below the fold!), and follow us on Twitter and Facebook to stay up to date. And if you want to take action now, visit Free Press for how to make your voice heard.

In the Internet Revolution, We Can’t Afford to Leave Part of the Country Behind

This piece originally appeared in VentureBeat

Too many communities have been left behind as the Internet revolution marches on. In much of the country, communication, access to information, and business are powered by the Internet. But in areas underserved by broadband networks – where it might also be too expensive to own a personal computer – adults who went to school too long ago and have not pursued re-skilling programs, and students who do not have Internet access at home or at school, are in danger of never catching-up.

Efforts originating in the public and private sectors are trying to change this narrative, but we need to do more. The President’s ConnectED plan to reform E-Rate aims to connect 99 percent of classrooms and libraries within five years. As I’ve argued before, this program is essential for educational equality, and equality of opportunity post high-school, and it needs broader support.

On the private side, the Red Hook Initiative (in Red Hook, Brooklyn) has installed free WiFi routers at churches, schools, and other community spaces. With a complimentary program in local schools focused on leadership, employment skills, and STEM training, the initiative has empowered the community to develop services in the present, and students are also better prepared for their futures in the modern economy. With support from local and state governments, successful programs like this could be rolled out to more places where they are needed.

One model for public-private partnerships worth following is what Etsy is doing in the post-industrial community of Rockford, Illinois (at the request of the town’s mayor, Larry Morrissey), and underemployed communities in New York City. Working with local groups, Etsy has a “craft entrepreneurship” program to teach basic business and computer literacy by boosting existing craft and manufacturing skills.

According to Etsy’s site, “many low-income groups have long had craft and manufacturing skills, but are unsure of how to unlock the potential of these skills for income and wellbeing in this day and age.”

In this program, the idea of unlocking existing skills for “this day and age” is the key. While a third of Etsy sellers use the income from selling their handmade goods to cover some household expenses, and 20 percent use the money to boost their savings, this program isn’t fully about money, and it’s not about Etsy either; it’s about bringing more people into the Internet economy and empowering communities to use the Internet as a platform to better themselves and their families.

People are learning how to run a business -- even just a small one -- with marketing, photography, pricing, and growth strategy lessons; they are making the most of their existing skills; and when the course is complete they are left with an Etsy store that might just provide the supplemental income to push their family over the poverty line.

But the primary and enduring benefit of this program, and others like it, is access to the Internet economy and the pride that comes with being able to do a little more than you could yesterday. Essential connectivity and basic education lay the foundation for individuals to retake control of their careers. First it’s an Etsy store, but then maybe it’s SideCar, UberX and finally a brand new startup business.. For the wellness of our economy, and our society, more communities need access to high-speed broadband and the knowledge that will help them harness the power of the Internet. Tech should support ConnectED and then work with government to ensure universal access.

Image Credit: spirit of america/Shutterstock

Pushing Patent Reform Through Senate Recess

We found out late last week that the Senate is pushing back a key vote on patent reform for the third time in a row. Early reports decried this as the beginning of the end of patent reform, but in fact the opposite is true. From everything we’re hearing, the Senators have reached a deal on the key provisions of comprehensive reform and plan to use their upcoming recess to smooth everything out.

Good news first: the bill looks likely to include the following strong provisions that generally align with the House Innovation Act:

Fee shifting: Meaningful fee shifting will discourage the most egregious actors — those without meritorious cases — from suing in the first place; and joinder provisions are necessary to make sure that the real party in interest — the one that really owns the patent — can be held liable for the trolling activities of shell entities are also essential. In other words, no more hiding behind shell companies.

Heightened pleading: Patent trolls benefit from asymmetry of information. They can file suits with vague and limited information, leaving companies with no choice but to consult a lawyer about the scope of the threat they face. Most startups don’t have an in-house lawyer at all, let alone one who specializes in patents.

Those bringing suits should set forth the basic framework of their case — who owns the patent, what product allegedly infringes the patent, and what parts of the patent are at issue. This would, at minimum, give startups a basic and common-sense understanding surrounding the threat, allowing them to make more informed decisions on how to proceed.

Discovery reform: Discovery is one of the most onerous and expensive parts of patent litigation. Reasonable limits on initial discovery will help incentivize startups to fight the trolls in court. This will, by default, incentive those trolls to only bring meritorious suits.

Demand letter reform: Patent trolls can legally send vague licensing demands, full of threatening legalese, and startups are again left with no information to understand the scope of the threat they face. Demand letters should include concrete information on the patent holder’s claim to give recipients needed information; and demand letters sent in bad faith should be actionable. 

Customer stay exception: Startups can sometimes find themselves facing expensive litigation for a product they obtained from someone else, or they might find their customers facing suits for using their products. In either instance, startups need tools — like robust stays — so manufacturers and suppliers can step in and join the defense.

So far, so good. The not-so-great-news, however, is that the Senate is now out on a two-week recess — and two weeks is a lot of time for opponents derail what appears to be a really good deal.

Most opponents can be clustered into two groups: D.C. insiders who oftentimes know their way around the legislative process much better than the small businesses and innovators who are being targeted by trolls; and large, well-resourced businesses (including the trolls themselves!) that have invested significant resources in the current broken patent system and fear losing some of that investment value.

So,  those of us who care about ending the reign of the patent troll need to speak up. Go to fixpatents.org, call your Senators NOW and tell them it’s time for real patent reform.

Finally, a word of caution: we’re reasonably optimistic that the bill we’ll see after recess will be a good one. But the process has been largely opaque and until we see final language we don’t know for sure what this deal will look like. We’ll be watching closely, however, and will keep you up to date in this space and on social media (Follow us on Twitter and Facebook).

Thanks to your help, we're closer than we’ve been in years to fixing a broken patent system that has been hurting inventors, startups, and the promise of technology. Now is the time to get this done.

The Biggest Threat to Patent Reform: The Apple/IBM/Microsoft Coalition

This article originally appeared in VentureBeat

There’s a new coalition in D.C., and big players like Apple, DuPont, Ford, GE, IBM, Microsoft, and Pfizer have all signed up. Unfortunately, launched on the day the Senate was supposed to take up the latest effort to reform the patent system, the coalition’s sole purpose appears to be an effort to derail the important strides we’ve made toward fixing the patent troll problem via the proposed Innovation Act legislation.

So what is it about the Innovation Act (and other legislative proposals being discussed in the Senate) that this coalition thinks will harm both their businesses and ability to build innovative products?

These companies were all startups themselves once, and protecting startups that cannot afford to protect themselves from patent trolls is at the heart of the Innovation Act. The startups being targeted by patent trolls have less than $10 million in revenues. They are in no position to hire a patent lawyer to understand the scope of the threat they face — let alone pay the millions of dollars it would cost to take case to court. Even worse, startups are too often short on talent, so they do not have the luxury of using their current employees to read and understand vague patents with “fuzzy boundaries”.

Today’s trolls send out scores of demand letters that make vague assertions of patent infringement while requesting “licensing fees” of $100,000 or more.

The cost of trolling, on the other hand, is minimal. Trolls also typically render themselves litigation-proof by creating shell companies with no assets, should they fall into legal trouble from a wrongful suit.

We need real reform that will stem the tide of the troll epidemic, while maintaining protection for patent holders to enforce their legal rights. This is precisely what the current proposals would do.

Fee shifting

It is nearly impossible for a startup to find the resources to fight a patent suit. The promise of seeing some of that money back at the end makes securing the resources easier.

Meaningful fee shifting will discourage the most egregious actors — those without meritorious cases — from suing in the first place; and joinder provisions are necessary to make sure that the real party in interest — the one that really owns the patent — can be held liable for the trolling activities of shell entities are also essential. In other words, no more hiding behind shell companies.

Heightened pleading

Patent trolls benefit greatly from asymmetry of information. They are able to file suits with vague and limited information, leaving companies with no choice but to consult a lawyer about the scope of the threat they face. Most startups don’t have an in-house lawyer at all, let alone one who specializes in patents.

Those bringing suits should set forth the basic framework of their case — who owns the patent, what product allegedly infringes the patent, and what parts of the patent are at issue. This would, at minimum, give startups a basic and common-sense understanding surrounding the threat, allowing them to make more informed decisions on how to proceed.

Discovery reform

Discovery is one of the most onerous and expensive parts of patent litigation. When startups face companies solely in the business of licensing and litigation (e.g., oftentimes a patent troll), they find themselves facing outrageously expensive motion practice that has little to no impact on their adversary.

Reasonable limits on initial discovery will help incentivize startups to fight the trolls in court. This will, by default, incentive those trolls to only bring meritorious suits.

Demand letter reform

Patent trolls are legally able to send vague licensing demands, full of threatening legalese, and startups are again left with no information to understand the scope of the threat they face.

Demand letters should include concrete information on the patent holder’s claim to give recipients needed information; and demand letters sent in bad faith should be actionable. Those senders should not be able to take advantage of the patent system and extort money from high-growth companies that are rebuilding the economy.

Customer stay exception

Startups can sometimes find themselves facing expensive litigation for a product they obtained from someone else, or they might find their customers facing suits for using their products. In either instance, startups need tools — like robust stays — so manufacturers and suppliers can step in and join the defense.

The harm resulting from the patent troll epidemic does not just impact startups; it creates an environment where startups have a negative impression of the patent system and are therefore significantly less likely to positively engage. A recent study from the National Sciences Foundation found that in the information sector (which includes software, Internet, and Data processing) only 10 percent of companies found utility patents either “very” or even “somewhat” important.

We need comprehensive patent reform to level the playing field for all innovators so they are no longer victimized by a litigation system stacked in favor of trolls. The legislation must realign the patent system with its founding principles — to incentivize innovation and the progress of technology. This includes protecting patent owners’ rights along with the rights of those facing patent threats. To be clear, there is nothing in the Innovation Act, or other proposed legislation, that would stop a legitimate patent holder from bringing a meritorious case for infringement.

To wit: our government grants patent holders a 20-year monopoly. Asking those who benefit from such monopolies to do basic minimal research before filing or threatening a lawsuit, or to actually inform the public about who really owns a patent is not onerous — it is part of a fundamental bargain between a patent holder and the public, and is probably something every responsible patent holder is already doing.

So why are companies like Microsoft, IBM, GE, and Ford trying to slow down this legislative process? Simply put, spending millions of dollars on patent resources has proved a good way to make money and to shut out their competition — high-growth, disruptive, and nimble startups. We must not let these entrenched interests get in the way of fixing a broken system.

Supporting Aereo Means Supporting Innovation Over Entrenched Interests

Today, we joined EFF, Public Knowledge, and CEA in filing a brief at the Supreme Court in favor of Aereo–the innovative company that allows you to watch television at any time, on any internet-enabled device.

Aereo’s product is thousands of dime-sized antennas, each one assigned to a customer who can use it to watch over-the-air television on-demand through the cloud. This Barry Diller-backed service has proven to be a good idea, and one that consumers want.

But enter the broadcasters who can’t stand the threat to their business model. Instead of competing with Aereo in the marketplace, they took the company to court, accusing Aereo of copyright infringement.

The argument is as follows: copyright law gives a copyright holder the exclusive right to “publicly perform” its content, so in retransmitting the broadcasters’ signals, Aereo is infringing the broadcasters’ copyrights. This is wrong. As a lower court already found, Aereo’s system of personal antennas and video streams allows individuals to make non-public transmissions of free broadcast channels that they may already access in their private homes independent of anything Aereo does. As such, no copyright violation.

The stakes here are high: if Aereo loses, it will likely have to shut its doors -- bad news for Aereo, bad news for its customers, bad news for innovative companies that want to follow in its steps, and I’d argue even bad news for the broadcasters--companies that can’t figure out how to deliver a product customers really want.

History should be a guide. In the early 1980s when the VCR first entered the market, the movie studios were less than pleased. At the time, the president of the Motion Picture Association of America famously told Congress: "I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone." There, like here, the movie studios sued for copyright infringement, and the case ended up before the Supreme Court. In a 5-4 vote, the Court found the VCR legal. That’s right--we were only one vote away from no VCR.

And, of course, the VCR not only proved to be an incredibly popular product, it was also good news for the movie industry. In fact, once VCRs were found in homes across the country, the market for home movies exploded and the industry found itself reaping the benefits.

It’s important to any entrepreneurial ecosystem that we allow innovative and disruptive products into the marketplace--whether it’s the VCR, Aereo, or who knows what else. Incumbent players that are often slow to innovate (anyone remember how long it took the record labels to realize people wanted digital music?) do everyone a disservice when they chose to fight in court instead of in the market.

Aereo has significant backing so it’s able to fight back. But litigation battles easily cost millions of dollars, and taking on a fight like this would be incredibly difficult for a smaller startup. So, we support Aereo and have asked the Supreme Court to keep the doors to competitive innovation open in the over-the-air television space, and in doing so set a precedent for more innovation generally.

This case is just the latest in a long history of entrenched interests trying to expand the scope of copyright law to shut down competition. The VCR case was another example, and so was the proposed SOPA bill we successfully shut down. As this case and others progress, we’ll be watching closely and working hard to stem this dangerous trend. Congress has indicated plans to overhaul U.S. copyright laws in the next few years--we hope they do it in a way that protects the interest of entrepreneurs nationwide.

It's Time To Fix Patents

Patent trolls, armed with low-quality patents, have been harming small innovative companies for years. Their time is up.

This week, the Senate Judiciary Committee is slated to take up patent reform -- Senate action is the important last step in an ongoing battle to fix a broken patent system. That’s why, today, we’re launching Fixpatents.org -- a simple campaign that allows you tell your Senator directly, on the phone or through Twitter, that we need real patent troll reform passed now. Personally contacting your representatives on the Hill is by far the best way to affect policy. Call your senator today and urge real patent reform.

Last December, the House passed an impressive bill of reforms, the Innovation Act, in a 325-91 vote, and the President has promised he'd sign it. We need to Senate to follow suit. This is the time to make our stand.

Patent reform matters to the recovering economy, to innovation policy, and mostly to small and growing startups who face the worst of the troll threats. Here’s why:

1. Startups are responsible for all net job growth over the last 30 years and the rise of the patent troll model threatens that continued growth.
2. The majority of companies targeted by patent trolls have less than $10 million in revenue. When small businesses face dubious multimillion dollar lawsuits, our innovation economy suffers.
3. Non-practicing entities -- or patent trolls --- filed 3,608 new suits in 2013, up almost 20% from 2012. And these types of lawsuits are expensive, costing defendants $1 trillion in lost wealth from 1990 - 2010 alone.
4. Patent troll suits accounted for 67% of all new patent cases filed last year, and 63% of all new patent defendants. This is a perversion of the justice system.

We are facing an epidemic and American businesses are paying the price. We need leadership, and action, now.

It’s time for Congress to pass legislation that puts an end to the dangerous business of patent trolling. Specifically, we need legislation that will:

1. Promote meaningful fee shifting
2. Shift the financial burden of burdensome litigation tactics, like discovery
3. Provide fair notice to accused infringers
4. Curb deceptive demand letters
5. Protect customers in patent litigation

The Senate must act, and with your help we can make patent reform a reality. Visit Fixpatents.org now, make the call, and urge your Senator to pass patent reform.

Please feel free to share this content on your own blogs, and share away on social media! 

Critical Mass Supports Timely Patent Reform

This morning, we -- and 5600 other people -- sent a letter to the Senate urging real patent reform. Those people include 1507 entrepreneurs, 758 investors, and 1006 inventors -- at least 150 of whom own their own patents. This should serve as yet another reminder of the critical mass of job-creating entrepreneurs and businesses that support patent reform; the Senate should take note and act swiftly.

This letter is in addition to a letter the Senate Judiciary Committee received from U.S. Senators Mark Udall (D-Colo.), Rob Portman (R-Ohio) and 15 others  late last week. Signed by a broad coalition of Democratic and Republican senators, the letter cites widespread support across the county and in Congress for reforming the U.S. patent system to protect America's most innovative industries, as well as Main Street businesses and entrepreneurs across the nation, from abusive lawsuits and costly settlements.

As the Senate receives this letter, over 100 people will meet at Stripe’s office space tonight to talk about patent reform, listen to a panel of experts -- including former USPTO Chief of Staff and Engine Fellow Peter Pappas -- and formulate a plan of action for passing meaningful reform this year.

With the majority of patent troll targets making under $10 million in revenue, this is an issue so important to our community, and the economy as a whole, that we cannot afford to wait for action. When small businesses face dubious multimillion dollar lawsuits, our innovation economy suffers.

With the Senate poised to take up this debate in earnest early next month, we are entering the final, and most important, stretch of this battle. And we need you more than ever.

If you signed today’s letter and want to do more, or if you're just joining this coalition, stay tuned for the launch of fixpatents.org, a site that will help you call your Senators directly. A number of Senators and Representatives in Austin last week confirmed that making a phone call is the single most influential action you can take to encourage action in return, so we hope you’ll join us.

As we celebrate today’s actions, we also know there is still a lot more to do. Don’t stop here. Help us see this through.

The Importance of Copyright Notice and Takedown

Today, the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet held a hearing on copyright law’s notice and takedown procedure -- an important section that strikes a delicate balance between the rights of copyright holders and the freedom of online service providers. This hearing is part of a longer process undertaken by Judiciary Chairman Robert Goodlatte to reexamine copyright law, but today’s proceeding is of particular interest to startup companies, many of whom are directly affected by copyright law and who have a vested interest in seeing that law updated for modern technology.

Paul Sieminski, general counsel of Engine member company Automattic, testified today, and this is how he laid out the case notice and takedown procedures matter:

“From our perspective, the [law’s] notice and takedown system generally works in practice. The safe harbor provisions of the law are very important to us, and we, like hundreds of other internet service providers, rely on them in publishing the huge amount of online content that our users create. The [law] provides important certainty that our hosting of user generated content will not lead to costly and crippling copyright infringement lawsuits.”

Before the takedown and notice procedure was passed in the late 1990s, great legal uncertainty existed for any company providing online services that allowed for third parties to post content. At worst, these companies could find themselves liable if a third party posted content that infringed a copyright -- and that’s no small deal. Infringing a single copyright can result in damages of up to $150,000. With potential damages like that, it’s hard to imagine that sites like YouTube, Facebook, and WordPress would even exist today.

Under the Digital Millenium Copyright Act (DMCA), the notice and takedown procedure requires that:

• Copyright holders notify service providers when they find infringing work on the provider’s site;
• The service provider notify the poster of that work that it will be taken down; and
• The poster has the option to fight back if they believe the post was not infringing.

When this process is followed, service providers find themselves in a safe harbor where they will not personally be liable for potential findings of copyright infringement.

This safe harbor has been instrumental to the growth of startup internet companies. Again, according to Paul:

“When the DMCA originally passed In 1998, it wasn’t possible to create a Facebook page, Twitter account or your own website, for free, in minutes like you can do on WordPress.com. These innovative tools allow anyone to communicate their vacation photos to the world, build a business as an independent publisher, or even organize a democratic, grass roots overthrow of an oppressive regime in the Middle East. The internet’s communication and sharing tools are used by millions of people, and all grew up under the DMCA. For the most part, the statute has worked to encourage the growth of innovative platforms and businesses. The United States is now home to the most thriving and advanced internet companies in the world.”

Traditionally, copyright was meant to incentivize artists to create, but more recently we’ve seen abuses of the system where incumbent industries attempt to rely on it to squelch competition (remember SOPA?). As this debate continues over the next few years, we’ll work hard to keep those abuses from happening, and ensure that artists and entrepreneurs are protected equally under the law.

New Bill Takes Aim at Patent Demand Letter Abuses

Since the end of last year when the House passed the Innovation Act with a resounding bipartisan majority, the President has announced his intention to sign the bill, and he made a strong statement in support of reform in this year's State of the Union address. But we've still spent the early months of 2014 working with Senators, and urging the Senate to act on pending legislation. Today, a new bill was added to the list. The Transparency in Assertion of Patents Act, introduced by Senators McCaskill (D-MO) and Rockefeller (D-WV), is an important bill that would protect consumers and small businesses by curbing the patent demand letter problem.

While the Innovation Act brought great gains to our community by squaring-up against patent trolls, the demand letter problem, which for jurisdictional reasons was left out of the House package, remains a grave concern. Last year, when we launched the demand letter database, Trolling Effects, with EFF and a coalition of tech advocacy organizations, we wrote:

The letters demanding these payments are often evasive, failing to include details about the patents, who owns those patents, and the products or services that allegedly infringe. They fail to give recipients the information to make rational decisions, such as whether they should pay the troll, ignore the letter, or go to court to fight it. Just hiring a lawyer to ascertain that seemingly simple information can easily cost well into the tens of thousands of dollars.

The letters raise even more fundamental concerns, too. Because they happen before a legal complaint is ever filed, they are not part of the public record. And once a settlement or license is signed, it will likely include a non-disclosure provision, prohibiting the letter's recipient from talking publicly about its contents. This means that the scope of the problem is often underreported, making it harder for policymakers to understand the true scale of the patent troll problem.

Here is what Sen. McCaskill and Sen. Rockefeller's bill would do:

• Require that demand letters contain certain basic information, such as a description of the patent at issue, a description of the product or service that allegedly infringes it, contact information for the patent's owners, and disclosures of ongoing reexaminations or litigations involving that patent.
• Define as an illegal, unfair, or deceptive practice certain egregious behaviors, such as sending letters threatening litigation without a real intent to file litigation, or sending letters that lack a reasonable basis in the law.
• Give state attorneys general explicit power to to target similar bad behavior in their own states.
• Allow the Federal Trade Commission to enforce these rules by levying penalties of $16,000 per each violation.

Signing this bill into law would go a long way to stopping some of the worst demand-letter abuses. We applaud Senators McCaskill and Rockefeller, and look forward to supporting this piece of legislation as it works its way through the Senate.

Speaking of which, urge the Senate to take action on this bill, and other essential patent reform measures, here. 

We Need to Expand Access to Education, Not Curtail it with Outdated BPPE Regulations

This post is by Tina Lee, founder and CEO of MotherCoders, a non-profit that helps moms on-ramp to technical careers in the new economy.

In many ways San Francisco is now a very different place than the one where I was born and raised in the 1970s. But that’s not surprising considering how much the world has changed -- vastly transformed by globalization and the advent of the internet. What is so troubling, however, is not that the world changes, but that public policy has been so slow to catch up. This was made all too clear when the Bureau for Private Postsecondary Education (BPPE), a unit of California’s Department of Consumer Affairs charged with licensing and regulating postsecondary education, moved to shut down education programs like Hack Reactor, App Academy and others.

While the marketplace has been driving technological change at a rapid and unprecedented rate, our civic institutions have been slow to adapt. Yet the health of our economy – not to mention our democracy – is dependent upon strategic policymaking that will ensure that everyone has equal opportunity to thrive in this new world. And one thing that’s always provided a promising pathway to social mobility in the U.S. is education – the kind that prepares Americans for participation in the economy through the acquisition of skills and knowledge that match market demands.

Right now the market desperately needs people with digital skills to fuel the growth of our innovation in economy, and people with software programming skills are in the greatest demand. In other words, there are plenty of job openings requiring software programming skills that offer growth potential and good wages, but not enough people to fill them.

In this environment, it’s no wonder people are flocking to coding bootcamps to retool their skill-set, especially since these programs take less time to complete than traditional academic and vocational programs, plus they offer mentorship and direct connections to local companies looking to hire. That’s why the recent move to shut down these programs is so troubling.

At a time when the digital divide is becoming dangerously synonymous with the opportunity divide, this seems emblematic of a larger disconnect between policy and reality. The fact is that demand for technology skills will only continue to grow as we shift further away from an industrial-based economy. According by research conducted by CODE2040 – a non-profit that’s working to increase the number Blacks and Latinos in tech -- there will 1.4 million new tech jobs by 2020, 70 percent of which will go unfilled unless we create more pathways to technology training.

As an educator actively working to bridge the digital divide in underserved communities, I know we should be focused on expanding access, not curtailing it. In fact, that’s the reason I founded MotherCoders – a non-profit organization that offers a tech orientation program designed to on-ramp moms to technical careers. By providing on-site childcare for mothers who want to learn basic computer programming, expand their understanding of the technology landscape, and network with peers and industry professionals, we’re doing our part to create a more dynamic, sustainable, and inclusive economy. And when our moms complete their tech orientation program, I want coding bootcamps to be an available resource for them for further skill development so that they can advance their careers.

While the role of regulation is critical in protecting consumers, and bootcamps on notice are working to comply, in this case the BPPE rules are due for an update. Many BPPE rules pertain to the operations of traditional, brick-and-mortar, post-secondary academic institutions, with language devoted to the governance of satellite campuses, on-site learning resources such as libraries and physical equipment, and administrative staff.

Satellite campuses? Anyone with a web enabled device can now become one;

Libraries? Almost all of the world’s knowledge has been digitized and made available online;

Physical equipment? All you need is access to a computer, an internet connection, and maybe a printer;

Administrative staff? Everything from HR to accounting to IT can be accessed as a service mediated by internet technology.

It’s very clear that these rules do not yet reflect how profoundly internet technologies have transformed the way our society works, and certainly not how coding bootcamps -- a new means of workforce development -- works.

To keep the U.S. competitive in the innovation game, it’s time to adapt our education policies so everyone has a chance to thrive in our new economy. My hope is that policymakers will work with citizens and industry alike to create the conditions necessary for building a diverse and inclusive twenty-first century workforce capable of competing in a fast-changing, technology-driven, globalized world.

Tina Lee is a mother of two young daughters and founder and CEO of MotherCoders, a non-profit that helps moms on-ramp to technical careers in the new economy. A lifelong San Franciscan who was raised in Chinatown by an immigrant grandmother, she holds a Bachelor of Arts degree in Political, Legal and Economic Analysis, with an emphasis in Economics, and an MBA from Mills College. She also holds an M.A. in Education from the Stanford University Graduate School of Education’s Learning, Design & Technology Program.