Engine Discovers Tech Cities Across America

This year, Engine is hitting the road to tell the stories of entrepreneurial communities in cities and towns all across America. With a video series, produced by our own Daniel Schwartzbaum, we’ll shine a light on founders and entrepreneurs, asking them why they do what they do, and what it is about their community that gives them the support they need.

We chose Portland for a our pilot project -- just a short flight from our home here in San Francisco, but light years away in terms of community building. What we found was a collaborative atmosphere where founders, capital investors, city and state government, and other local organizations came together to build, with intention and thoughtfulness, a community that feeds on the boundless energy of its proponents.

With the generous support of the Technology Association of Oregon, and their President, Skip Newberry, we have started to put together the film on what we found.

Here is just a taste: the preview trailer we produced for TAO’s office opening party last week. The full episode will be out soon. During the rest of this year, we want to discover more tech cities around the country -- let us know if you and your community want to be involved. We can't wait to hear your story.

EU Tech Sector Growth Shows Similar Trends to US

Just as our earlier U.S. research pointed to the pervasive and substantial growth of the high-value, high-tech workforce across the country, new research on high-tech employment and wages in the European Union highlights many of the same trends. Overall, the research establishes the high-tech sector as an important source of employment, income, and economic growth during what has otherwise been a difficult economic period for much of the EU.

In the first report of its kind to focus on the EU high-tech sector, we reframed the way Europe should be thinking about high-tech workers, expanding the definition to include STEM workers in non-high tech industries alongside workers within high-tech firms. Here’s what we found:

High-Tech Workers Are Better-Off in the Labor Market

With low unemployment rates and significant wage premiums, it’s clear that Europe’s high-tech workers face substantially more favorable labor market outcomes than their non high-tech peers.

High-Tech Employment is Booming Across Europe

Between 2000 and 2011, high-tech employment grew 20 percent where total employment increased only by 8 percent. The result was that by 2011, Europe’s 22 million high-tech workers represented 10 percent of total employment.

EU-27 High-Tech Employment Share of Total

8-20 percent

Mirroring a similar trend in the United States

The study also finds that high-tech employment is spread throughout the continent, reaching far beyond regions that are well-known tech hubs -- in fact increasing most in the areas with with previously lower concentrations of high-tech activity. So, geographically and economically diverse regions are benefiting from high-tech job creation--but that’s not all. There is also a sizable secondary local jobs multiplier, where the creation of one high-tech job in a region results in more than four additional non-high tech jobs in the same region.

High-Tech Local Jobs Multiplier

EUmultiplier

Delving into the idea that growth in high-tech employment is happening across Europe, here are some findings that might be surprising to some:

• The Czech Republic had the highest concentration of high-tech workers in 2011 (13.7 percent of total employment).
• Finland, Sweden, Denmark, France, and eight additional countries had high-tech employment shares above 10 percent of total employment in 2011 -- in other words, above the EU average.
• Spain has doing well--at least through 2011. Spain’s rapid high-tech growth, combined with its large population, amounted to an increase of 441,000 high-tech workers between 2000 and 2011—fourth in the EU-27 behind France, Germany, and Italy.

Employment Change by Country and Sector

employment change

This report certainly makes the case for the impact of the high-tech economy in Europe. Still, we need a deeper understanding of the contributions of this sector by looking at other measures of economic vitality, such as entrepreneurship, economic output, research and development, and productivity. Then, as in the United States, we are still left with the only question that counts: why do high-tech companies start where they do, and how can we create a better environment in each of our backyards? Our report doesn’t answer those questions, but it does establish a comprehensive set of facts from which policy makers and other stakeholders can draw upon as various proposals for increasing growth and competitiveness in the European Union are considered.

2014: Tech Policy Issues to Watch

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.

What's Up With Patent Reform?

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.

Why You Should Care About ECPA Reform

This piece was originally published in Venture Beat

The law that governs our interactions with the Internet was passed in 1986. Yes, the Electronic Communications Privacy Act — ECPA — became law before the Internet was widely used and at a time when most people did not have computers in their homes.

ECPA is out of date and out of its depth. But changing a law that touches as many industries and interactions as ECPA does takes a lot of political appetite and will. So why should you care?

Despite original intentions, ECPA is the touchstone privacy law protecting and governing our information and interactions online. So, among other things, it has been used by the government to argue that anything stored online for longer than 180 days has been“discarded” and therefore does not qualify for Fourth Amendment protection — the freedom from unwarranted search and seizure, and the right to privacy.

In other words, all those emails and Dropbox documents you’ve had for over six months can be obtained by law enforcement without a probable cause warrant. This includes the IRS, FBI, and DEA, as well as state and local law enforcement agencies.

So there’s the personal problem of having our online data unprotected by the Fourth Amendment — but that’s just the beginning. Since ECPA is being used to tackle questions outside of its original scope, and is therefore interpreted at will and applied unevenly, the ensuing uncertainty has an adverse impact on startups (read: small, fast-growing companies that are creating economic value and jobs).

Since data plays an increasingly important role for many technology startups, any uncertainty over compliance increases the burden of time and resources needed to unravel the issue. In addition, laws like this that disempower businesses and consumers place an added strain on user trust. Under ECPA, a complex legal request from law enforcement would force businesses to chose between facing fines and legal action while protecting their users, or complying with the government at the cost of alienating users. During the Occupy Wall Street protests last year, Twitter was caught up in all this while trying to protect a user’s Fourth Amendment rights against the unwarranted seizure of tweets over 180 days old. In the end, however, Twitter surrendered the data to avoid hefty fines.

This obvious disparity between the statute books and reality of how we use the Internet to communicate has already led to a bi-partisan push for reform, championed by the original ECPA author — Senator Patrick Leahy. Senator Leahy is joined by co-sponsor Senator Lee who explained that “when ECPA was enacted, email was primarily a means of communicating information, not storing it. Today, we use our email accounts as digital filing cabinets, where we store many of the personal documents and sensitive information that the Fourth Amendment was meant to protect. This bill takes an essential step toward ensuring that the private life of Americans remains private.”

There is also a reform bill in the House sponsored by Representative Kevin Yoder. The Email Privacy Act has 137 co-sponsors, but if it’s actually going to pass this do-nothing Congress, we need to take action. It’s worth noting here that the 113th Congress is on course to pass less legislation than any Congress in history. So far, it’s passed only 49 laws. The original “Do Nothing’’ Congress denounced by President Harry Truman in 1947, however, passed 906 laws.

And if that’s not a big enough hurdle, all reform legislation is now being blocked by the Securities and Exchange Commission in the hope of a special carve-out so regulatory agencies can continue to access our online documents without a warrant. Clearly, any such exception would undercut the purpose of reform.

So what can you do?

1. Sign the White House petition. Call on the White House to break its silence and stand up for ECPA reform. We need President Obama to tell the SEC to back down in its demands and make clear that the time for ECPA reform is now. The petition needs 100,000 signatures by December 12th. That’s next Thursday!

2. Join the TechFreedom Thunderclap to show your support and raise awareness about the need for reform.

3. Do your own evangelizing on social media using #ECPA and #GetAWarrant. You can also share these infographics from the ACLU and TechFreedom to educate others.

The right to privacy and the freedom from unwarranted search and seizure are not to be taken lightly. And as we live more of our lives online, it is essential that the law catches up.

Startup Investors for Patent Reform

To aid the movement of comprehensive patent reform, we organized a letter to Congress signed by forty prominent venture capitalists and angel investors.