Startup News Digest 9/25/15

Our weekly take on some of the biggest stories in startup and tech policy:

Startups Defend Net Neutrality Order. The FCC is facing ongoing litigation in the DC Circuit Court of Appeals over the net neutrality rules it passed earlier this year, and on Monday, the court received briefs from a variety of companies and organizations supporting the FCC’s rules. Engine filed a brief along with a group of innovative startups that included Dwolla, Fandor, Foursquare, General Assembly, GitHub, Imgur, Keen IO, Mapbox, and Shapeways. We argue that the FCC’s decision to reclassify broadband as a telecommunications service was necessary to preserve the continued growth of the startup sector, which has in turn driven consumer demand for broadband and incentivized companies to invest in their networks. The court will hear oral arguments in the case on December 4 and will likely render its decision sometime next year.

SEC To Finalize Crowdfunding Rules. Sources at the Securities and Exchange Commission have told Politico the agency is likely to finalize long-awaited crowdfunding rules in late October or early November. SEC rulemaking will put Title III of the JOBS Act into effect, which could radically expand capital access for startups—though the statute does contain some burdensome requirements for companies. While the startup community will be excited to see any action from the SEC in light of an extended delay, we need to ensure that whatever regulatory regime the SEC adopts is well-calibrated and accessible to the small, emerging companies that could most benefit from new sources of capital.

Bush Campaigns Against Open Internet. Most of the Republican candidates in the 2016 presidential race have come to realize that an overwhelming majority of the public supports net neutrality rules (including 81% of Republicans) and have refrained from loudly criticising the FCC’s Open Internet Order. But this week, Former Governor Jeb Bush expressed his opposition to net neutrality (a policy he onced called “one of the craziest ideas [he’s] ever heard”), arguing that preventing ISPs from abusing their gatekeeper power does nothing to enhance consumer welfare. Bush’s comments run counter to both the FCC and the conservative DC Circuit Court of Appeals, which have recognized that net neutrality rules and foster the growth of the edge providers and promotes investment in broadband networks, resulting in better and more affordable service for consumers. It’s a reminder that startups, consumers, and everyone else who benefits from the open Internet should keep a close eye on this presidential race. 

Administration Taking Steps to Promote High-Speed Broadband Access. On Monday, the Broadband Opportunity Council published its first report, which includes 36 actions that federal agencies will take to encourage broadband deployment.  These actions require no new funding, “but existing sources of funding are being opened up and barriers to deployment are being brought down.”  Of particular note is that the White House refers to broadband as a “core utility,” like electricity or water. We tend to agree - broadband is no longer a luxury. Connectivity is core to innovation and the ability of startups to reach customers and scale, and we are pleased to see the Administration taking these steps to bring access to underserved populations and areas of the country.  

White House Considers Encryption. Thanks to some leaked documents from the White House, it’s rumored that President Obama may come out in opposition to a law that would require firms be able to unlock their customer’s encrypted smartphones and applications. Up to this point, law enforcement has argued the need for backdoors to encryption to ensure national security and safety. This sort of advocacy from the White House would help repair global trust in the US government, countering the narrative in Europe that the US is trying to expand its surveillance activities. Meanwhile, the American Civil Liberties Union (ACLU) and other privacy advocates continue to push the importance of US government’s use of encryption to promote both personal privacy and national security.

“Facebook giveth and Facebook taketh away.”  The Wall Street Journal reported this week that dozens of startups have “shut down, been acquired or overhauled their business” as a result of Facebook’s new policies limiting outsider access to some of its users’ date. Facebook’s rules, which went into place in May, restrict what data can be used by third parties like startups, academics, politicians or organizations.  Other social media giants like LinkedIn and Twitter have enacted similar policies, signaling to the startup world that if you are building a product or service that relies on data from social media sites, that data may not always be available...

ECJ Advisor Deals Blow to U.S. Tech Companies.  In other data related news, a European Court of Justice (ECJ) advisor issued an opinion this week that the “safe harbour” agreement allowing for data transfers between the EU and the U.S. is “invalid” due to growing concerns around U.S. surveillance practices.  While the lawyer’s opinion is not legally binding, if cemented by a formal ruling it would create a headache for U.S. tech companies who could face data localization requirements in any EU countries.

Women Tech Leaders. Fortune profiles some of the powerful female talent Google has been able to attract at the executive level, including Ruth Porat, a recent addition who has led the transition from Google to Alphabet. Many of these executives after building their experience at Google have left to grow smaller tech companies. Meanwhile, Mary Lou Jepsen of Facebook has a different take: she sees many senior women leaving because they feel isolated by the tech industry.

SEC Said to Finalize Long-Awaited Crowdfunding Rules Next Month

Since 2012, entrepreneurs and everyday investors have been eagerly waiting for the Securities and Exchange Commission to finalize rules that will to put Title III of the JOBS Act into effect, allowing all Americans—regardless of their income—to invest in startups. Earlier this week, Politico reported on SEC sources saying final rules will be announced in late October.  

Title III is most highly anticipated and most controversial provision of the JOBS Act still awaiting SEC rulemaking. While investment crowdfunding under Title III has the potential to radically expand capital access for startups, the statute contains some burdensome requirements for companies, such as requiring audited financial statements for small companies to raise funds from unaccredited investors (people that make less than $200,000 per year or have less than $1 million in assets).

Many experts in the business community believe these requirements could make crowdfunding unworkable for most businesses. Further, the proposed rules announced by the SEC in October 2013 put forth additional requirements for companies seeking to raise money through crowdfunding, prompting concerns from entrepreneurs, crowdfunding platforms, and investors about the debilitating and largely unnecessary costs these rules create for small issuers.

Meanwhile, the delay in SEC rulemaking has allowed us to watch as other crowdfunding markets have evolved. The UK, for instance, has a robust investment crowdfunding market open to all investors, and it's seen tremendous growth in the last few years under a remarkably sparse regulatory regime. Here in the US, rewards-based crowdfunding and accredited investor crowdfunding also continue to grow as more companies seek alternative, innovative forms of financing. These markets offer valuable lessons for lawmakers and regulators alike as they continue to refine the rules governing investment crowdfunding under Title III—lessons we’ll explore in detail in our forthcoming whitepaper, "Financing the New Innovation Economy: Making Investment Crowdfunding Work Better for Startups and Investors." Look out for its release in the coming weeks.

Though the startup community will be excited to see any action from the SEC in light of what has already been an extended delay, we need to make sure that whatever regulatory regime the SEC adopts is well-calibrated and favors the small, emerging companies that could most benefit from accessing new sources of capital. And regardless of the rules the SEC adopts, we look forward to working in the coming years to improve the US crowdfunding rules to help the startup economy continue to grow.

Comments on NYC Congestion and FHV Studies

It’s been two months since New York City agreed to postpone a vote on legislation that would have capped the number of for hire vehicles in the city, a policy that would have been particularly damaging for small and emerging startups in the rideshare industry. The City instead has initiated a pair of studies: one a broad look at the taxi and for hire vehicle (FHV) industry and the regulations that govern it, and the other an analysis of congestion and its causes. Both studies are set to be completed by the end of this year.

To the City’s credit, it has made an effort to engage with startups and the larger tech community as it plans and conducts these studies. Engine has already participated in one meeting in which startups and advocates were given the opportunity to ask questions and weigh in on the studies.

However, it’s still unclear what impact this dialogue will ultimately have on the findings of the studies, and - more importantly - on whatever policy decisions are made based on those findings. With that in mind, Engine has shared the following recommendations with the Mayor’s office.

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The study focused on regulation of the FHV and rideshare industries should consider the following:

• The possibility of creating a brand new regulatory scheme for yellow and green taxis, livery and black cars, that is different from either of the current structures.
• The possibility of bringing yellow and green taxi regulations closer in line with the current black and livery regulatory scheme.
• The possibility of creating a new set of regulations that encourages and supports ridesharing or other public benefits being enabled by new technologies.
• The importance of creating a regulatory scheme that allows for emerging startups to innovate within the FHV industry, and which is not overly burdensome or cost prohibitive for new market entrants.

The study focused on the causes of traffic and congestion in Manhattan’s central business district should be sure to look at a wide array of potential contributing factors beyond the FHV and rideshare industries, including:

• The number of deliveries being made within the central business district and the behavior of those vehicles.
• The number of privately owned vehicles entering the central business district and changes in their behavior.
• Changes in bicycle and pedestrian traffic.
• Changes to the streetscape such as bike lanes, pedestrian plazas, or traffic calming devices.
• Street and other infrastructure conditions.
• Changes in scope, location and duration of street, bridge and tunnel closures resulting from construction, events, disabled vehicles, and other factors.
• Inefficiencies in current signaling systems and grid layout, including placement of one way streets.

Perhaps even more important than the parameters and findings of the studies are the policy recommendations that stem from these studies. In that context, we would like to see the City consider the following:

• When evaluating different factors, consider not just how much they contribute to congestion, but also what public benefits they provide. Some factors (ex. an increase in the availability of FHVs to underserved communities, improved access to bike lanes or pedestrian plazas) may have a negative impact on traffic but also have a clear public benefit. Other factors (ex. inefficiencies in signaling systems) have no public benefit. It will likely be preferable to reduce the factors that have no public benefit before reducing factors that have a clear public benefit.
• When considering driver pay, benefits, flexibility and quality of life, don’t just evaluate new technology driven FHV operators. Make sure to look at these factors for traditional drivers as well.
• Explore opportunities for the City to better use data to support a more flexible, 21st century regulatory scheme that can adapt to changing conditions in real time. Engage with transportation startups as well as leaders in the civic tech community to look for ways to make better use of the data that both companies and city agencies collect.
• Continue to invest in and prioritize making New York a more connected city. Broadband infrastructure doesn’t just help families and businesses connect to the Internet, it opens up endless possibilities to transform the streetscape into a smart-grid that can collect and adapt to real time conditions.
• Provide ample opportunity for innovators in the FHV and rideshare space to design and propose solutions to any negative impacts. Reasonable market and innovation based solutions should be viewed as preferable to government regulation wherever possible.
• If new regulations are considered, make sure they leave the door open for the next wave of innovators. Be careful not to inadvertently stifle new startups that could very well solve the problems currently under debate.
• Consider all solutions on the merits, even those that prove financially or politically challenging. Regulating FHVs may seem less expensive than making serious infrastructure investments, or more politically expedient than tolling East River crossings, but it may not prove nearly as effective at addressing the true causes of congestion.

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We’ll continue to engage with the Mayor’s office and other stakeholders in the weeks ahead. And as always, we’ll be working to ensure that startups have a real seat at the table.

Startups Fight to Defend Net Neutrality Order

Yesterday, Engine—along with a number of innovative startups including Dwolla, Fandor, Foursquare, General Assembly, GitHub, Imgur, Keen IO, Mapbox, and Shapeways—filed an amicus brief in the ongoing litigation over the FCC’s net neutrality order.

Engine and the companies on the brief have long been champions of net neutrality, working hard over the past year and a half to ensure that the FCC enacted the strongest open Internet protections possible. Convincing the FCC to pass bright-line rules against ISP blocking, throttling, and paid prioritization was a major first step in reestablishing the net neutrality rules that were thrown out in court in January 2014.

But now the country’s biggest ISPs have banded together, trying to get an appellate court to reject the FCC’s order. Their arguments range from claims that have previously been dismissed by other courts (the FCC has never considered any kind of broadband to be a “telecommunications service”) to arguments that are profoundly bizarre (despite more than 4 million comments, the FCC did not solicit enough public commentary about its rules).

Engine’s brief makes the case that the net neutrality rules that the FCC passed earlier this year are crucial to protecting the startup innovation that has helped drive the growth of the nation’s broadband infrastructure. It also argues that the entrepreneurs and investors that built the Internet economy have relied on the FCC’s work in protecting innovators from ISPs abusing their gatekeeper power over Internet access.

Oral arguments in the case are scheduled to take place this December, and the court is expected to issue its ruling sometime in 2016.

You can read the full brief here, and some key excerpts are below.

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The “virtuous cycle” is made possible — and drives demand for broadband services — because of competition and innovation by edge providers.  Consumers do not seek broadband services because of some intrinsic desire to access AT&T’s (or any other broadband company’s) technology infrastructure.  Rather, they seek broadband services for one reason and one reason only: because they want to access the overwhelming universe of content, information, and services offered by edge providers, the vast majority of which either are, or began life as, startups. Consumers that want access to these services demand higher quality connections to take full advantage of the Internet’s full potential, prompting broadband providers to invest more money in their networks.  And creative entrepreneurs find new ways to utilize these faster, better, and cheaper broadband connections to build more innovative services that spur consumer demand even higher.  

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The connection between net neutrality and the explosive growth of the Internet economy is not a coincidence.  Though Petitioners attempt to confuse the issue by conflating the regulatory classification of broadband with the actual regulations enacted pursuant to that classification, it is undeniable that the Internet has operated under a de facto net neutrality regime over the past decade, leading to a tremendous expansion of both edge provider services and broadband adoption—the virtuous cycle in action.    

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The value of strong net neutrality rules and the logic of the virtuous cycle of innovation has been recognized time and again by the FCC and the courts.  So long as strong net neutrality rules remain in effect, there is little reason to believe that the virtuous cycle will slow with the change in the classification of broadband.

But if broadband providers are permitted to “deneutralize” the Internet, the consequences for startups — and, due to the “virtuous cycle,” for further investment in broadband infrastructure and further innovation at the edge — will be devastating.  

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Without an open Internet, many of these companies likely would have never been started due to the increased costs and uncertainty that comes with discrimination and paid prioritization.  Others would have wilted in the face of their deep-pocketed competitors who would have been able to afford access to the “fast lane.”  To change the rules of the game now by permitting blocking, discrimination, and paid prioritization would disadvantage not only the amici, but also the hundreds of thousands of other startups and technology companies that have come to rely on an open Internet.

Northeast Startups, Here We Come!

The Engine team is getting back on the road to visit startups across the country. Next Monday, we’ll kick off our fourth Rise of the Rest tour with Steve Case, co-founder of AOL and CEO of Revolution, along with a busload of startup investors, startup community leaders, and startup advocates like ourselves. Together we’ll be highlighting the promise and growth of entrepreneurship far beyond the more familiar ecosystems like Silicon Valley. Our first stop is Baltimore, MD, then it’s on to Philadelphia, PA, Buffalo, NY, Manchester, NH and finally Portland, ME. In each city, we’ll be talking to entrepreneurs as well as business and community leaders. And at the end of each day, Steve Case will commit to investing $100,000 in the winner of a local startup pitch competition.

If you live in or around Baltimore, Philadelphia, Buffalo, Manchester, or Portland, come join us by RSVP’ing at the links below. Along the way, we’ll post dispatches from the cities we’ve seen. For updates, follow #RiseofRest on Twitter.

Baltimore: Monday, Sept. 28

Pitch Competition RSVP link

Celebration RSVP link

Philadelphia: Tuesday, Sept. 29

Pitch Competition RSVP link

Celebration RSVP link

Buffalo: Wednesday, Sept. 30

Pitch Competition RSVP link

Celebration RSVP link

Manchester: Thursday, Oct. 1

Pitch Competition RSVP link

Celebration RSVP link

Portland: Friday, Oct. 2

Pitch Competition RSVP link

Celebration RSVP link

Startup News Digest 9/18/15

Our weekly take on some of the biggest stories in startup and tech policy.

Tech and 2016. In case you missed it, check out Julie talking about tech and the 2016 election on KCRW’s Press Play with Madeleine Brand.

FCC Opens Up Business Broadband Data to New Eyes. On Thursday, the Federal Communications Commission (FCC) announced that it will release data on the little-understood special access market. While most consumers have never heard of special access lines, you probably unknowingly use them every day. They are the high capacity business broadband lines that allow ATMs to connect directly to your bank or cell phone towers to connect back to the network. Competition in this industry is sorely lacking, with just two providers covering most of the U.S. and jacking up prices for the startups, universities, hospitals, and other businesses that use them. While the data will only be accessible to analysts approved by the FCC, its release represents a step in the right direction towards more transparency, increased competition, and lower broadband prices.

Senate Committee Considers ECPA Updates. The Senate Judiciary Committee held a hearing on reforming the Electronic Communications Privacy Act (ECPA) on Wednesday morning. As we’ve covered in past digests, it's still legal for law enforcement to access your emails and other digital data without a warrant. Last week, the California legislature passed a bill to modernize these outdated digital privacy laws at the state level. Still, a federal overhaul of ECPA would be an even better fix, bringing these laws out of the digital dark ages.  Sens. Lee (R-UT) and Leahy (D-VT) have proposed a bill in the Senate, and there is similar legislation in the House. We’ll be tracking reform efforts.  

Dancing Baby Wins Victory For Copyright Fairness. The courts ruled this week in Lenz v. Universal, the famous “dancing baby” case. As Evan writes, “The Lenz ruling is important for a few reasons. First, it should make it much harder for content owners to abuse the takedown process. […] Second, the decision should serve as a loud reminder that the tech world needs to get to work rebalancing our copyright laws to ensure that they’re actually promoting creativity and expression.”  Read the whole post here.

$81M for CS in NYC. On Wednesday, New York City Mayor Bill de Blasio announced an $81 million public private partnership to make computer science education available to every student in city public schools by 2025. Substantial contributions have come from the Wilson family foundation, the AOL Charitable Foundation, and the Robin Hood Foundation. New York joins Chicago and San Francisco in terms of large cities that have made similar commitments, and we hope to see other cities, states, and the federal government continue to build on such efforts to prepare students for jobs in the growing innovation economy.

The Fight Is On Over Chicago’s Streaming Tax.  A group of Chicago residents have sued the city over its controversial application of the 9% Amusement Tax to online streaming services like Netflix, Hulu, and Spotify.  The Amusement Tax, which applies to events like concerts and sporting games, has been in existence for a while, but was only recently expanded to cover streaming services. And Chicagoans’ bills are already increasing.  As Ars Technica reports, one reader’s Spotify bill went from $7.99 to $8.71 this month. We’ll be watching, as the outcome of this case could have a national impact on the power of cities and states to tax the internet economy.

“Cool clock, Ahmed”. When a Texas middle-schooler’s homemade invention was mistaken for a bomb this week, prompting an outlandish response by his school and local law enforcement, it caught the tech world’s - and the President’s - attention. As a New Yorker writer points out, “His arrest comes at a moment when some of the world’s most influential people...have argued that there aren’t enough U.S. students gaining the math and science skills that will get them jobs in the tech sector."

A Different Kind of Tech Event. We were impressed and encouraged by the conversation at last week’s Tech Inclusion conference in San Francisco, which brought together leaders in Silicon Valley and the national tech community to discuss the challenge of making the tech industry more diverse. Read our take on why this wasn’t your typical tech event and what we took away.

Dancing Baby Wins Victory For Copyright Fairness

The development of copyright law in the US has followed a predictable (and unfortunate) trajectory: over time, Congress and the courts have continually added ever more and stronger protections for copyright owners and minimized the importance of creative reuse and open access. So, when this trend occasionally reverses—like when the Internet community rose up to fight back against SOPA/PIPA—it’s worth taking note. This week’s court ruling in Lenz v. Universal (the famous “dancing baby” case) represents such a victory.

A quick refresher for those who haven’t been following the case closely since it was first filed way back in 2007: Stephanie Lenz posted to YouTube a short video of her son dancing to Prince’s “Let’s Go Crazy.” Despite the fact that the video was less than a minute long, and that the song was barely audible in the background, Prince’s record label, Universal, promptly went crazy and sent YouTube a notice claiming that Lenz’s video infringed its copyright.

Under the Digital Millennium Copyright Act (DMCA), content distribution platforms (like YouTube) can’t be held liable for their users’ alleged copyright infringements if, upon receipt of a notice of infringement like the one Universal sent, they remove the identified material from their sites. This essentially gives content owners the power to direct the removal of content from the Internet simply by asserting an infringement. Recognizing that, Congress included in the DMCA a provision that allows the poster of allegedly infringing content to challenge the accusation of infringement, which is exactly what Stephanie Lenz did, claiming that her video was a “fair use,” and thus didn’t infringe Universal’s copyright.

Fair use is one of the few doctrines in copyright law that permits people to reuse someone’s copyrighted work without permission. Think, for instance, of a book review, for which one might want to use an excerpt of the reviewed book. Or a parody, criticism, or other forms of speech protected by the First Amendment. Each of these requires use of the underlying work and doesn’t harm the market for that work by creating some kind of substitute for the original content. A short clip of a child dancing to a pop song seems like a quintessential fair use, so it’s hard to imagine how Universal could have believed that Lenz’s video infringed its copyright.

Despite this, content owners consistently and wantonly send infringement notices, no matter how preposterous their claims of infringement may appear to reasonable people. This allows certain parties to act as police of content on the Internet, giving copyright holders what nearly amounts to a blank check to remove all kinds of protected speech.

Thankfully this week’s ruling in Lenz restores some sanity to this regime. The Ninth Circuit ruled largely in Lenz’s favor, holding that a content owner must consider fair use before it has content removed from the Internet.

The Lenz ruling is important for a few reasons. First, it should make it much harder for content owners to abuse the takedown process. It’s incredibly expensive and time consuming for platforms (especially small ones) to respond to takedown notices, and because until now it was virtually impossible to face any repercussions for sending false notices, content owners were incentivized to send as many removal requests as they could, often for improper purposes. When combined with the absurdly large penalties facing companies accused of facilitating copyright infringement, the process of handling takedown notices makes running a content distribution startup difficult if not financially impossible.

Second, the decision should serve as a loud reminder that the tech world needs to get to work rebalancing our copyright laws to ensure that they’re actually promoting creativity and expression. It’s troubling that it took almost a decade to convince a court that content owners shouldn’t be allowed to accuse companies of hosting infringing material if they’ve done virtually nothing to confirm or deny that belief. But it’s not surprising, since for years, content industries were the only ones at the table in Washington lobbying for copyright rules.

There’s a long list of obvious fixes to the copyright system that will realign the law with copyright’s original purpose: to promote creative activity.  We could start by eliminating statutory damages awards that bear no relation to the actual harm suffered, and by precluding personal liability for entrepreneurs that have not knowingly violated any copyright laws but whose companies are accused of facilitating the infringing activities of their users. There’s much work to be done, but as Lenz shows, through dedicated effort, we can make incremental but important changes to the copyright regime.

Not Your Typical Tech Event: What We Learned at the Tech Inclusion Conference

You can also read this post on Medium.

This past week’s Tech Inclusion conference in San Francisco was not your typical tech event. The audience included engineers, entrepreneurs, policymakers and community activists who were far more representative of the diversity of the Bay Area - and the rest of the country, too. The speakers didn’t shy from pointing out serious flaws in the very industry in which they work. An Oakland food startup employing local youth catered the lunches. And a “Mommy Pod”—an RV outfitted for breastfeeding mothers—was stationed just outside the entrance.

Where’s the diversity in tech? It all showed up last week at Tech Inclusion, a conference where speakers and attendees discussed the major challenges to improving the makeup of tech, but also the potential and the widespread commitment to doing better. From rethinking recruiting, to repurposing federal education grants, to envisioning tech as a platform for social justice, ideas big and small were all debated with both energy and a kind honesty not always heard at Silicon Valley meetups. The conversations between panels and during networking sessions were frank and authentic: Speaker Julia Nguyen quite accurately said, "when you don't talk about something it perpetuates ignorance." Congresswoman Barbara Lee's speech was empowering and direct.  

For a full rundown of conference speakers and topics, visit Techinclusion.co or check out the recorded event on YouTube. While we can’t chronicle all the motivating conversations we had and tell you about all the inspiring people we met, here’s a few things we took away:

Demand Transparency - We can’t address the problem if we don’t understand the scope of it. A growing number of technology companies are making their employee diversity data public. Most recently, the fast-growing startup Slack announced its numbers. We applaud this initiative and hope it continues to gain momentum with more companies releasing data. But we also need to see more categories of data released. As one conference-goer noted, we have no idea how many people with disabilities are working in the tech industry. They represent a workforce that’s massively underemployed despite the skills they have to offer. And we’re just starting to talk about veterans too

Look to Role Models - Many tech companies are actively addressing the lack of diverse employees in their ranks, some by hiring an employee whose role it is to oversee all aspects of making their company more inclusive. The directors and leaders of diversity efforts at Pinterest, Yelp, Twitter, and Thoughtworks all shared their ideas for recruiting a broader range of talent and also ensuring these new employees stick around and grow their careers. For some, recruiting at historically black colleges and universities is a new focus. And nearly every company of substantial size has employee resource groups (ERGs) for workers to consistently discuss and address making the workplace more welcoming.

Invest in the Pipeline - The importance of the talent pipeline cannot be underestimated. While it won’t help the industry embrace a more diverse employee pool right away, investing in education now will ensure our next generation of engineers and entrepreneurs come from a wider set of backgrounds, (and that there are more of them with the skills to power our innovation economy.) The Department of Labor has estimated over 1.3 million new tech jobs will open by 2022. This presents a massive opportunity for communities that have been historically excluded from tech and dozens of community organizations, governments and educational institutions are working to bring them into the fold. These efforts—from neighborhood programs like Hack the Hood to national movements like Girls Who Code—must be supported, scaled and expanded.

Build Coalitions  - Witnessing so many connections being made over shared values and complementary efforts was one of the best parts of attending this conference. We sensed new partnerships and collaborations forming by the minute. Coalitions based on shared goals - especially goals as big as overhauling the makeup of a fast-moving, fast-growing industry - are critical. They allow us to share resources and ideas, amplify our message and expand our reach.

Advocate for Policy Change - As a policy organization, we can’t overlook the impact that can be achieved when policymakers heed our calls for action. The conference highlighted several leading examples when government has been a powerful tool, including a local ballot initiative to fund job-based education programs in Oakland and the White House’s tech hire initiative. Engine also led a policy workshop, “Achieving Inclusion Through Policy and Advocacy” where attendees developed their own policy action plans that included reforming community block grants to fund diverse entrepreneurs and requiring the IRS to tax corporations based on their gender pay gap. And we’ve invited anyone who wants to continue this conversation to joins us at engine.is/diversity.

Policymakers are just beginning to engage with our wider tech community to understand how to propel tech-based entrepreneurship and, most importantly, ensure more of our country participates. At Engine, we work every day to push policymakers to support inclusive forms of technology innovation and entrepreneurship.

Over the past year, we’ve been part of conversations with policymakers as well as community organizations and industry leaders about the future of the tech sector. Tech Inclusion was a powerful convergence of the many disparate efforts we’ve seen. Like us, we hope the other attendees found new fuel, new partners, and new avenues for pursuing change last week. And if you’d like to join our efforts, visit us at engine.is/get-involved.

Startup News Digest 9/11/15

Our weekly take on some of the biggest stories in startup and tech policy.

CalECPA Letter to Governor Brown Urgently Needs Your Signature. On Wednesday, the California Assembly passed the California Electronic Communications Privacy Act (CalECPA) with broad, bipartisan support. The bill (which we covered in last week’s digest) would update digital privacy laws by requiring law enforcement to obtain a warrant before accessing an individual’s electronic communications. The bill now heads to Governor Jerry Brown for signature, but opponents are campaigning aggressively for a veto. We’re sending a letter to Governor Brown urging him to sign the bill and modernize an absurdly outdated privacy law. If you are a startup and would like to lend your voice to this fight, please fill out this form by noon on Monday, September 14.

Upcoming Tech Events. Catch our webinar on September 23, “How can startups work with government to promote innovation and new technologies?” Co-sponsored with Gide Public Affairs and ConnecTech, the webinar will look at how to incorporate a government relations strategy and leverage government resources to grow your startup, and how we can all advocate to protect the startup community. Click here to RSVP.

Intelligence Reauthorization Bill Still Held Up Over Terrorist Reporting Provision. As Congress returns to session, a bill to reauthorize funding for intelligence agencies continues to be held up in the U.S. Senate over a provision that would require social media and internet companies to police the speech of their users and report apparent “terrorist activity.” Opponents argue that the bill’s vague legislative language will result in a compliance nightmare for the wide range of companies that will be subject to the bill’s requirements.  Senator Ron Wyden (R-OR) has vowed to block the bill until these concerns are addressed.  We will be monitoring closely, as the currently ill-defined requirements could be overly burdensome and difficult to navigate for many startups.  

An Immigrant Entrepreneur’s Story. "Our immigration system hinders entrepreneurship, innovation and productivity," writes tech entrepreneur, Amit Paka, and we couldn't agree more. Paka shares his story of patiently navigating the irrationally complex immigration system to at long last obtain residency status and become a U.S. citizen. And in that time he also founded two companies, despite significant obstacles. This broken system impedes opportunities for entrepreneurs - the men and women creating new technologies and jobs in this country every day - yet it remains to be seen whether real solutions are in sight.

Patent Reform. Lot’s of news on patents this week. House Judiciary Chairman Bob Goodlatte expressed confidence that patent reform legislation would get a vote in the weeks ahead. The NY Times wrote in an editorial that “patent law should not be used to prevent consumers from reselling, altering or fixing technology products.” And the patent research platform Patexia launched a new initiative using crowdsourcing to help companies share some of the burdens associated with patent litigation. In case you missed it, check out our recent post on the status of patent reform efforts in Congress.

A Safety Net for the On-Demand Economy.  As lawmakers continue to grapple with the gig economy’s dramatic transformation of the American workforce, recommendations are emerging around which policies will best serve the growing class of on-demand workers. On Wednesday, the National Employment Law Project published a report calling on lawmakers to classify on-demand workers as employees and extend a number of protections and benefits to them. Freelancers Union founder Sara Horowitz proposed additional solutions in a New York Times op-ed published Wednesday, arguing for the creation of a “new system of portable benefits” to better provide a safety net for workers in the freelance economy. These are important conversations for the startup community to take part in as the debate continues around how to best support this new class of workers.

Diversity in Tech. African Americans face serious challenges in entering the tech field, even if they live just miles from Silicon Valley. Profiling several new organizations including the Hidden Genius Project, based in Oakland, the New York Times highlights how the tech community’s debates about its lack of diversity have spurred initiatives to educate, train and support underrepresented minorities to enter into and succeed in the industry. African Americans have become an especially important focus: they currently make up only 7 percent of the tech workforce and receive only 1 percent of VC funding. See more on Engine’s work to diversify tech here.

Tech Leaders in Politico 50. The Politico 50 is out, recognizing some of the people transforming American politics this year. The list includes a number of tech leaders, including Engine board member Marvin Ammori, along with Susan Crawford, Tim Wu, Michelle Lee and Chris Soghoian. Congrats to everyone who made the list!

Startup News Digest 9/4/15

Our weekly take on some of the biggest stories in startup and tech policy:

Growing Support for CalECPA.  Right now it's still legal for law enforcement to access your emails and other digital data without a warrant. SB 178, the California Electronic Communications Privacy Act (“CalECPA”), would change that on the state level by modernizing outdated digital privacy laws. The bill passed the California Senate back in June, but still faces a couple of hurdles, including a vote in the Assembly that should take place in the next couple of weeks.  The LA Times just endorsed SB 178, noting that “Californians need the protections offered by SB 178, and the bill deserves the Legislature's support.”  A poll published this week found similar support among California voters, with 82% of participants agreeing that law enforcement should get a warrant before accessing an individual’s digital data.  Engine echoes this endorsement of SB 178 and hopes to see California take the lead on updating its privacy laws to keep pace with the changing digital landscape.

The Future of Higher Education. Daniel Pianko of University Ventures writing in TechCrunch argues that the lack of innovation in higher education is due to a lack of commitment from Silicon Valley billionaires. “Today’s current generation of entrepreneurs are spending their energy and resources lobbying for band-aid solutions like H-1B visas, when they could be reimagining the current pipeline to address the lack of female and minority engineers in their companies.” Pianko points out that it was investment from 20th century titans of industry like Johns Hopkins and Andrew Carnegie that created the modern research university, and forced schools like Harvard and Yale to evolve in order to compete. He also points to non-traditional education models being pioneered at places like Galvanize. Here’s a look back at a deep dive we did on education policy and its impact on innovation.

New White House Hire. The White House announced that they are hiring their first Director of Product this week. Josh Miller, a startup founder who sold his company to Facebook last year will lead efforts to improve their existing digital products and look to develop new ones. Miller has a history of bringing a tech perspective to civic engagement. This marks yet another move from an administration that seems determined to engage with startups to improve the way government functions.  

Diversity in Tech. Troubling new data from the Pew Research Center shows that “businesses owned by women and minorities bring in far less revenue than firms with male or non-minority owners.” The research finds that even when you look at sectors where women tend to fare better, the problem persists. This Fortune article hypothesizes that one big factor may be a lack of investors--a problem that has been documented before. Engine will continue to work on access to capital issues, particularly as it affects founders from underrepresented groups. Stay tuned for more on that in September….  

Drones. The National Journal reports that in the absence of federal regulations, 26 states have now passed local legislation to limit the operation of drones. This patchworks of regulation is causing concerns for operators and commercial users. Hopefully the months ahead will see a thoughtful approach to protecting safety and privacy that doesn’t needlessly throttle innovation in this growing industry.

Car Hacking. The debate over how to make Internet-connected vehicles more resistant to cyber attacks is heating up in Washington. Much of the discussion will center around whether these are problems that can be solved within the industry, or if government action will be necessary to spur automakers to act.

Chile’s $40M Bet to Lure Global Startups: Lessons for Policymakers

Five years ago, the Chilean government launched Start-up Chile, a bold initiative to draw global entrepreneurial talent to its capital city. This new focus on innovation has since earned Santiago the nickname “Chilecon Valley.” Earlier this week, the Wall Street Journal reported that over 1,000 companies from 77 countries have so far been accepted into Start-up Chile, which provides early-stage startups with $40,000 in equity-free funding and residency visas for their employees, in exchange for locating their business in the country for at least six months.

The creators of Start-up Chile hope the influx of technology companies will ultimately help diversify the national economy, which has long been heavily dependant on the copper mining industry. (By some estimates, this single industry makes up 20 percent of Chile’s GDP and 60 percent of its exports.) Chile has now dedicated over $40 million to the program and its neighbors in Brazil, Colombia, and Peru have already launched similar efforts.

So is Chile on its way to becoming the next Silicon Valley, or at least the startup hub of South America? Well, as the Journal explains, the results are mixed. Most of the foreign startups that relocate to Santiago don’t extend their stays after the six-month program: over 80 percent leave Chile to scale their ventures elsewhere. As the article points out, this trend underscores some significant obstacles to innovating in Chile, in light of a regulatory environment that’s long favored established industries. One former government official noted that Chile can’t just provide public grants for startups, it must also create regulatory conditions that enable startups to challenge entrenched competitors. This is where the outcomes of the Start-up Chile program may offer some important lessons for policymakers around the globe hoping to cultivate tech ecosystems in their own cities, states, or countries.

Depending on who you ask, the tenets of the ideal tech ecosystem vary, but most analyses agree on several key pieces: a strong talent pool; access to financing; a dense network of ideas, mentors, and supporters; and a conducive regulatory environment. (We’ve previously written about some of these essential ingredients here). The concept continues to evolve as successful new ecosystems—from Los Angeles to Berlin—emerge. And seeing the positive economic results startups are generating, more and more governments are looking for ways to grow thriving entrepreneurial communities.

By luring companies with seed financing, Chile has taken at least one of these tenets seriously: access to capital. As the 2015 Global Startup Ecosystem Ranking from Compass points out, Santiago is among several cities, (in addition to Singapore and Tel Aviv,) whose focus on stimulating the financial foundation of its ecosystem has been successful, at least in the beginning stages of the ecosystem’s formation.

However, as the work we do at Engine reflects, government’s role in supporting technology entrepreneurship goes far beyond funding (though, we’d argue that the U.S. government could do more to open up new avenues to capital): every level of government must adapt to innovation-oriented policies. The Journal suggests Chile’s recent tax overhaul, which has been criticized by some for increasing the costs of doing business, could undermine the growth of its emerging startup sector. Regulations in other major national industries (with long, complicated histories), from banking to mining to energy, could further discourage innovation. Simply put, Chile’s greater economic priorities may not yet align with the needs of the nation’s budding entrepreneurs.

Chile’s program is still young and still evolving. The government is actively formulating new strategies to keep startups there longer, most recently with the launch of a $100,000 follow-up grant for select companies that agree to incorporate in Chile, stay for at least a year, and become mentors to local entrepreneurs, conditions meant to commit companies to expanding in Chile. And whether or not the program has generated major economic results, the influx of foreign entrepreneurs has created a valuable network in Chile for its own native entrepreneurs. In the first few rounds of applications, no Chilean companies were accepted. Now, 20 percent of the accepted companies have been Chilean.

Applicants and local entrepreneurs are also recognizing the benefits of capitalizing on existing economic strengths. The Journal points to one promising Start-up Chile company, BioFiltro, with a wastewater treatment technology—some of their first customers were Chilean vineyards that benefitted from BioFiltro’s cost-saving irrigation solution. This type of industry-focused model has already shown great promise in other cities all over the world. A public-private partnership in Des Moines, Iowa, for instance, created an insurance-focused startup accelerator to build upon Iowa’s long-standing insurance industry. In 2010, business leaders in finance joined forces to launch one of the first fintech accelerators in New York City and London, the world’s financial hubs. Startups built in Chile may find greater success by focusing on agriculture or even copper-mining. Chilean lawmakers could consider creating incentives that encourage innovation in these sectors.

What Chile has started to do is undoubtedly laudable, but Chile’s government and entrepreneurial community have more work to do if they’re going to produce leading technology companies and transform major sectors of their economy. As Chilean policymakers evaluate Start-up Chile’s early outcomes and forge a path forward, they should recognize that expanding and sustaining a strong tech ecosystem must go far beyond providing seed capital.

Startup News Digest 8/21/15

Welcome to the Startup News Digest, our weekly take on some of the biggest stories in startup and tech policy. Here's what we've been tracking the week ending August 21st, 2015:

• Venue Reform. 44.4% of all patent cases are filed in the Eastern District of Texas. And that’s no accident. Our friends at EFF took a close look at the numbers, and found that the “probability is so vanishingly small that you’d be more likely to win the Powerball jackpot 200 times in a row”. So why are so many cases filed there? Because the Eastern District is notoriously friendly to plaintiffs, making this an ideal location for patent trolls to operate. More on the numbers, and the need for venue reform, here. And read our recent take on the problem here.

• Copyright Law and Creativity. Copyright law's principal purpose is to encourage creativity: giving creators exclusive control over their content, the argument goes, will allow them to earn enough money to sustain further creativity. The trajectory of copyright policy in the past few decades seems to operate on the reductio ad absurdum that if exclusive control over content leads to more creativity, maximum control must lead to maximum creativity. It is no surprise, then, that content industries reacted so strongly to digital technologies that could weaken control over the distribution of their work, arguing that the Internet will ultimately destroy creative industries. But, as the New York Times highlights, this argument doesn't hold up all that well in practice. On the contrary, creative production has exploded with the rise of digital distribution technologies. The findings should give policymakers pause about further ratcheting up copyright protections like term lengths and infringement penalties that already likely diminish rather than promote creativity. We wrote more about the negative impact of punitive copyright law here.

• Diversity in Tech. The Verge took a close look at the diversity numbers at some of the largest tech companies.  And while the numbers aren’t good, they also point to some of the problems with the ways employment data gets reported to the federal government. If we’re going to make progress in diversifying the tech sector, we need data that accurately reflects the problem and the way it responds to various efforts from both the private and public sector. Check out some of Engine’s work on diversifying tech here.

• Taxing the Digital Economy. The Wall Street Journal looks at ways different states are trying to collect taxes from new technologies to offset losses in sales tax and other traditional sources of revenue. While states are reasonable to want to collect funds they are due, this kind of piecemeal approach creates serious regulatory issues for startups that operate nationally or globally. And it has the potential to push entrepreneurs out of states with particularly onerous policies. More here on the dangers of trying to apply old tax and regulatory schema to new technologies.

• Drones. As drones (or unmanned aerial vehicles, UAVs) go mainstream, and some disrupt air traffic, policymakers are looking to apply rules that would limit their ability to cause danger or invade privacy. Sen. Chuck Schumer (NY) is pushing to require dronemakers to develop technology that would keep drones from entering restricted airspace. This sort of geo-fencing provision will likely find its way into negotiations over the extension of the FAA reauthorization bill next month. Meanwhile, researchers at UC Berkeley are testing a license plate for drones consisting of multicolored lights on the bottom of an aircraft. The unique pattern of blinks assigned to each drone could be identified in a database by law enforcement.

• Decoding the On-Demand Economy. Policymakers (and presidential candidates, too) are grappling with how to interpret the emerging on-demand economy and too often, as Devin Findler of Institute for the Future points out, this industry is wholly categorized as either good or bad. The conversation among regulators, policymakers and even media critics should instead seek to understand the underlying technologies transforming sectors of our economy and how new platforms built on top of those technologies can be "intentionally designed to maximize the benefits for everyone connected to them." IFTF recently sat down with the Department of Labor to share these more nuanced insights about the future of work - we need more of these conversations happening at every level of government.

Celebrating Startup Day Across America 2015

The startup ecosystem is no longer exclusively a Silicon Valley, a New York City, or even a Boulder, Colorado phenomenon. Startups are flourishing in communities all across the country. We’ve seen entrepreneurs building new businesses in Des Moines, Detroit, and New Orleans on our Rise of the Rest tours and we’ve reported on some of the fastest growing startup ecosystems in the nation. On Wednesday, August 19, we’re working with Reps. Darrell Issa and Jared Polis, 1776, and dozens of startups and elected leaders  throughout the U.S. to celebrate Startup Day Across America—a national day bringing together members of Congress with startups in their districts.

This year, members of Congress will be making stops at startups, incubators, and co-working spaces in cities like Sacramento, Phoenix, and Charlotte for tours, demos and conversations with entrepreneurs.

Startup Day gives our representatives the opportunity to see firsthand how young and emerging companies are leveraging the power of technology to develop new products and services at an unprecedented rate, and also creating jobs in their districts. It provides entrepreneurs the chance to tell policymakers how and why supportive policy makes a difference: from patent reform to capital access, our lawmakers have the power to craft and champion legislation to support the new innovation economy.

We’ll be highlighting activities throughout the day. Follow #StartupDay on Twitter for updates - and if you’re hosting a member of Congress, make sure to let us know by posting with #StartupDay on your social media channels.

See you in Austin? Vote for Engine’s SXSW Panels!

It may seem early to be thinking about next year’s SXSW, but the panel picking process is already getting started. From now until September 4, the public can vote on over 4,000 potential panels for next year’s SXSW agenda. The team at Engine has submitted several proposals that we think will make for fascinating and informative conversation at the intersection of technology, startups, and policy. Plus, we’ve proposed a panel on how to launch a nonprofit organization like Engine. Help us make sure these panels get picked by voting for them today. You’ll need a SXSW account, and then you can vote for other great panels you’d like to see as well.

Last year, Engine discussed the “Politics of Innovation” with Techstars, Senator Jerry Moran, and Representative Kyrsten Sinema.

We hope to see you again in 2016!

Engine's Panels:

Tech at Issue in 2016 Election

Featuring Julie Samuels (Engine), Ron Klain (Revolution), Tod Ullyot (Andreessen Horowitz), Tony Romm (Politico)

Crowdfunding: Possibilities and Policy Challenges
Featring Evan Engstrom (Engine), Ryan Feit (SeedInvest), Sara Hanks (CrowdCheck), Michal Rosenn (Kickstarter)

Startups & Diversity: Can Public Policy Help?

Featuring Julie Samuels (Engine), Robin Kelly (House of Representatives), Robin Hauser Reynolds (Finish Line Features, LLC), Charlie Hale (Pinterest)

Interactive: Start a Nonprofit Without Tearing Your Hair Out
Featuring Chhaya Kapadia (New America's Open Technology Institute), Brooke Hunter (Engine)

Music: Start a Nonprofit Without Tearing Your Hair Out
Featuring Chhaya Kapadia (New America's Open Technology Institute), Brooke Hunter (Engine), Jesse von Doom (CASH Music)

More tech policy panels from Engine's friends:

Can Congress Tackle the Internet of Things?

Featuring: Rep. Darrell Issa, R-Calif.; Elizabeth Frazee, TwinLogic; Paul Daugherty, Accenture; Nicole Gustafson, National Football League.

Decrypting the Cyber Security Debate in Washington

Featuring: Rep. Will Hurd, R-Texas; Chani Wiggins, TwinLogic; Sonny Sinha, Department of Homeland Security; Denise Zheng, Center for Strategic and International Studies.

Are We Giving China the Internet? ICANN Explained

Featuring: Rep. Suzan DelBene, D-Wash.; Christian Dawson, i2 Coalition; Michele Neylon, Blacknight Internet Solutions; Tiffany Moore, TwinLogic.

Elise’s Data-Plan: Connecting Rural America

Featuring: Sen. Jerry Moran, R-Kan.; Rebecca Thompson, Competitive Carriers Association; Kristi Henderson, University of Mississippi Medical Center; Eric Woody, Union Wireless.

Following the Stream: Congress & Music Royalties

Featuring: Casey Rae, Future of Music Coalition; Rep. Mimi Walters, R-Calif.; Katie Peters, Pandora; Rachel Wolbers, TwinLogic.

Winter is Coming: Copyright Chill on Security

Featuring: Corynne McSherry, Electronic Frontier Foundation; Laura Moy, New America Foundation; Kyle Wiens, iFixit; Karen Sandler, Software Freedom Conservancy.

Pixelated & Political: The Internet in Washington

Featuring: Rep. Blake Farenthold, R-Texas; Rep. Eric Swalwell, D-Calif.; Rep. Renee Ellmers, R-N.C.; Michael Beckerman, Internet Association.

Internet Economy: In the U.S. & Abroad

Featuring: Sen. John Thune, R-S.D.; Michael Beckerman, Internet Association.

Embedding Human Rights in the Internet

Featuring: Joseph Hall, Center for Democracy & Technology; Karen Reilly, Independent; Eric Sears, MacArthur Foundation; Lindsay Beck, Open Technology Fund.

How to Fight ISIS without Breaking the Internet

Featuring: Rebecca MacKinnon, New America Foundation; Judith Lichtenberg, Global Network Initiative; Shahed Amanullah, LaunchPosse; Andrew McLaughlin, Betaworks.

The End of Online Free Expression?

Featuring: Gautam Hans, Center for Democracy & Technology; Dorothy Chou, Dropbox.

CDT/Fitbit: Ethics & Privacy in Wearable Research

Featuring: Michelle De Mooy, Center for Democracy & Technology; Shelten Yuen, Fitbit.

Everybody Dies: What is your Digital Legacy?

Featuring: Alethea Lange, Center for Democracy & Technology; Megan Yip, Law Office of Megan Yip; John Troyer, Centre for Death and Society; Vanessa Callison-Burch, Facebook.

Protecting the Digital You

Featuring: Nuala O’Connor, Center for Democracy & Technology

Euro vs. American Privacy: Clash of Civilizations?

Featuring: Jillian York, EFF; Ulf Buermeyer, Netzpolitik; Raegan MacDonald, Access; Chris Soghoian, American Civil Liberties Union.

Every City is an Internet City

Featuring: Nika Nour, Internet Association; Sen. John Thune, R-S.D.; Sen. Jerry Moran, R-Kan.; Rep. Fred Upton, R-Mich.

The Killer Congressional Office

Featuring: Seamus Kraft, Open Gov Foundation; Rep. Seth Moulton, D-Mass.; Sen. John Cornyn, R-Texas; Rep. Cathy McMorris Rodgers, R-Wash.; Sen. John Thune, R-S.D.

Internet of Things: Just Someone Else’s Computer?

Featuring: Rep. Blake Farenthold, R-Texas; Sherwin Siy, Public Knowledge; Jen Ellis, Rapid7; Sara Watson, Berkman Center.

Using data to power criminal justice reform

Featuring: Emily Shaw, Sunlight Foundation; Wesley Lowery, Washington Post; Tracy Siska, Chicago Justice Project; Clarence Wardell, Presidential Innovation Fellows Program.

The New Battle Over Encryption & How to Survive It

Featuring: Kevin Bankston, New America Foundation; Moxie Marlinspike, Open Whisper Systems; Jennifer Valentino-DeVries, Wall Street Journal; Heather West, CloudFlare.

No Encryption Backdoors, Please. Myths Debunked.

Featuring: Sunday Yokubaitis, Golden Frog.

Cryptowars 2.0: Silicon Valley vs. Washington

Featuring: Sara Sorcher, CS Monitor; Matt Blaze, University of Pennsylvania; Amit Yorak, RSA; Stewart Baker, Steptoe & Johnson LLP.

Smart Cars, Smarter Cities: New Transit Tech

Featuring: Michael Petricone, Consumer Electronics Association; Susan Zielinski, SMART; Andrew Collinge, Greater London Authority; Ashwini Chhabra, Uber.

Get your Goods: Unmanned Systems and 3D Printing

Featuring: Doug Johnson, Consumer Electronics Association; Gur Kimchi, Amazon; Ping Fu, 3D Systems; Richard Pelletier, Ford Motor Co.

Building better cities with better data

Featuring: Chris Gates, Sunlight Foundation; Tony Yarber, City of Jackson; Jennifer Pahlka, Code for America; Daniel X O’Neil, Smart Chicago Collaborative.

Be the Next Tony Stark

Featuring: Mike Geersten, TandemNSI; Gary Shapiro, Consumer Electronics Association; Christina Winn, Arlington Economic Development; Brad Tousley, Defense Advanced Research Projects Agency.

5 Best Startup Ideas in VR / AR

Featuring: Robert Scoble, RackSpace; Nonny De La Pena, Emblematic Group; Shawn Dubravac, Consumer Electronics Association.

High Res Audio in Every Earbud

Featuring: Jeff Joseph, Consumer Electronics Association; Maureen Droney, The Recording Academy; Aaron Levine, Sony; Pal Bratelund, TIDAL.

Online Privacy and the Price of Free

Featuring: Sunday Yokubaitis, Golden Frog; Alan Fairless, SpiderOak; Alex Bradshaw, Center for Democracy & Technology.

Zombie SOPA—A New Threat to the Open Internet

Featuring: Charles Duan, Public Knowledge; Mike Godwin, R Street; Abigail Slater, Internet Association; Ellen Schrantz, Office of Rep. Darrell Issa.

Autonomous Vehicles Are Here. But Are We Ready?

Featuring: Ian Adams, R Street; former National Highway Traffic Safety Administrator David Strickland; Jim Chen, Tesla; Jennifer Haroon, Google[x].

Disintermediation in Digital Content Markets

Featuring: Katie Oyama, Google; Casey Hastings, Pandora; Sasha Moss, R Street; Rep. Jared Polis, D-Colo.

Regulate All the (Internet of) Things!

Featuring: R.J. Lehmann, R Street; John Godfrey, Samsung; Eli Dourado, Mercatus Center; Lauren Soltani, Office of Rep. Suzan DelBene.

Disrupt the Grid! The Politics of “Homebrew” Power

Featuring: Catrina Rorke, R Street; Lynne Kiesling, Northwestern University; Tom Tanton, Reason Foundation; Doug Lewin, SPEER.

Ride the Wave: Data as Movement Builder

Featuring: Greg Fischer, City of Louisville; Dewey F. Bartlett, City of Tulsa; Michele Jolin, Results for America; Lori Sanders, R Street Institute.

Wi-Fi in Jeopardy: Losing the Signal

Featuring: Jessica Rosenworcel, Federal Communications Commission; Michael O'Rielly, Federal Communications Commission; Maura Corbett Glen Echo Group

Unlocking the Future of Music with Transparency
Featuring: Hank Shocklee, Shocklee Entertainment; Anthony Ray Sir Mix-A-Lot; Panos Panay, Berklee Institute for Creative Entreprenuership; Maura Corbett, Glen Echo Group

Will 2015 Be Our Last Real Best Chance for Patent Reform?

Earlier this month, the White House hosted its first ever Demo Day, inviting startups from all over the country to celebrate entrepreneurship. At that event, the President eloquently pointed out just how important the startup community is for our nation:

"Startups, young firms account for almost 40 percent of new hires.  And as we’ve fought back from the worst economic crisis of our lifetimes, those firms have helped our private sector create more than 12.8 million jobs over the last 64 straight months, which is the longest streak of private sector job growth on record."

With numbers like those, you would think all elected leaders would be racing to support pro-entrepreneurship policies. Yet Congress continually fails to move patent reform legislation, threatening the future of the startup community and the good jobs it creates.

The patent troll threat is not an abstract problem. And it’s not a problem that’s getting better. In fact, abusive patent litigation is becoming more prevalent: patent lawsuit filings are on track to break a new record this year (with a forecast of more than 6,000 suits) and 68 percent of suits so far have been filed by trolls. Furthermore, 82 percent of troll activity targets small and medium­-sized businesses, and 55 percent of troll suits are filed against companies with revenues of less than $10 million.

This fall presents an important opportunity—maybe our last—for patent reform to become law.

Where are we?

In June, the Senate Judiciary Committee voted 16-4 to move the PATENT Act to the full Senate floor; later that same month the House Judiciary Committee likewise voted, 24-8, to move the Innovation Act to the full House floor. Both bills represent comprehensive solutions that would address a dangerous patent troll problem; neither is perfect, but both would go a long way to fix a broken system. You can read more about the House bill here and the Senate bill here.

We were very excited when both bills were introduced. Since then, however, provisions in each have been watered down. Compromise and revisions are inherent to the political process, so to some extent this was expected. Questions remain, however, about how much is too much.

There are four primary issues that remain open to debate: venue, pleadings, discovery, and inter partes review (IPR). For political watchers, the last—inter partes review—is the most important. All of the other provisions of the House and Senate bills deal with litigation reforms, but inter partes review is a Patent Office procedure that allows for efficient and effective review of patents outside of federal court. That means the process is particularly good at weeding out bad patents and addressing patent quality, a huge problem that patent trolls have been able to exploit. Originally, the House and Senate bills barely addressed inter partes review, which we were glad about, since by and large the process has been quite successful.

Enter Kyle Bass. The well-known hedge fund manager’s most recent enterprise involves using the IPR process to challenge weak pharmaceutical patents and then short the stock of the company that owns the patent. The pharmaceutical industry, which relies heavily on patent rights, is far from pleased. And despite the fact that the IPR process contains significant protections for patent holders and the fact that Mr. Bass’ actions can already be addressed by the SEC, the pharmaceutical industry has been able to shoehorn its issue into the larger reform efforts.

As a practical matter, this means that long-standing Capitol Hill players, like PhRMA and BIO, are holding up patent reform efforts unless changes are made to weaken the IPR process. (We explain in more detail here why those changes are not only unnecessary, but in fact quite dangerous.) Senators Schumer, Cornyn, Grassley, and Leahy—the primary authors of the Senate bill—are still hammering out a so-called deal on IPR, details of which we should see soon. Even with such a deal, it’s unclear if PhRMA and BIO will decide to support reform efforts.

In the meantime, the House originally planned to move forward with a full vote on its bill in July, but at the last minute, Republican leadership pulled it from the calendar, claiming they needed more time to get the deal done. There is no real way to sugarcoat what happened: the delay shows a slowing of support and momentum for an important bill and we were disappointed that it happened.

Is there a path forward?

There is still a path forward. In September, when Congress comes back, the Senate is slated to pick up its efforts. We understand that Senate reform champions are close to a deal on IPR and that such a deal could create a framework for the bill to pass out of the full Senate. (This would be a particularly interesting turn of events, because in 2013 a strong patent reform bill passed the House 325-91 and then languished in the Senate in 2014.)

Using the momentum from the Senate, the House would be in a good position to revive its own efforts. Given the fact that the House did pass a bill in 2013 with a wide, bipartisan majority, we are confident that the bill would make its way through that chamber easily.

The White House has made clear its support of patent reform and we have every reason to believe that President Obama would happily sign a strong piece of patent reform legislation into law.

Is that path worth it?

Probably. There are two things to watch closely: IPR (see above) and venue (see more here). Right now, the House bill includes a strong venue provision that would help prevent trolls from filing so many cases in the notoriously plaintiff-friendly Eastern District of Texas. This would in turn make it easier for patent troll targets to fight back.

So, to simplify: anything that weakens IPR is bad (this should play itself out first in the Senate bill). Efforts to fix venue are good (see the House bill for this). Some combination of the two is probably liveable, though—as always—the devil is in the details, details we will be watching very closely over the next couple of months.

We’ll continue fighting to make sure that startups and inventors see legislation that will actually protect them from patent trolls and will need to call on you to help make our case. So watch this space closely and stay tuned.

VET Act: Turning GI Benefits into Startup Funding

Many Americans think of GI benefits as applying only to secondary education. But that’s a fairly narrow interpretation of a bill that originally set out to provide broader assistance for those transitioning from the military to civilian life.

In 1945, when the GI Bill (then called the Servicemen's Readjustment Act) was first passed, it provided low-interest loans to start a business, low-cost mortgages, tuition and living expenses to attend higher education. The Bill made not just college, but also business and home ownership possible for millions – opportunities that were previously seen as unattainable by the average American.

In 2015, GI benefits primarily emphasize education, providing about $20,000 per year (for three years), plus a stipend, to attend a university program. As Todd Connor of Bunker Labs (a network of veteran business incubators) explained in his recent blog post, this assumes that further education is what every veteran needs to become gainfully employed and reach their career goals. However, not all veterans demand nor need a secondary degree -- for many, employment and personal goals are better achieved by launching a startup or traditional small business. In a study conducted by Bunker Labs, 90 percent of veterans said they would like to use their benefits towards starting a business.

One way to make that dream a reality for more of our veterans is through the Veterans Entrepreneurial Transition Act of 2015, legislation co-sponsored by Senators Moran and Tester that was recently passed out of the Small Business and Entrepreneurship Committee. The VET Act would set up a pilot program to evaluate and fund proposals by veteran entrepreneurs, allowing them to use their $20,000+ per year towards starting (or acquiring) their own business. This would include “purchasing goods or services necessary for the creation or operation of a qualifying business enterprise.”  The pilot would even allow veterans to apply as a group and pool their benefits.

Our military is made up of diverse individuals who are hard working, strategic thinkers, and fast learners. We’re missing a great opportunity by not helping more of them become the next generation of innovators and entrepreneurs. We support the efforts of Senators Moran and Tester and urge the Senate and House to pass this important piece of legislation.

Bring Us Your Innovators: New entrepreneurial visa legislation aims to bring jobs, investment to America

Last week U.S. Reps. Zoe Lofgren (D-CA-19) and Luis Gutierrez (D-IL-4) introduced the EB-Jobs Act of 2015. The bill is meant to augment the present EB-5 immigrant investor program, providing additional visa opportunities for qualified immigrants who are not currently eligible for visas. This bill would create  a ‘startup visa’- a new green card category for entrepreneurs who establish businesses and create jobs. While the ‘startup visa’ is certainly a positive for entrepreneurs, it’s not the first time such legislation has been introduced, highlighting the need, but also difficulty of passing similar legislation.

This new bill is important for two main reasons; it highlights deficiencies in immigration avenues for entrepreneurs, and also recognizes the unique role the startup community plays in economic development and job creation. Currently, entrepreneurs and founders seeking to start a business in the US have limited options. The existing EB-5 program provides green cards to individuals who invest in a new commercial enterprise of between $500,000-$1 million (depending on the particular project area). Alternatively, high skilled individuals can enter the H-1B visa lottery, though as we noted in April it’s woefully oversubscribed.  This spring saw 233,000 applicants for 85,000 spots-  and only for individuals with a sponsoring employer. Lacking significant personal wealth or an existing employer willing to sponsor a visa, foreign entrepreneurs have no pathway to legal residency.

The EB-Jobs Act would change this landscape, allowing immigrants with a clear business plan and outside venture backing into the US on a green card. As written, the bill would provide residency to individuals who have either secured outside venture capital, are accepted into an accredited accelerator program, or have recently started a company that employs American workers. As Rep. Lofgren noted in announcing the bill, immigrants have created “nearly half of America’s top venture-backed companies and those companies in turn have created an average of 150 jobs each.” Research backs up the impact of immigrants on the startup economy: according to a recent report from the Kauffman Foundation, immigrants are nearly twice as likely to be an entrepreneur compared to native born americans. The EB-5 visa would ensure promising individuals can continue to start their businesses in the US, instead of Canada, Ireland, or a host of other countries currently offering startup visas.

Since 2010, Congress and the White House have put forth similar proposals to address this need, though efforts have perennially stalled - most often due to contention around broader immigration reform. While the bill faces an uphill battle in Washington, it’s important for all parties to recognize its benefits and limitations. As Rep. Gutierrez stated upon its introduction, “this bill is intended to address just one aspect: making the U.S. economy more attractive to job-creators and entrepreneurs.” This bill alone will not address the multitude of immigration issues affecting the economy, though for a small, but important subset of entrepreneurs, the legislation offers a new path to the US. For that reason alone, the EB-Jobs Act is good for the startup ecosystem and the American economy.

Celebrating Inclusive Tech & White House Demo Day

Momentum behind improving the tech community’s diversity and inclusivity is stronger than ever. And it needs to be - the current numbers are striking:

• At seven Silicon Valley companies that have released staffing numbers, and average of just 2 percent of technology workers are black and just 3 percent are Hispanic.
• Women represent fewer than 13 percent of employed engineers and 3 percent of startups founders.

Though most companies admit to a diversity problem, the startups and entrepreneurs who are successfully creating an inclusive environment and combating stereotypes have gone largely unnoticed, and their best practices are not being widely replicated. The White House seized this moment to host its first ever Demo Day under the theme of inclusive entrepreneurship, showcasing a diverse set of 50 entrepreneurs. Attendees represented a range of technologies, from new kinds of search engines to apps that utilize military base information and startups improving foreign language education.

Additionally, many larger companies and organizations announced tangible commitments to develop a more diverse and inclusive workforce and talent pipeline. Highlights from the announcements can be found below. More details, including the companies and individuals involved, can be found in the official press release.

To continue this important conversation, Engine hosted a reception with CEA and Google following the White House events. It gave Demo Day attendees and supporters the chance to talk further about their work to diversify tech, and better understand what part everyone is playing. Attendees engaged in detailed conversations about the road to entrepreneurship, what it means to be a minority seeking funding, and, more generally, the policies that affect new, small businesses. In attendance, among others, were Demo Day honorees Pinterest, FoodTrace, and Millennial Trains Project.

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The Administration announcements:

• Announcing 116 winners of two Small Business Administration prizes that promise to unleash entrepreneurship in communities across the country: the Growth Accelerator Fund for startup accelerators, incubators, and other entrepreneurial ecosystems; and the President’s “Startup in a Day” initiative that will empower mayors to cut red tape for local entrepreneurs.
• Scaling up the National Science Foundation I-Corps program with eight new and expanded Federal agency partnerships, introducing hundreds of entrepreneurial scientist teams across the country to a rigorous process for moving their discoveries out of the lab and into the marketplace.

The independent commitments:

• Expanding the response to the President’s TechHire initiative with 10 new cities and states working with employer partners on new ways to recruit and place applicants based on their skills, create more accelerated tech training opportunities, and invest in innovative placement programs to connect trained workers with entrepreneurial opportunities and well-paying jobs.
• Over 40 leading venture capital firms with over $100 billion under management, including Andreessen Horowitz, Intel Capital, Kleiner Perkins Caufield Byers, and Scale Venture Partners, committing to specific actions that advance opportunities for women and underrepresented minorities in the entrepreneurial ecosystem.
• Institutional investors committing over $11 billion to emerging managers, including CalPERS and the New York City Pension Funds.
• Over 100 engineering deans committing to attract and retain a diverse student body, building the pipeline for the next generation of American engineers and entrepreneurs.
• Over a dozen major technology companies announcing new actions to ensure diverse recruitment and hiring, including Amazon, Box, Microsoft, Xerox, and others committing to adopt variations on the “Rooney Rule” to consider diverse candidates for senior executive positions.

Patent Reform: Keeping Inter Partes Review Strong

As you probably know, patent reform legislation is moving again. Bills in both the House and Senate have been passed out of committee with bipartisan support and are moving to their respective chamber floors. We are cautiously optimistic we could see a patent reform bill signed into law in 2015. However, some issues remain unsettled and they must be addressed in order for patent reform legislation to be effective in fighting the patent troll problem. We’ll be breaking down these issue areas for you in separate blog posts - they concern Inter-Partes Review (or “preserving the ability to more affordably challenge the validity of a patent outside the court”), venue (or “dealing with the Eastern District of Texas”), pleadings (or “including basic information in the plaintiff's initial complaint”), and discovery (or “limit unnecessary fishing expeditions for evidence before the validity and scope of the case has been determined”).

Patent trolls rely on two tools: low-quality, impossible-to-understand patents and the outrageous costs of patent litigation. Proposed legislation in the House (Innovation Act) and Senate (PATENT Act) would address the second problem by leveling the playing field and giving defendants a meaningful chance to defend themselves. Yet, throughout the legislative process, we have expressed concern that the bills fail to do anything to improve patent quality. In an unwelcome development, certain proposed legislative changes would actually further weaken patent quality.   

As part of the last update to patent law, 2011’s America Invents Act, Congress created a procedure called inter partes review (IPR). IPRs allow a party to challenge a patent’s validity at the Patent Office instead of in court. These proceedings were designed to move quickly, within a year, and are considerably cheaper than litigation. While IPRs remain too expensive for most small startups (with legal fees, an IPR can easily cost upward of $250,000), they represent smart policy that helps rid the system of bad patents. So far the procedure has been successful.

Despite this, reform opponents—the biotechnology and pharmaceutical industries, in particular—are demanding major changes that would upend the IPR program in exchange for their support for patent reform legislation. They allege that IPR proceedings are unfair to patent holders. They wrongly allege that the program has resulted in “overly high” invalidation rates, and that these rates reflect underlying defects in the proceedings.       

But as Professor (and former White House advisor) Colleen Chien recently noted the bogeyman of overly high invalidation rates is wildly exaggerated.  

To understand this numbers game, you first have to understand a bit about how patents work. The heart of any patent is a series of claims. Patent claims should spell out exactly what a patent covers and the claims–usually at least upwards of 10, sometimes more than 100 per patent–are what define the metes and bounds of the patent. When a patent owner alleges that its patent is infringed, it is essentially saying that certain claims are infringed. Likewise, when a patent’s validity is challenged either in court or at the Patent Office (where IPRs take place), the party challenging the patent is asserting that certain claims are invalid.

Next you need to understand a bit about the Patent Office’s IPR process. First, it was specifically designed  to protect a patent holder from frivolous attacks. A party challenging a patent’s validity needs to put forward its entire case at the very outset and essentially ask the Patent Office to take up the challenge. (This is the opposite of litigation, where a party claiming infringement or challenging a patent can actually use the legal system to prove out its case as the litigation progresses.) In fact, the law requires that the Patent Office only institute IPRs when a “reasonable likelihood” that one or more of a patent’s claims are invalid. This weeds out frivolous claims and weak challenges at the outset. The process also uses an “estoppel provision” that prevents a patent challenger from later making arguments in a court appeal that it made—or could have made—at the Patent Office. In other words, the challenger can’t get two bites at the apple. If the litigation system likewise protected startups and other defendants from frivolous challenges in the same way that IPR does for patent holders, we would not have the huge patent troll problem we have today.

Now, back to the numbers. Certain groups—again, largely the pharmaceutical and biotechnology industries—have claimed that IPRs are “patent death squads,” citing data that purport to show that patents are invalidated by IPRs at an overly high rate. And while it might be true that about about 80 percent of patent challenges that result in a full IPR proceeding (up to and including a final ruling) have at least one claim invalidated, that statistic is seriously misleading. For starters, this statistic excludes the very large number of cases that the Patent Office has declined to hear. The Patent Office has instituted IPRs in only approximately 47 percent of patent challenges to date, meaning about 53 percent of patent challenges were not instituted, dismissed, or settled. By declining to institute a proceeding, the Patent Office gold-plates a patent and renders it basically immune from any further challenge.

First, about half of the claims that the Patent Office actually reviews are settled or dropped by the parties. Moreover, of all claims that the Patent Office reviews, only 24 percent are invalidated (again, these are claims, not entire patents). And most of these patents are still partially—or largely—valid, even if some claims have been thrown out. And all the others have been “gold-plated.” So the Patent Office has actually gold-plated far more patent claims than it has invalidated.    

IPRs are good for the patent system and there’s no evidence that they are unfair. To the contrary, the Patent Office has been widely praised for the quality and timeliness of its work. And nearly every decision by the PTO Board has been affirmed when appealed in the courts.

In sum, it is clear that the IPR process is working; in fact, it’s working quite well. And, notably, it’s being used very effectively by the tech industry, the industry that faces the biggest patent troll threats. In fact, over 60 percent of petitions are being filed on computer or electrical based patents, while less than 10 percent are on biotechnology and pharmaceutical patents.

Congress has worked hard to balance the needs of all industries that use the patent system, and proposed language in the House and Senate has been narrowly tailored to address only the worst actors and behavior (specifically, abusive litigation by patent trolls) while preserving the rights of patent holders to enforce valid claims. That balance is now threatened by the insistence of certain industry sectors that changes be made to the IPR process. These proposals would change the claim construction standard that has been used by the Patent Office for decades in order to make it harder to invalidate claims. The Senate bill goes even further: it would establish a presumption of validity for patents that are challenged in IPR that does not currently exist. Those changes threaten to severely weaken the effectiveness of IPR proceedings for everyone.

We should not further open up negotiations that weaken IPR—or carve out whole industries from using the procedure at all—merely to appease opponents of patent reform. Successful patent reform legislation must be comprehensive in scope and must produce a level playing field for all innovators. It must also do nothing to weaken patent quality. So it must ensure that the Patent Office’s IPR proceedings remain a viable, efficient, and effective tool to rid the system of bad patents.