Our weekly take on some of the biggest stories in startup and tech policy.
What Brexit Means for Tech. As the world reacts to the news of UK voters’ historic decision to leave the European Union, many are wondering what this means for the tech industry, which widely favored remaining in the EU. While the full consequences of the UK’s departure will take years to play out, the interim period could be one of great uncertainty for British and European tech firms, as well as for those U.S. companies with employees and customers across the pond. The EU has been working towards a digital single market strategy, as well as finalizing its privacy shield agreement for non-EU companies handling the data of European citizens—deals the UK may now need to separately negotiate. And London, which has become an international hub of startup activity and a shining star in the EU startup ecosystem, may face new challenges holding on to that status.
POTUS Issues Veto Threat Over Net Neutrality. It’s been just over a week since the D.C. Circuit Court voted to uphold net neutrality in an historic victory for startups across America and opponents in Congress are already pushing back. A budget bill currently pending before the House includes a harmful rider that would prevent the FCC from enforcing the Open Internet Order until broadband providers have exhausted all appeals. The House was slated to vote on the measure on Wednesday, but it was delayed due to the Democrats’ sit-in over gun control. It’s unclear when the bill will come back up for a vote, but the White House has issued a veto threat, citing the net neutrality rider as one of its major objections and arguing that “The appropriations process should not be used to overturn the will of both an independent regulator and millions of Americans on this vital issue.” We’re tracking.
FAA Finalizes Commercial Drone Rules. The Federal Aviation Administration (FAA) finalized its long-awaited small unmanned aircraft systems (UAS) rules on Tuesday, making it much easier for businesses to use drones for new and innovative commercial purposes. The drone industry has waited nearly four years for the FAA to issue its guidelines. While gaps in the regulatory framework remain (operating drones beyond visual-line-of-sight, at night, and over people are still prohibited), the rules have largely been lauded as an important milestone in expanding commercial opportunities for drone technologies. FAA Administrator Michael Huerta noted these rules are just a first step and that the agency is “already working on additional rules that will expand the range of operations.”
SCOTUS Upholds Patent Review Process. An important legal tool in the patent system—inter partes review—was upheld this week when the Supreme Court rejected a challenge to that tool in an 8-0 vote. Inter partes review, or IPR, (as we explain in this video) makes it easier to challenge and invalidate low-quality or bad patents—the kinds of patents that trolls often hoard and exploit to extract royalties from tech companies large and small. In Cuozzo v. Lee, SCOTUS upheld a lower court's ruling that backed the decision to invalidate one company's patent through the IPR process. As we've explained before, the abundance of low quality, uninventive patents is one of the major problems rattling our nation’s patent system and disproportionately harming startups and small businesses. We still need comprehensive patent reform to fix a dangerous patent troll problem, but IPR is one important tool in improving this system.
JOBS Act Provision Also Upheld. In another federal court decision this week, a key component of the JOBS Act was upheld. The provision under consideration, Regulation A+, allows private companies to raise up to $50 million in a kind of mini-IPO, but without the onerous reporting requirements of a full public offering. Reg A+ improves upon an older exemption (called Regulation A) that was never very popular—companies could only raise up to $5 million and were still required to register their securities in every state. The Security and Exchange Commission’s rules for the new Reg A+ preempted these varying state laws for issuers raising between $20 - $50 million, which was the cause for a legal challenge from Massachusetts and Minnesota. Ultimately, the court ruled the SEC acted within its authority in preempting these laws. This is good news for private companies and fast-growing startups seeking an influx of capital.
FCC May Open Spectrum. In a speech at the National Press Club, FCC Chair Tom Wheeler proposed new rules to identify and make available spectrum for 5G use. Fifth generation (5G) wireless connectivity enables speeds of up to 10 to 100 times faster than what we have today, and is crucial for the development of the Internet of Things. Wheeler’s proposal would allow the FCC to move quickly to auction off spectrum with a set of basic technical rules, and then rely on the private sector to build out further technical and security standards. It would also leave a large amount of spectrum unlicensed and free to use (essential for applications like Wi-Fi), as is the case under existing flexible-use rules. The rules would also seek to ensure competition by limiting the amount of spectrum that can be controlled by a single party. Wheeler’s proposal will be voted on at the July 14th FCC meeting.
The DMCA: Good for Innovation. The RIAA and its allies in the traditional music industry continue to ramp up their efforts to undo one of the key laws that made the modern internet possible, releasing a letter to Congress this week signed by dozens of musicians arguing that the Digital Millennium Copyright Act (DMCA) is somehow ruining the music industry. In a response to the letter, Evan writes that the RIAA’s complaints with the current legal system seem have nothing to do with the fundamental goals of copyright (promoting creativity) and everything to do with protecting legacy business models. The fact is that there is more creative output now than ever before, thanks in large part to the DMCA. Read Evan’s full response.
Tech Companies Big and Small Pledge to Diversify. 30 tech companies have signed the Tech Inclusion Pledge, vowing to make their workforces more diverse and track their progress towards this goal. The pledge was unveiled at this week's Global Entrepreneurship Summit at Stanford where world leaders in government and business are gathering to discuss the state of entrepreneurship worldwide. "We resolve to take action to make the technology workforce at each of our companies fully representative of the American people, as soon as possible," the letter, addressed to the President, states. The commitment to track and publish data about these efforts will be particularly important in evaluating both short-term and long-term efforts to make the tech industry more representative.