New year, new Congress, same issues. The new year and the new Congress kicked off this week, but many of the policy debates that concerned startups in 2018 will continue on. As the Democrats take control of the House and the gavels of key committees, expect vigorous oversight of the Trump administration across the board, which is likely to impact several of the policy areas startups care most about, including trade, net neutrality at the Federal Communications Commission, and more.
Access to capital will continue to be a top issue for startups in 2019. One looming policy threat to access to capital is increased scrutiny of foreign investment in certain kinds of technology, including artificial intelligence. Under a law passed in 2018, the Committee on Foreign Investment in the U.S. will continue implementation of a pilot program that has the agency review more deals involving foreign investment in “critical technology” companies.
After several years of positive developments for startups in the U.S. patent system—including court rulings and changes at the U.S. Patent and Trademark Office to help challenge easily abused patents—2018 brought some fears about backsliding that could easily extend into 2019. In 2018, the PTO proposed lowering the bar and changing the standard its Patent Trial and Appeal Board uses when determining whether a challenged patent should be allowed to stand. We expect to see the PTO propose other changes to the patent system, including rulemaking around what kind of innovations are eligible for patents, in 2019.
As 2019 continues, we also expect to see continue heated debate in the European Union around Article 13, a troublesome proposal that would require Internet platforms to filter user-generated content for copyright infringement before it’s uploaded.
This coming year, lawmakers are likely to continue considering poking holes in a foundational Internet law as a solution to any kind of troubling content online. In 2018, Congress passed a law ostensibly aimed at curbing illegal sex trafficking by opening up Internet platforms to legal liability if their users post content that run afoul of sex trafficking laws. As we warned at the time, creating such a carveout to Section 230 of the Communications Decency Act could “discourage Internet platforms from taking voluntary steps to deal with bad behavior online [and] may expose startups to liability for hosting content that they don’t even know exists.”
Despite the problems of that law, we’ve already seen some policymakers attempt to extend that line of thinking to other perceived problems online, including the opioid epidemic. We’ve also seen attempts to blame Section 230 for supposed “anti conservative bias” online, which ignores the reality that Section 230 is what gives Internet platforms the freedom to host controversial user content—including from conservative voices—without fearing legal liability.
Privacy and Data Security
After a year dominated by news stories, hearings, and general concerns about privacy online, lawmakers are sure to continue looking for ways to protect consumers privacy and data security in 2019. While Democrats in the House are primed to be looking to pro-consumer legislation to answer privacy concerns, the Republicans leading the Senate have also expressed an eagerness to write a law in this area. On top of common goals across the aisle and across the Capitol, Congress is also effectively facing a shot clock, with California’s sweeping privacy law set to go into effect in 2020. Due to likely unintended consequences in the state law—many of which will have a disproportionate impact on startups—there’s hope that Congress can pass a strong federal privacy law that avoids some of the California law’s downfalls before it goes into effect.
In 2018, the Trump administration took several steps to restrict immigration opportunities for tech entrepreneurs and employees, including postponing implementation of the International Entrepreneur Rule and reversing a policy that let spouses of H1-B visa holders apply for work permits. In the coming year, expect to see the administration take steps within its jurisdiction to continue narrowing immigration opportunities, including for high-skilled employees and entrepreneurs. And while H1-B visas have historically had largely bipartisan support, general immigration policy will continue to be a hot button issue on the Hill, especially with Democrats in control of the House.
The trade agenda garnered a lot of headlines in 2018, but several of the most significant developments on the trade front will see continued action in the coming year. Most notably, the Trump administration spent 2018 renegotiating the North American Free Trade Agreement, which resulted in the signing of the new United States–Mexico–Canada Agreement. That deal, however, has to be approved by the House this year. Outside of North America, expect trade talks with Japan, the European Union, and the United Kingdom to continue.
Trade tensions with China will also continue to dominate much of the trade conversation moving into 2019, with tech companies already seeing losses after the Trump administration imposed tariffs as retaliation for intellectual property theft. Concerns about China could have additional impacts on startups working in the artificial intelligence and machine learning space as the Commerce Department considers new export rules on those products.
One year after the passage of the Tax Cuts and Jobs Act of 2017, we expect to see more guidance on the implementation of Opportunity Zones from both federal and state governments. Opportunity Zones allow startups looking to relocate into designated economically depressed areas of the country in exchange for tax incentives. The Trump administration spent much of last year providing guidance on how exactly the law would be implemented, but there continue to be questions as startups look to invest in new communities.
In 2018, the Supreme Court's decision in South Dakota v. Wayfair overturned the physical presence standards previously in place, allowing states to set the rules for taxation of online sales. This year, we can expect to see states passing laws to get their hands on tax revenue from e-commerce sales, exposing startups to potentially thousands of different taxing regimes.
The net neutrality debate will continue on all fronts in 2019. Oral arguments in the case challenging the FCC’s repeal of the 2015 net neutrality rules—which kept the Internet a level playing field for startups—are scheduled to start next month. And expect Democrats in Congress to make net neutrality a key issue in 2019, especially in the House where they can set the agenda on everything from net neutrality legislation to FCC oversight.
At the same time, the federal government will continue its work to make broadband more available across the country, including through the release of more spectrum for commercial use. The FCC will proceed with spectrum auctions 2019 to make high frequency airwaves available for the next generation wireless networks.