Our weekly take on some of the biggest stories in startup and tech policy.
Uber and Lyft Leave Austin After Losing Campaign. Uber and Lyft ceased operations in Austin, TX on Monday after losing a referendum that would have overturned a city ordinance requiring all drivers to undergo fingerprint-based background checks, among other things. Uber and Lyft campaigned aggressively in favor of the ballot measure, spending some $8 million and publicly promising to suspend their operations in Austin if they lost. After 56 percent of Austin voters cast ballots against the referendum (though it’s of note that only 17 percent of voters turned out), the ride-sharing companies followed through on their commitment, causing a stir among riders, drivers, tech advocates, and cities across the country considering similar regulations. The San Francisco Chronicle called the companies’ move “an act of political prowess,” one tech commentator wrote that “Austin is no longer a tech capital,” while an author from Austin opined in the New York Times that Uber and Lyft were mistaken in their strategy and arrogant in their approach. Whatever your take, the debate is far from settled. Austin’s mayor has invited the companies to continue the conversation while Seattle, Miami, and Los Angeles are all grappling with whether they will pursue similar regulations.
Regulation Crowdfunding Goes Live Monday. On Monday, May 16, regulation crowdfunding will go into effect, meaning for the first time ever, anyone can invest in a startup through an online platform. This is big. Until Congress passed the JOBS Act in 2012, buying an equity stake in a company required being fairly wealthy or having a pre-existing relationship with the entrepreneurs raising capital. But, as Engine has previously explained, we’re skeptical about the extent to which this market will truly take off given the current regulatory framework. Thankfully, there’s already a bill in Congress that would make important fixes to improve crowdfunding. Anna writes about what the Fix Crowdfunding Act would do in The Hill.
Calling All Accelerators. Last week, the Small Business Administration (SBA) launched its Growth Accelerator Fund Competition for the third year in a row. This year, the SBA will distribute $3.95 million to qualified accelerators to help cover part of their operating budgets. The broad goal of the competition is to get an extra infusion of capital to accelerators and the burgeoning ecosystems they support, which, in turn, provide resources to boost the startup and entrepreneurship communities around them. If you run a growth accelerator, incubator, co-working space, shared maker-space, or other entrepreneurial ecosystem organization, you might be eligible to compete for a $50,000 prize from the government. Read our full post on the program here.
Copyright Office Holds Roundtable Discussion on DMCA. Last New Year’s Eve, the Copyright Office issued a notice of inquiry about the effectiveness of section 512 of the Digital Millennium Copyright Act (DMCA). Not surprisingly, the notice drew significant public interest, resulting in 90,000 comments flooding the office. As a part of the inquiry, the Copyright Office held roundtables this week in San Francisco, seeking testimony from key academics, tech companies, and copyright owners. Evan participated in the roundtable on behalf of Engine, representing the perspective of the many small online platforms that have benefitted from the DMCA’s limitations on liability but find difficulties in the structural imbalances in the damages available under the DMCA. As further discussed in Engine’s joint comments with GitHub, Kickstarter, Medium, and Redbubble, the high statutory damages associated with secondary infringement actions and the virtually non-existent damages available for false takedown notices make running a small online platform a financially risky proposition.
Oracle and Google Back in Court. Almost six years after Oracle first sued Google over Google’s use of Oracle’s copyrighted APIs in the Android operating system, the two adversaries are back in court again. So why does this fight between two tech giants matter for startups? Startup innovation relies on interoperability (ie. open exchange of information) between systems and programs, and this is fostered by APIs. Unfortunately, the courts already ruled that APIs are copyrightable. But now Google is fighting Oracle over whether its use of Oracle’s copyrighted API packages amounted to “fair use.” A loss for Google in this case would cost the company billions of dollars, but worse, it would set a dangerous precedent for startups and software development. As EFF’s Mitch Stoltz notes, “The possibility of a financial death sentence like that in a copyright case keeps most startups and smaller businesses from even trying to rely on fair use.” We’re tracking.
The “Chilling Effect” of Burr-Feinstein. Thus far, the debate around the Burr-Feinstein encryption bill has largely been dominated by the “big five” technology companies. But as Evan pointed out last month, beyond the security concerns the bill presents, it would also have a hugely negative impact on the startup sector. Cloud communications startup Twilio echoed that sentiment in a Fierce IT Security piece this week, noting that “In terms of what the FBI was asking Apple to do, which was to build something that didn’t exist, if you think about the impact of that on a smaller company and having the resources to do that, it would be pretty significant…It feels like a lot of the legislation is being written by people who don’t understand what it means for the companies that are going to have to comply. You cannot pass this legislation in a vacuum without understanding the impact on the companies you’re going to be calling on to comply with the law.”
ECPA Reform Moving in the Senate? Senator Grassley announced this week that he is considering bringing up the Email Privacy Act (which passed the House unanimously earlier this month) for a vote in the Judiciary Committee before the end of May. The bill, which would require law enforcement to obtain a warrant before accessing electronic communications, is viewed as a long overdue update to an electronic privacy law that was passed almost 30 years ago. Civil law enforcement agencies are still pushing back against reform and there is debate around whether to bring up the House-passed compromise bill or a competing bill from Senators Leahy and Lee, but we are hopeful that these questions will not stall committee action.