Startup News Digest: 7/8/2016

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

40 Startups Tell Congress: Encryption Matters. Over 40 technology startups from across the country signed Engine’s letter to Congress explaining why encryption is essential to their business operations and their users’ digital security and trust. “Encryption is at the heart of many of our products and services. Without the security and confidence that encryption provides, it would be difficult or impossible for us to find customers and investors, and ultimately, grow our businesses...Unlike larger technology companies, startups like ours lack the resources necessary to comply with the anti­-encryption proposals some legislators have put forward,” the letter states. Several startups including FourSquare, Convo, and Inflection also submitted individual statements describing how their companies utilize encryption and how bad legislation could damage their businesses. Read the full letter here.

Capital Access Bills Pass the House. On Tuesday night, the House of Representatives passed two bills from Congressman Patrick McHenry (R-NC) that aim to facilitate capital formation for entrepreneurs and startups. The Supporting America's Innovators Act (H.R. 4854) would remedy what’s know as the “99 Investor Problem” by raising the number of investors that can invest in angel funds from 100 to 250. The Fix Crowdfunding Act (H.R. 4855) would implement a number of fixes (that we’ve championed) that would significantly improve regulation crowdfunding, which recently went into effect. Both of these bills make important improvements to the capital access landscape and we hope that their broad, bipartisan support in the House pushes the Senate to act before the end of this Congress.

Congress Still Trying to Block Net Neutrality. Unfortunately, we saw some bad news out of the House this week too. On Thursday, the chamber passed an appropriations bill that includes a harmful policy rider that would block the Federal Communications Commission (FCC) from enforcing its net neutrality rules and hit pause on the agency’s efforts to open up the set-top box market. The White House has issued a veto threat for the bill, citing these riders as contributing to its objection.

Dem Party Releases Agenda, Still Waiting for Trump’s. Late last week, the Democratic Party released a draft copy of their national party platform, which will be finalized and approved by the full Platform Committee at the upcoming convention in Philadelphia. The draft included several tech-related proposals such as expanding high-speed broadband, increasing support for STEM education and research, and making it easier to start small businesses and startups. While party platforms only set out general principles that do not necessarily translate into specific policies, much of what is thus far included in the Democratic platform jives closely with Hillary Clinton’s released tech agenda, such as a staunch defense of net neutrality. However, both documents notably declined to take a strong stance on the encryption debate, a key sticking point between Silicon Valley and Washington. Meanwhile, the GOP continues to work on its own platform by crowdsourcing it to the party base at However, Donald Trump’s continued attacks on Silicon Valley and his mistaken beliefs about the tech industry are unlikely to favorably influence the drafting of the Republican platform.

The Patent Case Startups Should Watch. The upcoming Apple vs. Samsung case on the Supreme Court’s docket could have a resounding impact on startups and small businesses in all industries, Evan wrote last week in recode. In a 2015 ruling, a federal appeals court ordered Samsung to pay Apple the "total profits" attributable to several Samsung smartphone models after Apple alleged that Samsung infringed on certain patented design features used in the iPhone. The decision was quickly appealed to the Supreme Court. Where SCOTUS comes down on the “total profits” issue is important. As Evan explains, total profits awards for complex modern technologies will foster an environment prioritizing litigation over competition and make innovators especially vulnerable to crippling lawsuits arising from design patent infringement claims.  

Privacy Shield Almost a Done Deal. The EU’s 28 member states voted yesterday to approve the EU-U.S. Privacy Shield, which would replace the invalidated Safe Harbor agreement to allow for the legal transfer of EU customer data to the U.S. The European Parliament voted in favor of the deal in May and the European Commission will give its final approval next week. This is great news for startups, but as we’ve noted before, two major questions remain: will this new Privacy Shield agreement withstand judicial review by the ECJ, and in light of the Brexit, will the UK and its intelligence agency comply with the agreement once they are no longer part of the EU?