Startup News Digest 9/16/16

Our weekly take on some of the biggest stories in startup and tech policy. To receive this weekly digest in your inbox, sign up at

Stock Options Bill Moves Forward. On Wednesday, the House Ways and Means Committee voted to approve the Empowering Employees through Stock Ownership Act (H.R.5719), legislation that will make it easier for startup employees to exercise their options. Two days prior, Engine led a letter signed by over 50 startups expressing support for the bipartisan bill, which would allow employees to defer the tax liability they owe when they exercise illiquid stock options for up to seven years or until there is a liquidity event (whichever happens first). As the letter notes, the bill “will make it possible for more employees to obtain an ownership stake in the companies they help build and make it easier for startups and private companies to attract the talent necessary to grow the economy.” The bill is scheduled for a floor vote in the House later next week, and the Senate Finance Committee is also likely to consider it before the Senate recesses next Friday.

Startups Call for Better Business Broadband Competition. Engine led another startup letter this week calling on Congress to support the Federal Communication Commission’s (FCC) efforts to foster broadband innovation, investment, and competition by reforming the broken “business data services” (BDS) market. The BDS market is currently dominated by a few broadband gatekeepers that engage in anticompetitive behavior and jack up prices for consumers and businesses. The letter, signed by 16 companies, emphasizes the negative impact that this lack of competition is having on startups across the country, stating that overcharges by BDS providers “represent a hidden tax on all startups—money that would be better spent on hiring new employees, improving products, and driving growth.” The FCC is currently in the process of a rulemaking that will introduce competition and lower prices in the BDS market, and the letter urges Congress to throw its weight behind the commission's efforts. Read the full letter here.

Patent Office Grilled at Congressional Hearing. On Tuesday, the House Judiciary Committee held an oversight hearing of the U.S. Patent and Trademark Office (USPTO). It was expected that much of the conversation would focus on a recent report showing abuses of the Patent Office’s telework program (and it did). But Engine board president Julie Samuels took to the Hill in advance of the hearing to outline why it would be a shame if the “headline-grabbing discussion” of the report distracted from a bigger issue: why the Patent Office issues low-quality patents and what can be done to fix it. “The high numbers of patent litigation are directly tied to the low-quality patents that come out of the Patent Office,” writes Julie. Fortunately, USPTO Director Michelle Lee had an opportunity at the hearing to highlight the Patent Office’s efforts to improve patent quality, including the Enhanced Patent Quality Initiative. As Julie argues, it is important that efforts like these continue and that overblown reports of telework abuse don’t “overturn recent progress made under Director Michelle Lee and turn back the clock to favoring granting over quality.”

Europe Releases Copyright Reform Proposal. Last month's leaked copyright reform recommendations from the European Commission (EC) went from hypothetical to real this week, as the EC formally put out its recommendations for updating European copyright rules as a part of its “Digital Single Market” initiative. As we reported in August, the proposal is awful for startups and the broader internet community, as it requires User Generated Content sites to implement costly and ineffective filtering technologies and enter into forced agreements with content owners to pay for material that users upload—even when the site has no control over user activities. The cost of such obligations all but ensures that startup activity in the online portal space will dry up; YouTube spent $60 million building its best-in-class ContentID system and still had to hire a team of employees to address incorrect identifications and removals. Forcing startups to take on the same burden will simply guarantee that there are no new startups competing with YouTube.

Engine Joins Re:Create Coalition. In a Medium blog post on Thursday morning, Evan announced that Engine has joined the Re:Create Coalition to continue the startup community’s fight for balanced copyright. Engine has a long history of engaging on copyright issues. In fact, our organization emerged out of the original battle over the SOPA and PIPA bills. But while that fight “remains a critical milestone in the emergence of tech as a political force, our work to return copyright law to a system that promotes rather than hinders innovation is only beginning.” We’re joining a dozen other organizations to support a pro-innovation, pro-creator, pro-consumer copyright agenda. Learn more about Re:Create here.