Startup News Digest: 4/22/2016

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

Encryption Dominates Headlines...Again. Apple and the FBI sparred over encryption at yet another Congressional hearing on Tuesday. House Energy and Commerce Committee members heard from two separate panels, the first featuring law enforcement representatives and the second featuring technologists and Apple’s Bruce Sewell. The hearing was predictably fiery and once again highlighted the alarming lack of understanding of this topic on Capitol Hill. In case you missed it, last week Evan looked at what happens when policymakers blatantly disregard technological realities in his critique of Senators Burr and Feinstein’s draft “Compliance with Court Orders Act of 2016.” Hopefully, the recently announced House working group on encryption—which released a plan this week for examining questions related to encryption—will ensure that lawmakers will get up to speed on the underlying technology and avoid mistakes like the Burr-Feinstein bill.

Uber Settles in Major Driver Case. In a surprising turn of events, Uber has reached a settlement in a pair of class-action lawsuits in California and Massachusetts. The company will have to pay as much as $100 million to the roughly 385,000 drivers represented in the cases, but drivers in CA and MA will remain as independent contractors. The settlement is non-binding and Uber still faces similar lawsuits in other states, but it is seen as a significant victory for the company. Still, cities and states who are hostile towards ride-sharing platforms have other weapons in their war chest. Just this week, San Francisco announced that it would begin requiring drivers for “transportation network companies” (TNC) like Uber and Lyft to register as a business. The city has sent notifications to nearly 37,000 drivers who, as independent contractors, will be subject to the registration requirement and a $91 annual registration fee.

TaskRabbit Commits to Inclusion. The startup TaskRabbit is the first tech company to sign on to the Congressional Black Caucus’s Tech2020 effort to bring more African Americans into the tech workforce. The company has set out to increase the percentage of African American employees over the next year. Just last week, an African American woman, Stacy Brown-Philpot, became TaskRabbit’s CEO, making her one of the only African American CEOs in the entire industry. Hopefully more tech companies will follow TaskRabbit’s lead.

Stock Options for Startup Employees Need Fixing. 73 percent of venture-backed startups grant stock options to their employees—it’s one way for small firms to compete for talent with larger tech firms that offer new recruits generous salaries and benefits. Yet the current tax code makes it difficult for startup employees to exercise those options, Evan explains in an op-ed this week. Employees must pay taxes on their options even before there’s no public market to sell them. But fixing this problem simply requires Congress to pass a law establishing those taxes need not be paid until the shares can be sold. Read the full op-ed here.

Fighting Stupid Patents with IPR. One of the most important tools for limiting bad patents that harm startups is under attack. This week, Engine released a video explaining how this process called Inter Partes Review works and why it’s so important for tech startups. As part of the last update to patent law, 2011’s America Invents Act, Congress created a procedure called inter partes review (IPR). IPRs allow a party to challenge a patent’s validity at the Patent Office instead of in court. These proceedings were designed to move quickly, within a year, and are considerably cheaper than litigation. While IPRs remain too expensive for most small startups (with legal fees, an IPR can easily cost upward of $250,000), they represent smart policy that helps rid the system of bad patents.