Startup News Digest 03/27/26
The Big Story: Supreme Court says Internet intermediaries not liable for user actions
In a win for Internet users—including startups—the Supreme Court has said Internet intermediaries can’t be held liable for contributing to users’ alleged copyright infringement. In a unanimous ruling in Cox Communications v. Sony Music Entertainment issued on Wednesday, the Supreme Court said that Internet service provider (ISP) Cox Communications, as a provider of a general service, is not legally on the hook if its users commit copyright infringement.
In the case, Sony claimed the ISP contributed to copyright infringement committed by its users by continuing to provide broadband services despite having been notified that users were committing copyright infringement The Court disagreed, saying “a company is not liable as a copyright infringer for merely providing a service to the general public with knowledge that it will be used by some to infringe copyrights.” Under Supreme Court precedents, Internet intermediaries can be held liable for users’ copyright infringement under copyright law only when those intermediaries actively encourage users to commit infringement or design a product specifically to allow users to commit infringement. “Cox neither induced its users’ infringement nor provided a service tailored to infringement,” Justice Clarence Thomas wrote for the majority.
Engine led a coalition of pro-innovation groups in filing an amicus brief to the Supreme Court last fall arguing that forcing Internet service providers to cut off Internet access for users accused of copyright infringement would harm startups and hinder innovation, creativity, and expression online. The brief—signed by several startup and tech groups—explained that startups would be especially harmed by a ruling in Sony's favor, as Internet companies cannot operate without Internet access, and startups are often the first targets of infringement claims, particularly AI startups and platforms hosting user content. As the brief discussed, ISPs aren’t in a position to adjudicate copyright claims, especially given the incredible volume of user activity they handle, the ambiguity of fair use, and evolving legal questions around AI training data. And with statutory damages under copyright law that can reach $150,000 per infringed work, ISPs that don’t want to risk ruinous lawsuits would be incentivized to act out of extreme caution, terminating Internet access for subscribers—which can affect entire households, coworking spaces, universities, etc., when multiple people share an Internet network—over mere allegations of infringement. The Supreme Court was correct in recognizing the role of Internet intermediaries, and this decision should serve as a guidepost for ongoing debates about where liability should apply when users use Internet intermediaries and services.
Policy Roundup:
Patent reform upheaval draws scrutiny. The House Judiciary subcommittee on courts, intellectual property, artificial intelligence, and the Internet convened a hearingWednesday to examine oversight of the U.S. Patent and Trademark Office. Representatives questioned Director John Squires on the agency’s proposed rule, which would further restrict access to the Patent Trial and Appeal Board, along with numerous policy changes over the past year that have created uncertainty for innovators. Restricting the most accessible patent review tool enables weak, overbroad patents to be easily weaponized against startups.
Oklahoma enacts data privacy law. Oklahoma Governor Kevin Stitt (R) signed a data privacy law this week, marking over 20 states that have unique data privacy laws. The law echoes provisions from several other states’ data privacy laws—but even minor differences can stack up to meaningful costs for startups. The law is a reminder that Congress still needs to act to create one uniform, nationwide set of consistently enforced rules around user privacy to provide predictability and streamline costs as startups launch and grow.
Agencies explore writing new premerger filing rule. This week, the Federal Trade Commission and Department of Justice issued a request for informationseeking input on the content of premerger filings required for some mergers and acquisitions. The request follows a federal district court ruling last month vacating the agencies’ 2025 rule that expanded the information required to be included. The burdens associated with that form played a role in the court’s ruling, and agencies say they’re exploring a less burdensome—but still expanded rule. The vast majority of acquisitions are not problematic and the agencies should ensure the pre-merger notification process does not cause undue burdens that hamper exit opportunities for startups, which could negatively impact startup capital access and the benefits that arise from startup acquisitions.
Digesting Trump’s AI wishlist for Congress. Last Friday, the Trump administration sharedrecommendations on how it believes Congress should legislate around AI. In a new blog post this week, we examine what the seven-part framework, which centers on the administration’s “four C’s” of AI policy—children, communities, creators, and censorship—as well as innovation, workforce, and state preemption, means for startups. The framework—which comes as states have put forward more than 1600 AI-related bills so far this year—echoes many startup priorities for AI policy and contains some potential pitfalls where policymakers must tread carefully.
Startup Roundup:
#StartupsEverywhere: Boston, Massachusetts. Tactus, a Boston-based startup, is on a mission to make music truly inclusive and accessible. Their Bluetooth-integrated jackets and vests translate audio into precise tactile vibrations, allowing the deaf and hard-of-hearing community to experience live musical performances. We sat down with Jeremy Chow, CEO and Founder of Tactus, to discuss their work and the various challenges they encounter, such as the barriers to federal research grants and the ways tariffs are raising manufacturing costs.