Big Story: AI innovators need clarity, not uncertainty and legal threats
Policymakers at both the state and federal levels are still working to understand how traditional intellectual property frameworks apply to AI, which could lead to policies that increase compliance costs and expose startups to litigation. For example, California lawmakers advanced AB 412 this week, a bill requiring AI developers to identify and document the materials they use for model training. As the legal debate over AI and intellectual property unfolds—and numerous cases are currently making their way through the courts—startups need clear, consistent rules to navigate.
This week, California lawmakers moved forward with legislation that would require developers to disclose copyrighted works used in AI training—regardless of whether infringement occurred while the House Judiciary subcommittee held a hearing on global AI competition and intellectual property frameworks, including trade secrets protections. In a new blog post this week, Engine explained how proposals like California’s AB 412 deepen uncertainty around intellectual property and AI, layering on sweeping disclosure mandates, steep penalties, and record-keeping requirements that make the bill a nonstarter and unworkable for startups.
Since AI models are often trained on large, broad, mixed-source datasets, developers may unknowingly include copyrighted material without any practical way to identify or isolate it. And even if they could identify and isolate the copyrighted content needle in the dataset haystack, the use of copyrighted content for AI training should not constitute infringement and should be allowed under copyright law, as it reflects how innovation builds upon and iterates from existing work.
What startups need most is legal clarity, which proposals like AB 412, with its burdensome requirements, fail to provide and only add unnecessary complexity. Rather than layering on new, costly mandates, policymakers should focus on a framework that supports AI innovation while minimizing unnecessary legal risk.
Policy Roundup:
Engine urges SEC to expand capital access. In a letter to new the Securities and Exchange Commission, Engine joined a startup and investor coalition in a letter this week urging recently confirmed Securities and Exchange Commission Chair Paul Atkins to expand capital formation opportunities throughout a company's life-cycle, broaden access to investment outside of traditional hubs, and expand private market access for retail investors by modernizing accredited investor standards.
Senate moves to reverse hotspot funding. On Thursday, the Senate advanced a resolution to overturn the Federal Communications Commission’s expansion of the E-rate program, which enabled schools and libraries to purchase and distribute Wi-Fi hotspots and wireless Internet services to students. Scaling back this support risks deepening the digital divide by limiting reliable Internet access in underserved areas and cutting off a key pipeline of future entrepreneurs and innovators.
Senate hearing highlights danger of patchwork, lawmakers preview new AI bills. At a Senate Commerce hearing this week, Chair Ted Cruz (R-Texas) previewed plans to introduce a light-touch framework for AI development. Committee members and witnesses also underscored the danger of a patchwork of varying state laws regulating AI, which would add cost, slow development, and undermine startup competitiveness.
Another week of mixed messages on trade. During a White House meeting Tuesday with Canadian Prime Minister Mark Carney, President Trump dismissed mounting pressure to finalize trade agreements, saying, “We don’t have to sign deals...They want a piece of our market. We don’t want a piece of their market.” Later in the week, the administration announced a trade “deal” with the U.K.—the details of which still need to be ironed out—and teased deals with several other countries. Startups need clear and predictable trade policy that seeks to lower barriers and create access to markets abroad.
On the Horizon:
TUE 5/13: The House Energy and Commerce Committee will convene a markup of its portion of the sweeping Republican-led legislative package at 2:00 PM ET.
WED 5/14: The Senate Judiciary subcommittee on intellectual property will convene a hearing to discuss American innovation and economic leadership at 2:30 PM ET.
WED 5/14: The House Small Business subcommittee on economic growth, tax, and capital access will convene a hearing to discuss how private equity supports small businesses and drives economic growth at 10:00 AM ET.
THU 5/15: The House Appropriations subcommittee on financial services and general government will convene a hearing to conduct oversight of the U.S. Federal Trade Commission at 10:00 AM ET.
THU 5/15: Join Engine for lunch catered by Compliments Only and a panel discussion featuring AI startup founders to discuss how policy can support startups and innovation at 12:00 PM ET.
Startup Roundup:
#StartupsEverywhere: New York, New York. Charlotte Ketelaar is passionate about using her background in investment to help startups raise capital. While mentoring a variety of startups, she found a wide gap between the founders and investors, which led her to co-found Capwave AI. Recently, we had the opportunity to sit down and discuss her product, the role of open source, and more.
