The Big Story: Supreme Court case could threaten Internet access for startups
Engine led a coalition of pro-innovation groups in filing a brief to the Supreme Court on Friday in Cox Communications v. Sony Music Entertainment, arguing that forcing Internet service providers (ISPs) to cut off Internet access for users accused of copyright infringement will harm startups and hinder innovation, creativity, and expression online. Sony is suing Cox Communications, claiming the ISP contributed to copyright infringement committed by its users by continuing to provide broadband services despite infringement allegations. If major ISPs are pressured to terminate Internet access over accusations of infringement, the harm will hit every user, entrepreneur, and startup.
At the heart of the case is whether ISPs should be held liable when their users allegedly violate copyright law. 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. Statutory damages can reach $150,000 per infringed work, which quickly creates catastrophic liability for any company. ISPs that don’t want to risk ruinous lawsuits would be incentivized to act out of extreme caution, removing users from the networks entirely.
Startups can’t run without the Internet, and oftentimes they are the first targets of infringement claims, particularly AI startups and platforms hosting user content. The importance of broadband for entrepreneurs was reinforced this week when House Small Business Committee Chairman Roger Williams (R-Texas) said during a hearing that “rural entrepreneurs cannot compete on a level playing field because of the lack of access to reliable Internet.” Cutting off or destabilizing Internet access would threaten all users, especially those in the startup ecosystem, as we explained to the Supreme Court in the brief. Pressuring ISPs to terminate access over copyright infringement allegations “invites abuse by creating a powerful legal weapon that market leaders can use to choke off smaller innovative companies and creators from making their products and services available online,” we wrote. Policymakers should ensure that copyright frameworks protect everyone without creating unnecessary pressure for ISPs to pull Internet access for users.
Policy Roundup:
Federal appeals court finds Trump tariffs illegal. A federal appeals court ruled last Friday that President Trump exceeded his authority by imposing sweeping global tariffs using a national emergency statute. Engine has repeatedly underscored how tariffs harm startups, through higher costs, retaliatory measures, and increased uncertainty that make it harder for U.S. companies to grow to markets abroad. The appeals court ruling allows the duties to remain in effect until mid-October, and the Trump administration wasted no time asking the Supreme Court this week to quickly overturn the decision.
Patent review overhaul threatens patent quality and innovation. With Senate confirmation of John Squires pending, the U.S. Patent and Trademark Office, under Acting Director Coke Stewart, is implementing new Patent Trial and Appeal Board policies that restrict access to inter partes review, limiting startups’ ability to challenge low-quality patents. In a new blog post, Engine explored new policies limiting the most effective tool to combat weak patents that can be weaponized against startups.
Lawmakers spar during hearing on EU Internet rules. This week, the House Judiciary Committee hosted a high-profile hearing on foreign frameworks for Internet platforms, including the EU’s Digital Services Act and UK’s Online Safety Act. The partisan, transatlantic bickering over the laws demonstrates the inherent tensions at play between core values of expression, privacy, child safety, and the global success of U.S companies—especially startups with few resources.
Anthropic settles lawsuit over AI training data. With as much as $1 trillion in damages at stake, Anthropic reached a settlement in training its large language models this week, ending a closely watched copyright case after the Ninth Circuit had been considering whether millions of rightsholders could collectively sue for damages. For startups—who often have limited time and resources—the mere risk of costly litigation and staggering damages will pressure them to settle, even for meritless claims.
On The Horizon:
TUE 09/09: The House Financial Services subcommittee on financial institutions will convene a hearing to discuss reforms to strengthen the banking sector by improving funding access, tailoring capital rules for smaller banks, and streamlining capital-raising at 2:00 PM ET.
WED 09/10: The House Small Business subcommittee on contracting and infrastructure will convene a hearing to discuss opportunities for small business contractors at 9:30 AM ET.
WED 09/10: The Senate Commerce, Science, and Transportation subcommittee on space and science will convene a hearing to discuss the current administration’s AI Action Plan at 2:30 PM ET.
Startup Roundup:
#StartupsEverywhere: Menlo Park, California. Reverse logistics is managing the redistribution of returned or surplus unsold goods. Amrita Bhasin is working to make reverse logistics a mainstream corporate concept. Through her startup, Sotira, Amrita aims to reduce waste and increase producers’ bottom lines. We sat down with Amrita to discuss her company, her experience raising capital, and working in an industry transitioning directly from pen and paper to AI.
