So You Want to Hack the Patent System

Are you a startup or inventor wondering what to do about our broken patent system? Want to know what your options are? Check out Hacking the Patent System, an updated white paper published in partnership with EFF and students from the Juelsgaard Intellectual Property Clinic at Stanford Law School.

This paper includes important and timely advice for technology entrepreneurs attempting to navigate a dysfunctional and unfair system because, unfortunately, patent trolls remain a grave threat to startups and innovators. This is despite multiple attempts to pass reform legislation through Congress and an active Supreme Court working hard to fix a broken system. Not only does the threat of extortionary patent trolls still exist, but it’s actually getting worse. Lawsuits filed by patent trolls are up and significantly more than half of those cases are filed in the notorious Eastern District of Texas.

Despite these problems, startups often find themselves filing for patents, either because their investors tell them it’s a good idea or they plan to later use them defensively against lawsuit threats. This has led to a dangerous culture of “patenting up”—getting as many patents as possible in as short a time as possible.

To really fix the problem, a handful of things need to happen:

1. Congress must pass patent reform legislation that addresses fundamental inequities in the patent system that favor large patent holders and litigation plaintiffs.

2. Patent quality must be improved. Removing low-quality patents from the system will also remove the trolls’ deadliest weapon.

3. We must change the culture of “patenting up.” Big companies, investors, startups, and inventors need to come together to take a stand and return the system to its roots, which—as the Constitution provides—is meant to promote the progress of science and useful arts.

That all might take awhile. In the meantime, there are things that startups can do to navigate a broken patent system without hiring an expensive patent lawyer or even filing for a patent itself. We lay out some of those options here in an updated version of our Hacking the Patent System white paper, originally released in 2014. The paper takes a deep dive into alternative patent licenses: specifically, patent aggregators, patent pledges, and (new this year!) patent insurance.

Thanks to partners EFF and the Juelsgaard Intellectual Property Clinic at Stanford Law School—especially former students Marta Belcher and John Casey—for all their hard work.

Looking Forward (and Backward) to the 2016 Presidential Election

This post is one in a series of reports on significant issues for startups in 2015. In the past year, the startup community's voice helped drive notable debates in tech and entrepreneurship policy, but many of the tech world's policy goals in 2015, such as immigration and patent reform, remain unfulfilled. Check back for more year-end updates and continue to watch this space in 2016 as we follow policy issues affecting the startup community.

As 2015 comes to a close and we look forward to 2016, it is nearly impossible to ignore the presidential contest and its impact (or lack thereof!) on technology and entrepreneurship policy. As the party primaries rage on, notably missing has been any real debate about many of the issues that are most important to the startup community, such as access to capital, net neutrality, patent reform, and access to talent.

A few things are at play here: First, most of these issues are largely bipartisan. On the one hand, this is good news, since we’re more likely to see something get done. On the other, the polarizing nature of primaries—when candidates play to their bases—disincentivizes candidates from addressing anything that could be seen as centrist. Take, for instance, Sen. Marco Rubio’s 2013 efforts to strike a bipartisan deal on immigration, for which his Republican opponents now take him to task.

Second, with at least one notable exception (crypto and cybersecurity, more on that below), the issues startups care the most about frankly aren’t proving to be all that popular with campaigns. This is incredibly short-sighted. As economic growth and opportunity are central issues to every campaign, candidates should recognize startups as significant contributors. Startups are responsible for all net new job growth in the United States. They create opportunity and help the continued economic recovery in cities all over the country.

That’s not to mention all of the amazing technology they create, which is increasingly making its way into crucial and highly-regulated sectors such as health, transit, and education. How our federal government adapts to and regulates new technologies will greatly impact the future and the pace of innovation.

Our political leaders should support this community, which is why we’ve been disappointed to see so little attention paid to startup issues this political season. Troublingly, the only tech conversation receiving any significant airtime in the campaign—cybersecurity—has reflected a serious misunderstanding of the underlying technological issues and a disregard for the impact that ill-conceived cybersecurity policies would have on the startup economy. In the wake of numerous terrorist attacks, it’s no surprise that candidates are looking for any tool available to improve national security. But proposals to curb encryption technologies and increase surveillance programs only serve to make American companies and users more vulnerable to cyberattacks—there is simply no such thing as a “government-only” encryption backdoor—with no likely associated safety benefit. Tech companies and advocates have tried time and again to explain why such policies are technologically unworkable, but politicians do not appear to be listening. Obviously, this should be troubling to the startup sector. If policymakers are unwilling or unable to understand technology and tech issues, it’s unlikely that they’ll be able to craft policy that supports innovation.

It’s not just politicians, of course. Our community needs to make its voice heard, particularly as the primaries wrap up and we get down to the brass tacks of a presidential election. When that time comes, it will be up to us as much as to them to ensure that tech issues get their fair share of debate. We hope you’ll join us in making that happen!

Candidates Need To Address The Tech Industry In The 2016 Election

This piece was originally published in TechCrunch.

Despite the unprecedented growth of the tech sector, none of the 2016 presidential candidates has really stood out when it comes to technology and entrepreneurship policy.

Given the importance of many of the issues that the startup community faces, this is really unfortunate. But not necessarily surprising. Let’s start with the data:

• New firms – startups – are responsible for net new job growth in the United States.

• Each new tech job is responsible for 4.3 local non-tech jobs.

• High-tech startups, and their attendant job creation, exist all over the country.

All of which is to say, this community is of vital importance to our national economy. And it faces real problems that the next president will have to address. So where are the candidates?

For starters, many of these tough issues split our traditional notions of the two-party system. Take for instance the gig economy, which has pitted traditional unions against many newer tech firms. Or cybersecurity, which seemingly puts privacy advocates, law enforcement, and tech companies at odds.

And that’s not to mention the very real lack of diversity in this industry, which continues to be a serious problem without a real and promising solution in sight.

Even though allowing for more high-skilled immigration reform or doing a better job at educating American youth in STEM fields actually does have the potential to unlock scores of diverse talent for American companies, there has been little appetite in D.C. to do anything about it.

It’s true; none of these issues has an easy answer. They are hard problems that need real solutions. Many of those solutions will require bucking traditional political supporters (not to mention funders). Policymakers will have to make tough – and sometimes, unpopular – calls.

It’s only going to get harder as every company transitions to becoming a tech company, or at least a company that increasingly relies on technology.

We’ve already seen that start to happen, as traditional retailers have online stores, coffee shops and hotels provide Internet access, and banks implement online banking services. And that’s not to mention how much of people’s personal and social lives have moved online.

These issues will affect every aspect of our society and economy and more stakeholders will be at the table, demanding answers.

So you can understand why the candidates have attempted to evade these questions so far. But we should not let them do that anymore.

Election season presents an important opportunity to push candidates to go on the record, which may prove valuable for years to come.

Take then-candidate Obama, who in 2007 promised he would support net neutrality, saying unequivocally: “I am a strong supporter of Net neutrality.”

Fast forward to 2015, when President Obama followed through on that promise, strongly and publicly signalling his support for net neutrality in a moment now largely considered to be one of the most crucial in the leadup to the FCC’s historic action.

It’s not all up to the candidates, of course. This community of entrepreneurs must do its job, too. We must  remind the candidates that our community – which was largely responsible for stopping SOPA and for sending 4 million comments to the FCC in support of net neutrality – is listening for answers. And voting.

Will 2015 Be Our Last Real Best Chance for Patent Reform?

Earlier this month, the White House hosted its first ever Demo Day, inviting startups from all over the country to celebrate entrepreneurship. At that event, the President eloquently pointed out just how important the startup community is for our nation:

"Startups, young firms account for almost 40 percent of new hires.  And as we’ve fought back from the worst economic crisis of our lifetimes, those firms have helped our private sector create more than 12.8 million jobs over the last 64 straight months, which is the longest streak of private sector job growth on record."

With numbers like those, you would think all elected leaders would be racing to support pro-entrepreneurship policies. Yet Congress continually fails to move patent reform legislation, threatening the future of the startup community and the good jobs it creates.

The patent troll threat is not an abstract problem. And it’s not a problem that’s getting better. In fact, abusive patent litigation is becoming more prevalent: patent lawsuit filings are on track to break a new record this year (with a forecast of more than 6,000 suits) and 68 percent of suits so far have been filed by trolls. Furthermore, 82 percent of troll activity targets small and medium­-sized businesses, and 55 percent of troll suits are filed against companies with revenues of less than $10 million.

This fall presents an important opportunity—maybe our last—for patent reform to become law.

Where are we?

In June, the Senate Judiciary Committee voted 16-4 to move the PATENT Act to the full Senate floor; later that same month the House Judiciary Committee likewise voted, 24-8, to move the Innovation Act to the full House floor. Both bills represent comprehensive solutions that would address a dangerous patent troll problem; neither is perfect, but both would go a long way to fix a broken system. You can read more about the House bill here and the Senate bill here.

We were very excited when both bills were introduced. Since then, however, provisions in each have been watered down. Compromise and revisions are inherent to the political process, so to some extent this was expected. Questions remain, however, about how much is too much.

There are four primary issues that remain open to debate: venue, pleadings, discovery, and inter partes review (IPR). For political watchers, the last—inter partes review—is the most important. All of the other provisions of the House and Senate bills deal with litigation reforms, but inter partes review is a Patent Office procedure that allows for efficient and effective review of patents outside of federal court. That means the process is particularly good at weeding out bad patents and addressing patent quality, a huge problem that patent trolls have been able to exploit. Originally, the House and Senate bills barely addressed inter partes review, which we were glad about, since by and large the process has been quite successful.

Enter Kyle Bass. The well-known hedge fund manager’s most recent enterprise involves using the IPR process to challenge weak pharmaceutical patents and then short the stock of the company that owns the patent. The pharmaceutical industry, which relies heavily on patent rights, is far from pleased. And despite the fact that the IPR process contains significant protections for patent holders and the fact that Mr. Bass’ actions can already be addressed by the SEC, the pharmaceutical industry has been able to shoehorn its issue into the larger reform efforts.

As a practical matter, this means that long-standing Capitol Hill players, like PhRMA and BIO, are holding up patent reform efforts unless changes are made to weaken the IPR process. (We explain in more detail here why those changes are not only unnecessary, but in fact quite dangerous.) Senators Schumer, Cornyn, Grassley, and Leahy—the primary authors of the Senate bill—are still hammering out a so-called deal on IPR, details of which we should see soon. Even with such a deal, it’s unclear if PhRMA and BIO will decide to support reform efforts.

In the meantime, the House originally planned to move forward with a full vote on its bill in July, but at the last minute, Republican leadership pulled it from the calendar, claiming they needed more time to get the deal done. There is no real way to sugarcoat what happened: the delay shows a slowing of support and momentum for an important bill and we were disappointed that it happened.

Is there a path forward?

There is still a path forward. In September, when Congress comes back, the Senate is slated to pick up its efforts. We understand that Senate reform champions are close to a deal on IPR and that such a deal could create a framework for the bill to pass out of the full Senate. (This would be a particularly interesting turn of events, because in 2013 a strong patent reform bill passed the House 325-91 and then languished in the Senate in 2014.)

Using the momentum from the Senate, the House would be in a good position to revive its own efforts. Given the fact that the House did pass a bill in 2013 with a wide, bipartisan majority, we are confident that the bill would make its way through that chamber easily.

The White House has made clear its support of patent reform and we have every reason to believe that President Obama would happily sign a strong piece of patent reform legislation into law.

Is that path worth it?

Probably. There are two things to watch closely: IPR (see above) and venue (see more here). Right now, the House bill includes a strong venue provision that would help prevent trolls from filing so many cases in the notoriously plaintiff-friendly Eastern District of Texas. This would in turn make it easier for patent troll targets to fight back.

So, to simplify: anything that weakens IPR is bad (this should play itself out first in the Senate bill). Efforts to fix venue are good (see the House bill for this). Some combination of the two is probably liveable, though—as always—the devil is in the details, details we will be watching very closely over the next couple of months.

We’ll continue fighting to make sure that startups and inventors see legislation that will actually protect them from patent trolls and will need to call on you to help make our case. So watch this space closely and stay tuned.

Engine Statement on Postponement of New York FHV Cap

Engine is pleased that New York City has agreed to postpone a proposed cap on the number of for-hire vehicles in the five boroughs. As we said after the proposal was introduced, it had the potential to be especially problematic for some of the newest and smallest transportation startups in New York, and particularly for the next wave of innovators that haven't even launched yet.

We commend the Council and the Mayor's office for once again being responsive to concerns raised by the startup community. And we look forward to supporting a dialogue with startups and other stakeholders to find creative 21st century solutions to the problems of traffic and congestion.

Patent Reform: Where We Are and Where We’re Going (House Version)

Last week, the Senate Judiciary Committee voted 16-4 to move the PATENT Act to the full Senate floor, a big step toward making patent reform a reality. This morning, the House Judiciary Committee will take its turn marking up the Innovation Act. Unfortunately, that bill’s fate remains unclear.

When Rep. Goodlatte introduced his Innovation Act earlier this year (in the same form as it was overwhelmingly passed in December 2013), we, along with many others, applauded it as a strong piece of comprehensive legislation that would do much to fix a broken patent system. So were feeling very optimistic last week when the Senate moved its bill, because last year it was the Senate that held up reform. That sense of optimism lasted until earlier this week, when we saw the latest version of the Innovation Act.

Simply put, some of the most important provisions—those surrounding discovery, pleading, and venue—had been watered down, in some cases beyond recognition. As we write this post on the eve of the bill’s markup, we understand negotiations are ongoing, so we remain hopeful that the bill language we see today will indeed provide meaningful reform.

More details on what we’ll be watching:

• Discovery: Currently, discovery is by far the most expensive part of litigation for any party facing suit. For a patent troll who doesn’t make or sell anything, the cost of discovery is next to nothing. However, it can use abusive discovery practices to drive the costs of litigation even higher than they already are. The Senate bill would curb some of the worst of these practices by staying discovery until a party has had a chance to try to have a case dismissed. Unfortunately, the House bill would undermine that reform by limiting this important stay. We’re closely watching and supporting an amendment being introduced by Reps. Collins and Farenthold that would fix this.
• Pleading: Right now someone can file a patent suit without providing almost any basic details about his or her case, information like how a patent is infringed, what products allegedly infringe, and even who owns that patent. This information is easily known to any patent holder at the outset of a case, especially those who engage in a responsible amount of due diligence prior to filing a case. However, getting this information can cost the defendant tens or even hundreds of thousands of dollars. Fixing these pleading practices has long been a cornerstone of meaningful patent reform. The current version of the House bill, however, will not provide that fix. Frankly, the current legislative language is confusing and hard-to-follow, making it impossible to support it in its current form. We’re closely watching for an amendment, hopefully one that would more closely mirror the language in the Senate’s PATENT Act, an effort we would support.
• Venue: The majority of patent troll cases take place in small towns in the Eastern District of Texas. (Watch John Oliver explain it much more hysterically than we can here.) That’s because the Eastern District of Texas is notoriously friendly to patent holders (including trolls) and is hard and expensive to get to, making it even more difficult for startups to defend themselves. We’re glad to see the House bill take on this issue, but the language as it stands has so many  loopholes that it wouldn’t be effective. We are closely watching and supporting an amendment that would fix this being introduced this morning by Reps. Issa, Goodlatte, Nadler, Lofgren, Forbes, Chu, Farenthold, DelBene, and Walters.

The good news is that, as stated above, many members look ready to introduce amendments that would fix these shortcomings.

The bad news is that the process has, to put it mildly, gone awry.

We remain optimistic that the bill that comes out of the House Judiciary Committee tomorrow will meaningfully address the patent troll problem, but—until we see today’s vote—we cannot be sure.

Patent Reform: Where We Are and Where We’re Going (Senate Version)

Tomorrow morning, the Senate Judiciary Committee will markup the PATENT Act, a comprehensive piece of legislation that seeks to address the patent troll problem. We explained what we liked about that bill here when it was first introduced. In short, the most important provisions of the bill rein in an out-of-control patent litigation system that allow bad actors (trolls) to force startups to pay up by threatening expensive lawsuits.

This is a key political moment for patent reform: in fact, it was exactly at this time last year—on the eve of markup in the Senate—when efforts to fix the system fell apart. “Marking up” a bill is a crucial step toward making law; tomorrow, senators on the Judiciary Committee will debate and rewrite the legislative language and then, if everything goes according to plan, vote the bill out of committee and send it to the Senate floor for a full vote.

At the same time, debate continues in the House on a similar but slightly different piece of legislation, the Innovation Act. That bill should be marked up next week and we’ll of course be watching it closely.

At this point in the process, things are moving quickly. There’s a chance that by the time you’re reading this post, some real changes might have happened (if they did, we’ll update you!).

Post Grant Review

This is probably the most important issue that remains up in the air. 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. They 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 world of bad patents. So far the procedure has been successful.

Significant changes to IPR were not originally part of the Senate’s PATENT Act. We wish that were still the case. Yet it appears that IPR is now on the table (more of our thoughts on that here) as some reform opponents from the pharmaceutical industry have conditioned their support on this issue.This is where the process gets a bit strange. Senators who support litigation reform are hard at work trying to hammer out a compromise on IPR that will get the PATENT Act out of committee tomorrow with a wide vote margin, which we support. But, in the meantime, they have left a “placeholder” in the bill to clean up the language around IPR. This might explain why many of us who have long supported reform are not cheerleading as much as usual—not because we don’t support the PATENT Act per se (we still do), but because we actually haven’t seen the final language and, until we do, it’s hard to know whether this will be a full win for startups.

In the meantime, we will keep working to ensure IPR remains a strong and viable option to clear the system of low-quality patents while not ceding ground on the litigation reforms at the heart of the PATENT Act. Those reforms, of course, are the core of what will protect startups and successfully address a patent troll problem that has grown out of control.

Check us out on Twitter where we'll be following the situation closely and updating accordingly. 

Patent Reform is Good for Startups and Investors

 By Ron Conway and Julie Samuels

This piece was originally published in The Hill: http://bit.ly/1Hv8uXM

The debate over patent trolls rages on, getting some pretty high-profile (and hilarious) attention from John Oliver and action in the Senate, where the PATENT Act, the long-awaited companion bill to the House’s Innovation Act, was recently introduced. This legislation can’t move fast enough—and we are hopeful that the House Judiciary Committee will take the first step this week in passing meaningful reform. Every day without patent reform is another day of trolls targeting additional businesses and individuals. And unfortunately, those who suffer the most are the startups and small companies with whom we work. These are the companies that create jobs, build new technology, and have carried the laboring oar in helping our economy recover.

Which is why the investor community should wholeheartedly support these reform efforts. And most investors do. A survey of 200 VCs and their portfolio companies found “venture capitalists overwhelmingly believe that patent demands have a negative impact on the venture-backed community, with all or most of those assertions coming from” so-called patent trolls. And it’s beenestimated that were it not for troll threats, VC investment in startups would have been $8 billion higher over the last five years alone.

Even more, VCs nationwide, particularly those investing in high-tech companies, by and large support reforming the patent system. In fact, more than 140 of them signed a letter to Congress in support of the very type of reforms in the Patent Act and its companion in the House, the Innovation Act.

This makes all the more confounding a so-called “disagreement” in the venture community surrounding patent reform. Why would any VCs oppose reforms like those in the Patent Act or, the Innovation Act? Let’s look at some of the claims the National Venture Capitalists Association (“NVCA”) has made in testimony and in writing.

First, NVCA’s Scott Sandell expresses concern about the Innovation Act’s fee-shifting provision, claiming that it “effectively mandates the payment of legal expenses by the non-prevailing party in almost all cases.” Put mildly, that is a serious misreading of the current bill. In fact, members of Congress led by Rep. Hakeem Jeffries (D-N.Y.) reached a carefully negotiated compromise that would give courts discretion over when to award fees to a winning party—and said those fees should not be granted when a party’s “position and conduct … were reasonably justified in law and fact.” In English: bring a reasonable case and even if you lose, you won’t be stuck paying the winning party’s legal fees.

Sandell goes on to complain that fee-shifting “means that any entrepreneur who seeks to defend their patent will have to take into account the risk that losing in court could bankrupt their company.” Again, that is not the case. The only entrepreneurs who should in fact face such a risk are those who bring an unreasonable case—the exact type of litigation we are trying to discourage.

Perhaps even more troubling, Sandell claims that investors should not support this provision because it allows for investors to find themselves on the hook for a losing party’s fees. Again, not the case. Both bills carve out investors whose “sole financial interest” in the patent(s) is one who has an equity interest in the company. The Senate bill goes even farther, only applying in cases where the “primary business” party suing is “assertion and enforcement of patents,” e.g., is not making or selling anything based on the underlying technology. Even more, both bills allow for an investor to renounce his or her interest in a patent (and not the company that owns it).

Perhaps what’s most troubling, though, is NVCA’s blanket denunciation of these efforts and apparent unwillingness to come to the table to craft language that would accomplish the bills’ goals, which are not to target venture capitalists but to end the dangerous practice of trolls using shell companies to hide their identities and their assets.

Without fee-shifting, startups facing patent troll litigation have little incentive to put up a defense: even if they win the suit, they are stuck paying as much as millions of dollars in legal fees. The potential promise of seeing some of that money back helps align proper incentives—giving defendants a tool to fight back and encouraging plaintiffs to only bring reasonable cases.

Even more, Sandell claims that the fee shifting will cause more big companies to attack startups because they might recoup attorneys’ fees at the end of a suit. We reject this reading of the bill, but more importantly the data does not support this claim. Big companies are not, generally, suing startups over patents. We do not believe that adding even a million dollars in fees in a victory will change behavior. Will big companies decide that a small change in the balance sheet is worth the time of management to pursue? We think not.   

Opponents of reform aren’t just making erroneous attacks on fee-shifting. Objections to other provisions of the Innovation Act and the PATENT Act similarly leave us scratching our heads.

Take heightened pleading. Reform opponents claim this creates too much work for patent owners, but what does it really require? Setting forth such basic information as who owns a patent, what product allegedly infringes the patent, and what parts of the patent are at issue. This is not rocket science —it’s the kind of basic information a party needs to decide whether to fight or settle. The same is true with discovery reform, which would streamline the process to get the most basic information about a case at the outset before costs balloon out of control, leaving startups and small companies with no choice but to feed the patent troll. The kind of goals we’re talking about—transparency and fairness—should apply to anyone bringing a lawsuit in federal court, small startup to Fortune 500 company.

So again we ask, why would anyone who supports entrepreneurship—especially those who invest in it—not support the level-headed, common-sense and carefully crafted reforms in the Innovation Act and the PATENT Act? Taken in conjunction with strong patent reexam provisions established under the America Invents Act, these bills represent an important package of incentives that would rebalance and restore faith in a broken system. They will level the playing field and give startups and those companies that investors like Mr. Sandell fund tools to fight back against patent trolls, while at the same time not burdening legitimate patent holders who want to defend their rights in court. Without them, patent trolls will continue to prey on the youngest and weakest companies. It’s well past time to put an end to this dangerous trend once and for all. We urge the members of the House Judiciary Committee who want to support the startup and venture capital community to vote in support of the Innovation and PATENT Acts.

Conway is an angel investor and philanthropist in San Francisco. Samuels is executive director of Engine, a non-profit organization that supports the growth of technology entrepreneurship.

 

 

Remarks from Senate Hearing on PATENT Act

Engine Executive Director Julie Samuels' Oral Testimony as Prepared, Senate Judiciary Committee Hearing on PATENT Act:

Chairman Grassley, Ranking Member Leahy, and members of the committee, I’m Julie Samuels, Executive Director of Engine, an organization started several years ago to help advocate for high-tech, high-growth entrepreneurship. Through a combination of policy analysis and economic research, we represent startups nationwide. It’s an honor to be here today. I look forward to discussing effective solutions to the patent troll problem, especially because this problem disproportionately harms the community of high-tech, high-growth startups I represent.

Today I’m going to tell you about what the startup community needs from a functioning patent system—balance and fairness—and why the PATENT Act would help ensure those things.

Patent trolls are armed with two weapons: low-quality, impossible-to-understand patents on the one hand and the outrageous costs—both in time and money—of patent litigation on the other. So imagine you are a small startup, cash-strapped and hungry, and you get a patent demand from a company you’ve never heard of, claiming to own some basic technology. Your choices are: hire a lawyer and spend valuable and limited resources fighting back, or pay the troll to go away.

Which is why I want to talk today about fairness and balance, two concepts that go together. Right now, we have a system that across-the-board favors patent holders who abuse that system. Those parties have exclusive access to all of the relevant information surrounding the patent—basic things, such as, who owns it? Who else has rights to it?—along with the ability to single-handedly drive up the costs of litigation through discovery and motion practice.

It’s a system that essentially allows for legalized extortion, and that leaves startups nearly powerless to fight back without great personal risk and expense.

Take the experience of Jump Rope, a Chicago startup founded by Peter Braxton. An Air Force veteran and former Combat Pilot, Peter found himself facing a troll suit less than one month after he launched Jump Rope. Peter’s lawyers advised him to settle, but he instead decided to fund the litigation himself. Ultimately the court found no infringement, and that the the plaintiff failed to conduct even due diligence before filing suit—but not before Peter was forced to spend more than $250,000 on his defense.

Or take Life360, an app that keeps over 55 million families safe and connected. After raising $50 million in capital early last year, the company was hit with a troll suit that it decided to fight. In spite of a jury finding the troll’s claims meritless, Life360 still had to spend over $1.5 million to defend itself, with no reasonable recourse to recover that money.

Many of the startups who support reform are also patent owners themselves. Like Foursquare, which currently faces four troll suits. This year’s legal budget set aside enough money for these cases alone that could otherwise have been used to hire between six and ten engineers—good jobs that now do not exist.

There are countless other companies in our network, too, who invest in the patent system yet still support strong reform. Many asked that I not use their names, because they’re so afraid of attracting more troll suits. One startup general counsel told me, and I quote, “The system is set up in such a way that pretty much guarantees that the troll gets paid. It has nothing to do with the patent’s claims, but with the litigation fees. We were bombarded with letters, emails, discovery requests, and motions. It was all meaningless paper, but we still had to spend time and money to respond.”

In each case, startups divert resources from innovating, growing their business, and creating new jobs to fight what are often meritless claims. To make matters worse, the bulk of this money never finds its way back to inventors or research and development departments.

For a small startup, even one troll suit can ruin its business and the mere threat can cause significant disruption. No small business owner should be forced to put her company at risk simply to defend what she knows is right.

Which is why we need the kind of comprehensive set of reforms that is the PATENT Act.

The PATENT Act would bring much needed transparency to the system through heightened pleading and demand letter reform; giving startups tools to understand the scope of the threat they face, helping them decide whether they should hire a lawyer and fight or take a settlement and walk away. The bill creates the appropriate incentives for startups facing meritless suits to fight back: by shifting fees and allowing for real recovery and by reforming discovery, the PATENT Act allows parties a fighting chance in court. Right now, a startup worried about its bottom line has almost no choice but to pay a troll to go away; the PATENT Act would dramatically change this calculation and keep the courthouse doors open to everyone.

Taken together with the strong post-grant review procedures from the America Invents Act, the PATENT Act represents an important package of incentives that would rebalance and restore faith in a broken system. To be clear, no single reform in the bill can accomplish this task alone. It is only when they are all taken together that we can find the missing balance and fairness.

Opponents of reform argue that the proposed changes in the law would have the unintended consequence of making it harder to assert valid claims. In fact, nothing in the PATENT Act would hinder an inventor from monetizing, asserting, or enforcing valid patents, or making claims that are substantially justified or objectively reasonable.

The freedom to innovate has always been a central part of the American dream. For the sake of our economy and our identity, we must not let innovation become a legal liability.

A patent should be valued for what it covers and how it incentivizes innovation, not for its litigation value. The PATENT Act would go a long way to making that the case.

Thank you, and I look forward to your questions.

 

Senate's PATENT Act is a Big Win for Startups

Today, Sens. Grassley, Leahy, Cornyn, Schumer, Lee, Hatch and Klobuchar introduced the PATENT Act, an important piece of legislation targeting a serious patent troll problem. Engine is proud to support that bill.

The PATENT Act, and the Innovation Act, its House counterpart, are effective because they are comprehensive in scope. Each contains a package of incentives that, taken together, insert balance back into patent litigation, giving troll targets the tools to fight back and ensuring that patent holders act responsibly. Importantly, they are carefully crafted to ensure that a patent holder with a high-quality patent and a legitimate claim of infringement will face no barriers to making that claim.

To understand the way these bills work, you have to understand a bit about the patent troll problem. Patent trolls are primarily armed with two weapons: low-quality, impossible-to-understand patents and the outrageous costs of patent litigation, which can easily cost a defendant well into the millions of dollars. So imagine you are a small startup, cash-strapped and hungry, and you get a patent demand from a company you’ve never heard of, claiming it owns some seemingly basic technology. (This really happens. Often. See here, here, here, and here, for example.) Your choices are: hire a lawyer and spend valuable time dealing with the problem or pay the troll to go away, usually for a sum far smaller than what it would cost to hire that lawyer or go to court.

The good news is that the Supreme Court has been busy trying to fix the problem of low-quality patents. The bad news is that we still have a long way to go. Patent litigation remains outrageously expensive and one-sided, giving a patent owner who is willing to take advantage of loopholes in the system the ability to run roughshod over defendants.

This is where Congress, and specifically today’s introduction of the PATENT Act, comes in. Its provisions help right the imbalance in patent litigation through a series of reforms:

• Transparency and Heightened Pleading: Currently, someone can file a patent suit without providing almost any basic details about his or her case, information like how a patent is infringed, what products allegedly infringe it, and even who owns that patent. This information is easily known to any patent holder at the outset of a case, especially those who engage in a responsible amount of due diligence prior to filing a case.  However, getting this information can cost a party being sued tens or even hundreds of thousands of dollars. The PATENT Act would fix that, requiring patent holders to provide this basic information at the outset of litigation and also require patent holders to tell the Patent Office when they transfer a patent. Only with this basic information can parties make informed decisions about how they should proceed. If a party legitimately cannot find some of this information after making a “reasonable inquiry”, it may still file a suit, an important caveat protecting the responsible patent holder.

• Fee-shifting: Currently, little incentive exists for a party to defend itself in court. After years and millions of dollars spent litigating, a successful party will often be sent on its way with nothing more than a Pyrrhic victory. The PATENT Act remedies this by awarding fees to a winning party when a court determines that a losing party’s position was not “objectively reasonable”. This provision carefully strikes a balance between deterring those who bring crappy, unsubstantiated lawsuits and those who bring reasonable, good-faith cases. It also includes important provisions that would effectively end the practice of using shell companies with little or no assets to avoid responsibility. Specifically, a party who doesn’t make or sell anything with its patents will have to show that it can pay for fees if they are awarded. Only with this incentive can many startups afford to take on a troll threat, discouraging those trolls from bringing frivolous cases.

• Demand Letter Reform: Currently, trolls send vague demand letters full of legalese, targeting small businesses and even individuals. Because this takes place before a lawsuit is even filed, there is no public record of how often it happens. We know it is common practice, so we also know that we can’t even properly understand the scope of the entire patent troll problem. The PATENT Act will help fix this by requiring that such letters include certain basic information about the infringement claim and that they do not make false claims about the patent holder’s rights with regard to the patent. Only with these requirements will startups be able to make informed decisions about whether they should respond to or ignore a demand letter and whether they should hire a lawyer.

• Discovery Reform: Currently, discovery is by far the most expensive part of litigation for any party facing suit. For a patent troll who doesn’t make or sell anything, the cost of discovery is next to nothing.  However, it can use abusive discovery practices to drive the costs of litigation even higher than they already are. The PATENT Act would curb some of the worst of these practices by staying discovery until a party has had a chance to try to have a case dismissed. It also makes further recommendations to shift some of the discovery burden from the party producing information to the party requesting it. Only with these reforms can small companies and startups afford to litigate.

• Customer Stay: Currently, trolls love to target a company’s customers, claiming that by using off-the-shelf technology those customers are liable for infringement. This can put enormous pressure on companies that provide products and services (e.g., every company). The PATENT Act provides tools to both the customers and the companies in this dangerous situation, allowing the company to fight the litigation on behalf of its customers. Only with this provision will startups be able to protect their customers.

To be certain, the PATENT Act is not perfect. There are a number of areas where the bill could be made stronger. For instance, we wish the discovery reforms went farther, clearly providing in-statute limits on discovery to those documents directly related to the litigation and requiring a party seeking documents to cover the costs of getting those documents. We’d also like to see the bill more directly address venue and make it easier for parties to move a case out of the Eastern District of Texas, where so many cases are brought and where judges are notoriously plaintiff-friendly. Likewise, we remain concerned that the current customer stay provision only kicks in when the manufacturer is already involved in litigation.  We think improvements could be made to make it any easier for that manufacturer to actively step in on behalf of its customers. Finally, we think the bill could also make it easier and cheaper for parties to challenge low-quality patents at the Patent Office through a process called inter partes review (IPR).  For many parties, seeing a case all the way through to a final decision is not an economic reality, even with the above-discussed reforms. IPR provides a valuable means for a startup or party with limited financial resources to invalidate or narrow the scope of an otherwise overly broad patent.

All that said, we remain proud to support this bill. The heart of it—the litigation reform provisions—represent a hard-fought compromise, spearheaded by Sens. Schumer and Cornyn, who tirelessly worked to get this done. We will continue to work to improve the PATENT Act where we think it needs improvement, and fight off any efforts to water down its provisions. We look forward to seeing this become law.

Statement on Introduction of the PATENT Act

We applaud the introduction of the PATENT Act, an important piece of legislation that would create much-needed balance, fairness, and transparency in the patent system. The bill’s package of incentives directly target a patent troll problem that has, over the past decade, grown out of control, harming countless startups and our economy at large.

The patent troll epidemic has been well-documented by reporters, advocates, and even comedian John Oliver. It costs our economy at least $29 billion annually. But, worst of all, it disproportionately targets startups and small companies. Research shows that 55 percent of companies targeted by trolls have less than $10 million in annual revenue. And a survey of 200 VCs and their portfolio companies found “venture capitalists overwhelmingly believe that patent demands have a negative impact on the venture-backed community.” In fact, it’s been estimated that were it not for troll threats, VC investment in startups would have been $8 billion higher over the last five years alone.

The PATENT Act would give those threatened by patent trolls the tools they need to fight back, redistributing power and creating a more level playing field. These common-sense reforms would require patent owners to provide basic information, and would incentivize them to bring only those lawsuits that are based on high-quality patents and represent legitimate claims of infringement. As such, it creates no unnecessary burden on patent holders. And the bill effectively addresses the serious problem of out-of-control demand letters.

Patent reform enjoys broad bipartisan support in both houses and growing demand from the American people. In the weeks ahead, we'll be redoubling our efforts to ensure the passage of the PATENT Act, a bill that will strengthen the patent ecosystem for all innovators.

We commend the bill’s co-sponsors Sens. Grassley, Leahy, Cornyn, Schumer, Lee, Hatch and Klobuchar and look forward to the PATENT Act becoming law.

Why A Patent Verdict Against Samsung Is Bad News for Startups

Last night, I tweeted this:

 

The full story is here, which you should go ahead and read. But the gist is that Samsung lost a $15.7 million verdict in the Eastern District of Texas (the hallowed home of patent litigation) to Rembrandt, a party that claims to own the technology behind the Bluetooth 2.0 standard.

My tweet got a lot of attention (way more than my average missive), including countless replies basically calling me an idiot. Rather than engage with the twitter trolls (see what I did there? Clever, no?), I decided this would be a good time to talk about the patent troll problem and what it means for big companies and startups alike.

For starters, if you think I am particularly worried that Samsung, a huge company, lost a $15.7 million lawsuit, you don’t understand my feelings on patent reform, how the troll model works at all, or, apparently, how the patent system works. Let me tell you what I—and anyone who cares about protecting startups and innovation in this country should—care about.

Last week, when a jury found Samsung infringed three valid patents that supposedly cover the technology behind the Bluetooth 2.0 standard, it conferred on the patent owner, a company that neither makes nor sells anything, a monopoly on that standard. And, according to the Ars Technica article, which cites the patent owner’s complaint, Rembrandt asserts that these patents don’t just cover Samsung’s products, but “all products using Bluetooth 2.0 and later.”

So here is the problem: The inventor and the owner of the patents (two different parties) had nothing to do with the implementation of the popular Bluetooth 2.0 standards. In fact, so far as the story goes, the inventor has had no part in producing anything but 100 patents, which he sells to the current owner to use in patent litigation. Not to create new technologies (the type of progress of science and useful art the Constitution contemplated when it enacted a patent system), let alone to grow new businesses and create jobs. Instead, they serve as a tool for him and the patents’ current owner to extort money out of companies who do want to do those things.

Which is why I tweeted last night that this is very bad news for startups. Bluetooth technology is key to today’s growing technology marketplace. And it’s a market that is already regulated to some extent by the Bluetooth Special Interest Group (SIG), which maintains the technology’s standards. This is a particularly important point: tech companies rely on the concept of interoperability, meaning that anyone can use Bluetooth technology and it will work with different devices across the board. Currently, the SIG facilitates this in the Bluetooth space.

Before this verdict, a company who wanted to use Bluetooth could work with the SIG, a one-stop shop, to get access and necessary legal rights to the proper technology. But now there is a giant unknown: will Rembrandt sue? Demand a license to use Bluetooth? If a startup asks a lawyer about its new project that implements Bluetooth 2.0 or later, it’s likely to get an answer that someone else owns that technology, and it should either not work in that space or get ready to pay up.

I really am not overly concerned that Samsung finds itself on the hook for a $15.7 million verdict (though that’s not good news, either). I fundamentally care about the chilling effect that cases like these have on further innovation and—as I tweeted last night—on startups. Right now, we have a system that is, simply put, broken. We need real reform to get it back in working order, where everyone—big companies, startups, and garage tinkerers—are incentivized to innovate and create.

Patent Troll Targets Crowdfunding Startups

This post originally appeared in VentureBeat and was written in collaboration with D.J. Paul, a member of the Securities and Exchange Commission’s Advisory Committee on Small and Emerging Companies, and the co-chair of the Crowdfund Intermediary Regulatory Advocates (CFIRA).

On Thursday, House Judiciary Chairman Bob Goodlatte (R-VA) re-introduced the Innovation Act, a bipartisan bill targeted at fixing the out-of-control patent troll problem.

This comes not a moment too soon, as patent trolls have begun to target one of the newest areas of innovation and job creation: the crowdfunding industry.

AlphaCap Ventures, an entity that claims to offer “strategic, operations, and financial advisory services in the United States” and whose website resolves to nothing, has so far sued at least 10 companies engaged in some form of crowdfunding. They accuse each company of infringing upon multiple patents (you can see one here) that allegedly cover the very basic workings of managing customer information as it relates to private equity and debt markets.

On its face, the AlphaCap cases look sadly typical. There’s no evidence that AlphaCap has its own crowdfunding platform. Instead it appears to be using its patents as a tool of extortion against those who are actually creating something valuable for our economy.

Crowdfunding platforms have become an important part of the innovation economy, giving entrepreneurs unprecedented access to the capital they need to grow a business or launch a project. They’re also beginning to democratize finance: Women are nearly four times more successful when crowdfunding than when raising funds through traditional means like venture capital.

Unfortunately, many of these platforms are small and young — the most popular targets for patent trolls. In fact, 55 percent of troll suits are filed against companies with revenues of less than $10 million.

Fortunately, the Innovation Act gives the startup community a chance to fight back against trolls. This bill won’t stop patent holders from filing legitimate lawsuits, but it will give those unfairly targeted by trolls important tools to fight back. Among other things, it will require more transparency, shift costs of discovery — one of the most expensive costs of litigation — and shift legal fees when plaintiffs bring particularly baseless suits.

As the Innovation Act makes its way through Congress, it’s sure to meet opposition from some of the same powerful special interests groups, namely trial lawyers and pharmaceutical companies, who thwarted previous attempts at patent reform as recently as last spring. That’s why both startups and individuals who care about innovation need to make our voices heard in the weeks ahead. We need to send a message to members of both parties: Move quickly to support and pass this critical legislation.

Patent Litigation and the Continuing Need for Robust Reform Legislation

Tomorrow, the House Judiciary Committee will hold a hearing to review recent Supreme Court cases in patent law. Do not let the wonky subject matter fool you—this is an important hearing that should help set the groundwork for much-needed legislation that will finally fix the patent troll problem.

To understand what’s at stake, you have to understand a bit about patent reform and why it’s become such a critical issue to the startup community. In the past decade, patent litigation initiated by non-practicing entities—so-called patent trolls—has increased tenfold. This increase has been primarily targeted at tech companies, and the data show that the smallest of those companies—most often, startups—are in fact targeted the most frequently. This led to the recent push for patent reform. And last year, we made some real progress: not only did we come close to passing legislation, but the FTC took up the issue, as did more than 20 states, who introduced or passed legislation, or whose attorney general investigated, and in some instances sued, patent trolls. Even more, the Supreme Court stepped in, deciding six cases unanimously, each of which should help fix a broken patent system.

That’s the good news. The bad news is that opponents of patent reform now claim that because of those victories at the Supreme Court, we no longer need patent reform legislation.

They couldn’t be more wrong.

First, the most important of those cases—Alice v. CLS Bank and Nautilus v. Biosig—deal with patent quality. In other words, tightening the standards around what can and can’t be patented, an update that’s critical to eliminating trolls who thrive on low-quality patents  But it will take years, if not decades, for the impact of these cases to actually be felt. Patents last for 20 years, and the Patent Office has been in the business of granting approximately 40,000 software patents annually, which means at least hundreds of thousands of them currently exist. The vast majority of these patents won’t be reevaluated under Alice and Nautilus unless someone actually challenges that patent, either in court or at the Patent Office. Those challenges can cost tens or hundreds of thousands of dollars. So we don’t expect to see the number of bad patents falling dramatically any time soon.

Second, these cases do not address the patent troll’s other most favored weapon: the outrageous costs of patent litigation. Patent litigation is notoriously expensive, costing each side easily into the millions of dollars in legal fees, not to mention other valuable lost resources, like employee time. Trolls exploit this, often successfully demanding payments to go away instead of going to court. While one important Supreme Court case, Octane Fitness v. Icon, addressed at least some of this problem, it’s so far had limited effect. The Court held that a judge could make a loser pay a winner’s legal fees in “exceptional” cases, but, unfortunately, troll cases are no longer “exceptional.”

Despite help from the Supreme Court, we still need real, robust patent reform that will give judges discretion over when to grant fees, increase transparency in lawsuits and demand letters, even out the burden of litigation on both parties, and help protect technology’s innocent end users.

We’ll be watching tomorrow’s hearing closely to make sure that opponents of patent reform—those who benefit from a broken system—don’t mislead members of Congress and the public by overstating effect of the Supreme Court’s recent docket. We are thankful the Court has stepped in and sent a strong message that the system is broken. But lasting change that repairs the patent system for good will require an act of Congress.

Patent Reform: We’re Ready for Round II

Today, a bipartisan group of House members re-introduced the Innovation Act, an important piece of legislation that would directly address a patent troll problem that has ballooned out of control, costing our economy tens of billions of dollars annually.

You might recall that last year similar efforts got incredibly close to becoming law (In fact, the last time the Innovation Act was introduced, it passed the House with a 325-91 vote!), before stalling out at the eleventh hour in the Senate. We were disappointed at the time, saying then:

"This news is devastating to the welfare of startups who will continue to face the threat of patent trolls. That no agreement could be reached, especially in light of the efforts being made across the committee to find common ground, is also bad news for the economy where annual losses from patent troll litigation are billions of dollars."

More importantly, though, we noted then that the hard work we did transformed the political framework, and said to you, our community: “you changed the conversation from a wonky, back room discussion of legal tenets, to real world examples of harm. With your continued support, and the support of our friends in Congress, we can be on the winning side.”

Well, that time is now.

Despite some important progress in the courts and from the states on patent reform, trolls continue to be a serious threat to the innovation and startup ecosystem. Which is why we need comprehensive legislation to really fix the problem.

The reason why is fairly simple. Patent trolls are “successful” because they are armed with two weapons: low-quality patents, usually covering software-type inventions, that are nearly impossible to understand; and the ballooning costs of patent litigation (it can costs each side easily into the millions of dollars to fight a patent suit in court). Most of last year’s progress, especially an important case called Alice v. CLS Bank, dealt with the first problem, trying to improve patent quality. While that’s good news, it has—at least in the short term—only limited effect.

The Alice ruling can only be helpful in three distinct circumstances: 1) for new patents being issued by the Patent Office; 2) in litigation where a defendant attempts to invalidate the patent at issue; or 3) in one very specific proceeding at the Patent Office called a covered business method review (CBM). Let’s unpack each for a second:

• It’s critically important to have better standards for patentability going forward, but currently, there are approximately 2.24 million active patents in the United States. More than a million of those represent a software-type invention. And each of those patents has a lifespan of 20 years. The potential damage from this existing world of patents alone is enough to warrant legislation.
• As mentioned above, litigation can easily cost each side millions of dollars in legal fees, not to mention years of distraction from a business’ core function. Which makes the barrier to startups essentially impossible to overcome.
• CBM review is a great program, allowing affordable and efficient review of existing patents at the Patent Office. Yet it is currently limited to patents that touch financial products or services and—unless the law changes—the entire program is set to expire in 2020.

What’s more, none of this touches the out-of-control patent litigation system. Which is precisely why we need the Innovation Act. The Innovation Act, and other comprehensive efforts like it, use a combination of provisions to level the playing field, giving defendants more affordable access to make their case in a federal court. These provisions include common-sense reforms like requiring transparency when filing a lawsuit or issuing a demand letter (who are you? what patents do you own? what product do you claim infringes those patents?); shifting fees to winners when a losing party brought a particularly baseless lawsuit; shifting some of the costs of discovery, usually the most expensive part of litigation; and creating a vehicle for suppliers and manufacturers to help protect their customers when those customers become the trolls’ target.

Of all the good work we’ve done so far, the most important piece was earning a seat at the table. For the first time the startup community has a critical voice in this important debate. It is important that we use it and let Congress know the time has come to make the Innovation Act law.

Announcing Engine’s Diversifying Tech Caucus!

Yesterday, we were on Capitol Hill to launch our new Diversifying Tech Caucus. We’re excited to work with our Congressional Co-chairs—Senators Amy Klobuchar (D-MN), Shelley Moore Capito (R-WV) and Tim Scott (R-SC), and Representatives Cathy McMorris Rodgers (R-WA), Barbara Comstock (R-VA), Tulsi Gabbard (D-HI), Robin Kelly (D-IL) and Ruben Gallego (D-AZ)— to increase representation of women, minorities, and veterans in the tech sector, and the ability of these groups to access the good jobs that this industry creates.

Lack of diversity in tech is a well-documented and serious problem. Right now only one in 14 technical employees in Silicon Valley is African-American or Hispanic. Women currently represent fewer than 13 percent of employed engineers and hold fewer than 25 percent of STEM jobs. And just three percent of all startups are founded by women.

Congress can play a unique role in calling attention to these challenges, highlighting existing best practices, driving a public conversation, and designing policy initiatives that support and promote diversity. The Diversifying Tech Caucus will be a true partnership between policy makers, industry, and academia to organize, advocate, and create awareness about underrepresented groups and develop strategies for improving access and engagement. Industry and academic leaders will also work together to undertake extensive new research that legislators can use to elevate the issue and help develop meaningful solutions.

Lack of diversity in the tech industry is a complicated problem, one without a single, easy fix. But we are confident that when you get smart people from different walks of life with different sets of tools around a table, you can take great strides toward making it better. We have lots of work to do and can’t wait to get started.

 

 Engine Executive Director Julie Samuels

Senator Shelley Moore Capito (R-WV)

 

Senator Amy Klobuchar (D-MN)

Congresswomen Cathy McMorris Rodgers (R-WA)

Congressman Ruben Gallego (D-AZ)

Congresswoman Tulsi Gabbard (D-HI)

Congressman Blake Farenthold (R-TX)

Tech in New York - Governor Cuomo’s 2015 Opportunity Agenda

With Engine having recently expanded to New York, we’re paying closer attention than ever to the decisions being made in Albany and their impact on the state’s tech sector. New York is home to one of the largest and most rapidly expanding startup communities in the country, so local and state level policies on investment and regulation have implications for the future of tech in all fifty states. This afternoon, Governor Cuomo laid out his vision for 2015 in a combined State of the State and budget address, along with a 500-page policy book that included additional proposals and details. While the presentation covered a wide range of topics from criminal justice to transportation infrastructure, the Governor did include several initiatives of particular interest to the startup community in both the education and economic development sections of his speech. For example, the Governor discussed his recently announced New NY Broadband Program, which would provide matching funds for internet service providers that invest in high-speed broadband in underserved areas. Access to broadband is essential not just for consumers, but for growing and potential startup communities as well. By using state funds to leverage private investments, this program could go a long way towards supporting innovation around the state. At the same time, the Governor avoided mention of the proposed merger of Comcast and Time Warner Cable, which would do much to undermine efforts to improve broadband access here in New York and around the country. Giving Comcast that kind of monopolistic control over broadband would remove almost any incentive for them to provide the higher internet speeds necessary for startups to thrive, and for us to remain competitive with other countries. Governor Cuomo has previously indicated his concerns about the proposed merger, and the state’s Public Service Commission is currently reviewing the deal to determine if it would benefit or harm New Yorkers. We urge the Governor and the PSC to oppose this deal, and continue to champion high-speed access for all New Yorkers. The Governor also talked about expanding a number of programs that would provide startups with access to capital, technical support, and other incentives. One proposal particularly worth noting is doubling the NY State Innovation Venture Capital Fund from $50 million to $100 million. The Fund is overseen by Empire State Development, and provides two types of investments: small pre-seed stage investments of up to $100,000 to startups associated with universities in state; and investments of up to $5 million in businesses in strategic tech industries. This additional capital, and the private investment it can leverage, could make a big difference for some startups that would otherwise have trouble accessing funding. And the state can do even more to help New York startups access capital. In his campaign policy book released in October, Governor Cuomo declared his support for equity crowdfunding, which provides financing opportunity for businesses that have a hard time attracting traditional venture capital. Crowdfunding has proven to be especially beneficial to women and minority owned startups. And while the real solution is federal authorization of equity crowdfunding, New York could join more than a dozen other states that have already authorizing intrastate crowdfunding. This would not only provide greater opportunities for diverse startups in Queens or Albany or Rochester, it would help build momentum towards federal action. We hope to see more support from the Governor on this subject in the months ahead. The Governor also discussed a package of proposals to improve higher education in ways that would better prepare students for tech jobs and help startups access the talent they need in order to grow. He talked about creating partnerships between community colleges and employers, and rewarding schools who use those partnerships to provide students with real-world job skills. He proposed an Employee Training Incentive Program that would provide tax incentives for companies that provide on-the-job training. And perhaps most exciting, Governor Cuomo proposed changes that would streamline approval of new programs and degrees both at higher education institutions and high-quality proprietary schools. Recognizing that the skills many new employers need change on a yearly or even monthly basis, he said that “it can no longer take two years for a new degree or training program to be approved.” With startups in constant need of new talent, we welcome the Governor’s commitment to providing students in New York relevant skills. And since startups account for all net new job growth in the United States, making sure those jobs go to New Yorkers is good local economic policy. As more decisions around the details and implementation of these proposals get made, we’ll be working to ensure that startups play a meaningful part in the conversation. And we’ll continue looking for other ways policy makers here in New York can support innovation throughout the state.