Statement on Termination of Comcast Merger Agreement

 

In response to Comcast's announcement that it had terminated it's merger agreement with Time Warner Cable, Engine Policy Director Evan Engstrom issued the following statement:

"This is a major victory for the future of the Internet, and for the startups and families that depend on high-speed broadband access to work and study and innovate. The proposed merger would have given Comcast monopoly control over Internet access for a huge swath of the country, effectively removing any incentives to increase speeds, lower costs, or expand coverage. The death of the merger is a step towards broadband policies that favor competition over conglomeration. If Comcast wants to expand in the future, it will need to do so by competing with its rivals, rather than simply buying them. Engine is proud to have worked with so many great organizations to prevent the merger, and in the months ahead we will continue to fight for policies that expand broadband access and make the U.S. even more competitive in a global economy."

We Support the Demand Letter Transparency Act

Engine is encouraged to see that Reps. Jared Polis, Tom Marino, and Ted Deutch have reintroduced their Demand Letter Transparency Act. This bill will bring much needed transparency to ambiguous demand letters that are used as a tool for extortion, often targeting the country’s smallest businesses and startups. A strong patent system requires robust public notice; this bill will ensure such notice by giving the targets of patent trolls the information they need when facing the very real and very serious threat of spurious patent litigation.

This bill does three key things:

• Requires that those entities sending a certain number of demand letters submit information regarding the letter and the patent of interest to the Patent and Trademark Office (PTO).
• Establishes a demand letter database at the PTO that would make letters publically accessible and searchable.
• Requires demand letters include some basic information, such as identifying and explaining how each patent and claim has been infringed.

Any comprehensive patent reform solution needs to include language that addresses the growing demand letter problem. This issue has been particularly problematic for startups and individuals who can’t afford an attorney to review such letters, which often cost upwards of tens of thousands of dollars - and that’s before even entering the courtroom. The Demand Letter Transparency Act is the best bill introduced so far to address the demand letter problem. However, the FTC and states also have a role to play in protecting consumers, and federal legislation must not preempt their ability to do so.

And, of course, demand letter legislation is no substitute for robust patent litigation reform, which will challenge the patent troll business model of using the high cost of litigation to force settlements. The Innovation Act introduced in the House would provide that comprehensive litigation reform, especially when coupled with the Demand Letter Transparency Act. And we call on the Senate to introduce a companion bill NOW. Startups have waited long enough for real relief.

Bill text can be found here.

CPUC Commissioner Proposes Denying Comcast Merger

On Friday, Commissioner Michael Florio of the California Public Utilities Commission issued a proposed decision rejecting Comcast’s attempted merger with Time Warner Cable—an important step towards blocking further consolidation in the broadband market. Commissioner Florio’s decision is particularly significant, as the CPUC was close to voting on an alternate proposed decision approving the merger with minimal conditions. That Commissioner Florio felt compelled to write a decision rejecting the merger speaks to how problematic it would be for California’s broadband future.

In his proposed decision, Florio writes: “There are a number of concerns about post-merger scenarios, ranging from possible to the probable or certain, that lead us to conclude that this transaction is not in the public interest. These include (but are not limited to) the potential lowering of quality of service and customer service standards to a lower common denominator, an increasing monoculture in the fixed broadband market in California, concerns about privacy, less competition in the special access market, and—most importantly—less competition in the broadband market, both the retail segment of that market and the segment that allows edge or content providers to reach retail subscribers.”

Commissioner Florio expresses specific concerns about the impact of the potential merger on California’s broadband market and it’s larger tech economy. He writes: “Were the post-merger Comcast to exploit its bottleneck position between its retail subscribers and edge providers, as it has shown the inclination to do, it would likely make broadband less attractive to a mass audience, make the investment in and provision of online services (VoIP competitors) and content (Netflix, Amazon, etc) less attractive to edge providers, and dampen the ‘virtuous cycle’ of innovation, investment, and broadband deployment.”

The proposed decision also addresses the economic harm that occurs when edge providers have fewer pathways to reach customers: “In more concrete terms, the proposed merger between Comcast and Time Warner reduces the possibilities for content providers to reach the California broadband market. Many of these content providers are located in California, and a reduction in their ability to reach their intended markets would likely to have a negative impact on the California economy. Such a negative effect on the economy is, itself, likely to discourage the deployment of broadband.”

These concerns echo many of the points raised by Engine and other organizations that support the growth of startups and entrepreneurship. As the decision explains, a post-merger Comcast would be the sole provider of 25 Mbps speed Internet access for 78% of California census blocks and would face only one competitor in the remaining areas. Putting such vast control over broadband connectivity in the hands of one company—particularly one voted the “worst company in America”—would diminish Comcast’s incentives to invest in expanding and improving its broadband infrastructure. The consolidation of mega-ISPs in a market already starved for competitive offerings will only make it less and less likely that California and the U.S more generally will catch up to international peers in terms of Internet speed and affordability. The next generation of innovative startups that depend on high-speed, low-cost Internet access to attract customers and develop innovative services will face a much more difficult competitive landscape if Comcast is allowed to swallow up all potential competitors.

Commissioner Florio concludes that the proposed merger would cause myriad competitive harms that cannot be mitigated through conditions, and therefore, the merger is antithetical to the public interest. “In sum, we find that placing conditions on the merger, even assuming that those conditions could address all of the potential harms associated with the merger, is unlikely to succeed in doing so. And based on our review, it is not clear that any conditions, however well designed, well intended, well enforced and fully implemented, could mitigate the harms associated with the merger.”

This proposed decision is big news, and not just for residents on California. Since much of the merger’s value to Comcast lies in acquiring Time Warner’s California customers, a CPUC rejection would likely kill the merger nationwide. But while Commissioner Florio’s proposal offers hope, it does not by itself spell the end of the Comcast merger. The full CPUC still has to vote, which could happen as early as May 21.

Anyone concerned about our nation’s broadband infrastructure needs to make their voices heard. The CPUC will be accepting comments on the proposed merger until April 30. If you believe that America’s broadband future is too important to be left in Comcast’s hands, send your comments to the CPUC Public Advisor at public.advisor@cpuc.ca.gov and encourage them to reject a merger that would pose an incalculable risk to innovators everywhere.

Despite the Negativity, Revised Patent Laws Improve the System

Procedures for challenging patents after they're granted have cut bogus claims.

This op-ed was originally published in the National Law Journal

When the America Invents Act was enacted in 2011, stakeholders cheered this major reform of the patent system. Negotiated and drafted with extensive involvement from patent holders and patent lawyers, the act established postgrant review proceedings to be conducted by expert administrative judges within the U.S. Patent and Trademark Office. These three new proceedings were touted as more cost-effective and quicker alternatives to litigation — making it easier to challenge, and invalidate, certain low-quality patents. Improperly issued patents are often used abusively by patent trolls against startups and others, and the America Invents Act created mechanisms for taking bad patents out of circulation.

But things have changed. These post­issuance proceedings are now under attack, often by the same entities that helped create them. The main target of criticism has been inter partes review, which allows an issued patent to be challenged, but only on the ground that it is not novel or nonobvious — in short, that it was not truly inventive.

'DEATH SQUAD' LABEL

These popular and effective proceedings have been labeled "death squads" of patent rights, and accused of bias against patent holders. Legislation has even been introduced to curtail these proceedings — all based on inaccurate and misleading statistics on invalidation rates, faulty inferences and conjecture.

Let's look at the facts. Some have ­complained that the inter partes review proceeding is more widely used than expected. Much has also been made of allegedly too high invalidation rates. It is sometimes wrongly asserted that 80 percent of patents are being invalidated. But the critics of inter partes review fail to point out that these proceedings were ­specifically designed to deter challenges to good patents.

First, the Patent Trial and Appeal Board only institutes proceedings if it has first determined that some of the challenged patents are "more likely than not" to be invalidated. Given this high bar, it should not be surprising that a high percentage of these patents are invalidated. If invalidation rates were low, that would indicate a real problem: It would reflect poorly on the board's decisions to institute proceedings, and would mean that too many good patents were being targeted for challenge.

These proceedings have a provision that discourages the filing of weak challenges. Once an inter partes review is instituted, the challenger is barred from seeking judicial review of any matter that could have been raised in the review. Filing an inter partes review without strong grounds will result in a denial of the petition, which effectively "gold plates" the challenged patent, rendering it very hard to attack in the future. In addition, the proceedings are designed to be costly and front-­loaded, another deterrent to weak challenges. Because these proceeding are engineered to take up only strong challenges, one would expect to see relatively high invalidation rates.

But the Patent Office's most recently published statistics do not support the meme of overly high invalidation rates. In reality, just more than 600 petitions (encompassing an aggregate 20,000 or so claims) have been concluded to date. The board has instituted proceedings against 68 percent of patent claims challenged, and declined to institute them against 32 percent. The board has invalidated 36 percent of these claims.

The invalidation rate of total claims challengers have sought to invalidate in these proceedings is even lower — 24 percent. So the board has actually "gold plated" far more patent claims than it has invalidated.

INVALIDATION OF BAD PATENTS

Lastly, the legal landscape has changed dramatically. Recent court decisions have significantly raised the bar for patentability in key areas, making it easier to invalidate bad patents.

And it is unreasonable to criticize the board for implementing the law. Moreover, as the board's decisions are appealable to the U.S. Court of Appeals for the Federal Circuit, time will tell whether anything is flawed about these proceedings. But thus far the court has upheld the board's decisions. None of this is to suggest that the inter partes review proceedings are perfect. From the time the Patent Office was charged with the huge task of implementing the law, Patent Office leadership acknowledged that it would not get everything right the first time. It conducted extensive outreach across the country to gather input from stakeholders, and its implementation of the America Invents Act has been a resounding success.

The board, too, has been widely praised for its professionalism and the quality — and timeliness — of its work. But neither the Patent Office nor the board are resting on their laurels. A change was recently made to the rules to raise the page limits for some filings, and other revisions are in the works. A rulemaking proceeding to address concerns about these proceedings is also pending

Despite that, critics are championing the STRONG Patents Act of 2015, which would upend these proceedings without much, if any, evidence that there is a real problem. This legislation is being presented as an alternative to patent reform, but it would do nothing to address the very real problem of patent-troll abuse. It would only make it much harder for startups and others to use these proceedings for their intended purpose.

We should wait for the Patent Office to conclude its rulemaking and make the changes it has indicated are in the works. In the meantime, we should just let the America Invents Act work.

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Peter C. Pappas is a senior adviser to Engine Advocacy and the former chief of staff for the US Patent & Trademark Office, where he served from 2009 to 2013.

 

News from first-ever Patent Quality Summit

Last week the Patent Office (PTO) held its first-ever Patent Quality Summit – yet another indication of their focus on improving patent quality.  The two-day meeting was intended to take a hard look at patent quality, evaluate PTO proposals, and brainstorm other ways to address this significant problem.  This discussion is timely, as bad patents continue to stifle innovation. Startups have been victimized too often by patent trolls using low quality patents as fodder for sending baseless demand letters and threatening litigation to extort settlements.

At the conclusion of the summit, there was some general consensus among participants that:

1. Overly broad patent claims are extremely prevalent.  The former Chief Judge of the Federal Circuit went so far as to estimate that 70 to 90 percent of the patents he reviewed included at least some “grossly overbroad” claims, mixed in with solid and borderline claims. With about 3 million patents in force, this statistic underscores the extent of the patent quality problem.
2. Quality has to start with the application itself and the conduct of prosecuting the claims in it.   Patent prosecution lawyers are often overzealous in pressing for the broadest possible claims, even those that are clearly invalid.  The PTO allows for many opportunities to wear down the examiner into perhaps accepting borderline or weak claims.  
3. Poor and incomplete recording of the examiner interviews undermines patent quality.  Historically, the “record” has been lacking in sufficient detail. Patent lawyers press examiners into omitting things from the record so they can later claim that the patent covers more.  Examiners are at a disadvantage when arguing with trained, often aggressive patent counsel, and may too often give in to their demands as a path of least resistance.  As a result, startups -- and the public – are deprived of public notice of the specifics and scope of the patent that the law requires.
4. Claim clarity is essential to quality. A clear record is what enables a court to properly interpret the claims. But it is also essential to putting other innovators and the general public on notice about the scope of the patent. This has too often been overlooked.
5. Examiners need to make greater use of Section 112 - part of the law that ensures the “definiteness” requirement is met by the patent.  Section 112 has been historically underutilized, allowing too many vague and overly broad patents.                

Ultimately, examiners will need the strong support of the PTO’s leadership in order to effect any real change.  The patent prosecution bar is not necessarily keen to accept changes that may limit their room to maneuver around the system, and to pursue the broadest possible claims.  One speaker alluded to an “arms race of overly broad claims”. It is well past time to de-escalate this race, and shrink the often inflated scope of claims back to those that are valid.    

Though the PTO has proposed improving the quality of “customer service” provided to applicants, it must be emphasized that the ultimate customer is the innovation ecosystem and the public. An excessive focus on the applicant often works to undermine quality in obvious ways. Therefore, the PTO should be guided by a focus on the public interest in making new rules to improve quality.    

An Outdated Visa System Leaves the Future of Innovation to Chance

Today U.S. Citizenship and Immigration Services (USCIS) will begin accepting applications from companies for H-1B visas - the primary work authorization program for foreign high-skilled employees, including those with expertise in science, engineering, and computer programming. These are workers that our economy depends on to power the country’s top technology firms as well as young and growing technology startups.

Yet despite an exponential increase in global demand for talented workers, the visa pool remains capped at 85,000, an arbitrary and outdated number set by Congress decades ago. USCIS already announced it expects the cap to be met within 5 days, meaning visa applications for high-skilled engineers, computer scientists and developers will be subject to random lottery. The futures of the very brightest men and women among these workers will be left to chance, while companies will again be forced to limit their workforces here in the US.

For all those who care about the future of our economy, April 1 is an opportunity to remind Congress that this woefully outdated immigration system is hindering the growth of high-tech companies across this country and the good jobs they create. Serious reform is long overdue, and it becomes more urgent with each passing year as we turn away more and more skilled, in-demand workers vital to both new startups and established companies.

Immigration reform must include raising the cap on H-1Bs and expanding the scope of other types of visas many companies rely on to hire talented workers. But a full modernization of the immigration system must also incorporate new pathways for both work authorization and citizenship for high-skilled foreign entrepreneurs seeking to build new companies here. Because it’s not just about allowing high-tech companies to hire educated employees to fill existing jobs; our economy also needs ambitious entrepreneurs to create new jobs, as well as new technologies that will continue to make America the world leader in innovation. Talent can be born anywhere, and an immigration system that welcomes and encourages entrepreneurship will make sure that these talented individuals can flourish here in the U.S.

While the President’s executive action addresses some of the shortcoming of our immigration system and aims to create visa pathways to allow entrepreneurs to build businesses in America, a truly modernized, updated and viable system can only come through Congressional reform. If we are to remain at the forefront of innovation, we must do everything in our power to bring the most talented innovators to the U.S.

Unless Congress acts to expand the pool of visas available for these innovators and make it easier for foreign entrepreneurs to create businesses and jobs in the U.S., we risk forfeiting our status as the leader of the technology world.

Why we don't have unpaid internships

Internships—whether paid or unpaid—have become a standard way for students to distinguish themselves in a competitive job market. Among nonprofit organizations especially, unpaid internships are so common that people are sometimes taken aback when they hear we don't have them.

The Department of Labor (DOL) has guidelines about what internships should provide (including a six-point test), but it is unclear whether these apply to nonprofits, which get an exception for volunteers. To oversee an internship as defined by the DOL guidelines takes a lot of staff time, and nonprofits are notorious at operating beyond capacity. Most internships aren’t governed by labor laws (with the exception of those in a handful of states and cities) leavingunpaid interns with no protection against discrimination.

To have an unpaid internship in a major city (like New York or San Francisco, where Engine is located) with a high cost of living assumes that the intern has resources from elsewhere to support the unpaid full-time work. This can lead to a class disparity in the candidates who apply for internships. This disparity can then be perpetuated in the workforce, as internships offer a distinct career advantage.

We believe internships are important for people trying to build experience in new fields. Internships give people an opportunity to prove themselves, build a portfolio of work, and learn about business culture. They also give potential employers an opportunity to see how an intern might fit into their business. “Fit” is a word that is used so often as a defining factor in deciding who to hire, so this advantage is huge. In specialized fields, internships also signal that a job applicant has experience in a niche set of issues, which can be a real boon to the HR person who is sifting through hundreds of resumes and looking for a way to sort the candidates.

Despite these benefits, we cannot endorse unpaid labor, and encourage students and those embarking on new fields of work to seek out employment opportunities at organizations that can support their work.

In the meantime, we have created a volunteer program that has clear benefits for students and professionals without full-time hours or relocation expenses. 

Engine is a lean organization with a small staff and a big mission. We don’t think it’s fair to offer an internship program unless we have the capacity to give an intern a meaningful experience and a paycheck.

SEC Finalizes Rules for Title IV of the JOBS Act

Today, the Securities and Exchange Commission convened to vote on adopting rules to implement Title IV of the JOBS Act. The Commission voted unanimously, finally putting Title IV into effect nearly three years after the original legislation was signed into law.

Title IV addresses Regulation A, a securities registration exemption that allows private companies to raise a limited amount of capital without having to meet many of the onerous disclosure and reporting conditions required of publicly-traded companies. The JOBS Act gave Regulation A, (now reframed as Regulation A+,) new life by raising the offering cap from $5 million to $50 million. Some are calling  Reg A+ a kind of “mini IPO”, since it allows companies to raise funds from the wider public, including unaccredited investors, so long as their investment does not exceed 10% of their income or net worth.

The rules that were ultimately adopted divide Regulation A+ raises into two tiers, up to $20 million and up to $50 million. In the $20 to $50 million range, companies no longer have to register their securities with each state individually. The preemption of state blue sky laws, regulations that govern securities sales in each state, is being lauded as a huge win for the wider business and investment communities. These laws were a big reason why Regulation A was rarely utilized as a capital formation tool before the JOBS Act, when the maximum raise was capped at $5 million.

Nonetheless, companies seeking investment up to $20 million may still have to register their deals at the state level. The SEC’s rules include a coordinated state review process  managed by the North American Securities Administrators Association (NASAA), which could simplify the state-by-state registration process if implemented correctly.

“This mandate, often referred to as Regulation A+, is designed to help enhance the ability of small companies to access capital,” said White. “Small companies are essential to the livelihood of millions of Americans, fueling economic growth and creating jobs.” We couldn’t agree more with this statement. However, while Regulation A+ now offers a new financing option for growing companies, we still need alternative sources of financing for emerging startups seeking to raise far less than $20 million. These companies may still be subject to costly oversight under Regulation A+, especially if the proposed “coordinated review” process doesn’t streamline the system as promised.

The final piece of the JOBS Act—Title III crowdfunding from non-accredited investors—could help fill this gap for small, early-stage funding. However, the SEC has been unwilling to implement Title III crowdfunding thus far. And many experts in the wider startup and investment communities believe that even if the SEC were to enact the Title III rules it’s proposed, the costs of raising capital under Title III would limit its value to most startups.

Whether through Title III equity crowdfunding or some other approach, there continues to be a stark need for alternative financing options for entrepreneurs, particularly those from groups that have traditionally faced greater difficulty raising venture capital funds.

The SEC’s new Reg A+ is an exciting and important new funding mechanism. It will certainly help grow the startup economy and it opens participation in startup financing to the public like never before. But policymakers’ work is not done. They must do more to provide additional alternative pathways for creative and promising entrepreneurs to launch and finance the next wave of innovative startups.

Report on Impact of Copyright Law on Investment

Engine, Fifth Era Release Report on Impact of Copyright Law on Investment

89% of investors said legal environment makes them less likely to invest

Engine and Fifth Era, an advisory and investment firm, today released a new report entitled "The Impact of Internet Regulation on Early Stage Investment". The report makes a compelling case for copyright reform, and will be used by Engine and other advocates to push Congress to enact reform legislation this session.

In 2014, Fifth Era surveyed 330 investors in eight countries around the world (Australia, France, Germany, India, Italy, Spain, the UK and the US) to assess the degree to which future legal environment might impact their willingness to invest in Digital Content Intermediaries (DCIs). These countries represent 56% of world GDP and 25 %of world population.

The survey found significant concerns among investors in all eight countries around a number of issues, including:

• Legal Environment - Globally investors view the legal environment as having the most negative impact on their investing activities with 89% of the investors surveyed saying it had a modest or strongly negative impact. A large majority of early stage investors around the world feel that the current legal environment has a more negative impact on their investing than either a weak economy or an increased competitive environment.
• Regulatory Ambiguity - When asked what it was about the legal environment that so concerns investors and impacts their investing behavior, the ambiguity in the current regulatory environment was identified as of significant concern. 88% of worldwide investors surveyed said they are uncomfortable investing in DCIs that offer user generated music and video given an ambiguous regulatory framework.
• Uncertain and Potentially Large Damages - In all eight countries surveyed, early stage investors view the risk of uncertain and potentially large damages as of significant concern as they look to invest in DCIs. 85% agree or strongly agree that this is a major factor in making them uncomfortable about investing in DCIs.
• Secondary Effects of IP Infringement Regulations - The second area of consistent concern worldwide was secondary liability. 78% of investors said they would be deterred from investing in DCI’s that offer user uploaded music or video should new anti-piracy regulations increase the risk that their investments would be exposed to secondary liability in IP infringement cases.
• These findings highlight the risk that problematic copyright regulations might greatly curtail or cut off capital from the early stage companies that are driving global innovation, GDP growth and new job formation.

The full report can be found at:

http://www.fifthera.com/perspectives-blog/2015/3/20/6enku92k815grtyz9vfpmn83lqhfsx

Engine, Fifth Era Release Report on Impact of Copyright Law on Investment

89% of investors said legal environment makes them less likely to invest

Washington, DC – Engine, a non-profit advocacy and research organization that promotes startups and entrepreneurship, and Fifth Era, an advisory and investment firm, today released a new report entitled "The Impact of Internet Regulation on Early Stage Investment". The report makes a compelling case for copyright reform, and will be used by Engine and other advocates to push Congress to enact reform legislation this session.

In 2014, Fifth Era surveyed 330 investors in eight countries around the world (Australia, France, Germany, India, Italy, Spain, the UK and the US) to assess the degree to which future legal environment might impact their willingness to invest in Digital Content Intermediaries (DCIs). These countries represent 56% of world GDP and 25 %of world population.

The survey found significant concerns among investors in all eight countries around a number of issues, including:

• Legal Environment - Globally investors view the legal environment as having the most negative impact on their investing activities with 89% of the investors surveyed saying it had a modest or strongly negative impact. A large majority of early stage investors around the world feel that the current legal environment has a more negative impact on their investing than either a weak economy or an increased competitive environment.
• Regulatory Ambiguity - When asked what it was about the legal environment that so concerns investors and impacts their investing behavior, the ambiguity in the current regulatory environment was identified as of significant concern. 88% of worldwide investors surveyed said they are uncomfortable investing in DCIs that offer user generated music and video given an ambiguous regulatory framework.
• Uncertain and Potentially Large Damages - In all eight countries surveyed, early stage investors view the risk of uncertain and potentially large damages as of significant concern as they look to invest in DCIs. 85% agree or strongly agree that this is a major factor in making them uncomfortable about investing in DCIs.
• Secondary Effects of IP Infringement Regulations - The second area of consistent concern worldwide was secondary liability. 78% of investors said they would be deterred from investing in DCI’s that offer user uploaded music or video should new anti-piracy regulations increase the risk that their investments would be exposed to secondary liability in IP infringement cases.

These findings highlight the risk that problematic copyright regulations might greatly curtail or cut off capital from the early stage companies that are driving global innovation, GDP growth and new job formation.

The full report can be found at:

http://www.fifthera.com/perspectives-blog/2015/3/20/6enku92k815grtyz9vfpmn83lqhfsx

About Engine

Engine is a non-profit organization that supports the growth of technology entrepreneurship through economic research, policy analysis, and advocacy on local and national issues. The startups we represent are among the most innovative and fastest growing companies in the country, fundamentally altering and challenging entrenched business models, ideas, and institutions across all industries. These are the businesses that drive our economic prosperity, create jobs, and improve our lives. Visit engine.is to learn more about Engine.

About Fifth Era

Fifth Era is an advisory and investment firm based in the San Francisco Bay Area. Working with the founders, executive teams and boards of our advisory clients we develop compelling strategies with an emphasize on executable plans – not lofty concepts that an organization can not make happen. Visit fifthera.com to learn more about Fifth Era.

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Taking the Tour Down South

Engine is thrilled to be participating in Revolution’s third Rise of the Rest Tour along with the teams from UpGlobal and Google for Entrepreneurs. Rise of the Rest is a road show to highlight and support entrepreneurship across America. The cities lined up for this May’s trip include Richmond, Raleigh-Durham, Charleston, Atlanta, and New Orleans. In addition to convening civic leaders, local entrepreneurs, investors, and innovators, the visit to each city includes a pitch competition among local startups. The winning company will receive $100,000 in funding from Revolution Ventures to launch or grow its business.

As Revolution’s Steve Case put it, these are “some of America’s oldest cities where entrepreneurs are creating some of the newest businesses, innovations, and jobs.” The Engine team on board the bus will be especially interested in learning how each city is uniquely fostering entrepreneurship and supporting the growth of innovation and technology jobs. During the past two tours we've seen that regions take different approaches to expanding their entrepreneurial ecosystems - whether building on the success of incumbent industries, benefiting from supportive local government policies, or tapping into the talent pool of nearby universities. The stories from America's Southeast will be sure to offer new perspectives important to our national policymakers on issues from connectivity to capital access.

We’ll be in Richmond, Virginia on May 4th; Raleigh-Durham, North Carolina on May 5th; Charleston, South Carolina on May 6th; Atlanta, Georgia on May 7th; and New Orleans, Louisiana on May 8th. If you're an entrepreneur, a community organization, or government leader and want to make sure we visit your startup or hear your story along the way, please visit the Rise of the Rest site or reach out to anna@engine.is.

VCs Agree: Startups Need Tools to Fight Patent Trolls

Today, one hundred forty early stage investors from around the country joined Engine and the App Developers Alliance in urging Congress to pass meaningful patent reform legislation this session. Their position is consistent with the opinion of the broader venture community that patent trolls are harming the ecosystem in which they operate - reflected in a study by Robin Feldman of NVCA members,. Patent trolls make an uncertain patent system even less hospitable to innovation. And, as reported by Catherine Tucker, this means less financial investment.

Patent litigation abuse is a growing problem, with patent trolls having filed 2,791 new lawsuits in 2014 - up 500% from 2005. It’s also a problem that disproportionately harms startups. 82% of troll activity targets small and medium sized businesses, and 55% of troll suits are filed against startups with revenues of less than $10 million.

In their letter to Congress, the investors write: “[W]e find our portfolio companies facing a dangerous patent troll problem. When a troll sues, or even threatens, a small startup, the results can be disastrous. Many of us have seen young companies fail in the face of such threats. In fact, a recent survey found that 70% of VCs have portfolio companies that have received patent demands, the majority of which come from so-called patent trolls. This is not sustainable.”

Engine and these investors agree that we need legislation targeted at the patent troll’s business model – threatening small businesses with ambiguous claims and taking advantage of asymmetries in the patent litigation system to force settlement.

The current system does not take into consideration a new generation of innovators and tech entrepreneurs. The massive influx of patents in this particular space creates more confusion as to what’s already been invented and who is infringing - and this confusion builds on the large amount of uncertainty that already accompanies patent litigation.

Enter the Innovation Act: a bipartisan bill that was recently reintroduced by Rep. Goodlatte, aimed at making patent litigation a more fair assessment of infringement rather than a tool for intimidation. The Innovation Act is carefully tailored so as not to weaken patents but rather require plaintiffs to bring better cases in a number of key ways:

• By requiring judges to consider end-of-case fee-shifting; the looming threat of fees will pressure bad actors to act more “reasonably” from the beginning of the case in order to avoid the possibility of paying the defendant’s fees.
• By limiting a troll’s ability to drive up the cost of discovery (and by default increase the time it takes to complete this step) early in the case, the language addresses a frequently used method for leveraging the high cost of this step early in a suit to extort settlements.
• By requiring a more comprehensive complaint from the plaintiff at the beginning of the case, the defendant will not only be properly informed but the “reasonableness” of the plaintiff’s claims will be clearer.

These provisions set out better litigation practices that will lead to more efficient litigation. And better litigation reduces the burden for plaintiffs, defendants, and the courts.

At the moment, startup defendants do not have access to justice in the courts. Most simply can’t afford the ongoing costs of patent litigation. If everyone is forced to settle, without invalidating the patent, we feed the beast and encourage a growing number of startup casualties.

The one hundred forty VC partners that signed today’s letter are part of the growing chorus in favor of real patent reform. But we need to make sure everyone’s voice is being heard by Congress, to combat the powerful entrenched interests that are opposed to change. So please go to fixpatents.org to learn more about the problem, and to use our handy tool to tweet at your representatives. Together we can stop patent trolls and protect the future of American innovation.

Engine Response to Release of Net Neutrality Rules

Today, the FCC released its long-awaited Open Internet Remand Order that establishes the strongest net neutrality protections the Commision has ever enacted. While the rules are not perfect, they are an incredible victory for the many startups and advocates that fought so hard for the past year against some of the most well-funded corporate lobbying interests in the nation to preserve and protect the open Internet.

The Order is critically important for two main reasons: first, the FCC took the politically difficult step of reclassifying broadband under Title II of the Communications Act—essentially labeling broadband Internet as a “common carrier” service—in order to build its new rules on a legally secure foundation. While the FCC’s prior net neutrality orders had important protections that supported the growth of the Internet we enjoy today, the Commission has repeatedly seen its rules thrown out in court due to a failure to provide an adequate legal framework supporting the rules. The order’s reclassification of broadband as a Title II service is a necessary prerequisite for strong rules, as the court in Verizon v. FCC noted. The FCC had the courage to stand up to the powerful telecom lobby and do what was once considered politically impossible, and for that, all Internet users should be grateful.

Secondly, the Order contains strong, bright-line net neutrality rules and demonstrates a clear recognition of how important the open Internet is to startup activity. The FCC’s use of flat bans rather than case-by-case adjudication in dealing with paid prioritization, throttling, and blocking is meant to relieve “small edge providers, innovators, and consumers of the burden of detecting and challenging instances of harmful paid prioritization.” As the Commission recognized, bans on ISP discrimination are useless to startups if these small, cash-strapped companies must bear the burden of challenging violations. In addition, the order creates a “no-unreasonable interference/disadvantage” standard that is meant to give the FCC the flexibility to address future threats to the open Internet. It is unclear at this point whether the FCC’s general discrimination standard will prove effective in blocking future ISP activities that undermine net neutrality. Still, it is encouraging that in considering whether to allow these practices, the FCC will evaluate their impact on innovation and competition. Since the central value of an open Internet is the freedom to innovate and compete on the quality of one’s ideas rather than the size of one’s legal team, the FCC is right to put the concerns of innovators at the center of any inquiry into discriminatory ISP practices.

The rules, however, are not without fault. As we expected, the Order does not impose a flat ban on zero-rating schemes. Without such a ban, carriers may enter into agreements with large edge providers to exempt data from those providers from consumers’ data caps. Considering more than half of all smartphone users with data capped plans report altering their online behavior because of these caps, startups that have to compete with zero-rated companies will be at a huge competitive disadvantage, and future innovation may be stifled as a result. Similarly, the Order is somewhat unclear on how it will treat interconnection disputes, though it appears that the FCC will review claimed abuses on a case-by-case basis.

All in all, the Order released today is a monumental victory for Internet freedom. There is still significant work left to do fighting the inevitable legal challenges and congressional meddling that will seek to undo the FCC’s actions, but the plan appears to offer strong rules built on a solid legal foundation—the cornerstones of any successful net neutrality plan.

Tell Congress: It's time to #fixpatents

There’s never been a more critical need to fix our broken patent system than there is right now. Patent trolls filed 2,791 new suits in 2014, up 500% from 2005, and 82% of troll activity targets small and medium sized businesses.

That’s why Engine is ramping up our ongoing efforts to pass meaningful reform legislation. We’re starting with the relaunch of fixpatents.org—a website that will educate and mobilize both startups and individuals around patent reform.

We also released a new white paper (with an accompanying executive summary) detailing the patent troll problem and the need for action by Congress, the courts, and the U.S. Patent and Trademark Office. The paper discusses the very real impact of patent trolls on the startup community, the current state of patent litigation, and why we need legislation now.

Conversations in Congress are ongoing, and we are cautiously optimistic that a bill will pass this session. But we need legislation that is multi-pronged, closing the many litigation loopholes patent trolls use to force meritless settlements. At the same time, we can’t weaken the powerful—and affordable—alternatives to litigation that were set out by the America Invents Act to challenge bad patents. Together, these provisions will equip startups and small businesses with the tools they need to fight back in the courts, keep innovating, and building a competitive economy.

Engine and our partners are pushing for targeted, comprehensive legislation to help startups fight the patent troll problem in the courts—legislation like the Innovation Act introduced by Rep. Goodlatte in January. If we’re going to win this fight, Congress needs to hear from the individuals and small businesses that are disproportionately affected by the troll problem.

So please go to fixpatents.org and use our handy tool to tweet at your Representative and Senators, urging them to pass a reform bill this session.

The Mothers of Tech: How One Organization Supports Moms to Stay and Succeed

You can also read this post on Medium.

Your company’s talent will probably have kids. That’s a fact that Tina Lee wants everyone to know. Tina is the founder of MotherCoders, a non-profit that provides a tech orientation program for moms. Another fact: 81% of women become moms. Tina thinks moms are one demographic that too often gets overlooked in the conversation about how to increase diversity in technology fields.

Not just women, but mothers in particular, are an enormous population with insight, perspective and influence. MotherCoders makes that case explicitly on its homepage, pointing to the fact that moms represent a $2.4 trillion market. “And with many of them already online and using technology, their participation in driving innovation can result in better products and services for everyone.”

 It’s clear that the tech industry can’t afford to miss out on mothers as valuable contributors. Yet both anecdotal evidence and data indicate that tech companies both large and small can be inhospitable for expecting, new or even seasoned mothers.

In a recent survey of 716 women who left the tech industry, two thirds cited “motherhood” as the primary reason. Whether companies had bad or no maternity leave policies, “lack of flexible work arrangements…or a salary that was inadequate to pay for childcare,” women who become mothers have faced significant strains in staying and succeeding in tech jobs. Even Sheryl Sandberg had to ask Sergey Brin to designate parking spots for expectant mothers at Google—he admitted that it hadn’t ever occurred to him.

“I just have so much empathy for moms who’ve had to step out of the workforce,” said Tina, who has years of experience as an IT consultant and a technical recruiter, an M.A. in Learning, Design & Technology from Stanford’s Graduate School of Education, and programming skills she’s picked up along the way. However, when she wanted to gain more proficiency after having her first child in 2011, she couldn’t find a resource that worked well for her as a working mom. Weekend workshops and weeknight meetups conflicted with her parenting responsibilities and the online classes she tried after her second child was born weren’t conducive to her learning style.

Needless to say, in most environments, Tina was the only mother with young children, exacerbating her feelings of loneliness and frustration. “I came from tech and understand tech. I’m not afraid of it, and I was having this many problems?”

In 2012, Tina launched MotherCoders in San Francisco in an effort to create an open and supportive community of moms either entirely new to technology or interested in relaunching their careers in tech. MotherCoders offers a series of eight Saturday classes to introduce students to major themes in computer programming. By the end of the course, students have built a personal website, learned about the technology landscape and tools driving innovation, and connected with women—many of them moms, too—who expose students to the many career possibilities that tech skills enable, from full stack engineering to user experience design.

In addition to fostering an open and supportive space, for a little extra money MotherCoders also provides onsite childcare, a benefit very few, if any, of the more mainstream technology education programs offer.

Two classes of women have now graduated from MotherCoders and each of the 13 graduates has taken a different path. Some moms have used MotherCoders to prepare themselves for intensive tech education bootcamps while others have used the skills they gained to grow their own businesses.

Tina is now figuring out how to scale the program to attract more students, and far beyond San Francisco. She’s received inquiries from mothers across the U.S. as well as in Ireland, New Zealand, and India who face similar challenges, and she wants to build a curriculum and an infrastructure that could support these women too. This includes attracting more donors to support the organization’s mission.

Meanwhile, more Silicon Valley companies have stepped up and re-evaluated their company policies in efforts to retain talented women. The Atlantic reported that many leading tech companies, like Apple, Facebook, Google, and Yahoo, have some of the most generous parental leave policies is the U.S., across industries. And even smaller companies are starting to follow suit.

That’s a start, but the industry has a long way to go. Beyond parental leave, childcare has to be an integral part of the equation, along with a broader cultural shift in the way employers and fellow employees view women who become mothers in their careers.

 “Employees have to have peace of mind about their kids to do good work,” Tina explained, “It’s a systemic problem to women participating fully in our economy and women being able to lean in. The motherhood penalty is real. The fatherhood bonus is infuriating.” 

It’s time companies see motherhood as an asset. MotherCoders instills women with the skills and the confidence to prove it.

We Won the Internet! What’s Next?

This post originally appeared in re/code.

*****

For everyone who cares about the future of an open Internet, today is a day of celebration. The Federal Communications Commission’s vote for net neutrality will not only allow today’s startups to compete and grow and create new jobs, it will also allow future generations of innovators to develop world-changing technologies that we can’t yet even imagine.

This victory was especially meaningful for the thousands of startups whose combined voices convinced the FCC to take action. Many find themselves wondering where we go from here, and how we can use that newfound power to drive positive change in the future. To answer that question, let’s look at how we got here, and what the net neutrality fight has taught us.

More than just SOPA/PIPA 2.0

For many observers, the Internet’s massive response to 2011’s SOPA/PIPA legislation represents both the founding moment and the high-water mark of the tech community’s political engagement. The scope and coordination of the online protests that followed introduction of those bills surprised lawmakers who had not realized that tech companies were able to muster such powerful civic engagement.

The net neutrality movement that has dominated headlines for the past year struggled at first to break free from comparisons to SOPA/PIPA — even within the tech policy community, many doubted that Internet users would generate enough momentum to reverse the FCC’s initial watered-down plan.

How quickly things change. Starting last fall, net neutrality began to gather steam behind an online protest — the “Internet slowdown” — that echoed SOPA/PIPA’s “Internet blackout.” More than four million commenters weighed in with the FCC, an overwhelming majority of which supported a proposal to reclassify broadband as a common carrier service — an idea once considered preposterously unlikely amongst the telecom elite of Washington, D.C.

And after numerous attempts by big telecom to snatch some victory from the jaws of defeat, the FCC voted today to approve the most comprehensive net neutrality plan in history, one rooted in the Commission’s Title II common carrier authority.

Be proactive

The net neutrality effort resembles the SOPA/PIPA movement in several ways. Both involved an unexpectedly strong public response to a policy that would have undermined the continued vitality of the Internet ecosystem. Both were spurred on by digital activists and online, grassroots community engagement.

But in other ways, net neutrality represents the next phase in the Internet community’s political maturity. While SOPA/PIPA involved convincing Congress not to act (read: to behave as it normally does), the net neutrality movement had to convince three unelected officials to adopt a policy that was fiercely opposed by an industry far more well-funded and adept at D.C. lobbying than the MPAA. This time, against all odds, tech put forward an affirmative agenda, and won.

The tech community is made up of innovators and entrepreneurs — people who see yes where others see no. We need to bring that same attitude to or political engagement, working towards policies that make things better, not just fighting back against potential harm.

Stay at the table

SOPA/PIPA and net neutrality both showed that the tech world can effectively mobilize and react when confronted with existential threats. But if the tech community wants to take the next step in shaping the political landscape in which it operates, we must be willing and able to set the agenda. To do this, we must engage with Washington more regularly, and pay closer attention to seemingly smaller issues that nonetheless impact how the Internet functions.

Of course, most startups simply don’t have the time or resources to spend influencing policy that big telecom and other entrenched industries do. That’s where organizations like Engine can help, maintaining regular dialogues with policy makers and harnessing the combined voices of hundreds of startups. Which brings up our next lesson …

Small startups speak with a big voice

Unlike during SOPA/PIPA, many of the larger and more established tech companies stayed out of the net neutrality fight all together. That left it to smaller startups to take the lead in convincing both the FCC and elected officials to support net neutrality.

This made it much harder for opponents to argue against Title II without appearing to be against startups — and the good jobs they create all over the country. And while net neutrality proved to be a surprisingly partisan issue, in general, both parties want to be known as “the party of tech,” and are eager to be on startups’ side.

This should prove an advantage in some upcoming fights: Both patent reform and high-skilled immigration already find support on both sides of the aisle. And many of the issues that will impact the tech world in the coming years don’t yet have clearly drawn political lines, giving us all a chance to proactively define them as bipartisan.

Forge partnerships outside of tech

Today’s victory was the result of a massive team effort that included not just tech organizations like Etsy, Kickstarter, Vimeo, and Foursquare, but also diverse groups like the National Association of Realtors, the Future of Music Coalition, and the National Hispanic Media Coalition. This allowed us to simultaneously articulate the importance of an open Internet to high-tech startups and traditional mom-and-pop businesses; to independent media companies and civic organizations; to students, artists and working families.

As the walls between the tech industry and every other aspect of American life continue to disappear, we need to make clear to policy makers that these are not just tech issues. These issues affect Americans from all walks of life. And the way we can do that is by continuing to build diverse coalitions and looking for partners in unexpected places.

With net neutrality, the tech world has emphatically proven that its voice can move mountains in Washington. If we want to put that voice to more regular use, the opportunity is limitless. Now it’s on all of us to figure out how we want to use it next.

Statement on Historic Net Neutrality Vote

 

 

Statement from Engine Policy Director Evan Engstrom

Re: Historic FCC Net Neutrality Vote

 

Today the FCC took a momentous step to secure the future of an open Internet. With today's vote the FCC has stated loud and clear that the Internet must remain a level playing field. This decision will not only allow today's startups to compete and grow and create new jobs, but it will also allow future generations of innovators to develop world-changing technologies that we can't yet even imagine. And while these rules may not prevent all future exploitation by Internet Service Providers, they are a tremendous victory for the Internet community in its efforts to fight discrimination.

We're grateful to Chairman Wheeler and Commissioners Clyburn and Rosenworcel for their commitment to net neutrality. And we also know that none of this would have been possible without the unprecedented efforts of thousands of startups around the country. It was their hard work that turned back a potentially devastating defeat, and it was their voices that convinced the FCC to enact the strongest protections the Internet has ever seen. 

Today is a day for celebration, but our work is far from finished. In the months and years ahead we'll continue to harness the incredible energy of our startup community to combat future threats to an open Internet, and to ensure all startups can access the tools they need to thrive.

Startups Send Letter to FCC in Support of Title II

Today, Engine released a letter signed by over 100 startups making clear that entrepreneurs and innovators fully support Title II reclassification to preserve an open Internet. Earlier this month, FCC Chairman Tom Wheeler announced his plan to implement strong net neutrality rules. Fellow FCC Commissioner Ajit Pai—in a last ditch effort to argue against Title II reclassification—claimed in a press release that “small, independent businesses and entrepreneurs” did not support Title II. Startups from across the country, including Automattic, Dwolla, Etsy, Foursquare, Imgur, Kickstarter, Tumblr, and Yelp, wrote today to set the record straight.

Startup support for Title II and net neutrality is nothing new, as the letter notes: “Because net neutrality is such an important issue, the startup community has been engaged in the Commission’s Open Internet proceeding to an unprecedented degree. The clear, resounding message from our community has been that Title II with appropriate forbearance is the only path the FCC can take to protect the open Internet. Any claim that a net neutrality plan based in Title II would somehow burden ‘small, independent businesses and entrepreneurs with heavy-handed regulations that will push them out of the market’ is simply not true.”

These startups were built and thrived under a de facto net neutrality regime, and if the Internet economy is to continue its unparalleled growth, preserving an open playing field is crucial. Allowing ISPs to use their gatekeeper power to pick winners and losers on the Internet is the real threat to the continued viability of these startups, not a regulatory structure based in Title II.

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.

Startups Head to DC for Final Push on Net Neutrality

Earlier this month, FCC Chairman Tom Wheeler announced a plan to reclassify broadband as a Title II common carrier service, prompting cheers from the Internet community. After a year of debate it appears that the pro-net neutrality movement has won the day. But while the Chairman has released broad outlines of his net neutrality plan, there’s no guarantee that the specific measures the FCC adopts will be sufficient to preserve an open playing field for startups.

To make sure that the FCC gets the details right, Engine and the Open Technology Institute at the New America Foundation organized a fly-in last Thursday, bringing a group of top startups to DC to make the innovator’s case for strong net neutrality rules. Representatives from Union Square Ventures, Bigger Markets, Capitol Bells, Etsy, Foursquare, Keen.io, Spend Consciously, and Vimeo spent the day at the FCC and on Capitol Hill meeting with key policymakers to discuss the future of the open Internet.

In the morning, the startups met with FCC Commissioner Jessica Rosenworcel and senior staff from Chairman Wheeler’s office to discuss the nuances of the Chairman’s proposal. We focused specifically on the need for rules that prevent ISP discrimination at interconnection points, and ensuring that the Commission’s general ban on discriminatory practices does not put an impossible burden on startups looking to challenge ISP activity.

The startups next moved on to the Hill, meeting with members of Congress and senior staff to discuss the proposed net neutrality legislation circulated in January. Pending FCC action renders legislation of any kind unnecessary, and the current draft bill fails to provide many basic net neutrality safeguards while simultaneously stripping the FCC of authority to protect against future ISP threats to the open Internet. The startups met with members of the House and Senate Commerce committees and let them know that startups did not view the bill as a good starting ground for a compromise, and that any legislation that offered weaker protections than those in the FCC plan would be viewed as a non-starter.

We are deeply grateful for the hard work of these startups and so many others, which has helped get the FCC to where it is today. It’s not easy for startups to take time away from their businesses to travel to Washington, but their efforts are paying dividends. With the FCC’s rulemaking in its final days, we must make sure the rules they issue are strong enough to keep the Internet open for generations of future innovators.