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!

2015 Year in Review: Privacy and Security

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. 

by Emma Peck and Evan Engstrom

This year saw an alarming number of high-profile data breaches—as of mid-December, there had been over 750 breaches exposing nearly 178 million records, surpassing 2014’s pace. Not surprisingly, policymakers were compelled to turn their attention to data security and privacy issues, putting forth a range of proposals around privacy, encryption, surveillance, and data security. These proposals were met by the startup community with both praise and disapproval, but one clear message permeated the debates around all of these issues: too often, offered policy solutions do not take into account the needs and realities of the quickly evolving startup ecosystem. Outdated laws are applied to new technologies, and increasingly, new proposals show a clear lack of understanding of the technologies they will impact.

ECPA Reform

A prime example of a law that is completely ill-fitted for today’s technological realities is the Electronic Communications and Privacy Act (ECPA). ECPA is the privacy law that governs our interactions with the Internet. But the law was passed in 1986 (before most people even had computers in their homes), and it allows law enforcement to access electronic communications that are older than 6 months without a warrant on the grounds that such communications are “abandoned.” These rules do not conform to how people use and understand the Internet, and providing such lax privacy protections for electronic communications erodes consumer confidence in the safety and security of online services. Thankfully, a coalition of industry and civil rights organizations—including Engine—helped persuade California to correct this problem at the state level. In October, California passed reforms to ECPA requiring law enforcement to obtain a warrant before accessing a wide variety of digital information. A bill to reform ECPA at the federal level also resurfaced this year, garnering support from over 300 cosponsors in the House, which made it one of the most popular bills in Congress. There are still a few federal agencies that oppose reform, but a provision in the recently passed omnibus served as a rebuke to the remaining hold-outs. ECPA reform will likely be one of the first topics considered by the House Judiciary Committee in 2016, and we are tracking.

Encryption

This year, 2016 presidential candidates and current policymakers also put forth proposals aimed at combating terrorist threats to our nation—from “closing that Internet up,” which has been broadly viewed as preposterous, to creating backdoors for encrypted technologies, which unfortunately has been met with acceptance in some circles that ought to know better. The debate around encryption is one of the best examples of the problems that arise when lawmakers don’t understand the technologies at issue in the policies they are proposing. It is well accepted by cryptographic experts that creating a backdoor (or “golden key”) for encrypted technologies is not technically feasible without undermining the security of the system as a whole. And in addition to threatening constitutional rights, it is unlikely that creating a backdoor would even be effective in keeping bad actors from using unbreakable encryption. Yet this “solution” has been central to a number of policy proposals, highlighting a lack of understanding from lawmakers on both sides of the aisle.

Safe Harbor

In October, the tech world was left in a state of confusion after the European Court of Justice (ECJ) invalidated the safe harbor agreement that allows for the legal transfer of data between the U.S. and EU. In short, the ECJ ruled that U.S. laws allowing the government to broadly and secretly collect consumer data violated EU privacy rules and therefore, the safe harbor rule was incompatible with EU law. As such, companies that had previously relied on the safe harbor as the legal basis for importing EU customer data into the U.S. had to find other ways to legally import such data. Many commentators downplayed the significance of the ruling, noting that companies could find other legal pathways for importing EU data via contractual agreements or pre-approved internal data protection mechanisms. But, while such protocols may be feasible for large multinationals, startups with EU customers but without the resources necessary to negotiate alternative arrangements were left in legal limbo. Though EU and U.S. policymakers are working on developing another safe harbor arrangement, the recent push in the U.S. to further weaken privacy protections through misguided encryption policies could end up ensuring that any new safe harbor rule would also fall short of EU privacy standards. More broadly, the court ruling helped crystalize the nonsensical nature of enforcing territorial data restrictions in a globally interconnected digital world and highlighted the impact that U.S. surveillance practices have on the ability of American startups to thrive in an increasingly global world, where many countries have concerns about the privacy of their citizens’ data.

Data Security

Spurred on by the many data breaches in 2015, members of Congress spent considerable time crafting legislation regarding how companies should handle security breaches. A number of the proposals require notification within a set amount of time following discovery of a breach. While well-intentioned, security professionals agree that publicly announcing a breach too early actually decreases security by allowing for bad actors to take advantage of vulnerabilities that have not yet been patched. It’s true that a uniform federal standard would be preferable to the existing 47 state laws governing breach notification insofar as compliance with a single standard is easier for cash-strapped startups than having to comply with 47 different regimes. But the bills introduced this year are deficient in a variety of ways that highlight the alarming lack of technological expertise on Capitol Hill.

Additionally, as a result of a court decision earlier this year, the Federal Trade Commission (FTC) now has explicit authority to police whether companies’ data security practices are “reasonable”. However, determining which practices are reasonable and which are not is a difficult task—even security experts disagree over which protections companies should have in place. The FTC has tried to bridge this gap in technological understanding through their “Start with Security” initiative. And Engine hosted an event in October to help startups navigate data security policy. But it is still clear that lawmakers do not understand data security as a technical matter, and it is the role of the startup community to try to educate policymakers on the ways in which proposed policies can dictate practices, for better or worse.

Looking Forward

Privacy and security were two of the most talked about issues in 2015 and it’s unlikely that they’ll go away in 2016. They have already featured heavily in the Presidential debates, and as more of our daily life migrates to the online world, cybersecurity threats will only continue to grow. Policymakers know they must do something to address these threats, but doing something is not necessarily better than doing nothing if proposed policies don’t reflect the technological realities of today. Before the tech sector can convince Congress to pass bills that support the work we are doing, we have an obligation to instruct policymakers on how their policies will impact and interface with technologies in practice. Engaging at this level will pay dividends down the road.

2015 Year in Review: Regulating the New Economy

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.

by Anna Duning and Evan Engstrom

The ever-increasing pace of technological development and expanding reach of innovative enterprises into well-regulated industries has put considerable strain on the nation’s policymaking apparatus. As new technologies (such as recreational drones) become more popular and new platforms integrate everyday activities (such as transit) with technology, policymakers are faced with difficulties in crafting forward-thinking policies or adapting existing regimes to new technologies. In 2015, we saw this phenomena play out in a variety of ways all across the country at the municipal, state, and federal levels.

New Devices, New Rules

In 2015, the drone market grew exponentially, with more than 400,000 drones sold. The increasing presence of unmanned aircrafts—and the corresponding rise in reports of rogue drones posing safety hazards to commercial aircrafts and stoking privacy concerns—prompted the Feds to introduce new regulations for recreational drones this year. The Federal Aviation Administration, along with the Transportation Security Administration, ultimately came up with a drone registry for hobbyists, requiring recreational pilots enter their devices into a new national database. Commercial drones from the likes of Google, Amazon, and even Wal-Mart are also expected to take to the skies in the new year. These companies have all been part of a lobbying effort to keep new regulations limited and reasonable.

As the age of widely-available autonomous vehicles nears (Tesla says within two years), state lawmakers are grappling with how to establish the appropriate safety and regulatory standards for what will surely be one of the most disruptive technologies deployed in recent memory. Cybersecurity, accident liability, and basic road rules are all pressing concerns. Several states have already approved the testing of autonomous vehicles with varying degrees of regulations. Most recently, California introduced proposed rules that would require a licensed driver to be present in the vehicle. This requirement could limit some of the more promising uses of these new vehicles (such as transportation for the young or disabled) and even threaten the vehicle’s safety, but the state will take comments before instituting the final standards. We’ll be monitoring closely as state governments continue craft new regulations. These new rules won’t just impact the big manufacturers, as autonomous vehicles could spawn an entirely new sector of startups creating software for these cars.

Blockchain Rising

Though Bitcoin and the blockchain technology that powers it are relatively old developments by tech standards (2009!), cryptographically-secure distributed ledger technologies came to the attention of the mainstream in a big way this year, drawing interest from large financial institutions and regulators alike. While this increased scrutiny may rankle some of Bitcoin’s techno-libertarian old guard, the relatively cautious approach policymakers have taken to regulating the Bitcoin sector is a promising sign for the future growth of cryptocurrencies and blockchain technologies.

As Federal regulators have been content to monitor the development of cryptocurrencies, state policymakers have taken more proactive steps to regulate the sector. New York enacted its BitLicense rules this summer, which obligate financial intermediaries that hold or control virtual currencies on behalf of New York residents to obtain a license and follow certain customer monitoring and reporting requirements. The rules were meant to apply to just those companies that handle funds on behalf of customers and not impact software developers and entrepreneurs that don’t actually control customer money, but since the Bitcoin system looks so radically different from traditional financial systems, the rules necessarily have created some confusion as to how they will apply in practice. Fortunately, New York regulators appear to be cognizant of the need to avoid overregulating this nascent industry and will hopefully work to rectify any overbroad regulatory issues that may arise. As other states begin to consider regulations like New York’s regime (California for one debated a similar Bitcoin license bill this year before it died in the legislature), the need for a more uniform Federal standard will quickly become a priority for the sector. With more and more money pouring into blockchain startups ($500 million in 2015 alone), digital currency regulation will likely become a more pressing issue in 2016 and beyond.

The New Sharing/Gig/On-Demand Economy

No one seems to have agreed upon the best term to describe the collection of technology startups building platforms that connect customers to workers, homeowners, and drivers. Call it the sharing economy, the gig economy, or the on-demand economy; regardless, this new technology is shaking up well-established industries and the regulatory frameworks in which they’ve long operated.

Startups including Uber, Lyft, TaskRabbit, Handy, and Instacart (to name just a few) are restructuring how a wide variety of services are provided, and with that, challenging the existing labor standards that by and large rely on two narrow designations—employee or independent contractor. Many of these companies now face a slew of lawsuits about that classification, including a class action against Uber in California. Just weeks ago, Seattle became the first city in the nation to allow on-demand drivers to unionize. This legislation, too, will likely be contested in courts. The outcomes of these cases could dramatically reshape the 1099 economy and will surely impact the startups who’ve built their companies around existing worker classification rules. We’ll be paying close attention as they’re debated into 2016 and beyond.

Beyond the labor market, many of these startups are providing new (and in many ways, better, faster, and more efficient) services within highly regulated industries. This year, ridesharing companies, came up against major challenges in cities throughout the world. The New York City Council proposed rules this summer that could have put a freeze on all for-hire vehicles. Another requirement—that ride-sharing apps pass government approval before making changes—was also floated, though ultimately struck down. Meanwhile, San Francisco voted on a ballot proposition to limit Airbnb rentals in the company’s home city, a measure that ultimately failed, but cost the company $8 million to fight.

Ultimately, the trend of startups beginning to compete in heavily-regulated sectors of the economy accelerated in 2015 faster than many had predicted, resulting in an all too common struggle to fit the square peg of new innovations into the round hole of existing regulations. Not surprisingly, given the slow pace at which our nation’s regulatory bodies operate, the many policy debates that came to the fore in 2015 are nowhere near resolution. Next year will almost certainly see these policy debates escalate, and it is imperative that the startup community engage in this policymaking to ensure that the incredible potential of new technologies isn’t stifled by ill-fitting regulations.

2015 Year in Review: Telecom

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.

by Emma Peck and Evan Engstrom

The net neutrality debate that dominated the tech policy conversation in 2014 was once again the top telecom issue in 2015, peaking at the end of February with the Federal Communications Commission’s (FCC) passage of its new Open Internet Order, which contained the strongest non-discrimination rules ever put in place to protect the Internet economy in the U.S. The telecom excitement didn’t end there, as policymakers and courts dealt with a huge number of issues related to promoting telecom competition, limiting ISP discrimination, and building out the next generation of telecommunications services. In short, the momentum in 2014 carried over into 2015 in a big way, and looking ahead, 2016 is poised to be yet another landmark year in telecom policy.

In addition to the FCC’s net neutrality order, the startup community saw big wins with the termination of the Comcast-Time Warner Cable merger and the FCC’s decision to undo anti-competitive broadband laws in Tennessee and North Carolina. We weighed in on debates around next year’s incentive auction and continued to push for increased unlicensed spectrum allocation. Lastly, we articulated our hope to see legislation move next year that would open up more federal airwaves for commercial use.

Net Neutrality

After more than a year of campaigning, the tech community won one of its biggest policy victories ever with the FCC’s decision to reclassify broadband as a telecommunications service in order to pass the strongest net neutrality rules this country has ever seen. Net neutrality advocates had little time to rest, however, as the rules immediately came under fire in Congress and in the courts. Republicans used their control of both houses of Congress to push legislative tricks meant to undermine the FCC’s work, including riders to various unrelated appropriations bills that would have blocked the FCC from using any funding to enforce the new Open Internet Order. While the net neutrality community effectively neutralized those threats, a legal challenge to the net neutrality rules is still playing out in the courts. Filed by a consortium of ISPs immediately after the FCC’s February vote, the lawsuit argues that the FCC overstepped its statutory authority in reclassifying broadband under Title II and that—despite more than 4 million public comments—the FCC did not provide adequate notice of the regulatory changes it made. An appellate court heard oral arguments in the case in December and is expected to issue a ruling early next year. Whatever the outcome, the Supreme Court is likely to weigh in, ensuring that the net neutrality debate will continue in 2016 and beyond.

Municipal Broadband

In another high-profile legal battle, the FCC is fighting to uphold its authority to preempt state laws that inhibit municipal broadband build-out. At the same February meeting where the historic Open Internet vote took place, the FCC acted to improve broadband access and competition by undoing anti-competitive broadband laws in Tennessee and North Carolina that prevented local communities from providing Internet access for their citizens. But those states have pushed back against the FCC’s decision in a lawsuit that will continue to play out into 2016. The outcome may impact the FCC’s broader authority to encourage broadband deployment, and we are tracking.

Telecom Mergers

The startup community won another victory in April when Comcast’s plan to merge with Time Warner Cable (TWC) collapsed under regulatory pressure. 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 same enthusiasm that drove the effort to pass strong net neutrality rules helped convince regulators at the FCC and in the states to take a hard look at whether allowing this type of consolidation in the market for Internet access would end up doing irreversible harm to the nation’s high-speed broadband market. Recognizing that promoting competition between ISPs is the only way to help put the U.S. back on par with international peers in terms of broadband affordability and quality, the FCC hinted that it would block the merger, prompting Comcast to walk away from the deal. While the merger’s demise meant that ISP competition didn’t deteriorate further, there is still a long way to go before there is adequate competition in broadband markets.

Spectrum

Incentive Auction

Broadcasters, potential bidders, and regulators spent 2015 gearing up for next year’s spectrum incentive auction. With enormous sums of money at stake (an auction of less valuable spectrum brought in more than $40 billion in 2014), stakeholders have been aggressively lobbying for favorable auction rules over the past few years, and this spring saw a particularly heated debate around the size of the auction’s spectrum reserve. As competition is so important for startup growth, the startup community weighed in on the importance of establishing auction rules that promote competition. While we didn’t win the fight for a larger reserve, next year’s auction still has the potential to re-shape competition in the mobile broadband market. We’ll be watching when March rolls around.

Unlicensed Spectrum

Licensed frequencies weren’t the only airwaves getting attention this year. 2015 saw an explosion in the “Internet of Things” and continued growth in the use of Wi-Fi, attracting the attention of policymakers and underscoring the importance of access to unlicensed spectrum. In November, Engine supported legislation introduced by Sen. Schatz that would ensure that unlicensed spectrum is central to any future spectrum strategy. We hope to see that bill or something similar move next year, possibly with a larger spectrum package (more on that below).

Federal Spectrum

The AWS-3 spectrum auction ended in January, netting almost $45 billion and demonstrating that there is still a critical need (and willingness to pay high dollar) for spectrum. In an effort to free up more of this valuable resource, members in both the House and Senate introduced bills that would incentivize the federal government to give up its inefficiently used spectrum. While neither bill was able to move before year’s end, there is hope that a larger spectrum package that includes these provisions, as well as a number of broadband deployment provisions, will be taken up sometime in the new year.

2015 Year in Review: Capital Access

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.

by Anna Duning and Evan Engstrom

2015 will be remembered as the year of investment crowdfunding. In October, the SEC released the long-awaited rules that finally allow everyday investors to crowdfund startups in exchange for an ownership stake in the business. The Title III rules were certainly the most anticipated development in of the year in capital access policy, but the SEC also unveiled other alternative fundraising mechanisms that may end up eclipsing investment crowdfunding in impact, at least in the short term. Congress joined the mix as well, working on a variety of bills to help promote capital formation. However, as with the SEC’s efforts, the efficacy of these programs remains to be seen. Ultimately, 2015 was a year of new developments and renewed optimism for capital access policy.

Investment Crowdfunding is Finally Here

After Congress passed the JOBS Act in 2012, the SEC was tasked with crafting rules to fill in the details of Congress’s proposals, including Title III of the JOBS Act, which legalized investment crowdfunding for non-accredited investors. In the intervening years, the SEC passed rules supporting other aspects of the JOBS Act, but it dragged its heels in implementing investment crowdfunding under Title III. Having missed several prior deadlines, the SEC finally issued rules for non-accredited investment crowdfunding at the end of October. The rules themselves improved upon the SEC’s original proposal from 2013 in some key ways, but, as we discussed at length in a white paper on the then-proposed crowdfunding rules earlier this year, the upfront disclosure obligations are especially problematic. Unless and until startups can raise small amounts of capital without having to incur significant costs preparing disclosures, that are largely useless to investors, it’s unlikely that many startups will turn to investment crowdfunding as a primary fundraising tool. We’ll be watching.

The Mini IPO

Several months before the SEC released the long-awaited final Title III crowdfunding rules, the agency completed another set of JOBS Act rulemaking, which garnered slightly less attention. With Title IV rulemaking complete, growing private companies now have another funding mechanism, Regulation A+, through which they can raise up to $50 million without being subject to some of the onerous reporting requirements required of publicly traded companies. Industry experts have called it a sort of “mini IPO.” Regulation A+ also allows for a limited subset of non-accredited investors to participate in the investment. In its short lifespan, this new exemption has seen limited activity: as of October, only 34 companies had pursued or were in the process of pursuing a Reg A+ raise. This slow start may be attributable challenges from state securities regulators about exactly whom should be eligible to take part in these new investments.

States Take Up Crowdfunding, Too

While investment crowdfunding rules languished in the rulemaking process until the very end of 2015, states took it upon themselves to craft new capital formation tools for startups. Throughout the year, several states passed crowdfunding legislation, authorizing local businesses to raise equity from local shareholders within the state. New Jersey was the most recent state to legalize intrastate crowdfunding in November. The SEC also gave intrastate crowdfunding a boost of confidence in November when it proposed a new rule that, among other improvements, would allow companies to pursue intrastate crowdfunding even if incorporated elsewhere. Ultimately, intrastate crowdfunding may not be an appealing fundraising option for high growth technology startups whose services and products may reach far beyond a state’s borders, yet we’re pleased to see state legislators recognize the importance of capital formation for new firms.

Congressional Support for Startups

Throughout the year, members of Congress also attempted to bolster capital formation through various measures, though on a scale far more modest than 2012’s JOBS Act. Recognizing that startups and other tech companies are staying private for longer, policymakers have sought ways to provide much needed liquidity for employees. One such bill, the RAISE Act—which was passed unanimously in the House and ultimately included in the massive highways bill—streamlined the process of privately selling unlisted shares. Other capital access-related legislation such as a bill that would create exchanges for private venture securities (the “Main Street Growth Act”), and one that would loosen restrictions on startups “generally soliciting” investments (the “Helping Angels Lead our Startups” or “HALOS” Act”) received some air time in Congress, but remain in legislative limbo.

Looking Ahead to 2016

In 2016, it seems likely that policymakers will direct efforts in capital access policy towards a few key areas. Improving the structure of Title III investment crowdfunding should remain a priority, as many critics have identified issues with the rules. If Congress is serious about democratizing startup financing, they’ll need to diligently track the growth of the crowdfunding sector and promptly respond to problems that spring up along the way. Similarly, despite the passage of the RAISE Act, liquidity for private shares remains a concern as IPOs decrease. While many tech companies don’t like the idea of liquid markets for their shares, if startup employees continue to find it difficult to receive value for their stock options, startups will find it harder and harder to attract top talent, as employees will be loathe to leave larger firms if the compensation startups can offer is functionally useless.

Finally, as 2016 is likely to see a large scale debate on tax reform, Congress will inevitably consider tax policies meant to help drive startup activity. 2016 may not match 2015’s monumental capital access policy achievements, but startups should work to harness Congress’s enthusiasm for policies that promote startup growth to continue the positive momentum in the new year.

Year in Review: Patent Reform

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.

Despite real strides made in the courts, patent trolls continue to be a serious drain on the startup economy. The number of patent cases filed by trolls in the first half of 2015 outnumbered filings in previous years. Historically, the majority of troll cases were filed against small companies with revenues of less than $100 million.

Recap: Patent trolls take advantage of loopholes in the patent system to leverage bad patents and expensive litigation to force companies (especially small ones) into costly settlements. Settlements that could cost several hires, derail products, challenge customer trust, or, worse, harm the whole company.

Back in January, the House reintroduced the Innovation Act and the Senate followed suit with the PATENT Act, reflecting strong commitments from congressional leaders to pass a bill that would put a stop to this tax on startups. These bills are both comprehensive in nature, addressing the trolls’ favorite loopholes. Some of the key provisions address pleading requirements, discovery procedures, and fee-shifting standards.

The House bill also includes a provision to address venue abuse, one that specifically would keep cases out of the now-infamous Eastern District of Texas. The provision would limit patent infringement suits to districts where the patent inventor conducted research or a party operates a physical facility. This will hopefully disincentivize those who cherry-pick venues based on where they are most likely to win -  i.e., the Eastern District of Texas, where nearly half of patent cases in the US were filed in the first half of 2015. Note: Thus far, the Senate bill does not include a similar provision.

Though voted out of their respective Judiciary Committees in June, we’ve seen both bills stalled, waiting to be scheduled for a vote by the entire Congress. Why? As Engine’s Executive Director Julie Samuels explained: competing interests operating in a one-size-fits-all system. The patent system, as it stands now, works for incumbents, like the pharmaceutical and manufacturing industries that have profited from it for decades. Unfortunately, this system does not work so well for technologies that rely on software, which represent an ever-increasing amount of economic activity. And not just from tech companies! Industries like retail, homebuilders, and realtors, for example, increasingly rely on software innovations to grow their business, only to find themselves facing a broken patent system, staring down the gun of a patent troll.

This year, we also saw non-comprehensive patent reform legislation introduced (again) that, while a good start, would not have gone nearly far enough to address the patent troll problem. And due to the lack of action from Congress, 2015 saw an increasing number of state legislators attempt to curb the patent troll problem. And there was also the evolution of the Pharmaceutical industry’s (PhRMA) own troll: Kyle Bass, the hedge fund manager who uses the Inter Partes Review (IPR) program at the Patent Office to challenge weak pharmaceutical patents and then short the stock of the company that owns the patent. In response, PhRMA has advocated for changes to the IPR process to limit Bass’ success. We hope these changes don’t happen; it’s important that we keep this program robust as an effective alternative to challenging bad patents without wasting the resources demanded in a courtroom.

Though patent reform was met with challenges in 2015, we remain confident that 2016 could bring about real and comprehensive legislation. Representative Goodlatte in the House and Senators Schumer, Cornyn, Grassley, and Leahy in the Senate remain committed to seeing legislation through. Coupled with court cases that help address low patent quality (like last year’s Alice v. CLS Bank decision, which has gone a long way to help get bad patents out of the system), the prospect for patent reform remains good. Engine will remain a firm supporter of comprehensive patent reform as we head into the new year.

Year in Review: Tech Talent and Diversity

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.

by Anna Duning and Ange Royall-Kahin

Lawmakers, industry leaders, and nonprofit groups alike contributed to important, and sometimes heated, conversations about America’s tech talent pool this year. The growing need for talented workers, the lack of diversity in the industry, and the vexed immigration system continue to pose challenges to both tech firms as well as policymakers.

Diversity

Additional tech companies joined some of the larger firms this year in releasing their diversity numbers. While the figures themselves didn’t inspire much confidence about industry diversity, we observed a growing recognition of the issue and commitment to creating a more inclusive tech industry. Engine participated in the Tech Inclusion Conference in San Francisco, where participants from across the country discussed challenges to improving the makeup of the tech community and solutions to making change. Several companies have also demonstrated good faith commitments to closing these gaps.

In Congress, Engine helped launch the Diversifying Tech Caucus in January to highlight the importance of diversity in the tech community and craft policy solutions to bring new people into this workforce. The bicameral, bipartisan Caucus, now with over 20 members, facilitated dialogues about startup efforts to diversify tech as well as the roles and obstacles veterans face in the industry. Another legislative group, the Congressional Black Caucus, also affirmed its commitment to diversifying the tech industry this year and launched Tech2020, an effort to increase the participation of African Americans in technology.

The White House and federal agencies also launched several initiatives this year to bolster and diversify the tech workforce:

• In March, the White House announced TechHire, a national program to get more Americans the training they need to enter the tech workforce. Through partnerships with universities, community colleges, apprenticeship programs, and non-traditional educational offerings such as coding bootcamps, TechHire has recruited over 40 communities to support their efforts.

• At the beginning of August, the White House hosted its first Demo Day under the theme of inclusive entrepreneurship, showcasing a diverse set of 50 entrepreneurs. The event also highlighted members of the tech community making concrete commitments to improving diversity.

• Later this year, the Department of Education launched a pilot program to evaluate the effectiveness of non-traditional education providers, such as coding bootcamps. While these new programs offer students valuable skills for well-paying, in-demand jobs, many are un-accredited and therefore disqualify students from using federal funding towards tuition. If successful, the outcomes of the Department’s pilot may help expand access to new learning models for vital technical skills.

Veterans

This year, we saw Washington take interest in how to connect veterans with resources that would aid them in transitioning into the tech industry. In July, Senators Moran and Tester introduced the Veterans Entrepreneurial Transition Act of 2015. The bill would allow veterans to apply their GI Bill benefits towards starting their own businesses. In August, the Department of Veterans Affairs (VA) launched a new pilot for accelerated learning programs (e.g. coding bootcamps with certain providers) - at no cost to participants. We look forward to seeing how the results shape the conversation around using GI Bill benefits towards coding bootcamps and alternative tech education.

Immigration

Immigration policy also plays a key role in supporting and growing technology companies and startups, too. Some of our country’s most successful technology firms were founded by immigrants and foreign talent is in high demand among U.S. tech companies, big and small. In 2015, the United States Citizen and Immigration Services (USCIS) received a record number of H-1B visa applications: 233,000 for the 85,000 spots. The H-1B program also came under fire this year for both favoring large companies and outsourcing firms (see Disney’s actions), as well as for abuse.

The H-1B program represents just one set of issues rattling our outdated immigration system, yet, none of these additional challenges saw real solutions from Congress this year. Speaker Paul Ryan made it clear that it’s unlikely any needed legislation will pass until a new president is elected. Nonetheless, a few incremental improvements (that didn’t require congressional approval) were pushed forward. USCIS began accepting work authorization applications so H-4 dependent spouses can work here, too. The Department of Homeland Security (DHS) is considering extending the OPT visa program for STEM students. And we soon expect DHS to announce guidelines for improved pathways for foreign entrepreneurs to acquire visas in order to start companies here.

Looking Ahead

While Speaker Ryan’s outlook gives the tech community little optimism for immigration reform in 2016, we hope high-skilled immigration policy will make its way into the presidential candidate agendas. It is likely that progress will be made to support veterans entering tech. The VET Act is gaining support and we expect that it will head to the Senate floor in the first half of the year. We also hope to see legislation introduced that would allow veterans to use their GI Bill benefits towards alternative tech education programs, such as coding bootcamps. On the industry side, we’re optimistic, too. The public pressure and attention on tech firms’ employee diversity that mounted throughout this year has now raised expectations. Companies are keenly aware they need to do better and made promises that we hope to see begin to come to fruition in 2016.

2015 in Tech and Startup Policy

In 2015, Engine celebrated several political victories for the tech community, traveled across the country to emerging startup ecosystems, and published new research on the challenging issues facing startups and policymakers alike.

We’re especially grateful for all the support of our community of entrepreneurs, VCs, and technology experts. They helped us win net neutrality, signed our letters to Congress, joined us on Capitol Hill, and shared their stories to demonstrate why entrepreneurs and the startups they build are such a valuable part of our economy and our nation.

Watch this space to read about all the issues we tackled this year.

Engine Highlights in 2015: Major Wins and Moments for Technology Startups and Entrepreneurs

Net Neutrality: The FCC announced its historic net neutrality decision to keep the Internet open and fair. Engine has since defended attempts to undermine net neutrality in the courts.

Capital Access: The SEC finalized investment crowdfunding and Reg A+. Engine published a paper on improving investment crowdfunding policy for startups and investors.

Patent Reform: Over 140 venture capitalists and 200 startups signed letters in support of patent reform. We brought several groups of startups to the Hill and released a book of troll stories. And this summer, the PATENT Act and the Innovation Act were passed out of Judiciary Committees in both the Senate and House.

Diversity in Tech: Engine launched Congress’ first and only caucus uniquely dedicated to expanding diversity in the tech industry. We also launched efforts to support #VetsWhoTech with a briefing on Capitol Hill, support for the VET Act, and released a series of stories about veterans in the tech sector.

Telecom: We worked with a coalition to successfully stop Comcast’s attempted merger with Time Warner.

Digital Privacy: The state of California passed one of the strongest electronic communication privacy laws in the nation.

Startup Cities: Engine visited emerging startup ecosystems around the country, stopping with the #RiseofRest tour in Richmond, Raleigh-Durham, Atlanta, New Orleans, Baltimore, Philly, Buffalo, and Manchester.

2016 Race: Engine hosted the first ever Iowa Presidential Tech Town Hall.

We hope you’ll join us in 2016 as we continue to fight for greater capital access, improved educational opportunities for tech workers and aspiring entrepreneurs, patent reform, and strong net neutrality protections.

Catch you next year!

Startup Policy Digest: 12/18/2015

Our weekly take on some of the biggest stories in startup and tech policy. 

CISA Sneaks into Omnibus. As Congress scrambled to clear its legislative calendar before leaving DC for the year, it packed a bunch of unrelated bills together into a 2,000 page omnibus spending bill that will need to pass in order to adequately fund the government. This potpourri approach to legislation raises serious concerns about government transparency and access, as all but the most well-connected groups are effectively blocked from the closed-door dealmaking that resulted in the omnibus. This year’s omnibus produced one notably terrible outcome: the resurrection of the much-maligned Cyber Intelligence Sharing Act (CISA), which is meant to allow companies to share information on cyber attacks with government in order to help prevent future hacks. Critics argue that the bill creates more problems than it solves by jeopardizing user privacy, incentivizing companies to secretly monitor user activity, and allowing the government to obtain consumer data without a warrant. With the ECJ’s nullification of the EU/U.S. data transfer safe harbor so fresh in policymakers’ minds, it is a particularly inopportune time to pass a bill that many believe is effectively an expansion of government surveillance authority.

EU Sets New Data Privacy Rules. On Tuesday, the European Parliament and Council effectively agreed upon a negotiated version of the EU Data Protection Reform originally drafted in 2012. The measures will be formally adopted in early 2016 and go into effect in 2018. US businesses are concerned with several of the law’s provisions that make compliance challenging and also expensive. Among their concerns: Companies that violate the rules could face fines of up to 4 percent of global sales; the law also formalizes the “right to be forgotten” statute, allowing users to not only correct inaccurate personal data, but also the right to remove irrelevant or outdated information; the age of consent for data processing is set at 16 years; companies must alert authorities within three days of a reported data breach; and larger “data-processing” companies must designate a data protection officer.

An Uber Union? Seattle has become the first city in the nation to allow on-demand drivers for companies like Uber and Lyft to unionize. The legislation, passed by Seattle’s city council on Monday, is seen as a test case for the changing 21st century workforce and will likely be contested in court. While some have argued that the new policy conflicts with federal law and raises antitrust concerns, others insist that the local law has teeth. Regardless of its merits, the law further complicates the broader debate around worker classification in the emerging “gig economy” and whether policies can support both innovation and workers.

California’s New Self-Driving Car Laws. A month after a study by California’s Department of Motor Vehicles, the state released proposed rules for driverless cars. Some of the rules came as no surprise to driverless car manufacturers such as Google, Tesla, and Ford: consumers must receive special training certificates and the autonomous vehicles must meet certain cybersecurity standards. However, one proposal, if passed, could significantly impede innovations in this emerging industry. The California DMV wants a licensed driver present in the vehicle, preventing the kinds of functions—package-delivering vehicles or transportation for the blind—that could truly revolutionize transit. This rule also complicates the liability question by making the licensed driver legally on the hook for any accidents. Google, on the other hand, has thus far stated that it is willing to take responsibility for any accidents on the road. There’s still room for debate though; these rules open for public comment next month.

BingeOn? Maybe Not Says FCC. In its net neutrality rules from earlier this year, the FCC declined to enact a flat ban on “zero rating” programs whereby ISPs exempt certain data from user data caps. Instead the FCC decided to tackle such issues on a case-by-case basis. Since then, ISPs have begun to test the FCC’s willingness to regulate data exemption policies, such as T-Mobile’s Music Freedom and BingeOn plans. While T-Mobile’s programs do not implicate the most concerning net neutrality problems by allowing any music or video streaming company to take advantage of the data exemption without payment, some net neutrality advocates have taken aim at T-Mobile’s policy of throttling all video traffic regardless of whether it is a part of the BingeOn program. FCC Chairman Tom Wheeler has previously applauded T-Mobile’s programs as creative, pro-consumer innovations, but now, the FCC wants to take a closer look. With the Commission’s data cap inquiry and the DC Circuit’s pending decision on the validity of the FCC’s net neutrality, 2016 looks to be an important year for the future of the open Internet.

Drone Registration Goes Live. The Federal Aviation Administration unveiled new recreational drone requirements this week. Starting December 21, drone hobbyists must register their unmanned aircrafts and pay a $5 fee through a new FAA web page. The registration requirements represent a mostly uncontroversial attempt to maintain safety and accountability in national airspace as more and more drones populate the skies.

GOP Misses on Tech Issues. While many observers called this week’s Republican debate the most “substantive” yet, tech experts heard uninformed positions and misconstrued information on issues such as surveillance, the operation of the Internet, and encryption. For instance, Gov. Kasich inaccurately assumed that encryption prevented law enforcement from collecting information that could have foiled the San Bernardino shootings. Yet, whether encryption played any role in law enforcement’s access to important digital communications has not been confirmed. Meanwhile, Mr. Trump suggested that parts of the Internet should be “closed,” a preposterous suggestion that would not only hinder communication amongst bad guys, but also the good guys who drive ambulances, operate hospitals, and alert the world to vital information. Such superficial positions on high-impact tech policy are disconcerting - legislating these areas will require thoughtful (and, frankly, more complicated) solutions.

Prisoners Turned Coders. San Quentin State Prison just graduated 21 inmates from its tech incubator, which teaches inmates to code as well as the skills it takes to design and pitch a business to investors and peers. The program,  made possible by The Last Mile organization, has become so popular that inmates are requesting transfers to San Quentin. Next up: A new program from The Last Mile will provide inmates with paid coding jobs for businesses outside prison walls.

CISA Resurrected: Bad Policy, Broken Process

News yesterday that a dormant and much maligned cybersecurity bill—the Cyber Information Sharing Act—had not only resurfaced but was on a fast track towards becoming law by virtue of being appended to a large spending bill came as an unfortunate surprise for the tech sector, privacy advocates, and anyone who cares in transparent policymaking. In the last few weeks of 2015, all of Congress’s remaining legislative capacity was directed towards passing the bloated mish-mash of policies known as the “omnibus.” In theory, the omnibus is a “must-pass” spending bill (“must-pass” in the sense that signing it into law is necessary in order to fund the government) that combines a number of different appropriations bills into one, streamlining what could otherwise be a tedious effort to pass spending bills piece-by-piece. But, in what has become a commonplace practice in DC, this year’s omnibus crams in piles of unrelated legislation (more than 2,000 pages in all), effectively ensuring the passage of controversial bills that would likely have faltered if exposed to the normal legislative process, public debate, or a straightforward Presidential veto.

Ultimately, this means that groups and individuals without significant influence or lobbying power often find themselves pushed out of closed-door conversations about what unrelated bills get appended to the omnibus. While this closed process doesn’t always result in terrible legislation (the removal of anti-net neutrality riders to this year’s omnibus being a prime example of good policy emerging from the omnibus mess), when bad legislation does find its way into the omnibus, it’s almost impossible to get it out. It is through just this backwards process that the ill-fated Cyber Information Sharing Act (CISA) found its way into the omnibus and on a seemingly unstoppable course towards a Presidential signature.

CISA essentially creates a framework for companies to collect and share user data with government in a way that may circumvent basic privacy protections. While the bill is supposed to help government and industry cooperate to prevent cyber attacks like the high-profile hacks that targeted Sony, Target, and the federal Office of Personnel Management, critics argue that the bill creates more problems than it solves by jeopardizing user privacy, incentivizing companies to secretly monitor user activity, and allowing the government to obtain consumer data without a warrant. By moving CISA through the omnibus, these critics have been shut out of the recent negotiations. It’s no surprise then that the language that ultimately made it into the omnibus is worse in terms of privacy protections than other iterations of the bill.

For startups, CISA’s inclusion in the omnibus is bad for a few reasons. First, enacting significant legislation via amendment to unrelated must-pass bills limits the voice of small business in government. As this becomes more commonplace, startups who do not have the resources or relationships to participate in closed-door discussions are boxed out. Second, any bill that weakens privacy protections for user data threatens to undermine consumer confidence in Internet services. This, in turn, decreases the market for startups that provide such services. Finally, considering the European Court of Justice recently invalidated a crucial safe harbor by which US companies—startups included—were permitted to import EU consumer data precisely because of US laws that gave government access to user data without any real privacy protections, pushing a bill like CISA only threatens to make things harder for US companies operating overseas.  

As policymakers consider a variety of cybersecurity and privacy issues, it’s crucial that the startups and technologists that understand how key technologies actually work are a part of these conversations. Congress’s decision to move CISA through the omnibus spending bill is a move in the wrong direction for the startup sector’s participation in DC.

Improving Access to STEM with Policy

Back in January, we worked with Senators Shelley Moore Capito, Tim Scott, Amy Klobuchar, and Representatives Barbara Comstock, Tulsi Gabbard, Ruben Gallego, Robin Kelly, Cathy McMorris Rodgers to launch the Diversifying Tech Caucus (DTC). The Caucus was organized to address one of the most pressing issues facing the tech sector today: the alarming lack of diversity in the tech workforce. DTC members have been instrumental in promoting a variety of bipartisan bills that would not only strengthen the tech talent pipeline by providing Americans with better access to STEM (science, technology, engineering, and math) education opportunities, but would make it easier for new entrepreneurs and workers to participate in the startup ecosystem.

Here are a few pieces of legislation introduced and sponsored by DTC members (and others) that have our support:

• Diversity in Science Technology and Nurturing Capable Educators Act (DISTANCE) Act
  Sponsored by DTC Chair Rep. Robin Kelly (D-IL), this bill would provide scholarships to college students studying in a STEM field who agree to teach in a K-12 school for five years after they graduate. The Department of Education’s most recent teacher shortage report highlights the consistent shortage of math and science teachers, which affects 28,000 students a year in California alone. The DISTANCE Act would incentivize STEM college students to become teachers, improving America’s ability to train the next generation of tech innovators.
• Innovate America Act
  Sponsored by DTC Chair Sen. Amy Klobuchar (D-MN), the Innovate America Act would, among other things, create 100 new STEM-focused secondary schools, measure graduation rates for students majoring in STEM degrees, increase the number of scholarships for aspiring computer science teachers, and expand undergraduate research opportunities to encourage more students to enter STEM fields. Since computer science is often not designated as a core academic subject, administrators are less likely to hire teachers who are prepared to teach it. Bills like the Innovate America Act help increase the pool of skilled computer science teachers who are crucial to building the STEM pipeline.
• GI Bill STEM Extension Act
  Introduced by Rep. David McKinley (R-WV), this bill would authorize nine months of additional Post-9/11 Educational Assistance for a veteran who has used all his or her benefits and who: (1) is enrolled in a postsecondary education program that requires more than the standard number of credit hours for completion in a STEM field; or (2) has earned a postsecondary degree in one of those fields and is enrolled in a teaching certification program. Given that a typical undergraduate engineering program takes around 4.5 years to complete, this bill provides important financial relief for veterans transitioning into STEM jobs.
• America Can Code Act
  Introduced by DTC members Reps. Farenthold and Cardenas, the bill would designate “computer programming languages” as “critical foreign languages,” which would provide incentives for state and local schools to teach more computer science classes in K-12 curricula. Creating incentives for schools to boost computer science curricula might seem peculiar, considering the well-known need to train a ever-growing need for skilled programmers, but currently, only one in four schools teaches coding. The bill also establishes a Task Force on Computer Programming and Coding (in the Department of Education) to identify and prioritize challenges of educating and training a workforce equipped to fill jobs in emerging STEM fields.
• Veterans Entrepreneurial Transition Act (VET Act)
  Introduced by Sens. Moran and Tester (and co-sponsored by DTC chair Sen. Shelley Moore Capito), this bill would establish a pilot program enabling veterans to use their GI Bill benefits towards starting a new business or purchasing an existing business. We described the context (and our support) for this bill here. The VET Act would make it easier for veterans to participate in the tech startup economy and achieve entrepreneurial goals that don’t require higher education.

Congressional interest in working on legislation that addresses the tech world’s diversity problem remains high, but adding your voice to the conversation about these bills will go a long way towards moving the agenda forward. Bill sponsors are always looking for emails, calls, and letters from the public in support of the provisions in the bill; personal anecdotes are particularly impactful in order to highlight the importance of a bill’s goals. You can find contact information for members of Congress on their respective websites (also linked to their names in this post).

Are you a startup that cares a lot about improving the tech talent pipeline? Do you want to work with Engine to support legislative solutions? Send us an email at ange@engine.is.

Startup News Digest: 12/11/2015

Our weekly take on some of the biggest stories in startup and tech policy. 

Net Neutrality Has its Day in Court. The net neutrality debate that has dominated tech policy headlines for the past two years finally got its day in court last Friday. A panel of three judges from the DC Circuit heard oral arguments in the lawsuit brought by a consortium of ISPs to invalidate the FCC’s net neutrality rules. Proponents of the FCC’s rules came away from the hearing fairly optimistic. A majority of judges seemed to side with the FCC in the most crucial aspect of the dispute: whether or not the Commission had adequate authority to reclassify Internet access as a “telecommunications service.” The court pushed back more significantly on the FCC’s authority to reclassify mobile broadband and the adequacy of the notice the FCC provided about the final rules it adopted. While we remain optimistic about the Court’s ultimate decision, the net neutrality debate will almost certainly not go away when the Court issues its ruling early next year. It seems likely that the case will ultimately end up before the Supreme Court, and Congress continues to ponder whether it should pass anti-net neutrality legislation.

Feinstein Wants Tech to Report Terrorist Activity. As terrorists attempt to use Internet platforms to mobilize followers, disseminate propaganda, and coordinate attacks, working to diminish militants’ capacity to organize through social media is critical. But the Requiring Reporting of Online Terrorist Activity Act, introduced by Senator Dianne Feinstein (D-CA) earlier this week, is not the answer. The bill would require tech companies to report “any terrorist activity” that they have knowledge of to law enforcement. This obligation seems innocuous on its face, but as often happens, difficulties arise in determining how to actually apply this standard. Emma elaborates on all of the reasons the bill’s controversial (and previously rejected) framework could potentially do more harm than good here.

Computer Science in Classrooms. An education bill signed into law on Thursday acknowledges computer science as a foundational academic subject. By doing so, the bill puts computer science “on equal footing with other subjects when state and local policymakers decide how to dole out federal funds.” This new designation could potentially accelerate computer science's introduction into classrooms across the U.S. and ultimately help address the country's growing tech talent shortage.

Bill Would Cut Back H-1Bs. Senators Bill Nelson (D-FL) and Jeff Sessions (R-AL) introduced a bill this week that would reduce the number of H-1B visas available by 15,000 and also modify the way those visas are allocated—requiring they go to workers who will earn the highest wages. The H-1B program allows companies to hire foreign high-skilled employees, including those with expertise in science, engineering, and computer programming. While these visas are highly coveted within the tech industry, accounts of program abuse have galvanized members of Congress to restructure the program. “This bill directly targets outsourcing companies that rely on lower-wage foreign workers to replace equally-qualified U.S. workers,” Sen. Nelson said in a statement. While attempting to prevent bad practices by specific outsourcing companies, this bill would unduly harm the wider tech industry by further limiting global talent from contributing to U.S. companies, big and small. 2015 saw a record number of H-1B applications: 233,000 for the current 85,000 spots.

Investment Crowdfunding for Tech? Not So Fast. An article in this week’s Wall Street Journal highlighted a few of the shortcomings of investment crowdfunding, a new fundraising tool for startups made legal last month with the release of SEC rules. Those rules contain numerous burdensome requirements for companies raising equity from the crowd, potentially deterring high-growth technology startups. For instance, once a company takes on over 500 investors or grows to a certain size, it must file regular disclosures with the SEC: “It is all the pain of an IPO without the benefits of the IPO.” We’ve previously detailed some of the other issues with those rules, concluding that policymakers must continue to work to lower the cost of raising seed capital through crowdfunding or the impact of investment crowdfunding for startups will be modest.

What We Heard in Iowa: Earlier this week, Engine teamed up with the Technology Association of Iowa to discuss technology policy with Iowa entrepreneurs, caucus goers and two of the 2016 presidential candidates in Cedar Rapids. As the Cedar Rapids Gazette reported, the candidates agreed that education is “vital to innovation” but, not surprisingly, disagreed on the federal government’s role. O’Malley’s address focused on his track record as governor of Maryland. While Fiorina took a different approach, focusing on national security and technology “as a tool and a weapon” in those efforts. The forum offered a glimpse on where at least two candidates stand on a handful of important tech issues and as we look to 2016, we hope to hear a lot more.

Patent Suits Cost Universities. Universities have been getting more involved in patent reform policy and a recent Brookings article explains why. Its author also emphasizes that universities are turning observers off by engaging in offensive litigious actions, which is seen as contrary to the public mission of a university. Furthermore, it doesn’t make sense for universities to be involved in patent reform conversations since universities as a group do not have a financial interest in patenting: 87 percent of tech transfer offices operate in the red. Since there is a false belief among some that without patents there would be no innovation, it is important that the public voice of universities acknowledge “that the debate on the impact of patents on innovation is not settled and that this impact cannot be observed in the aggregate, but must be considered in the context of each specific economic sector, industry, or even market.”

Where are the Women in Tech? A new list was published on the “Best Cities for Women in Tech” and Washington, DC topped it, with women making up about 37 percent of the tech workforce (New York, NY comes in at number five and San Francisco, CA at 23). Kansas City, Missouri (at number two) was one of the only two cities in the study where women in tech don’t face a gender pay gap. Recruitment of women and underrepresented groups in the tech community remains a large part of the diversity conversation: language used in outreach and job descriptions could be turning well-qualified applicants off from even applying. One startup, Textio, is trying to address this problem with their product that “applies a form of artificial intelligence (AI) called natural language processing (NLP) to study the verbiage in documents” and can help highlight words with certain negative connotations.

Senate Bill Requiring Terrorist Activity Reporting a Flawed Approach

As terrorists increasingly exploit Internet and social media platforms to mobilize followers, disseminate propaganda, and coordinate attacks, working to diminish militants’ capacity to organize through social media is critical. And in the wake of the recent, horrific attacks in Paris and California, a renewed push to improve these efforts is understandable. But the Requiring Reporting of Online Terrorist Activity Act, introduced by Senator Dianne Feinstein earlier this week, is not the answer.

Every day, startups and tech companies voluntarily work with law enforcement to combat terrorist threats. FBI Director James Comey noted in a July Congressional hearing that even absent a legal requirement to do so, Internet and technology companies “are pretty good about telling us what they see.”

Sen. Feinstein’s bill would require tech companies to report “any terrorist activity” they have knowledge of to law enforcement. This obligation seems innocuous on its face, but as often happens, difficulties arise in determining how to actually apply this standard. Crucially, nowhere in the three page bill is “terrorist activity” adequately defined. The legislation is modeled after a law requiring the reporting of child pornography, but unlike child pornography (which is intrinsically unlawful, generally easy to detect, and never constitutionally protected speech), “terrorist activity” is vague and undefined. Under the bill, companies would have to independently determine what “terrorist activity” encompasses—a difficult task for startups without large legal teams or a deep understanding of this complex landscape. Startups are neither qualified nor equipped to comply with these onerous requirements.

Beyond its burdens, the bill’s incentive structure is illogical. Because of the overbroad definition of “terrorist activity,” there will be a strong incentive for companies to over-report poor quality information, lest they miss something for which they will later be held liable. This will create a needle-in-the-haystack conundrum, swamping law enforcement with useless information.

On the flip side, the bill could also discourage some companies from reporting anything at all. The bill’s sponsors emphasize that the bill would not require companies to monitor customers or undertake any additional steps to uncover terrorist activity. But if companies are only required to report activity when they see it, there is an incentive for some to simply turn a blind eye, arguing that if they did not have “actual knowledge” of the activity, they were not obligated to report it.

Simply put, Sen. Feinstein’s bill could potentially do more harm than good. It would chill innovation and create a compliance nightmare for startups. The bill’s flawed approach has already been debated, and an almost identical provision was removed from the Intelligence Authorization Act earlier this year due to similar concerns.

The startup community stands at the ready to partner with the government to combat those who want to harm our nation. But any policy solution should be balanced, well defined in scope, and grounded in evidence that it will truly make Americans safer.

2016 Candidates: What About Tech?

Since the 2016 presidential contenders declared their candidacies and more recently, garnered increasing attention from national media and the electorate, we’ve been listening closely to what they have to say about technology. From where we stand, there’s a lot at stake: the Labor Department expects over 1.3 million job openings in the industry by 2020, cybersecurity and privacy challenges continue to make headlines, and technology itself is only becoming more ubiquitous. That’s not to mention that many of the startups navigating these challenges are an invaluable part of the national economy: new firms are responsible for all net new job growth in the United States. Yet, aside from some vague musings about the gig economy, general statements about immigration reform, and outlandish ideas about the Internet, we haven’t heard much, at least much of substance.

As Engine’s Executive Director, Julie Samuels, explained in TechCrunch, candidates have thus far evaded questions on many of the issues that matter most to technology entrepreneurs and industry leaders, because “many of these tough issues split our traditional notions of the two-party system.” They also don’t have easy solutions.

In an effort to highlight some of these issues, Engine teamed up with the Technology Association of Iowa to host a forum on December 7 in Cedar Rapids. Iowa is not only the first state to hold primary elections, making it a popular destination for campaigns this time of the year, but it’s also home to a vibrant and growing technology and startup community. The tech industry is one of the fastest growing job sectors in the state and accounts for 8.8% of Iowa’s GDP.

The program started off with a panel discussion among Julie Samuels and local tech entrepreneurs to address why policy matters to this community in Iowa and all over the country. Eric Engelmann, founder of the Iowa Startup Accelerator, spoke about the importance of capital access to entrepreneurs building companies outside Silicon Valley. Helen Adeosun, CEO and co-founder of Care Academy, discussed the great need for industry diversity, and Bruce Lehrman, CEO of a Cedar Rapids-based data center company, noted the urgent challenge of finding technically trained workers.

We were later joined by 2016 candidates Gov. Martin O’Malley and Carly Fiorina who shared their own views on the talent shortage and access to capital, among other issues. As the Cedar Rapids Gazette reported, the candidates agreed that education is “vital to innovation” but, not surprisingly, disagreed on the federal government's role. O’Malley’s address focused on his track record as governor of Maryland; under his administration the state was rated number one for innovation and entrepreneurship by the U.S. Chamber of Commerce and expanded STEM education offerings in Maryland schools. When pushed on his specific policy prescriptions for supporting innovation and the country’s entrepreneurs, however, his answers were less direct.

Fiorina took a different approach in her address, strongly condemning the recent attacks in Paris and San Bernadino before turning to the role of technology “as a tool and a weapon” in national security and cybersecurity efforts. “Having led the world’s largest technology company, I know what it will take for America to lead in this realm,” she added. When Engelmann asked about whether she’d repeal the Affordable Care Act, which he said allowed entrepreneurs to start their own ventures, she affirmed she would, arguing the free market could better provide healthcare solutions. And in response to how she’d support more women entrepreneurs, Fiorina underscored the layers of the bureaucracy that slow down all new business owners.

This week’s forum offered us a glimpse on where at least two candidates stand on a handful of these important issues. As we look to 2016, we hope to hear a lot more.

EU Commission Seeks Input on Major Policy Regarding Online Intermediaries

Though the EU’s economy is the largest in the world in terms of GDP, its innovation economy has historically lagged behind the US and other international peers. Investment in EU startups has risen slowly but steadily in the past decade, but, the EU is home to only four of the top 20 cities for startups in Compass’s 2015 rankings. This is not just bad news for the EU economy, but also for US startups looking to expand overseas.

The sluggishness of the EU’s startup sector is due in no small part to the significant regulatory burdens involved in conducting business across member state boundaries. In fact, our research shows that how a country regulates its technology sector has an enormous impact on early stage investment in startups. In a study we published earlier this year, 88% of worldwide investors said they would be uncomfortable investing in digital content intermediaries in countries with an unfavorable or murky regulatory environment.

Fortunately, the EU is already well underway in devising a fix for its complicated regulatory hurdles in the form of the proposed EU “Digital Single Market”—essentially a uniform, trans-Europe market for digital goods and services. As part of its effort, the EU Commission recently issued a consultation asking for information and commentary regarding the value of online platforms and intermediaries in promoting innovation and economic growth. Since the Commission’s Digital Single Market strategy is still somewhat in flux, there is no guarantee that the new regulations it puts in place will work if the Commission doesn’t receive enough feedback explaining how crucial online platforms are in a well-functioning Internet economy, and how dangerous restrictive regulations would be to the viability of the EU’s burgeoning startup sector.

To maximize the potential of the Digital Single Market and foster startup growth throughout Europe, the EU Commission should ensure that its Digital Single Market strategy focuses on policies that support online platforms and intermediaries. Online platforms are critical to a healthy Internet economy by virtue of the core services they provide in connecting Internet users and facilitating the flow of information, but as the US tech sector shows, their real economic value lies in their ability to support interoperable startups that use larger intermediaries to build and promote their services. The Google Play and Apple App stores feature more than 1.8 and 1.5 million apps, respectively—a great many of which were created by the startups responsible for virtually all new net job growth. The economic value of this market is significant; by 2017, worldwide mobile app revenue alone is projected to exceed $77 billion. Assuming the EU doesn’t hamper the growth of this market by crafting regulations that impose undue costs and restrictions on online platforms, Europe stands to gain a significant portion of the app economy’s growth. Projections estimate that employment from the app market in Europe will increase from 1.8 million in 2013 to more than 4.8 million in 2018.

Of course, the app market represents just a small fraction of the value that online intermediaries provide in spurring startup activity. Social media platforms and search tools allow startups to easily and cheaply connect with customers and online payment platforms help lower startup costs by outsourcing payment systems; together, these intermediaries give entrepreneurs the ability to reach customers and turn their ideas into business realities. Online platforms are the hubs off of which countless startups have built their businesses, and the low cost of operating a business in this symbiotic, open model of innovation allows new entrepreneurs to build ventures with few resources. In this sense, allowing online platforms to operate effectively across the EU is critical to growing the EU’s startup ecosystem, not to mention to US companies looking to expand into international markets. As the EU collects information regarding the role online intermediaries play in Europe’s startup market, it’s important that the Commission hear from entrepreneurs and innovators on the ground who can speak to the value freely operating intermediaries provide to fledgling enterprises. The consultation closes December 30; interested parties can fill out the EU’s survey here.

UPDATE: The EU Commission is holding an event this Thursday in San Francisco at the Consulate General of the Netherlands (120 Kearny St.) with key stakeholders to discuss the implications of its online platform regulation strategy. This is an incredible opportunity to help shape the future of EU tech policy, so sign up while there’s still space.

Tech Meets Politics in Cedar Rapids

This afternoon, Engine, in partnership with the Technology Association of Iowa, is hosting the first ever Presidential Tech Town Hall. We’ve invited presidential candidates to address over 200 entrepreneurs, technology leaders, and caucus-goers in Cedar Rapids. Former HP CEO Carly Fiorina and Gov. Martin O’Malley will join us to share their platforms for supporting technology innovation and entrepreneurship.

Iowa is not only the first state to hold primary elections on February 1, but it’s also home to a vibrant technology and startup community. Major industry leaders including Google, Facebook, IBM, and Microsoft all have offices in Iowa. Norand Corp, now part of Intermec in Cedar Rapids, developed the core technology for Wi-Fi. Entrepreneurs in Des Moines, Iowa City, and Cedar Rapids are also building new startups every day.

What will the presidential contenders have to say to these tech-savvy and entrepreneurial-minded caucus-goers? You can join the conversation on Twitter at #IowaTech2016 and follow along by watching the livestream starting at 4pm CT at www.TheGazette.com.

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.

Startup News Digest: 12/4/2015

Our weekly take on some of the biggest stories in startup and tech policy.

Trade Secrets Bill Resurfaces. On Wednesday, the Senate Judiciary Committee held a hearing on the Defend Trade Secrets Act (DTSA), a bill purportedly meant to help curb international trade secret theft by creating a federal cause of action for trade secret appropriation. However, like most intellectual property laws, trade secret litigation is rife with abuse as companies regularly use trade secret claims to stifle competitors and hinder employee movement. The proposed legislation would exacerbate these problems by creating an ex parte seizure procedure whereby a party can—without detailed factual inquiry and without a presentation of both sides of the case—ask a judge to seize a defendant’s property. In this regard, the DTSA goes well beyond what state trade secret law provides, making it a potent tool for incumbents to use the courts to unfairly hinder legitimate competition. And, international trade secret thieves will be able to avoid this federal law as they have avoided prior state laws by simply being outside of the US, it’s hard to see how this bill would actually address the problem it claims to address.

Net Neutrality Hearing. The DC Circuit Court of Appeals heard oral arguments today in the challenge to the FCC’s net neutrality rules. A group of telecom companies filed suit against the FCC shortly after the Commission issued its net neutrality rules this spring, arguing that the decision to reclassify violated administrative rules and exceeded the FCC’s delegated authority. While most net neutrality supporters believe that the Commission’s rulemaking is likely to withstand legal challenge, the DC Circuit is notoriously unpredictable. The hearing itself was not broadcast due to the DC Circuit’s strict rules on recording proceedings, so we’ll have to wait for reports from those in the room to get a read on how the judges received each side’s arguments. We’ll be tracking closely.

Starting Up the Broadband Economy. In an op-ed in re/code, Engine Policy Director Evan Engstrom elaborates on why policies that encourage a competitive broadband market are essential to the continued success of the startup economy. Increasing competition ensures America’s entrepreneurs can use their limited funds to build their businesses, rather than lining the pockets of a few huge incumbent providers. There is still a long way to go towards a robust, healthy Internet ecosystem. But we are working to ensure that startup voices are heard and that real reform happens now.

Trouble for ECPA Reform? The broadly supported Email Privacy Act ran into opposition from law enforcement authorities at a House Judiciary Committee hearing on Tuesday. Calls for an emergency exception and a carve out for civil agencies are nothing new, but they are preventing the committee’s chairman, Rep. Bob Goodlatte, from backing the legislation. Despite being one of the most popular bills in Congress with over 300 bipartisan cosponsors, it won’t move until Rep. Goodlatte gives the go-ahead. We’re tracking.

Add “Lobbying” to List of Startup CEO Responsibilities. Engaging with lawmakers is just another part of being a startup leader now, reports the New York Times. “In addition to knowing the language of computer code, founders are speaking the language of Washington, keenly aware of the potential regulatory battles that could be on the horizon.” In a shift from the historical status quo, startups are no longer eschewing politics, but increasingly embracing a dialogue with D.C. instead.

Patent Lawsuits Filed Set New Record. On November 30, 257 new patent litigation cases were filed—a new one day record. Furthermore, 196 of these cases were filed in the Eastern District of Texas, a notoriously plaintiff (and troll) friendly court. This is clear proof of forum shopping and further evidence that patent reform legislation should also address venue abuse. The mass amount of filings are likely tied to the fact that December 1 marks the effective date of significant changes in the Federal Rules of Civil Procedure for patent cases—i.e. going forward, plaintiffs may be required to provide more information in their initial claims.

Women in STEM. Michelle Lee, the Director of the US Patent Office, authored an op ed in which she cites a study that found that only 15% of all inventors are women. She writes, “The lack of gender parity is not just a social issue, it is an economic imperative.” In response, the Patent Office has launched, in partnership with Invent Now, an “All in STEM” initiative to get more girls interested in STEM and more women in flourishing STEM careers. Meanwhile, the latest diversity numbers from tech companies demonstrate the continuing need: women employed globally by Microsoft decreased from 29% to 26.8%.

Cities and Innovation Ecosystems. It takes years for cities to build up a “critical mass” of tech companies and workers to the likes of the Bay Area. But in some of the nation’s smaller cities, the environment has proven conducive to small companies and large companies cooperating in a way that has become engrained in the DNA of Silicon Valley—where startups are built off the API of large companies and interoperability is part of the culture. A recent report by the World Bank discusses what factors affect the growth of entrepreneurship ecosystems across different cities.

Conversations Around Capital Access. Before taking a break for Thanksgiving, Engine attended a forum hosted by the SEC on capital access issues for startups. Participants honed in on the JOBS Act rules: how they’re playing out in practice and whether there are policy modifications that could facilitate their success. Read Emma’s run-down of the discussions here.

SEC Hosts Forum to Discuss Capital Access Issues for Startups

Last week, Engine participated in the Securities and Exchange Commission’s (SEC) 34th annual Government Business Forum on Small Business Capital Formation, where industry and government experts shared their perspectives and made recommendations on capital access issues for small and emerging companies.  

A lot has happened since the last forum in 2014. In March, the Commission adopted rules to implement Title IV of the JOBS Act, also known as Reg A+, which 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. And just last month, the Commission finalized crowdfunding rules that will allow startups to raise capital from everyday investors over the Internet, marking the completion of the Jumpstart Our Business Startups Act (JOBS Act) rulemaking process.

While it will take time to assess the impacts of these newer rulemakings, the SEC and other stakeholders have been closely monitoring other developments in small business capital markets to help glean lessons to guide future Commission policy. In 2013, the SEC lifted the ban on general solicitation, allowing companies to publicly advertise that they’re raising money. AngelList, a leading equity crowdfunding portal for accredited investors, allows issuers on its site to use general solicitation. However, AngelList’s COO Kevin Laws noted that in the past six months, only two percent of deals on the platform took the public, general solicitation route. The other 98 percent were limited to a private list of investors.

This data from AngelList affirmed what SEC Chairwoman Mary Jo White’s noted in her welcome remarks (and something we have lamented): compared to traditional private capital-raising options, general solicitation still makes up an extremely small portion of the offering market. So why the poor showing? Startups are wary of this funding path because of the unclear definition of what exactly constitutes “general solicitation,” as well as onerous requirements for verifying accredited investor status. The good news, though, is that the Commission has “not observed widespread fraud, as some had feared would occur.”

The use of Reg A+ has also been tepid since becoming effective in June. While the SEC has not yet compiled comprehensive data on the impact of these rules, Sara Hanks, CEO of Crowdcheck, reported that she has seen only around 25 filings of variable quality. She attributed this lackluster showing to a number of factors (it takes a long time to do a Reg A+ filing and the rules are still relatively young), but emphasized that state-level registration requirements for companies seeking less than $20 million are a huge deterrent. We have expressed concerns about this and echo Sara’s wish list for improvements to the coordinated review process, a single filing form, and a single payment process. Each of these changes would simplify the Reg A+ process and incentivize participation by small and emerging companies.

Finally, participants were eager to discuss the Commission’s most recent rulemaking: investment crowdfunding for non-accredited investors. While the rules will not be effective until May 2016, stakeholders (including Engine) are already advocating for modifications to ensure the crowdfunding market achieves its full potential.

One improvement recommended by Kevin Laws was to allow non-accredited crowdfunding investors to participate in alternative investment vehicles like the syndicates common on AngelList. Syndicates, which have been enormously successful in the accredited crowdfunding market, allow for known investors to create funds in which other investors can participate, allowing less experienced investors to benefit from an insider’s expertise (for a more detailed explanation of how they work, see AngelList’s FAQs). Under Title III of the JOBS Act, syndicates, funds, or other special purpose vehicles (“SPVs”) are not eligible for the crowdfunding exemption due to limits on which entities can raise capital through non-accredited crowdfunding. But as we’ve argued, syndicates and other SPVs allow for additional investor protections and portfolio diversification while simplifying the fundraising process for issuers. Congressional action on this piece would make investment crowdfunding in the U.S. safer and more profitable for non-accredited investors.

As the impacts of the JOBS Act are realized, we will see both successes and failures. And importantly, modifications will need to be made. The early, meager response to both general solicitation and Reg A+ should not discount the enormous potential they represent. Instead, it should incent policymakers to pursue solutions that will improve upon the statute and regulatory framework. It is important that constructive conversations like those that took place at last week’s forum continue. A dialogue between those on the ground and those in government is essential to realizing the the original intent of the JOBS Act: facilitating access to capital for innovative entrepreneurs to launch tomorrow’s startups, create jobs, and drive economic growth.

Startup News Digest: 11/20/2015

Our weekly take on some of the biggest stories in startup and tech policy. 

Encryption Debates Resurface. Last week’s terrorists attacks in Paris reignited debates over encryption. Officials suspect the attackers may have used encrypted messaging systems to coordinate the plots, (though nothing has been confirmed.) Policymakers are again considering whether the law should require tech companies create “backdoors” for law enforcement, making it easier for officials to track and disrupt threats. Many in the tech community, including Apple, have publicly opposed such backdoors for government, arguing these restricted access points could make their systems more vulnerable.  

$100 Million in Grants for Tech Training. This week, White House representatives were in Baltimore to announce the expansion of its TechHire initiative with the launch of a $100 million grant competition. TechHire, which launched in March, involves education and employer partnerships in dozens of regions across the U.S., all dedicated to training, recruiting, and placing more Americans in tech jobs. Awards from this new grant will go to programs across the country that serve Americans who face barriers to entering the tech sector, whether those are educational, geographical or income-based.

Startup Equity in Highway Bill. A little known piece of startup-friendly legislation has made its way onto the highway bill, the massive federal transportation bill that lawmakers in the House and Senate are scrambling to finalize. This unrelated legislation is the RAISE Act, which would more easily allow startup employees to sell company equity to accredited investors. In October, the House passed the bill unanimously, but it hasn’t yet made its way to the Senate floor. We won’t know until December whether these new rules will remain in the highway bill - federal funding for roads has been extended to December 4 while Congress hashes out the details of the new bill.

Chicago Limits Drones. Chicago’s city council passed a bill banning certain uses of drones. The first bill of its kind, the rules will potentially hinder hobbyist use. Chicago’s ordinance, in line with FAA regulations, prohibits drones from flying above 400 feet, flying within five miles of and flying over schools, churches, hospitals, police stations, and any private property without consent. Chicago has experienced some uncomfortably close encounters with drones: one crashed Midway airport’s runway and another flew frightening close to crowds gathered at Lollapalooza.

Patent Reform will Encourage Innovation. Executive Director Julie Samuels was featured in a series of perspectives on patent reform in the Washington Post. Her perspective: if Congress does not pass patent reform legislation, patents will inhibit the innovation they set out to incentivize. Innovative inventors and young companies are being threatened by “patent trolls” that are wielding bad patents, frivolous infringement allegations, and exploiting loopholes in an expensive patent litigation system. Unfortunately, legislation that would help relieve startups and stop trolls is stalled in Congress - largely because of incumbent interests, e.g. the pharmaceutical industry (PhRMA). The bottom line: the one-size-fits-all patent system that has long worked for PhRMA is not working for software.

ICYMI: November is National Entrepreneurship Month. In other news from the White House, President Obama has issued an official presidential proclamation designating the month of November as National Entrepreneurship Month. “Since our Nation's founding, our progress has been fueled by an inherent sense of purpose and ingenuity in our people. Americans have more opportunities now than ever before to carry forward this legacy - to create something, to raise capital in creative ways, and to pursue aspirations,” states the proclamation. While we’re always celebrating the work of entrepreneurs, it’s great to see policymakers and organizations across the country rally behind them this month.