ACT applauds the Register of Copyrights for recognizing the need to review intellectual property law in the evolving environment of the digital economy. With content delivery now occurring on a wide range of consumer devices in a mobile setting, new copyright issues are emerging that will have a profound impact on the technology industry.

The mobile app industry is experiencing dramatic growth creating more than half a million jobs in its five years of existence. Innovation in this space occurs rapidly and the importance of copyright protection is becoming more pronounced. The marketplace is poised to reach $20 billion in revenues, but the sharp increase in app piracy threatens the future of the mobile ecosystem. We look forward to working with Congress, the Register of Copyrights, and other stakeholders to address this serious problem confronting our industry.

Final Rule Makes Important Changes for Large Companies and Platforms

“ACT and the app developer community appreciate the FTC’s efforts to address to remove ambiguity and address the concerns of large companies  and app platforms.  These changes are welcome, but the FTC did not do enough to ensure continued opportunities for educational app startups.”

“While we appreciate the efforts of Chairman Leibowitz, we are particularly concerned with his expectation that the industry will simply find a solution to the new rules.   It is akin to jumping off a cliff with the plan to build the parachute on the way down.  While that may work for big companies, small companies lack the silk and line to build that parachute before they hit the ground. “

Where will Educational Innovation Come From?

“Today, tens of thousands of independent app developers from around the country are building the future of education.  I am worried who will be left to finish that work tomorrow.

“These innovators want to provide groundbreaking educational innovations while protecting the privacy of their users, but $9,500 in legal fees represents more than a year’s worth of income for most educational apps. Moreover, even if an app does not actually require COPPA parental consent, the complexity of these rules will require most educational app developers to spend thousands of dollars in legal fees to confirm one way or another.”

Third Party Plug-ins Are Critical to Educational App Startups

“We are very concerned about the implementation of this rule, especially as it applies to the use of third party plug-in technologies that make the app ecosystem possible.  At the press conference today, the speakers spent an extraordinary amount of time demonizing these technologies and suggesting the eventual implementation of the new rules would make it difficult for educational app startups to survive.  While large, vertically-integrated firms like Google never need to use third party plug-ins, the startup community is dependent on analytics, classroom tools, and other services provided by their partners.”

The Mobile Industry is Giving Parents New Tools, Making COPPA-style Consent Less Important

“In the mobile space, companies like Apple and Microsoft are giving parents the ability to control directly app downloads, app use, and data collection and sharing regardless of decisions made by the app developer.  These tools make the need for such drastic changes to the COPPA rules completely unnecessary. This is one area where the industry needs to work directly with the FTC to educate and empower parents and developers on best practices for protecting children’s privacy.”

For more information or to setup an interview with Morgan Reed, please contact Mark Blafkin at 202.420.7483.  ACT can also provide educational app developers who can discuss their concerns in detail.

In response to the report, Association for Competitive Technology Executive Director Morgan Reed made the following statement:

“For the past year, we have educated hundreds of app developers around the country on best practices for privacy and developed new transparency icons. The message from the FTC today is that they appreciate our work, but we still have a lot to do.”

“The rapid growth of the mobile app industry has been fueled by startups and first time developers, some of whom are still in high school. In fact 87% of apps aredeveloped by small or micro businesses that do not have legal departments or privacy experts on staff. This report reminds us how important it is for the industry to focus attention on educating developers on privacy best practices.”

“We partnered with the world’s largest group of educational app developers, Parents with Apps, to run educational seminars and even create a new set of privacy disclosure icons for kids apps. We are continuing this work in 2013 and expanding it to include to all app developers.”

“One area of progress that the FTC missed, however, is on unique device identifiers like Apple’s UDID. Apple and the other platforms are moving developers away from using device-specific identifiers that can be unified across apps and services, and are introducing alternatives to limit tracking that are app-specific for sharing with advertisers and other 3rd parties. This will make it very difficult to combine information based on these ID’s across multiple apps or the web. Additionally, the platforms have given parents very granular tools that allow them to prevent apps from accessing certain types of data (like geolocation) regardless of app settings.”

“We applaud Senators Klobuchar and Hoeven for the introduction of the Cloud Computing Act of 2012. The enterprise and consumer marketplaces are rapidly adopting cloud computing. With the explosive growth of smartphones and tablets, consumers are embracing mobile computing and the applications in the cloud that add incredible functionality to their devices.

“Companies large and small are eager to take advantage of the convenience of remotely stored data and applications. Small businesses using the cloud realize considerable cost savings for software and hardware both at start-up and over time. Businesses and retailers that experience cyclical traffic or activity spikes can achieve considerable savings by paying for additional storage only when needed. This enables small businesses to scale and compete efficiently by reducing hardware investment.

“The cloud is facilitating the explosive rise of the mobile economy, but unfortunately the law has not kept pace with technology. The uncertainty this produces threatens to stifle innovation in emerging new mobile services. Statutes written to provide security when the most sophisticated consumer electronic storage unit was an answering machine simply cannot guide industry and lawmakers in the digital age. We support the leadership of Senators Klobuchar and Hoeven to update our laws so U.S. companies can thrive and continue to lead in the global mobile marketplace.”

“We want to thank Senator Padilla and Governor Brown for their strong commitment to California’s internet economy.  The Golden State is home to incredible innovation in mobile and online commerce that has changed the way we work and communicate while creating hundreds of thousands of high-paying jobs. The enactment of SB 1161 protects the internet infrastructure that is critical for the success of California tech entrepreneurs.  It preserves a level playing field ensuring that California companies can compete fairly in the global marketplace.”

“App makers understand that children’s online privacy laws must be updated to reflect the growth of new technologies and the evolution of mobile communications,” said ACT Executive Director Morgan Reed. “Unfortunately, the Commission has failed to grasp both the scope and nature of the app marketplace in its latest regulatory proposal. While perceiving the app economy to be hundreds of times smaller than it actually is, the FTC has paradoxically proposed developers collect more information, not less, to protect children’s privacy. If that wasn’t confusing enough, the FTC believes the world would be a better place if we spent $250 million more on lawyers and $250 million less on developing educational apps and content for kids.”

When the FTC measured the impact of its proposed regulation on education app developers, it estimated only 500 apps initially would be affected with an additional 125 in each successive year. This figure is grossly inaccurate considering the Apple App Store alone has 28,800 education apps. The number is significant when measuring the immense impact this proposal will have on the app industry. Because the Commission anticipates legal and technical certification for every new app would require nearly $10,000, the total costs would easily exceed $250 million. Considering that implementation is accomplished more easily and cheaply during the development stage, app companies will likely pay substantially more to apply these changes retroactively to a software product with an existing customer base on multiple platforms.

“App developers agree that the FTC should be empowered to bring enforcement action against those who violate the online privacy of children,” continued Reed. “However, the FTC’s proposed changes come at enormous cost to app makers while demonstrating a fundamental failure to understand the industry it is seeking to regulate. We support the Commission’s goal that mobile apps should provide a safe learning environment for children. We are deep troubled, however, that the FTC believes the elimination of children’s apps is the way to achieve this. The education app marketplace is a tremendous economic success story with 87% of the most successful products made by small business innovators – many of whom are parents. Requiring these developers to pay $10,000 before writing their first line of code means most of them will no longer seek to make learning tools for children. Explaining to startups that they will need a $10,000 legal investment to get started means they will pursue other opportunities than education.”

Consider who would suffers most under this regulatory regime. The educational impact of touchscreens in early learning environments has attracted widespread acclaim.

Classrooms in:

• Auburn, Maine: iPad improves kindergarteners’ literacy scores
• Hobart, Indiana: Apps help students, teachers learn in real time
• Flagler County, Florida: Flagler Schools IT department designs classroom apps
• Grand Island, Nebraska: Tablet technology booms in the classroom
• Farmington, Minnesota: iPads for Farmington Students

And in special education settings: Sixty Minutes: Apps for Autism.

“These proposed new fees would absolutely devastate the small business app companies whose innovative learning tools are revolutionizing early education and special education,” continued Reed. “The massive costs would utterly change the face of the ecosystem, marking the end of free kids education apps and putting these valuable resources outside the reach of middle class families.

“The FTC should weigh very carefully the chorus of criticism it has received from its latest proposal. It should make every effort to protect child safety online without taking down children’s education in the process.”

“It’s amazing that Google is clinging to this explanation that a help page unedited from years ago is the only concern here. Google wrote a program to disable the privacy protections people used to prevent being tracked. The company actively collected information from people who didn’t want them to. It’s incredible that Google would suggest that overriding do-not-track protections was unintentional and involved no wrongdoing. It is clear that the biggest fines aren’t a deterrent if it only takes a few hours to pay them off and the perpetrator never even has to admit guilt. Commissioner Rosch was right to highlight these shortcomings of the settlement.

“The public grows ever fearful with each privacy violation that hits the headlines. If they feel nothing is happening to stop this behavior they will call on Congress to respond legislatively. The last thing small business entrepreneurs need right now are new laws and regulations that will stunt innovation and job growth. We need strong enforcement of existing laws and settlement agreements. The FTC can serve the entire online community well by providing this enforcement deterrence. The technology industry, and the public at large, would be better for it.”

WHO:
Morgan Reed, Executive Director, Association for Competitive Technology
Stephen Balkam, Chief Executive Officer, Family Online Safety Institute
Mary Engle, Associate Director, Advertising Practices, Federal Trade Commission
Adam Thierer, Senior Research Fellow, Mercatus Center, George Mason University

WHEN:
Thursday August 9, 2012 at 12:00 – 1:30 pm

WHERE:
2322 Rayburn House Office Building, U.S. House of Representatives

REGISTER:
To register for this event, please visit: http://coppabriefing.eventbrite.com

Mobile app developers have always appreciated voluntary programs that help us provide a better experience for our users. CTIA has wisely partnered with ESRB to produce a new initiative that can be a valuable resource to app developers and parents. Having effectively served as a guide for parents to choose appropriate video games for their children, ESRB is well-positioned to provide advisements for similar applications on mobile devices. Games on mobile devices now account for fifteen percent of industry revenues and this figure is growing. The CTIA/ESRB offering is a welcome addition to the self-regulatory efforts underway to provide greater consumer choice and transparency in the nascent mobile apps marketplace.

ACT strongly supports actions taken by the Justice Department today to punish Google for consistently violating the Controlled Substances Act to profit from advertisements of counterfeit drug sales.  It says a lot about a company’s unwillingness to act in the public interest when it takes a half-billion-dollar fine to stop it from facilitating illicit drug sales to children and seniors.

Google found itself in the middle of a multimillion dollar financial fraud investigation when a captured fugitive assisted an undercover operation revealing the search giant’s role in the “unlawful sale of drugs through Google’s AdWords program.” The Justice Department found that Google was aware of the problem for years and its involvement was not merely that of an innocent bystander — its representatives consistently provided assistance to drug counterfeiters helping to improve their ad campaigns.

Google has long pretended to be unaware of the mass piracy it facilitates and profits from through its dominant position in the online search and search advertising business.  Its pattern of encouraging piracy and counterfeiting has resulted in sizable lost revenue in the entertainment industry and in online educational products like Rosetta Stone.  Small business entrepreneurs find it particularly difficult to protect their products and combat piracy when Google allows counterfeiters to advertise stolen versions.

It’s about time that Google was taken to task for facilitating this criminal behavior.  American businesses will fare much better if the Justice Department continues to crack down on widespread piracy as it did in today’s Google settlement.