HR 5418 – U.S. District Court Patent Pilot Program

January 22nd, 2009 | ACT

Tech Environmental Impact Statement

HR 5418 – U.S. District Court Patent Pilot Program

Rep. Darrell Issa
Introduced, January 4, 2007

Legislative Background

Representative Darrell Issa’s legislation aims to increase judicial expertise on patent cases. Most federal judges hear a wide variety of cases and therefore lack the proficiency to handle increasingly technical patent claims. This bill would improve judicial expertise with patents, by creating a pilot program to educate participating judges on patent law and the technical matters underlying patent claims. The Director of the Administration Office of the U.S. Courts would be required to designate at least five district courts from at least three different judicial circuits for this program. Judges would designate themselves to be included among a pool of possible judges to hear patent cases. The program would last ten years. This legislation helps address patent quality at the district court level. Congress similarly targeted patent quality in the judiciary when in 1982 it created a central appellate court for patent cases, the U.S. Court of Appeals for the Federal Circuit (CAFC).

Tech Environmental Effects

This bill would benefit the tech environment in several ways: • District courts that handle the largest numbers of patent cases would be targeted for this pilot program • Participating judges would more frequently preside over patent cases and therefore enhance their expertise in this area • Greater resources will be available for the educational and professional development of judges and to compensate skilled law clerks with expertise in engineering and hard sciences.

   Tech Environmental Impact Studies

Assessing legislative, regulatory, and judicial activity to determine positive or negative effect on the Tech Environment.

The Tech Environment

The system of legislative, regulatory, and judicial conditions under which technology companies operate, innovate, and compete.

About ACT

The Association for Competitive Technology (ACT) is an international education and advocacy group for the technology industry. Focusing on the interests of small and mid-size entrepreneurial technology companies, ACT advocates for a “Healthy Tech Environment” that promotes innovation, competition and investment.

TEQI Scoring

The table below applies the TEQI scoring matrix to this legislation. In each of 10 TEQI categories, the bill is analyzed for potential positive or negative effect on the Tech Environment.

TEQI Category Score  Analysis 
Reduces cost of doing business +1.0   Litigation costs often represent a significant burden on business, especially for smaller firms. Judges with patent expertise would run their courts more efficiently and productively, keeping lawyers in line and reducing legal fees. 
Expands Market Opportunities    
Particularly favorable to small tech firms +1.0   Patents help protect the intellectual assets of all innovative firms, but patent litigation is cost that is a greater relative burden on the bottom-line of smaller firms. Better judicial enforcement of patent protections help small firms reap the benefits of their work.  
Takes government out of a market/process    
Enables firms to participate in regulatory process    
Reduces uncertainty/encourages investment
(VC, Wall St)		    
Stimulates Innovation    
Encourages consumers to spend    
Allows for ROI – encourages business spending +1   Encourages business spending and allows for increased returns on investment. Patents provide incentives for new inventions and help inventors earn a return on their work. Judicial expertise in patent law will improve the value of a patent through rigorous enforcement in infringement actions and proper disposition of bad patents. Increased judicial certainty allows innovators to keep on innovating.  
Workforce growth/stimulates employment    

Total

 

+3.0

 

  

Conclusion

HR 5418 is a targeted pilot program that improves the patent litigation process at the district court level. Its aim is simple – increase the expertise of judges hearing patent cases. Its effect could be substantial, if not immediate. Better informed judges can weed out frivolous claims more quickly while focusing on cases with legitimate claims. As a result, anticipated and actual costs of enforcing and defending lawsuits decrease, reducing the burden on all parties but particularly the budgets of small firms. Less money for lawyers means more money for innovating, so firms can increase their research budgets and returns on investment.

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French DADVSI Copyright Law

April 8th, 2008 | ACT

Tech Environmental Impact Statement


French DADVSI Copyright Law

French Minister of Culture Renaud Donnedieu de Vabres
Signed into law by French President Jacques Chirac on August 3, 2006








Legislative Background


France recently passed legislation similar to the U.S. Digital Millennium Copyright Act (DMCA).  The Loi relative au droit d’auteur et aux droits voisins dans la société de l’information (Law on Authors’ Rights and Related Rights in the Information Society), commonly referred to as the DADVSI, was supposed to be France’s implementation of the WTO’s TRIPS agreement on intellectual property. However, due to the numerous amendments added to the bill during the legislative process, the DADVSI has become in-part an anti-copyright law whose provisions go far beyond anything mandated by the TRIPS agreement. 


Article 14 of the DADVSI, which is also often called the iPod law, is its most controversial provision.  It mandates interoperability of digital rights management (DRM) systems, requiring sellers of online digital content and manufacturers of digital entertainment devices to provide information about proprietary DRM technologies to competitors if this information is needed to guarantee interoperability.  


Article 14 does have a “safe harbor.” It allows companies to deny access to this information to others if the use of DRM technology has been explicitly agreed to by the copyright holder.  This means that companies wishing to protect their intellectual property can use DRM technology, but only by engaging in time-consuming, cost-intensive, and not necessarily successful negotiations with artists and record labels.       


The law creates a new administrative agency called the DRM Regulation Authority. It has the power to demand proprietary software information from companies. Companies forced to disclose information about proprietary DRM technologies to competitors will receive financial compensation.  However, the scope of compensation will depend on a political body and will not be the result of private negotiations between companies.  


Tech Environmental Effects


Positive Tech Environmental Effects of Article 14:



  • The law opens up opportunities for those companies that base  their business models on connecting to the software of competitors.

Negative Tech Environmental Effects of Article 14:


Forced interoperability is detrimental to the tech environment in several ways:



  • By undermining free market mechanisms and diminishing incentives for innovation, the law creates inefficiencies and harms the economy 
  • Rather than rewarding innovators, the law punishes them for their creativity by forcing them to disclose trade secrets and other proprietary information to competitors
  • Article 14 gives excessive power to the new Regulation Authority to be founded under the DADVSI, leaving it to the bureaucrats rather than to private negotiations between private companies to determine the price at which information about proprietary DRM technologies is made available to competitors
  • Mandated interoperability destroys the ability of firms to engage in creative pricing strategies and differentiation, thereby diminishing the incentives for content creation and distribution
  • Entrusting the management of the compulsory licensing process to a government agency means that transactions between private firms become susceptible to political pressure

  

Tech Environmental Impact Studies


Assessing legislative, regulatory, and judicial activity to determine positive or negative effect on the Tech Environment.


The Tech Environment


The system of legislative, regulatory, and judicial conditions under which technology companies operate, innovate, and compete.


About ACT


The Association for Competitive Technology (ACT) is an international education and advocacy group for the technology industry. Focusing on the interests of small and mid-size entrepreneurial technology companies, ACT advocates for a “Healthy Tech Environment” that promotes innovation, competition and investment.


TEQI Scoring


The table below applies the TEQI scoring matrix to this legislation. In each of 10 TEQI categories, the bill is analyzed for potential positive or negative effect on the Tech Environment.



















































TEQI Category Score  Analysis 
Reduces cost of doing business EVEN   Article 14 reduces the cost of doing business for follow-on companies trying to connect to the software of established competitors. On the negative side, it increases the cost of doing business for companies who must negotiate new licenses with every artist featured in their online store.  
Expands Market Opportunities EVEN  Article 14 expands market opportunities for imitative companies. However, compulsory interoperability decreases market opportunities for tech firms who use DRM to differentiate their products. 
Particularly favorable to small tech firms EVEN   Small tech firms that want to use DRM technologies in their products will be at a competitive disadvantage if innovations can be capitalized on by competitors. Article 14 may, on the other hand, be beneficial for those small firms wanting to connect to DRM systems so that they can capitalize off of other companies’ innovations.  
Takes government out of a market/process -1.0   The law establishes a new government agency where none previously existed. This Regulatory Authority has the power both to demand interoperability information from companies and determine the price at which it is sold to competitors. As a result, innovators will not only lose the right to refuse to license proprietary technology, they will also lose the right to negotiate the terms under which they do so.  
Enables firms to participate in regulatory process -1.0   The law does not envision the automatic participation of an industry council in the Regulatory Authority’s decision-making process. The lack of a fixed consultation procedure between the tech industry and the Regulatory Authority is especially disadvantageous for small firms, who tend to be unaware of informal opportunities for participation and less well-equipped than their larger competitors.  
Reduces uncertainty/encourages investment
(VC, Wall St)		 -1.0   Mandated interoperability takes control away from the innovator and therefore adds more uncertainty to a firm’s ability to earn a positive return on investment. Investors will be wary to provide funding for products when competitors can force interoperability and thereby reduce potential profits.  
Stimulates Innovation -1.0   Article 14 rewards imitators rather than innovators. It makes it easier for companies to capitalize on the innovations of others, thereby diminishing incentives for investing substantial amounts of time and money into the creation of innovative products. The law is more likely, therefore, to stymie innovation in the digital content market than to stimulate it.  
Encourages consumers to spend +1.0   The interoperability requirement may lead to the proliferation of new online digital content stores and new digital entertainment devices. More choice and lower prices may increase consumer spending.  
Allows for ROI – encourages business spending +1.0   Business spending and R&D efforts are expected to provide positive returns on investment. Article 14 diminishes such returns and thus takes away the incentives for spending. Forced interoperability reduces opportunities for product differentiation and creative ways to recapture R&D costs  
Workforce growth/stimulates employment +1.0   The law opens up business opportunities for firms trying to connect to the software of established competitors, so it might lead to workforce growth and stimulate employment in the short run. However, if established companies decide to leave the French market because they feel that their business models are being undermined by the forced disclosure of proprietary information, then the loss of jobs associated with their withdrawal could offset any gains stemming from the creation of new firms.  

Total

 

-1.0

 		  

Conclusion


Article 14 will have an overall negative effect on the Tech Environment.  By inserting a government agency into market processes, it threatens the ability of the market to rapidly innovate  Given the fast pace at which the tech industry moves, governmental regulations simply cannot be crafted and amended quickly enough to keep up with developments in the industry.  Moreover, the French are targeting what is but a niche market of a much larger market, with online music sales accounting for a mere 6% of music sales overall in 2005.  


Furthermore, entrusting the pricing of compulsory DRM licenses to a government agency carries with it the danger of the agency’s being hijacked by political interests.  Given that companies can challenge decisions of the Regulatory Authority in the Paris Appeals Court, the future might see the propagation of law suits rather than the proliferation of innovative products.


Originally, the DADVSI served a sensible purpose– to update French intellectual property law to provide better legal protection for DRM technologies.  However, DADVSI’s Article 14 makes it harder for companies to protect their intellectual property and deploy DRM-based business models that allow for creative pricing strategies and differentiation. 


Overall, the forced interoperability provision is a solution in search of a problem and is likely to have greater negative effects than it will have benefits for the tech environment.

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S. 156 – The Permanent Internet Tax Freedom Act

January 18th, 2007 | ACT

Tech Environmental Impact Statement

S. 156 – The Permanent Internet Tax Freedom Act

Sponsors: Senators Wyden, McCain, and Sununu
Status: Introduced Jan. 4, 2007

Legislative Background

S. 156 makes permanent the existing temporary moratorium on Internet access taxes. Current law prevents states and cities from taxing consumers for the communications services they rely on for Internet access, but this moratorium will expire on November 1. By enacting a permanent ban, Congress demonstrates that it is serious about increasing broadband deployment and narrowing the digital divide for all Americans.  

The Internet Tax Freedom Act first became law in 1998. Recognizing the benefits of allowing internet access—especially broadband—to be free from state and local taxes, Congress renewed the law twice more, once in 2001 and again in 2003. 

Tech Environmental Effects

 

 This bill would benefit the tech environment in several ways: 

  • Taxing Internet access widens the digital divide and limits the economic, educational and healthcare opportunities available to lower-income Americans. Only 11 percent of households with incomes below $30,000 have broadband service, compared to 61 percent of households with incomes above $100,000.[1]  Economists have found that high prices prevent consumers from upgrading to broadband.[2]

    •  

  • Broadband access equals opportunity, but taxing access raises costs for telework, distance learning, interactive medicine, and new online business models.
  • Broadband access increases opportunities for telework. 59% of employees would prefer work from home at least part-time.[3]  By 2008, 41 million employees globally may spend at least one day a week teleworking.[4]

    •  

  • Internet access taxes will slow broadband deployment, particularly in rural and low-density areas. Fewer consumers will buy a higher-priced taxed product. A smaller pool of potential customers means providers can’t justify investment in new broadband infrastructure build-out.

             

            		   Tech Environmental Impact Studies 

            Assessing legislative, regulatory, and judicial activity to determine positive or negative effect on the Tech Environment. 

            The Tech Environment 

            The system of legislative, regulatory, and judicial conditions under which technology companies operate, innovate, and compete. 

            About ACT 

            The Association for Competitive Technology (ACT) is an international education and advocacy group for the technology industry. Focusing on the interests of small and mid-size entrepreneurial technology companies, ACT advocates for a “Healthy Tech Environment” that promotes innovation, competition and investment. 

            TEQI Scoring

            The table below applies the TEQI scoring matrix to this legislation. In each of 10 TEQI categories, the bill is analyzed for potential positive or negative effect on the Tech Environment.

            TEQI Category Score  Analysis 
            Reduces cost of doing business +1.0   If the access tax moratorium expires, Internet connection costs could increase by $85 or more per year.[5] 
            Expands Market Opportunities +1.0  Increased opportunities for telework, telemedicine, distance learning, and new business models. A July 2006 Hudson Highland Group Survey reveals that 59% of employees would prefer to work from home at least part-time. A Deloitte study published in 2006 finds that by 2008, 41 million employees globally may spend at least one day a week teleworking.  
            Particularly favorable to small tech firms      
            Takes government out of a market/process      
            Enables firms to participate in regulatory process      
            Reduces uncertainty/encourages investment
            (VC, Wall St)            		      
            Stimulates Innovation +1.0   The more people that access the Internet, the more valuable it becomes to entrepreneurs and other innovators.  
            Encourages consumers to spend +1.0   73% of Americans use the Internet, but only 42% have broadband at home.[6] Lower prices will increase consumer demand for more and faster Internet access.  
            Allows for ROI – encourages business spending +1.0   Internet providers will spend to satisfy consumer demand for higher connectivity speeds and deploy new or upgraded infrastructure.  
            Workforce growth/stimulates employment +1.0   As providers deploy new networks, telework opportunities increase, especially for workers that live in rural areas. Employers will have new hiring and working opportunities available to them.  

            Total

             

            +6.0

             

            		  

            Conclusion

            S. 156 seeks to prevent the excessive taxation of a vital service—Internet access.  The effect of not renewing would have substantial downstream effects for Internet infrastructure around the country, but especially in rural and high-cost / low-density areas. Taxes keep prices high and decrease consumer demand, which lowers the expected returns of Internet infrastructure providers from building new and upgraded networks.     

            Prohibiting Internet access taxation is consistent with existing federal policies that have pursued a less-burdensome regulatory environment for the Internet and other new communication services. A tax on Internet access is a tax on our ability to communicate, educate, and inform. A permanent tax moratorium promotes continued innovation on the ‘Net. 

               

            1 Michael Clements and Amy Abramowitz, The Deployment and Adoption of Broadband Service: A Household Level Analysis, 2006. 

             2 Robert W. Crandall and Charles L. Jackson, The $500 Billion Opportunity: The Potential Economic Benefit of Widespread Diffusion of Broadband Internet Access, July 2001.  

             3 Hudson Highland Group, July 2006. 

            4 Deloitte & Touche LLP, Eye to the Future – How Technology, Media and Telecommunications Advances Could Change the Way We Live in 2010, 2006. 

            5 Assuming that Internet access is taxed similarly to wireless telecommunications, 17%, or $7, of a consumer’s broadband Internet access bill will go toward taxes each month. 

            6 Pew Internet and American Life Project, May 2006. 

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            HR 3997 Financial Data Protection Act

            January 17th, 2007 | ACT

            Tech Environmental Impact Statement

            HR 3997 Financial Data Protection Act

            Rep. LaTourette (R-OH)
            Markup and Amended, March 15, 2006

            Legislative Background

            Representative Steven LaTourette’s legislation creates a national standard for data security requirements and consumer notification. Currently there exists a patchwork of state regulations governing businesses that collect financial account or identity information about consumers. The lack of uniform law increases compliance costs for businesses engaged in interstate commerce. This bill would preempt state regulation and create national standards for data protection, breach notification, and fraud mitigation. 

            HR 3997 amends the Fair Credit Reporting Act (FCRA) to create “data security safeguards.” It requires all businesses to maintain reasonable policies for protecting sensitive financial information of consumers and mandates an immediate investigation upon a data security breach. If a data security breach is reasonably likely to cause substantial harm or inconvenience to a consumer, companies must inform consumers that there is a likely risk of either a) identity theft, or b) fraudulent transactions being made on the consumer’s account. 

            This bill includes a provision that would allow a delay in consumer notification if such notification would impede the efforts of law enforcement. It also provides that companies offer a free six month credit-file monitoring service for a breach involving sensitive financial identity information. 

            Tech Environmental Effects

            This bill would BENEFIT the tech environment in several ways: 

            • It creates a national standard for all U.S. businesses to replace a patchwork of different state laws
            • Risk-based notification guidelines reduces compliance costs and prevents consumer over-notification in no or low risk situations
            • Consumers are likely to increase online purchasing activity because they feel more secure about providing sensitive financial information

            It could also have a NEGATIVE effect on the tech environment: 

            • The bill broadly defines a “financial institution” in a way that could include anyone that accepts credit card information, increasing the compliance costs of small tech firms

            HR 3997 will have an overall positive effect on the Tech Environment. By creating a national standard for data collection and breach notification, it expands market opportunities for business, especially those with significant online activity. Although it expands the scope of government regulation of the tech sector and applies to business transactions not currently subject to regulation, it does so in ways that minimize legal costs for businesses with nationwide customers. A patchwork of state regulation makes it difficult for companies to comply, increasing their legal exposure for violations in one state even while they may be following the rules of another state. Internet-based companies are particularly disadvantaged, especially small retailers who lack the resources to operate under numerous sets of rules.  

            		   Tech Environmental Impact Studies 

            Assessing legislative, regulatory, and judicial activity to determine positive or negative effect on the Tech Environment. 

            The Tech Environment 

            The system of legislative, regulatory, and judicial conditions under which technology companies operate, innovate, and compete. 

            About ACT 

            The Association for Competitive Technology (ACT) is an international education and advocacy group for the technology industry. Focusing on the interests of small and mid-size entrepreneurial technology companies, ACT advocates for a “Healthy Tech Environment” that promotes innovation, competition and investment. 

            TEQI Scoring

            The table below applies the TEQI scoring matrix to this legislation. In each of 10 TEQI categories, the bill is analyzed for potential positive or negative effect on the Tech Environment.

            TEQI Category Score  Analysis 
            Reduces cost of doing business EVEN   A uniform data security notification law allows businesses, especially small Internet-based companies, to spend resources to comply with only one law, not a multitude of different state laws. However, this law creates new costs for companies not already covered by state data protection laws and potentially applies to any business that accepts a credit card for payment. 
            Expands Market Opportunities +1  A patchwork of multiple state rules is a barrier to entry for many online companies. A single, national law prevents businesses from having to think twice before serving customers from different states. 
            Particularly favorable to small tech firms +1   Small firms, in comparison to larger companies, lack the personnel and money to comply with numerous state laws.  
            Takes government out of a market/process -1   This is a new federal law where none previously existed. Although it replaces the existing law of some states, it would create new regulatory burdens for companies in many jurisdictions. Additionally, market incentives for consumer data protection are adequate in many situations.  
            Enables firms to participate in regulatory process      
            Reduces uncertainty/encourages investment
            (VC, Wall St)            		      
            Stimulates Innovation      
            Encourages consumers to spend +1   The buying and selling of goods, particularly online, requires a degree of trust regarding the safekeeping of sensitive information. This bill provides consumers with the security that they have certain legal rights that will assist in remedying the negative effects of a breach that compromises their sensitive personal information.  
            Allows for ROI – encourages business spending      
            Workforce growth/stimulates employment      

            Total

             

             

             

            		  

            Conclusion

            HR 3997 modifies the FCRA to address the growing problems of identity theft and financial fraud. According to the Federal Trade Commission, identity theft costs consumers and businesses more than $55 billion each year. Businesses bear almost $50 billion of the total cost and therefore have significant incentive to protect their data systems. The marketplace punishes businesses that are subject to data breaches in ways that include losing customers, loss of reputation and liability for lawsuits. 

            However, many states have begun regulating the way that businesses collect and store consumer information. Yet, the Tech Environment for information is a national market. State rules often vary based on the essential elements of what defines a breach and what kind of breach triggers notification. HR 3997 applies sensible rules in this regard. 

            HR 3997 requires notification only when a data security breach is reasonably likely to cause substantial harm or inconvenience to a consumer. A trigger based on risk of harm reduces false positive notifications to consumers in ways that would desensitize a consumer from acting on a breach with probable negative effects. The bill allows flexibility in the means of notification, allowing businesses to tailor the way it contacts its customers by phone or email in addition to a postal mailing. 

            A healthy Tech Environment requires uniform rules for breach notification and remedies. HR 3997 creates a national standard for data security that promotes reasonable data protection and breach notification rules. 

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            The 108th Congress – Improving the Environment for Tech Entrepreneurs

            February 1st, 2005 | ACT

            The environment for tech entrepreneurs significantly improved during the 108th Congress according to the Tech Environmental Quality Index (TEQI) released by the Association for Competitive Technology (ACT) today. Government actions that lead to improved incentives to innovate, expanded market opportunities and consumer spending growth, pushed the TEQI up 10.76 points to a score 100.76 during the 108th Congress. 

            Click here to read the summary report.

            Click here to see the full data.

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            TEQI Summary Q3 2004

            October 8th, 2004 | ACT

            With the November elections looming, Congress spent much of the third quarter hurrying to finish up their work and head home to campaign. Yet, despite the rush, Congress spent a lot of time on technology policy and other issues critical to the Tech Environment. In a last minute flurry of activity on the Hill, Congress offered new techrelated bills and spent substantial time on issues such as spyware, Voice Over Internet Protocol (VOIP), intellectual property, and trade.

            According to the Association for Competitive Technology’s Tech Environmental Quality Index (TEQI), the efforts of Congress to improve the Tech Environment outweighed some missteps and boosted the TEQI by more than 3 points for the second straight quarter.

            Click here to read the full report.

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            Quick Recovery After Disasterous Q1

            July 28th, 2004 | ACT

            The second three months of 2004 held promising signs for a healthier tech environment according to the Association for Competitive Technology (ACT). ACT issued its second quarter 2004 Tech Environmental Quality Index (TEQI), demonstrating a rebound of more than 3 points from its first quarter index. Tech and business friendly e-commerce bills, legislation aimed to give consumers and businesses relief from resource-stealing spyware, and legislation that would stimulate free trade all contributed to this recovery.

            TEQI Summary Report

            TEQI Data

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            TEQI Q1 2004 Report

            April 21st, 2004 | ACT

            In the first quarter of 2004, the Tech Environment Quality Index (TEQI) plummeted nearly 4 points, creating a harsher environment for innovation, competition and growth in the information technology sector according to Association for Competitive Technology (ACT). The TEQI, which is released quarterly by ACT, identified the primary causes of this drop as the continued tug-of-war between state and federal authorities on tech issues and the haphazard enforcement of competition laws.


            Click here to read the full report.


            Click here to read the analysis.

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            TEQI Q1 2003 Report

            February 12th, 2004 | ACT

            The 108th Congress made some important strides to improve the Tech Environment in 2003 according to the Association for Competitive Technology’s (ACT) Tech Environmental Quality Index. However, the growing tug-of-war between the federal government and states over tech policy issues threatens to reverse those gains.

            TEQI 2003 Summary

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