Guest Post: What new piracy legislation would mean for Silicon Prairie startups
About the Authors: Drew Larson and Adam Gregg are attorneys at the BrownWinick Law Firm. Larson works in its Startup, Corporate, and Estate Planning practice and may be reached at firstname.lastname@example.org. Adam works primarily in Government Relations and may be reached at email@example.com.
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It is an undeniable fact that technology has revolutionized the way we live and do business. In fact, a good number of you reading this right now operate a website, have online business operations, or even own a tech company. Many of these online activities could face new legal risks due to legislation currently working its way through Congress known as the Stop Online Piracy Act ("SOPA") and the Protect IP Act ("PIPA"). This legislation has the potential to significantly stifle innovation, dramatically increase costs, and create an enormous amount of legal uncertainty for online businesses.
SOPA and PIPA were proposed to solve the legitimate problem of online copyright infringement. However, the broad language and remedies provided by the legislation sweep much further than merely remedying specific cases of copyright infringement, threatening entire websites for the actions of a limited number of their users.
Basically, SOPA and PIPA reverse the structure and balance created by the Digital Millennium Copyright Act ("DMCA"), which for over a decade has helped Internet companies grow and flourish. The DMCA is one of the big reasons companies like Facebook, YouTube, and Twitter weren’t crushed in their early days by frivolous legal action. The DMCA basically provided a safe harbor from liability to website providers from the actions of their users so long as they follow certain statutory notice and take down procedures related to the particular content that allegedly infringed. Generally, this was the sole procedure required to protect the website operator from nearly all liability for the content uploaded to its website by its users.
Among its provisions, SOPA proposes the creation of unprecedented rights which permit a private party, without any involvement by a court, to effectively shut down a site by sending a notice claiming the presence of infringing content to a business's ISP or payment processor. Under this bill, the ISP or payment processor is required to shut down or prevent payments to a website within five days, regardless of whether the content was pirated or what proportion of the site’s total content was pirated. In most circumstances the ISP or payment processor will not know whether the content is infringing, and the website operator or user that uploaded the content will not have sufficient time (or money) to respond to the notice. This means nearly any internet business could be crippled by a "notice" sent by an unscrupulous competitor or anonymous troll. This new law also places a huge burden on internet service providers, search engines and other sites by making them responsible for policing the content under someone else’s control.
The bills would also have devastating effects on innovation and the ability of tech startups to raise seed capital. As the Wall Street Journal recently reported, "[v]enture capitalists will think more than twice about putting $3 million of early-stage capital into startups if they know that the vast majority of the funds will go to pay lawyers to defend the companies instead of to hire engineers to create and build product." It is hard enough to start a company and raise capital without additional hurdles and risks being created by this bill.
Additionally, by taking down an entire site or preventing payments to the website operator for any level of alleged infringement on the site, SOPA would ultimately censor the free, lawful speech of all other users of the site. Without any due process safeguards, the powers created by SOPA could easily be abused to silence a competitor or anyone else. To protect themselves from liability, it will be in the best interest for ISPs and other similar sites to 'overblock,' or sweep in non-infringing sites in order to minimize the chance of lawsuits and their risk of liability.
This has significant ramifications for software companies on the Silicon Prairie. For companies that allow user generated content or integrate social media into their products and services, the potential risk is huge. For example, there are companies on the Silicon Prairie that provide online marketplaces for people to sell goods and services. If a user on one of those sites were to upload infringing content, the entire marketplace could be brought down under the proposed legislation. Many companies on the Silicon Prairie are integrating social media into their products, allowing users to upload or link to potentially infringing content. Under the current broad definitions contained in SOPA and PIPA, these links could potentially be sufficient to subject the site’s owner to liability or risk having the site shut down.
For established companies on the coasts there may be sufficient resources to protect themselves from bad actors that are willing to file unfounded notices and the like. However, for the nascent technology companies that are just starting to gain traction here in on the Silicon Prairie, the costs of defending themselves and the damage caused by even a short term service interruption under the proposed legislation could be the end of the company. We are personally worried that the tremendous growth of the technology community and traction that we have been building across the Silicon Prairie could be halted in its tracks, erasing years of effort and growth. Our local technology companies can’t afford to bear the increased legal and business risk created by this proposed legislation.
The movie studios and recording industry are right about the need to seriously address online piracy. No American business, including those on the Silicon Prairie, should have their ideas or products stolen. However, Congress must look for an approach that effectively halts copyright infringement, doesn't compromise constitutionally protected free speech and due process, and still allows the Internet to grow and flourish. Ultimately, SOPA and PIPA do not accomplish these goals.
Editor's Note: For more on SOPA and PIPA, check out Larson's recent appearance on PrairieCast: "PrairieCast with Sam DuRegger, Tej Dhawan and Drew Larson".