Emerging Technologies Washington Update - February 2020 #2

This Week: House Energy and Commerce holds AV hearing, releases more draft legislative text; Senate Judiciary Subcommittee begins series of hearings on DCMA; President’s budget request prioritizes AI, other technology investment; coronavirus hits tech hard; AB 5 developments.

Week in Review

On Monday, the House passed H.R. 4753, the Drone Origin Security Enhancement Act. The bill prohibits the Department of Homeland Security from acquiring or operating foreign manufactured unmanned aircraft systems (UAS), or UAS with certain parts manufactured overseas. Also on Monday, Senator Josh Hawley (R-MO) proposed to make the Federal Trade Commission (FTC) part of the Department of Justice (DOJ) under one Senate-confirmed Director, rather than five commissioners, reporting to the Associate Attorney General. Hawley’s proposal focuses on “Big Tech” oversight and would give the new entity authority to enforce rules requiring interoperability, data portability, and data minimization.

House Republicans have named Rep. Jim Jordan (R-OH) the new ranking member of the House Judiciary Committee. He succeeds Rep. Doug Collins (R-GA), who is stepping aside as he pursues a bid for the Senate. Rep. Mark Meadows (R-NC) will replace Jordan as the top Republican on the House Oversight and Reform Committee.

President Trump released his FY21 budget proposal on Monday, proposing sweeping cuts to federal spending. Several House and Senate committees are holding hearings on the FY21 budget this week as Congress prepares to begin the appropriations process. Senate Budget Committee Chairman Mike Enzi (R-WY) said this week that he will not hold a hearing on the President’s budget request, calling it an “exercise” to which Congress pays little attention. See below for additional details on the budget proposal as it pertains to emerging technologies.

On Wednesday, the President signed an Executive Order on Strengthening Resilience through Responsible Use of Positioning, Navigation, and Timing Services (PNT) directing the federal government to develop guidance to mitigate the risks of disruption to critical infrastructure that rely on PNT services. The order responds to concerns about U.S. adversaries hacking global navigation satellite systems. President Trump and First Lady Melanie Trump also hosted President Lenin Moreno Garcés and First Lady Rocio González de Moreno of the Republic of Ecuador to the White House.

The Department of Justice hosted a workshop on Wednesday at Stanford University on venture capital and antitrust. In opening remarks, Assistant Attorney General Makan Delrahim called the event “part of our on-going effort at the Department of Justice to understand the competitive conditions under which online platforms operate.” He also observed that venture capitalist and antitrust enforcers “share similar values” when it comes to dynamic competition, investment, and disruption.

On Wednesday, Senators Merkley and Booker introduced the Ethical Use of Facial Recognition Act, which would temporarily prohibit the federal government from using facial recognition software. The bill would also bar state and local governments from using federal funds to implement such technology. After 18 months, a commission established by the bill would provide recommendations to congress on how the government should use and regulate facial recognition software.

On Thursday, Senator Kirsten Gillibrand (D-NY) released a bill that would overhaul the way the government regulates privacy. The bill, titled the Data Protection Act, would create a new Data Protection Agency, where consumers could file data malpractice complaints against companies. The agency would be responsible for investigating complaints and inflicting penalties if wrongdoing is found.

The House adopted a resolution to remove the deadline for ratifying the Equal Rights Amendment (ERA). Senators Ben Cardin (D-MD) and Lisa Murkowski (R-AK) have offered a Senate companion resolution. Supporters have renewed their efforts since Virginia ratified the ERA earlier this year.

Last Friday, California Attorney General Xavier Becerra released revised regulations regarding the California Consumer Privacy Act (CCPA) in response to comments received on the initial proposal. The public may comment on the modified regulations until February 25.

Looking Ahead

The House and Senate will be in recess next week coinciding with Presidents’ Day.

On February 19, the Department of Justice will hold a workshop on Section 230 of the Communications Decency Act titled “Section 230 – Nurturing Innovation or Fostering Unaccountability?.” 

The President and First Lady will travel to India on February 24 and 25. President Trump and Prime Minister Modi are expected to celebrate a new US-India trade agreement during the visit. On April 21, the President and First Lady will host King Felipe VI and Queen Letizia of Spain at the White House for a state visit.

House Energy and Commerce Holds AV Hearing, Releases More Draft Legislative Text 

On Tuesday, the House Energy and Commerce Consumer Protection and Commerce held a hearing to discuss the future of autonomous vehicles (AVs) in the United States. Lawmakers on both sides of the aisle shared the desire to work together to pass legislation that establishes safety standards and regulations for the gradual deployment of self-driving vehicles while retaining the country’s competitive edge in the global market. 

Energy and Commerce Committee Chairman Pallone (D-NJ) emphasized the importance of self-driving vehicles being safe and reliable in order to receive public acceptance. He highlighted that troubling safety incidents, regulatory black holes, and lax oversight threaten to disrupt the critical balance and the future of the technology itself. Ranking Member Rodgers (R-WA) warned that the United States is falling behind China and losing the global race in AV deployment. Safety advocates, trial lawyers, and local officials spoke in support of Congress empowering regulators at the National Highway Traffic Administration to require companies to provide more data from AVs such as collision reporting. Trial lawyers expressed their desire to exclude forced arbitration rules that could prevent riders from bringing injury claims against AV manufacturers.

Following months of bipartisan and bicameral negotiations, seven new sections of a draft AV bill were released on Wednesday. The sections cover cybersecurity, consumer education, inoperative controls, appropriations, personnel and staffing, crash data, and the exclusion of trucks.

Senate Judiciary Subcommittee Begins Series of Hearings on DCMA

The Senate Judiciary Committee Subcommittee on Intellectual Property held a hearing on Tuesday to discuss the Digital Millennium Copyright Act (DCMA). Senators and panelists discussed the original purpose of the DCMA and what reforms may be needed to bring it into the 21st Century. President Clinton signed the DCMA in 1998 and its original intent was to protect content creators from online counterfeiting. Critics have argued that the bill is outdated, impedes fair use of content on the internet, and limits innovation. Lawmakers are currently examining whether to reform the bill, scrap it, or leave it as it is written.

During the hearing, panelists noted that the bill’s reach was further than intended and that it was even impacting groups like farmers and automakers. In addition, panelists criticized the courts’ interpretation of the bill, which some think has put too much burden on copyright holders and not enough on platforms and internet providers. When asked how to improve the bill, panelists suggested red flag provisions need to be reformed and the government needs to increase antitrust enforcement in the copyright and telecommunications industries.

President’s Budget Request Prioritizes AI, Other Technology Investment

President Trump’s $4.8 trillion fiscal 2021 budget request released on Monday would cut spending at all but five of the Cabinet-level departments and major agencies in keeping with the administration’s intent to limit the federal bureaucracy. However, it includes significant funding increases for research and development in emerging technologies. While the request is largely a wish list for Congress, which will write and vote on its own budget, the proposal provides insight into the administration’s policy and spending priorities.

The President’s budget also reflects a prioritization of scientific research seen as crucial to international competition and security by requesting a significant funding boost for critical emerging areas including artificial intelligence (AI) and quantum computing. In fact, it proposes doubling the nondefense AI spending budget from about $973 million to almost $2 billion. This boost is in keeping with the administration’s American AI Initiative launched last month and actions to increase funding for quantum computing and communications through the National Quantum Initiative Act.

Overall, the Federal Communications Commission (FCC) did not request significant changes to funding or staffing. Representing a modest increase of 1.5 percent, it proposes a $134.5 million increase for spectrum auction authority from the current year. Similarly, the Department of Commerce requests an additional $25 million to the National Telecommunications and Information Administration (NTIA) to modernize spectrum management systems and accommodate for more advanced technologies. The budget proposes doubling AI funding for the National Institute of Standards and Technology (NIST) to “accelerate the development and adoption of interoperable, secure, and reliable AI technologies and resilient position, navigation and timing systems, and support a prominent U.S. role in standards development efforts for 5G.”

The Department of Defense 2021 budget request includes the largest research funding request in more than 70 years, including $7 billion in investments in four emerging technology areas it deems Advanced Capabilities Enablers (ACEs), including hypersonics, AI, 5G, and autonomous platforms.

Reflecting its seriousness about pending investigations into tech giants, the Department of Justice (DOJ) requests a steep 71 percent increase in congressional spending on the Department’s antitrust division and an additional 87 staffers to address the increase in workload.

Coronavirus Hits Tech Hard

Technology is central to discussions about the spread and impact of the coronavirus (COVID-19) epidemic.  For good or evil, not only have emerging technologies like AI played an increasingly prominent role in monitoring and tracking the illness, but China has even deployed technologies like drones to enforce the wearing of face masks to contain it. Meanwhile, the preponderance of face masks has presented new challenges for government surveillance and the spread of the virus has even been said to have led to delays in China’s installation of 5G base stations. Furthermore, while the Internet has been the source of helpful information, statistics and instructions, it has also been used to spread misinformation, rumors and conspiracies.

Coronavirus repercussions highlight China’s outsized role in the technology manufacturing sector, as the China trade wars did before the virus tightened its grip.  Recent factory shutdowns expose supply chain vulnerabilities as technology companies that rely upon products manufactured or sold in China fear production shortages, launch delays and suspensions in shipping. The outbreak caused major tech players to withdraw from Europe’s biggest telecommunications conference, the Mobile World Congress, ultimately leading to its cancellation altogether.  The conference is typically a launching ground for new technology, and this year 5G was expected to be center stage.

Few if any industries are proving immune to the effects of the virus. With flights and cruises grounded, and hotel reservations canceled, the global tourism, travel, logistics, retail and aviation industries are all grappling with the financial impact of COVID-19. The full impact remains to be seen with untold billions of dollars in the balance.  

AB 5 Litigation Developments

On February 10, a U.S. District Court Judge denied a motion for preliminary injunction filed by Uber, Postmates, and two individuals. The plaintiffs sued California challenging AB 5 as a violation of several provisions in the United States and California Constitutions. The judge determined that plaintiffs did not have a likelihood of success on the merits of any of their claims and held that their claim of irreparable injury was belied by the assertion by Uber and Postmates that their drivers are independent contractors even under the Dynamex standard codified in AB 5.

Also on February 10, in the lawsuit filed by the California Trucking Association, the court took two additional actions. First, the court denied the International Brotherhood of Teamsters motion for a stay of the injunction pending appeal to the United States Court of Appeals for the 9th Circuit. Second, the court dismissed two of the three legal challenges to AB 5. The court held that the dormant Commerce Clause is not available in light of the enactment of the Federal Aviation Administration Authorization Act of 1994, which was the basis for the court’s issuance of the preliminary injunction. The court also held that the Federal Motor Carrier Safety Administration’s opinion preempting California’s meal and rest break rules was not enforceable in court because that statute does not create a private right of action. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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