Blacklisting Entrepreneurs: PROTECT IP Could Harm Web Startups

Government has discovered the wonders of entrepreneurship. The good part is that we can hardly have a conversation about job creation or economic growth in this country without repeated governmental paeans to entrepreneurs and their importance; the bad part is that government often forgets how fragile the entire entrepreneurial ecosystem can be, and how easily it is undermined.

Consider the PROTECT IP legislation wending its way through Congress. Short for "Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act of 2011," PROTECT IP was introduced in May by Patrick Leahy of Vermont. It purports to protect intellectual property owners -- read: the entertainment industry -- from websites outside the U.S. that are illegally hosting their content.

There are many problems with PROTECT IP, and they start with its simplicity. If a site contains a page with illegal content -- say, a link to a pirated movie -- the copyright owner can petition a U.S. court to make that site invisible to people inside the U.S. The way they do that is by forcing domain name servers (DNS), the directories used by U.S. residents, to no longer list the site, thus making it invisible to search engines and no longer reachable without typing in an actual numerical Internet address. Further, the site would no longer appear in existing search results.

This has been the goal of IP owners for as long as there has been an Internet. Instant blacklisting of infringing sites, disappearing them off the face of the web world.

The problems, however, are myriad. For starters, there is no due process: A site could be blacklisted the day a U.S. judge receives the complaint. Bang, you no longer exist to American web users. There is, in other words, no presumption of innocence, and no notification requirement.

It is also over-broad. If your site is "enabling or facilitating" infringing actions, you fall under PROTECT IP's sway. You don't actually have to be infringing, just facilitating it in some way -- perhaps a message board post, perhaps something else -- and copyright owners have the right to ask you be ripped from DNS directories in the U.S. An ideologically diverse cross-section of 100 law professors in a recent letter agree that this is an over-broad attack on free speech.

Law academics and free speech aside, PROTECT IP is certain to cause problems for entrepreneurs. Many new technologies and new services challenge and change the boundaries of intellectual property. Look at the recent introduction of the highly popular service, a sort of private DJ-ing offering over the web. As quickly as it was launched and began growing, it had to be closed off to non-U.S. users due to copyright complications, thus limiting the growth of a compelling, popular and non-infringing service. The problem of services like, Spotify and others will only get worse under the ham-handed protections of PROTECT IP, with commensurate consequences for entrepreneurs around the world. This legislation is an entrepreneur-harming error.

The situation is the same in other areas of changing law. In patents, we continue to try to make some change -- the move from first-to-invent to first-to-file is overdue in harmonizing the U.S. with the rest of the world -- while ignoring most of the real anti-entrepreneurial problems with the current system.

What problems? The rise and increasingly stifling consequences of patent trolls, these litigious shell companies, often located in favorable jurisdictions like East Texas, that attack deeper-pocketed companies with lawsuits over nonsensical patents that they aren't using, and that shouldn't have been granted in the first place.

Many venture capitalists will tell you that a significant fraction of their portfolio companies are currently tangling with these patent trolls, running up their legal costs, while doing nothing to innovate, hire and otherwise contribute meaningfully to the U.S. economy. Cracking down on patent trolls by making software patents more difficult to obtain, or even by making such patents shorter, would do wonders for entrepreneurs.

This list is growing. To intellectual property, and patents, we could add the current mess about sales taxes in the U.S., an issue that has caused online retailer Amazon to end its affiliate relationships in California, to the detriment of many thousands of in-state entrepreneurs.

These are manifestations of the government's mixed messages about entrepreneurs, with plenty of high-minded rhetoric, but then lots of grubby and dangerous policy. It is long past time that government words and actions meshed when it comes to entrepreneurs.