Take Control of Your (Legal) Destiny

This is an opinion post about the need for tech businesses of all kinds to do their part in ensuring that the legal system regulates them fairly, but doesn’t ruin their business.

The genesis of this post comes from this Telegraph article about comments made by Google Executive Chairman Eric Schmidt, which I encourage everyone to read. The article was ostensibly about Google’s views regarding facial recognition databases (which it is against), but it also said this:

“Mr Schmidt, however, warned regulators and legislators against trying to prevent worrying services in such a way that may stifle innovation. “Hopefully the French or any other country won’t pass laws that are so foolish they force Google to not be able to operate in those countries,” he said referring to a French law requiring internet companies to retain unencrypted passwords for a year.

Well-meaning people in government write something which is pretty broad and you have to be careful when you do this kind of regulation,” Mr Scmidt said in answer to a related question.  You might affect something and have an unintended consequence.  So that is what we are always concerned about”.

It sometimes seems that tech businesses don’t spend much time on thinking about what the legal/tax/regulatory system should be like as part of their business strategy. Instead, this important issue is relegated to the same status as the day to day business legal ‘compliance’ – which can have unfortunate consequences.

As a result, well-meaning governments worldwide over the last decade or so have done a number of things which they think are needed to protect people, but which also stifle innovation or just plain make life hard for tech businesses. Here’s some examples:

Yahoo and the Nazi Memorabilia case: way back in 2000, a French organisation sued Yahoo! for alleged breach of a law against the display or sale of Nazi memorabilia, some items of which was at the time on sale on a Yahoo! auction site. Yahoo! argued (quite sensibly) that it was based in the US and the service was not in any way targeted specifically at France or intended to breach that law. It was just an auction site, over whose contents Yahoo! exerted no control. Yahoo! was still found liable and ordered to take steps to ensure this could never happen again or face a 100,000 Franc fine per day (which, as far as I know, is still running).

Three Strikes: a number of different countries have enacted or are enacting Three Strike type laws (e.g. the Digital Economy Act in the UK). You can debate whether or not they (or any other anti-piracy laws) are a good idea, but it’s clear they impose significant burdens on tech business – principally ISPs – for the benefit of the creative industries. Generally, the ISPs weren’t particularly happy about it (in the UK, two of them even sued the government over it) but they haven’t got much of a choice really.

Street View, Facebook privacy policies, Google Buzz and Sony/PSN: in each of these more recent examples, tech businesses have greatly underestimated the depth of consumer feeling over data protection and privacy issues. It’s just a matter of time before we see governments taking action over this.

Virtual goods: so far, legal developments in virtual goods have been in the East (e.g. here’s what the Vietnamese government said last year) – but with the incredibly rapid rise in the value and importance of virtual goods worldwide, it’s just a matter of time before regulators step in the West as well. As I’ve written about before, I suspect there’s going to be a battle. But I don’t see virtual goods providers doing anything so far to fend off heavy-handed government regulation.

I could go on, but hopefully you get my point – these are tech innovations brought low either by existing laws or because they just didn’t understand the government/legal perspective. All of it was avoidable.

What can you do about it?

There isn’t any magic cure of course – but, at whatever stage your business might be, you still have a stake in shaping how it will be regulated on a range of different fronts: how it should be taxed/incentivised by government, how IP laws should be made fit for their modern usage, how to deal with trade and competition issues – the list goes on.

Here’s some thoughts on what you can do:

Talk with your lawyer – not just about the day to day legal issues that need to be dealt with, but what’s coming up on the horizon and how it could affect you.

Industry events – discuss these issues when you meet your colleagues. Example: if you’re a games business, it’s good to discuss recent business and tech developments, but what about changes to the intellectual property laws that your whole business depends on?

Politics –  get your trade association involved, go to governmental events, speak with your local MP, get lobbyists involved if need be – do what you can to influence the debate.

I think now is the best time we’ve had in years for authorities to actually listen to the needs of tech businesses – so let’s make use of it.

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