Congress slow on tech issues in '07

by Grant Gross

December 18, 2007 —

No one is calling 2007 a banner year for the technology industry in the U.S.
Congress.

Congress passed a handful of bills on many tech vendor and trade group wish
lists, but in several cases, they represented partial victories.

"This Congress so far has a record of neglect on technology issues,"
said Representative Bob Goodlatte, a Virginia Republican, whose party lost the
majority in Congress in the November 2006 elections.

Goodlatte isn't an impartial observer, but members of the tech community also
acknowledge that Congress has been slow to act on tech issues this year. Still,
not everyone was expecting great things from a Congress that had to reorganize
after the change in party control.

It's too early to judge this session of Congress, which continues through 2008,
said Kevin Richards, federal government relations manager at cybersecurity vendor
Symantec. "I think we have a lot of interest [from lawmakers], and this
has the potential to be a tech-friendly Congress," Richards said.

Members of the tech community point to some success in Congress this year:

-- Congress passed the America Creating Opportunities to Meaningfully Promote
Excellence in Technology, Education, and Science Act, which became law in August.
The America
Competes Act allocated US$43.3 billion for research and math- and science-education
programs.

-- Congress approved a free-trade agreement with Peru in December, the only
such agreement approved this year. Some labor and environmental groups opposed
some free-trade agreements, but the pacts are "imperative" for tech
vendors, said Sage Chandler, senior director of international trade for the
Consumer Electronics Association.

The CEA, which launched a campaign against "protectionism" in October,
said every trade agreement is important to its members. Upcoming free-trade
agreements coming before Congress include Columbia, Panama and South Korea.
A handful of CEA members are already doing business in Peru or would like to
and between 2000 and 2006 U.S. consumer-electronics exports to Peru increased
by 12 percent, Chandler said.

"Without the ability to sell into foreign markets and get components from
foreign markets, our companies aren't going to be able to employ Americans,"
she said.

Some successes the tech community can point to, however, were partial victories:

-- Congress, in late October, passed a seven-year extension to a moratorium
on access taxes and other taxes unique to the Internet. But many tech groups
and lawmakers had pushed for a permanent tax ban, arguing that it was needed
to foster Internet and broadband growth.

Opponents of a permanent ban successfully argued that it would remove a check
on Internet service providers attempting to include other services, such as
VoIP (voice over Internet Protocol), in the tax ban. In addition, some lawmakers
argued that a permanent ban could cripple the ability to pay for services.

But some lawmakers argued Congress should've gone farther. The House of Representatives,
which in the past has approved permanent extensions, this year passed a four-year
extension and "had to have the Senate show them the way to a better seven-year
extension," Goodlatte said. The "ultimate goal" should be a permanent
tax moratorium, he said.

-- The Senate in December passed a one-year extension to a research and development
tax credit for U.S. companies. The Temporary
Tax Relief Act, which the House approved Nov. 9, extends the tax credit,
which covers 20 percent of qualified R&D spending. But many tech groups
have called on Congress to permanently extend the R&D tax credit, which
has been extended a dozen times since 1981.

Supporters of an expanded tax credit argue that the U.S. has fallen behind
other nations in its R&D support. Once the most generous with R&D tax
breaks, the U.S. by 2004 fell to 17th out of the 30 nations of the Organisation
for Economic Co-operation and Development.

But the tax break comes with a price tag of about $7 billion a year, and Congress
has been reluctant to extend the program long term. Some government watchdog
groups have called the R&D tax credit corporate welfare.

But tech groups have said the R&D tax credit helps keep high-paying tech
jobs in the U.S. And companies have a hard time mapping out their R&D when
the credit keeps expiring, said Symantec's Richards. "The on-again, off-again
nature of the credit makes it impossible for companies to do the long-term planning
that's needed," he said.

In many other areas, Congress failed to act on legislation many tech groups
called for:

-- Patent reform: Many large tech companies said their top priority was for
Congress to pass a wide-ranging patent reform bill that would make it more difficult
for patent holders to sue and collect massive infringement awards. The House
of Representatives in September passed the Patent
Reform Act, which would allow courts to limit patent damage awards if a
patented invention is a small piece of a larger product. Among other things,
the bill would also allow a new way to challenge patents within one year after
they've been granted.

Supporters of the bill, including Microsoft and IBM, argued that it's too easy
for patent holders who have no intent of marketing an invention to sue large
companies and collect multimillion-dollar damages when a small piece of a technology
product is found to infringe. "There are people who now just hold patents
to sue and not to innovate," said Symatec's Richards.

Another important piece of the bill would limit where patent holders could
file lawsuits, Richards said. Many patent holders file lawsuits in the patent-friendly
U.S. District Court for the Eastern District of Texas, even though neither the
patent holder or the accused infringer is located there.

Opponents, including pharmaceutical companies, some small technology vendors
and inventors, have successfully stalled the bill in the Senate. They say the
bill severely weakens the power of patents.

Senate leaders say they will tackle the bill again in January. Opponents will
continue to pressure lawmakers, said Ronald Riley, president of the Professional
Inventors Alliance, which has enlisted the support of some labor unions.

Opponents have talked about finding candidates to run against lawmakers who
support the bill, Riley said. "We will have an all-out onslaught on the
legislation," Riley said. "We think we will have to make an example
of some legislators."

-- H-1B visas: Another top priority of many tech vendors has been an expansion
of the H-1B visa program for skilled foreign workers. The current yearly cap
is 65,000 visas, with exceptions for an additional 20,000 graduate students,
but in recent years, the cap has been filled before the year begins.

Microsoft Chairman Bill Gates testified before a Senate committee in March,
saying the U.S. should not shut out talented workers. "We have to welcome
the great minds of this world, not drive them out of this country," Gates
said. "These employees are vital to American competitiveness."

But U.S. tech worker groups such as the Institute of Electrical and Electronics
Engineers-USA (IEEE-USA) have opposed a higher H-1B cap, arguing that companies
use the program to hire foreign workers for less money than unemployed U.S.
workers would receive. An H-1B increase to 115,000 was part of a comprehensive
immigration bill in the Senate, but that bill stalled over a contentious debate
about illegal immigration.

-- Data breaches: A handful of data breach notification and cybercrime bills
stalled as Congress focused on other issues. The House approved two antispyware
bills, one that created penalties of up to five years in prison for some spyware-like
behavior. But the Senate didn't act on the bills, in part because there are
concerns that the second spyware bill would preempt tougher state laws.

-- Net neutrality: Many consumer groups and Internet-based companies continued
to call on Congress to pass a net neutrality law, which would prohibit broadband
providers from blocking or slowing competitors' Web content. However, the U.S.
Federal Communications Commission has included some net neutrality rules in
an upcoming spectrum auction, and both Verizon Wireless and AT&T have recently
pledged to allow outside content and devices on their mobile-phone networks.

Congress has also examined tougher penalties for copyright infringement, but
hasn't moved legislation forward. With the change in party control, some things
have been delayed, and "that was fine with us," said Art Brodsky,
spokesman for Public Knowledge, a consumer-rights group that has opposed tougher
copyright penalties.

Some observers expect Congress to be more active on tech issues in 2008. It
will be an election year, and it will be hard for controversial legislation
to move forward, but many tech issues aren't partisan, Goodlatte said.

Passing some tech-related legislation would show some progress, he said. "I
would think that the Democratic leadership, in the miserable lack of success
they've had in passing legislation this year, would be looking for a new approach
in the new year," he said.

IDG News Service