U.S. Congress lagging behind on tech issues in ’07

WASHINGTON – You won’t hear anybody calling 2007 a banner year for the U.S. Congress decisions on the technology industry.

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 House in November passed a one-year extension to a research and development tax credit for U.S. companies, but a Senate version of the Temporary Tax Relief Act, which passed in early December, stripped the R&D credit out of the bill. The credit would cover 20 percent of qualified R&D spending. 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.

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