In 1996, Congress cleared the way for the modern Internet with a single short statute. Technically, it was known as Section 230 of the Communications Decency Act. But you can think of it as the law that gave us websites like Reddit, Craigslist, Digg, and perhaps all of social media.
Section 230 states, essentially, that websites cannot be sued or prosecuted for content posted by their visitors.* It was passed, in part, to undo the effects of a New York court ruling that held they could be. So for instance, if a Facebook user writes something libelous on their wall, Mark Zuckerberg doesn't have to worry about anybody hauling his company into court. The Electronic Frontier Foundation has called Section 230 "the most important law protecting Internet speech."
But section 230 has also been economically powerful, perhaps in ways Congress couldn't have foreseen. It was simple and intuitive to understand for entrepreneurs and didn't require a lawyer to implement. As a result, it has functioned as a permission slip for the whole Internet that says: "Go innovate." Entrepreneurs have responded by founding the user-generated content sites we know and love today.
If Capitol Hill is interested in supporting the next great generation of entrepreneurs, it would be wise to look at laws like section 230 as a model for the future. We need more permission slips for innovators, and fewer vague and legally treacherous regulations that stop them in their tracks.
Do No Harm
Washington's job in fostering national innovation isn't always to actively encourage it. Sometimes, the best policy is simply not stifling it. As Ben Huh, CEO of the Cheezburger Network put it to me recently, the most important thing the government can do is avoid "careless acts burning down innovation."
And on that front, Washington has had a fairly poor track record in recent years.
Take the state of America's copyright system. Congress last made a substantial revision to it in 1998, three years before the iPod, six years before Google Books, and nine years before the Kindle. Those changes, as well as others that came years before, were pushed by major lobby groups to greatly expand the impact of copyright law beyond its traditional purpose, scope, and length. In so doing, the abdication of copyright's constitutional purpose and our founders' intent has inhibited content creation and innovation and hurt the public.
The results are a body of law completely at odds with the way we use technology today (as well as the needs of new content creators). Backing up a DVD, streaming your own music collection from the cloud, unlocking and jail-breaking your phone, and creating subtitles of films or read-aloud functionality for books to help the blind and deaf - are all illegal or on legally precarious territory.
The most dangerous part of our current copyright regime for entrepreneurs, however, is the legal uncertainty it has created. Because so much of the law is ambiguous, content owners have been able to sue young, innovative companies into extinction, even if their services turned out to be legal. The companies that pioneered the DVR and the digital music player, for instance, were both bankrupted before their technology was ultimately vindicated in court. Today, companies like Aereo and Dish Network** have to go through litigation to keep their products on the market.
When there is this level of uncertainty, innovation requires massive investments to weather the legal costs, and the few market participants who can afford to do so are usually large corporations. The VCR went through a serious and drawn-out fight for existence. Sony was ultimately able to win the legal battle to sell the first VCR, the Betamax, only because they had the legal resources for nine-years of multi-million-dollar litigation. In the eighth year the VCR was found to be illegal in the 9th Circuit, and they were able to appeal it to the Supreme Court where it was upheld by one vote (and on the narrowest of holdings).
Few companies have the resources to wage that kind of battle. Unfortunately, innovation typically comes from new market participants, as many large corporations often have vested interests in the status quo. For every Sony that was willing to fight for a new technology, there are many more new products that have no multinational corporation ready to wage a sustained and costly litigation war. This massive barrier to entry and legal uncertainty constitutes an expensive tax upon innovation that is directly paid to special interest groups. This is how innovation dies. Not with a bang, but with a chill.
More Like 230
Our current system of copyright isn't the only area of the law that has a cooling effect on innovation. During my time in Silicon Valley, I've heard repeated concerns from entrepreneurs regarding problems with our immigration policy and numerous accounts of the difficulties navigating our ineffective patent system as well. And all of these areas of the law contrast with the relatively straightforward rules of the road that govern speech and user generated content, thanks to section 230.
It's useful here to imagine what would have happened to a company like Reddit had Section 230 never existed. Let's assume the company's founders arranged a meeting with their Congressman and asked them to change the law to facilitate their market model for a message board on the Internet. What would most Congressmen think? Assuming they didn't get stuck with the Senator who referred to the Internet as "a series of tubes," it is likely that their elected representative would respond, "This is such a small market, and a silly idea, so why would we bother changing the law for you?" And yet, today Reddit is a billion dollar company and according, to one study, 6% of adults on the internet are Reddit users (myself, included).
In short, innovation cannot depend upon hiring a team of lobbyists, booking a flight to DC, introducing a bill, and getting it signed into law. Making sure that we have simple, easy to understand laws and regulations ensures that it won't have to.
Unfortunately, instead of progressing in the direction of the free market and innovation, Congress is at risk of regressing. Recently, a group of State Attorneys General have asked Congress for special exceptions to Section 230. The proposed amendment would allow states to prosecute "internet companies, including potentially their executives, for violations of state criminal law for their online publication of third party content."
As Santa Clara law professor Eric Goldman explains, the move would end up "eviscerating" Section 230, removing a "key internet immunity" that has been responsible for the "extraordinary Internet boom over the past 15+ years." Companies would be forced to take on the prohibitively expensive cost of policing their entire websites. Suddenly, speech law would have the same level of uncertainty as copyright.
Section 230 has worked. Washington should make our failed legal regimes look more like it, not make Section 230 look more like our failed legal regimes.
*Importantly, it doesn't apply to copyright infringement, which is dealt with under other statutes.
**Correction, September 12, 9:38 AM: An earlier version of this article incorrectly stated that DirectTV, rather than Dish Network, needed to go through litigation in order to keep it's product on the market.