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The Technology 202: Venture capitalists balk at proposed export limits on AI, quantum computing

with Bastien Inzaurralde

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Venture capitalists are warning the Trump administration not to overly restrict the export of new technology such as artificial intelligence -- insisting that could make it much harder for American start-ups to sell their products abroad. 

The Commerce Department is considering whether to slap tighter export controls on a long list of new technologies, including AI and quantum computers, to prevent U.S. technology from falling into the hands of foreign adversaries. 

But the National Venture Capital Association, in public comments on the potential rule last week, voiced concerns that the list of technology the government defines as critical to national security is far too broad. The venture capitalists only want to see the department limit the export of technology specific to defense -- not a whole category of technology so broad it could include consumer products such as self-driving cars and voice assistants. 

"By categorizing only those technologies that have significant defense uses – and not those that merely have broad commercial implications or incidental national security significance – as emerging technologies, the government can ensure the impact on American scientific and technological advancement is minimized while still protecting important national security interests," NVCA CEO Bobby Franklin said in a statement. 

The comments highlight a broader issue that's fueling tension between Silicon Valley and the Trump administration. The same technology behind products we use everyday is increasingly of national security interest. AI is powering applications ranging from Netflix recommendations, to your iPhone's Siri voice assistant, to image recognition on social networks and recruiting software. 

“Almost everything is using AI in one way or another,” said Jeff Farrah, NVCA's general counsel. “So then is everything subject to export controls?” 

The government's efforts to restrict AI could be at odds with Silicon Valley's business interests — especially in China. While artificial intelligence is now a Pentagon priority, it's also the next big thing in Silicon Valley and driving a wave of investment in new companies. Defense officials believe the U.S. is in an artificial intelligence arms race with China, but investors and industry executives are trying to make inroads into one of the world's most lucrative markets.

Unnecessary export controls on AI would create new hurdles for businesses, NCVA argues, potentially requiring them to go through lengthy licensing processes when they want to sell new products in other countries or work with foreign citizens on research. 

What's more, artificial intelligence and quantum computing are evolving so quickly that even many people in the industry haven’t reached a consensus on definitions for the technology. Still, the technology industry is very wary of leaving that task up to the government.

“There’s not a lot of faith from people in the industry that the government will get this right,” Farrah said. 

Though the Trump administration appeared to want to move expediently on this rulemaking when it was announced last year, the government shutdown could derail those plans.

It’s unlikely that the agency has the staff and resources to do a substantive review of comments, said Melissa Duffy, a partner at the Dechert law firm focused on international trade. “I think the shutdown has surely put a dent in the process and slowed things down,” Duffy said. 

The Commerce Department's request for comment comes during a broader trade spat with China and as the United States is using increasingly aggressive tactics to deter theft of intellectual property. 

Silicon Valley is already concerned about how the fallout from the trade war will affect technology companies’ bottom line. Apple’s decision to slash its quarterly revenue forecast because of a downturn in sales of iPhones in China sent jitters through the industry that a broader recession could be imminent after years of skyrocketing technology stocks. 

And Silicon Valley investors are concerned that broader U.S. national security efforts are creating too many regulatory hurdles for companies. The Treasury Department has begun piloting a program in which a wider range of foreign investments in U.S. technology companies must undergo a review to ensure they do not pose national security risks. The process, which takes up to 45 days, is at odds with the technology industry's habit of moving fast and the speedy pace at which start-ups often burn capital to grow. 

Duffy said the pilot program and proposed export controls are intended to work hand-in-hand to prevent foreign adversaries from accessing technology critical to national security. “They’re two different ways of doing the same thing,” she said. “They’re both intended to make it hard.”

Correction: A previous version of this story incorrectly identified Jeff Farrah's title. He has been promoted to general counsel.


BITS: A group of Google employees plans to launch a social media campaign today as part of a push to end forced arbitration to settle workplace disputes in the tech industry, according to Recode's Shirin Ghaffary. The group, called Googlers for Ending Forced Arbitration, intends to share facts about forced arbitration on Twitter and testimonies on Instagram throughout the day to educate the public. Even though Google and other tech firms ended forced arbitration in cases of sexual harassment and assault, “it’s still used and enforced by many tech companies for cases related to other workplace issues like racial or religious discrimination,” Ghaffary reported.

Today's planned social media campaign shows that the labor movement in tech is increasingly organizing, according to Wired's Nitasha Tiku. “Thus far, most of the action has come from within Google,” Tiku wrote. “But in December, the anti-arbitration group started soliciting copies of employment contracts from colleagues at Facebook, Uber, and other tech companies, as well as third-party contractors, in order to understand how tech employers convince both workers and contractors to sign arbitration agreements that inhibit their right to bring sexual harassment or discrimination claims in front of a jury.”

NIBBLES: The Justice Department issued a legal opinon on Monday that would increase restrictions on online gambling as many states have been easing their limits, The Post's Tom Hamburger, Matt Zapotosky and Josh Dawsey reported.  The new opinion will likely be tested in the courts. It would reverse an Obama-era opinion that said the Wire Act, a law prohibiting interstate wagering, only applies to sports betting. 

The gambling industry was dismayed by the opinion and feared it could stifle the growing online gambling industry. But GOP megadonor and casino magnate Sheldon Adelson has long sought such a restriction. He and his wife gave Republicans $113 million during the 2016 election cycle. Adelson has argued online gambling could be dangerous for children and invite criminal activity. 

“I am willing to spend whatever it takes,” Adelson told Forbes in 2013. "I don’t see any compelling reason for the government to allow people to gamble on the Internet and nobody has ever explained except for the two companies whose special interest is going to be served if there is gaming on the Internet, Caesars and MGM.”

BYTES: House Energy and Commerce Committee Chairman Frank Pallone Jr. (D-N.J.) said Federal Communications Commission Chairman Ajit Pai refused to brief the committee's staff about the disclosure of users' location data by wireless carriers. Motherboard reported last week that T-Mobile, Sprint and AT&T sold access to their customers' location data to third-party companies.

“There’s nothing in the law that should stop the Chairman personally from meeting about this serious threat that could allow criminals to track the location of police officers on patrol, victims of domestic abuse, or foreign adversaries to track military personnel on American soil,” Pallone said in a statement. “The Committee will continue to press the FCC to prioritize public safety, national security, and protecting consumers.”

The FCC said in a statement that it “has been investigating wireless carriers' handling of location information” and will resume the probe once the partial government shutdown comes to an end, the Hill's Harper Neidig reported.


Huawei chief executive Ren Zhengfei said on Tuesday that his company hasn't ever spied for the Chinese government — and it never would, according to the Wall Street Journal's Dan Strumpf and Josh Chin. “No law requires any company in China to install mandatory back doors,” Ren Zhengfei told reporters. “I personally would never harm the interest of my customers and me and my company would not answer to such requests.”

Zhengfei made a rare public appearance as the companies' troubles are deepening on the world stage, following the arrest of a Huawei executive in Poland on charges of espionage. "Mr. Ren didn’t say what specifically he would do to resist requests from the Chinese government," the Journal reported. "All companies doing business in China are required by law to hand over customer data to the government in cases that touch on national security. In China, national-security threats are broadly defined and can include speech critical of the Communist Party."

— Elon Musk's Tesla may face some competition from a more than 80-year-old carmaker. Volkswagen plans to invest $800 million in a project to expand a factory in Chattanooga, Tenn., to produce electric vehicles, TechCrunch's Kirsten Korosec reported. The production is set to start in 2022, and the project is expected to create 1,000 jobs. Additionally, Volkswagen is building a facility to produce electric vehicles in Zwickau, Germany, where production is expected to start in 2019, Korosec noted. The company also plans to add electric vehicle production at facilities in China in 2020 and in Germany by 2022.

“VW’s Chattanooga expansion is just a piece of the automaker’s broader plan to move away from diesel in the wake of the emissions cheating scandal that erupted in 2015,” according to TechCrunch. “Globally, VW Group plans to commit almost $50 billion through 2023 toward the development and production of electric vehicles and digital services.”

— The Giant Food Stores supermarket chain announced that it will add robots named "Marty" to its 172 stores in Pennsylvania, Maryland, Virginia and West Virginia, according to The Washington Post's Peter Holley. “The robotic rollout is part of a plan by Giant’s parent company, Ahold Delhaize USA, to deploy about 500 robots to stores such as Giant, Martin’s and Stop & Shop,” my colleague wrote. “The robots will begin arriving ‘in waves’ over the coming months, according to Giant, which expects to have the devices fully deployed in about six months.”

The robot's responsibilities include spotting spills and other trip hazards on the store's floor and reporting them to human employees. 

— Alphabet’s Wing unit as well as the drone-service companies AirMap and Kittyhawk said they demonstrated a new system to track different kinds of drones, according to the Wall Street Journal's Andy Pasztor. The companies said the system would make it possible to access drones' location and the identity of drone operators via several electronic devices simultaneously. “With three of the burgeoning industry’s leading companies backing the approach and promising to step up testing, proponents hope to persuade the Federal Aviation Administration to loosen flight restrictions before completion of full-fledged rule making expected to take years,” the Journal reported.

— More technology news from the private sector:

Wheels come off in scooter legal row (BBC News)

Fintech firms want to shake up banking, and that worries the Fed (Reuters)

Apple's services revenue growth is slowing down, RBC says (CNBC)

Alibaba Confident in China Sales Despite ‘Troubling Headwinds’ (The Wall Street Journal)

The Super-Secure Quantum Cable Hiding in the Holland Tunnel (Bloomberg News)


— A technology policy think tank supported by Google, Amazon and Facebook suggested a “grand bargain” in which Congress would repeal federal privacy laws that are specific to certain sectors or issues and replace them with a single federal data privacy law that would preempt state privacy legislation, the Verge's Makena Kelly reported. The think tank, called Information Technology and Innovation Foundation, also advocated for increasing the authority of the Federal Trade Commission to fine firms that run afoul of the data privacy law.

Sen. Richard Blumenthal (D-Conn.) was unimpressed with the proposal. “If Big Tech thinks this is a reasonable framework for privacy legislation, they should be embarrassed,” Blumenthal said, according to Kelly. “This proposal would protect no one — it is only a grand bargain for the companies who regularly exploit consumer data for private gain and seek to evade transparency and accountability.” (Amazon founder and chief executive Jeffrey P. Bezos owns The Washington Post.)

— More technology news from the public sector:

Feds Can't Force You To Unlock Your iPhone With Finger Or Face, Judge Rules (Forbes)

FAA Proposes More Commercial Drone Operations at Night and Over People (The Wall Street Journal)

The Transportation Department is Funding Autonomous Drones (Nextgov)

New York City Sued Airbnb Operators For Allegedly Posing As Fake Hosts​ (Motherboard)

Ocasio-Cortez is driving more Twitter conversation than the top 5 news companies combined (Axios)


— Zoox, a startup building self-driving vehicle software for a robot taxi service, named Intel executive Aicha Evans chief executive, the Wall Street Journal's Tim Higgins reportedEvans said she was drawn to the start-up's ambition to build a new vehicle and the company's emphasis on urban services. “It’s about executing and scaling,” she told the Journal about her upcoming job. “If we weren’t building it from the ground up, I wouldn’t be interested.” Evans, who is chief strategy officer at Intel, is set to take her new position at Zoox on Feb. 26. 

“Her hiring makes Ms. Evans, born in Senegal and raised in Paris, one of the most high-profile black women running a Silicon Valley tech company,” Higgins wrote. “She succeeds Tim Kentley-Klay, the co-founder who was removed as CEO by Zoox’s board last August after the company had completed a $500 million round that valued the company at $3.2 billion.”

— Intel's board has yet to find a candidate to take the job of chief executive at the company despite a search that has gone on for more than six months, Bloomberg News's Ian King reported. Kevin Cassidy, an analyst at Stifel Nicolaus & Co, said Intel needs a chief executive soon to make strategic decisions for the company. “The new CEO will have many difficult decisions to make in a short amount of time,” Cassidy told Bloomberg News. “The company can perform well in the near term due to good demand for PC and servers, but longer-term decisions and strategy need a CEO soon.”


— Technology news generating buzz around the Web:

Robot Hotel Loses Love for Robots (The Wall Street Journal)

Screens Might Be as Bad for Mental Health as … Potatoes (Wired)

These 5 travel destinations are fighting back against the “Instagram Effect” (Fast Company)

Facebook’s 10-year glow-up challenge reminds us that Facebook used to be fun (The Verge)


— Susan Hendrick will lead external communications for Uber’s Federal Affairs team in Washington, the company announced in a news release.


— News about tech incidents or blunders:

Instagram Influencers Dupe Their Fans With ‘Free’ Products (The Daily Beast)


— Today in funding news:

Amazon Invests in Qualcomm-Backed Israeli Semiconductor Startup (Bloomberg News)

Peter Thiel’s Valar Ventures targets $350M for new funds (TechCrunch)



Coming soon


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