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Yesterday, the White House issued a Fact Sheet summarizing its Executive Order on a comprehensive strategy to support the development of safe and secure artificial intelligence (“AI”).  The Executive Order follows a number of actions by the Biden Administration on AI, including its Blueprint for an AI Bill of Rights and voluntary commitments from certain developers of AI systems.  According to the Administration, the Executive Order establishes new AI safety and security standards, protects privacy, advances equity and civil rights, protects workers, consumers, and patients, promotes innovation and competition, and advances American leadership.  This blog post summarizes these key components.

  • Safety & Security Standards.  The Executive Order sets out several required actions for developers of AI systems.  Notably, the White House, “in accordance with the Defense Production Action,” will require companies developing any foundation model “that poses a serious risk to national security, national economic security, or national public health and safety” to notify the federal government when training the model and provide results of all red-team safety tests to the government. 

Relatedly, the Executive Order directs certain federal agencies to undertake the following actions and initiatives:

  • National Institute of Standards and Technology:  establish standards for red-teaming required before the public release of an AI system. 
    • Department of Homeland Security:  apply the NIST standards to use of AI in critical infrastructure sectors and establish an AI Safety and Security Board. 
    • Departments of Energy and Homeland Security:  address AI systems’ threats to critical infrastructure, as well as chemical, biological, radiological, nuclear, and cybersecurity risks; it also calls for the creation of standards for biological synthesis screening.
    • Department of Commerce:  develop guidance for content authentication and watermarking to label content generated by AI and received by the government; it also suggests that federal agencies would be required to use these tools.
    • National Security Council & White House Chief of Staff:  develop a National Security Memorandum that ensures that the United States military and intelligence community use AI safely, ethically, and effectively.

…
Continue Reading Biden Administration Announces Artificial Intelligence Executive Order

Practice and Procedure

The ITC’s Recent Sua Sponte Use of 100-Day Expedited Adjudication Procedure

Over the last few years, the International Trade Commission (“ITC” or “Commission”) has developed procedural mechanisms geared toward identifying potentially dispositive issues for early disposition in its investigations. These procedures are meant to give respondents an opportunity to litigate a dispositive issue before committing the resources necessary to litigate an entire Section 337 investigation.

In 2018, the ITC adopted 19 C.F.R. § 210.10(b)(3), which provides that “[t]he Commission may order the administrative law judge to issue an initial determination within 100 days of institution . . . ruling on a potentially dispositive issue as set forth in the notice of investigation.” Although the ITC denies the majority of requests by respondents to use this procedural mechanism, the ITC has ordered its ALJs to use this program in a handful of investigations to decide, among other things, whether the asserted patents claim patent-eligible subject matter, whether a complainant has standing to sue, whether a complainant can prove economic domestic industry, and whether claim or issue preclusion applies.

In a recent complaint filed in Certain Selective Thyroid Hormone Receptor-Beta Agonists, Processes for Manufacturing or Relating to Same, and Products Containing Same, Inv. No. 337-TA-1352, Complainant Viking Therapeutics, Inc. (“Viking”) alleged that respondents had misappropriated trade secrets to create their own drug candidates to compete with Viking’s VK2809 (phase 2) clinical drug candidate. As required by Section 337(a)(1)(A) governing trade secret cases, Viking alleged that the respondents’ unfair acts caused injury and threatened to cause injury going forward to Viking’s domestic industry. Viking’s theory of injury was based on the assumption that Viking’s VK2809 drug candidate and respondents’ ASC41 and ASC43F drug candidates would both receive FDA approval, would both launch into the same market, and would compete with one another. Viking’s complaint stated that its domestic industry product drug candidate, VK2809, will be brought to market in 2028.

Unlike past instances where the ITC employed 100-day proceedings, the Commission took the remarkable step of placing this investigation into a 100-day proceeding sua sponte on the issue of injury, even though no respondent raised the issue of injury as a basis to deny institution or order expedited adjudication. See Notice of Institution (Jan. 20, 2023). Respondents had not even argued that Viking’s injury allegations were deficient in their pre-institution filing. Commissioner Schmidtlein wrote separately to express her disagreement with the majority’s decision to order and expedited proceeding, noting that “these issues [are not] suitable for resolution within 100 days.”…

Continue Reading Section 337 Developments at the U.S. International Trade Commission

In the past five years, loot boxes have been the focus of many gaming regulators worldwide.  While the regulatory status of loot boxes is still unclear in the EU, the Report of the European Parliament on Consumer Protection in Online Video Games: a European Single Market Approach, adopted on January 18, 2023, may bring some clarity on how loot boxes will be regulated in the EU in the future.

This blog post illustrates how loot boxes are currently regulated in the EU and explains why the gaming industry should already prepare for a possible ban on paid loot boxes.

Qualification of Loot Boxes in the EU

In its Study on Loot Boxes in Online Games and Their Effect on Consumers, in Particular Young Consumers of July 2020, the European Parliament broadly defined loot boxes as “features in video games which are usually accessed through gameplay, or which may be optionally paid for with real-world money.  They are ‘mystery boxes’ which contain randomised items, so players do not know what they will get before opening.  Players can access diverse types of in-game content through loot boxes such as cosmetic items for game customisation (e.g. skins and new looks for the player’s avatar) or items affecting gameplay (e.g. tools, weapons, levels, maps, in-game currency etc.) which could, for example, help players compete better or advance more quickly.”

Thus, loot boxes are usually characterized by the following features:…

Continue Reading Upcoming EU Legislation on Loot boxes?

February 10, 2023, Covington Alert

Political committees, advertisers, and advertising platforms have operated under a cloud of uncertainty regarding which disclaimers, if any, must appear on internet-based advertisements. Existing Federal Election Commission (“FEC”) regulations and guidance left many unanswered questions about the disclaimers required for these increasingly important internet ads. The FEC has finally offered some clarity in this area, though some tough questions remain.

In December, the FEC voted to expand the agency’s political advertising disclaimer requirements to explicitly address internet-based ads, capping a winding rulemaking process that began over 11 years ago. These new rules go into effect on March 1, 2023. This client alert discusses how the disclaimer rules have changed, what ambiguities still exist, and what political committees, advertisers, and advertising platforms should expect going forward.

How did the FEC’s disclaimer rules change?

The new FEC disclaimer rules expand the scope of the types of internet-based communications that must have disclaimers, and also describe the content that such internet advertising disclaimers must include.

Expanded Scope. FEC regulations place disclaimer requirements on all “public communications” that (1) are made by political committees, (2) contain express advocacy, or (3) solicit a contribution. While the content of the general disclaimer requirements depends on the identity of the entity making the communication, all disclaimers must be “clear and conspicuous,” must indicate whether the entity is authorized by a candidate, and must identify the person who paid for the ad.…

Continue Reading What You Need to Know about the FEC’s New Internet Communications Disclaimer Rules

At the beginning of a new year, we are looking ahead to five key technology trends in the EMEA region that are likely to impact businesses in 2023.

1. Technology Regulations across EMEA

European Union

If 2022 was the year that the EU reached political agreement on a series of landmark legislation regulating the technology sector, 2023 will be the year that some of this legislation starts to bite:

  • The Digital Services Act (DSA): By 17 February 2023, online platforms and online search engines need to publish the number of monthly average users in the EU. Providers that are designated as “very large online platforms” and “very large search engines” will need to start complying with the DSA in 2023, and we may start to see Commission investigations kicking off later in the year too.
  • The Digital Markets Act (DMA): The DMA starts applying from 2 May 2023. By 3 July 2023, gatekeepers need to notify their “core platform services” to the Commission.
  • The Data Governance Act (DGA): The DGA becomes applicable from 24 September 2023.

Also this year, proposals published under the European Data Strategy—such as the Data Act and European Health Data Space—and EU legislation targeting artificial intelligence (AI) systems—including the AI Act, AI Liability Directive and revised Product Liability Directive—will continue making their way through the EU’s legislative process. These legislative developments will have a significant impact on the way that businesses ingest, use and share data and develop and deploy AI systems. In addition, the new liability rules will create potentially significant new litigation exposure for software and AI innovators.…

Continue Reading Top Five EMEA Technology Trends to Watch in 2023

There is near universal agreement among policymakers, lawyers, and lobbyists that the Foreign Agents Registration Act (“FARA”) is deeply in need of legislative reforms to update the statute and bring it in line with modern practices. Agreeing on specific amendments, however, has been challenging, and several prior efforts ended with no new enactments, as we…

Mandatory gender pay gap reporting is new to Ireland and is likely to attract media attention and potential comparisons, particularly for multinational and higher profile companies.  Deciding how best to communicate the gender pay gap – if it exists – will be important in averting any particular anxieties which may arise for employees and their representatives in particular. 

Ireland’s unadjusted 11.3% gender pay gap, last reported in 2019, is below the then EU average of 14.4% (down to 13% in 2020 without Ireland, Greece and the UK reporting) and is explained largely by education, occupation, working time and enterprise size.  It is pretty typical of most other EU states and addressing the EU gender pay gap is a key focus for the EC’s gender equality policy.  It is also important for Europe in addressing the estimated 30.1% pension gap feeding the at-risk-of-poverty rate disparity between the sexes.

What organisations are in scope?

The first compliance deadline looms this December for employers of more than 250 employees.  The workforce threshold numbers will decline on a staggered basis over the next two years but smaller employers with less than 50 employees are exempt.

Picking a snapshot date for reporting

The Employment Equality Act 1998 (Section 20A)(Gender Pay Gap Information) Regulations 2022 detail the reporting requirements for employers in Ireland.  Organisations in scope this year (having more than 250 employees) are required to pick a snapshot date from last June and to report the results no later than 6 months later, December 2022. …

Continue Reading New Gender Pay Gap reporting – deadlines loom in Ireland

The Department of Enterprise Trade and Employment has published a draft new law to protect Irish critical technology and infrastructure from potentially harmful non-European foreign investment.  The Screening of Third Country Transactions Bill 2022 legislatesto curb so-called “third country” (meaning non-European Union/non-European Economic Area countries) hostile actors using ownership of, or influence over businesses and assets in the Irish state to harm Ireland’s security or public order. 

First time to screen

It will be the first time Ireland has screened investment from a non-European country with a view to halting that investment if it poses such a threat.  The draft new law responds to the EU Investment Screening Regulation (EU) 2019/452 (“Regulation” – see more in Covington blogs here and here) which allows – but does not oblige – European Union Member States to screen foreign investment for risks to their security or public order.  

EU fears

The Regulation reflected a growing concern within Europe about the purchase of strategic European companies by foreign-owned firms, those concerns now heightened as a result of Covid and, more recently, by the war in Ukraine. 

The European Commission (“EC”) guided on June 22 2021, that “(s)uch transactions may put European collective security or public order at risk, especially when foreign investors are state owned or controlled, including through financing or other means of direction…while remaining open to investment, the EU is equipped to protect its essential interests.” …

Continue Reading Ireland to screen non-European foreign investments

Securities and Capital Markets

On March 21, 2022, the SEC proposed landmark rules regarding climate-related disclosures that would, if finalized, impact both domestic and foreign private issuers that are subject to the reporting requirements of the Securities Exchange Act of 1934.  The much-anticipated proposal will elicit discussion regarding the type, amount, and materiality of certain climate-related information that a company could be required to report.  The proposal also highlights the significant shift in market expectations globally regarding a company’s oversight of evolving climate-related risks and opportunities.  The SEC also published a fact sheet describing the proposed new disclosure requirements, which includes a matrix outlining the proposed phase-in periods and accommodations for the new disclosures.  The timing and scope of final rules remains uncertain, but the earliest that certain large accelerated companies would need to comply with the proposed rules if adopted would be 2023 (with the possibility of a filing by 2024).

Below we summarize:

  1. Background developments that led to the proposal;
  2. Key provisions of the proposed rules;
  3. Controversial elements of the proposal that may engender further debate; and
  4. What companies should be doing now.

Background

In recent years, investors have become increasingly focused on climate-related issues and risks related to a company’s business.  This heightened awareness has resulted in the SEC taking various steps to address investor demand for more transparent, comparable, decision-useful climate-related disclosure.  For example, in 2010, the SEC released guidance on how companies should apply existing disclosure requirements pertaining to a company’s business operations and exposure to material climate-related matters.[1]

In March 2021, SEC Commissioner and then-Acting Chair Allison Herren Lee requested public input from investors, companies and other market participants on whether current disclosures regarding climate-related opportunities and risks provided adequate information to investors.[2]  ESG-related task forces were also established with the purpose of evaluating climate-related disclosures and claims.  In July 2021, SEC Chair Gary Gensler announced the SEC would propose mandatory climate-related disclosure rules.  In September 2021, the SEC’s Division of Corporate Finance issued a Sample Letter to Companies Regarding Climate Change Disclosures to provide companies with additional guidance regarding climate-related disclosures.
Continue Reading SEC Proposes Landmark Climate-Related Disclosure Rules