Technology companies will be in for a bumpy ride in the second Trump Administration. President-elect Trump has promised to adopt policies that will accelerate the United States’ technological decoupling from China. However, he will likely take a more hands-off approach to regulating artificial intelligence and reverse several Biden Administration policies related to AI and other emerging technologies.Continue Reading Tech Policy in a Second Trump Administration: AI Promotion and Further Decoupling from China
Quantum Computing: Developments in the UK and US
This update focuses on how growing quantum sector investment in the UK and US is leading to the development and commercialization of quantum computing technologies with the potential to revolutionize and disrupt key sectors. This is a fast-growing area that is seeing significant levels of public and private investment activity. We take a look at how approaches differ in the UK and US, and discuss how a concerted, international effort is needed both to realize the full potential of quantum technologies and to mitigate new risks that may arise as the technology matures.
Quantum Computing
Quantum computing uses quantum mechanics principles to solve certain complex mathematical problems faster than classical computers. Whilst classical computers use binary “bits” to perform calculations, quantum computers use quantum bits (“qubits”). The value of a bit can only be zero or one, whereas a qubit can exist as zero, one, or a combination of both states (a phenomenon known as superposition) allowing quantum computers to solve certain problems exponentially faster than classical computers.
The applications of quantum technologies are wide-ranging and quantum computing has the potential to revolutionize many sectors, including life-sciences, climate and weather modelling, financial portfolio management and artificial intelligence (“AI”). However, advances in quantum computing may also lead to some risks, the most significant being to data protection. Hackers could exploit the ability of quantum computing to solve complex mathematical problems at high speeds to break currently used cryptography methods and access personal and sensitive data.
This is a rapidly developing area that governments are only just turning their attention to. Governments are focusing not just on “quantum-readiness” and countering the emerging threats that quantum computing will present in the hands of bad actors (the US, for instance, is planning the migration of sensitive data to post-quantum encryption), but also on ramping up investment and growth in quantum technologies. Continue Reading Quantum Computing: Developments in the UK and US
Quantum Computing: Developments in the UK and US
This update focuses on how growing quantum sector investment in the UK and US is leading to the development and commercialization of quantum computing technologies with the potential to revolutionize and disrupt key sectors. This is a fast-growing area that is seeing significant levels of public and private investment activity. We take a look at how approaches differ in the UK and US, and discuss how a concerted, international effort is needed both to realize the full potential of quantum technologies and to mitigate new risks that may arise as the technology matures.
Quantum Computing
Quantum computing uses quantum mechanics principles to solve certain complex mathematical problems faster than classical computers. Whilst classical computers use binary “bits” to perform calculations, quantum computers use quantum bits (“qubits”). The value of a bit can only be zero or one, whereas a qubit can exist as zero, one, or a combination of both states (a phenomenon known as superposition) allowing quantum computers to solve certain problems exponentially faster than classical computers.
The applications of quantum technologies are wide-ranging and quantum computing has the potential to revolutionize many sectors, including life-sciences, climate and weather modelling, financial portfolio management and artificial intelligence (“AI”). However, advances in quantum computing may also lead to some risks, the most significant being to data protection. Hackers could exploit the ability of quantum computing to solve complex mathematical problems at high speeds to break currently used cryptography methods and access personal and sensitive data.
This is a rapidly developing area that governments are only just turning their attention to. Governments are focusing not just on “quantum-readiness” and countering the emerging threats that quantum computing will present in the hands of bad actors (the US, for instance, is planning the migration of sensitive data to post-quantum encryption), but also on ramping up investment and growth in quantum technologies. Continue Reading Quantum Computing: Developments in the UK and US
U.S. Government Issues New U.S. Sanctions and Export Controls Targeting Russia and Belarus for Continued Aggression Against Ukraine; Update on European Sanctions Developments
June 18, 2024, Covington Alert
On June 12, 2024, the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) and the U.S. Commerce Department, Bureau of Industry and Security (“BIS”) issued additional measures to counter Russia’s continued aggression in Ukraine. The measures, announced in advance of the G7 summit in Italy last week, are intended to “continue to drive up costs for the Russian war machine.”
The actions taken by OFAC and BIS include new prohibitions on providing certain information technology- and software-related services to persons located in Russia, establishing additional sanctions designed to target the Russian financial infrastructure, strengthening secondary sanctions that can be applied to non-U.S. persons (including in particular non-U.S. financial institutions), and expanding export controls restrictions on items destined for Russia and Belarus (including with respect to certain types of software). Along with the new rules, OFAC designated for property-blocking sanctions more than 300 individuals and entities (including parties identified for sanctions by the U.S. State Department), while BIS used its authority to make additions to the Entity List, issue Temporary Denial Orders, and notify U.S. distributors of additional restrictions on shipments to parties known to be supplying items to Russia. Significantly, BIS altered its Entity List rules to permit certain address-only designations to the Entity List and, among other designations, added to the Entity List eight addresses in Hong Kong with a high diversion risk. Exports, reexports, or transfers of certain items subject to the Export Administration Regulations (“EAR”) to purchasers, intermediate or ultimate consignees, and end users who use those addresses generally will require authorization from BIS.
Separately, on June 13, 2024, the UK Government imposed a new round of asset-freezing sanctions on a number of notable Russian entities. The European Union is also considering a 14th package of sanctions measures relating to Russia, although as of this writing the EU has not yet enacted the new package.
New U.S. Sanctions
Prohibition on Certain Information Technology and Software Services
As part of the joint actions, OFAC issued a determination pursuant to the authority of Executive Order 14071 (the “IT and Software Services Determination”) that prohibits the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a U.S. person, wherever located, of (i) information technology (“IT”) consultancy and design services, and (ii) IT support services and cloud-based services for enterprise management software and design and manufacturing software (collectively, “Covered Software”) to any person located in the Russian Federation, unless licensed or otherwise authorized by OFAC. The IT and Software Services Determination is effective beginning at 12:01 eastern daylight time on September 12, 2024. “U.S. persons” include U.S. legal entities and their non-U.S. branches; U.S. citizens and lawful permanent residents, no matter where located or employed; and persons present in the United States.Continue Reading U.S. Government Issues New U.S. Sanctions and Export Controls Targeting Russia and Belarus for Continued Aggression Against Ukraine; Update on European Sanctions Developments
U.S. Competition Agencies File Statement of Interest in Algorithmic Pricing Case
On March 28, 2024, the U.S. Department of Justice and the Federal Trade Commission jointly filed a Statement of Interest on behalf of the United States in the case of Cornish-Adebiyi v. Caesars Entertainment, 1:23-CV-02536 (D.N.J. Mar. 28, 2024).
In the Statement, the agencies express their disagreement with two
Continue Reading U.S. Competition Agencies File Statement of Interest in Algorithmic Pricing CaseInsights from the Munich Security Conference: Towards an Expanding U.S.-EU Defense Taxonomy?
This year’s Munich Security Conference reemphasized the need for Europe to invest in greater defense capabilities and foster a regulatory environment that is conducive to building a defense and technological industrial base. In Munich, President Ursula von der Leyen committed to appointing a European Commissioner for Defence, if she is reselected later this year by the European Council and European Parliament. And the EU is also due to publish shortly a new defense industrial strategy, mirroring in part, the first-ever U.S. National Defense Industrial Strategy (NDIS) released earlier this year by the Department of Defense.
The NDIS, in turn, recognizes the need for a strong defense industry in both the U.S. and the EU, as well as other allies and partners across the globe, in order to strengthen supply chain resilience and ensure the production and delivery of critical defense supplies. And global leaders generally see the imperative of working together over the long-term to advance integrated deterrence policies and to strengthen and modernize defense industrial base ecosystems. We will continue tracking these geopolitical trends, which are likely to persist regardless of electoral outcomes in Europe or the United States.
These developments across both sides of the Atlantic follow on a number of significant new funding streams in Europe over the past couple of years, for instance:
- The 2021 revision of the European Defense Fund Regulation allocated €8 billion for common research and development projects, meant to be spent during the 2021-2027 multi-annual financial framework (MFF).
- As a direct response to Ukraine’s request for assistance with the supply of 155 mm-caliber artillery rounds, the EU adopted the 2023 Act in Support of Ammunition Production (ASAP), with a €500 million fund to scale up production of ammunition and missiles.
- Most recently, the EU adopted the 2023 European Defense Industry Reinforcement through Common Procurement Act (EDIRPA), introduced a joint procurement fund of €300 million to facilitate Member States’ collective acquisition of defense products.
- The European Peace Facility (EPF), an off-budget instrument, with an overall financial ceiling exceeding €12 billion, is primarily destined toward procurement of military material and large-scale financing of weapon supplies to allied third countries (including €6.1 billion for Ukraine).
U.S. Tech Legislative, Regulatory & Litigation Update – Fourth Quarter 2023
This quarterly update highlights key legislative, regulatory, and litigation developments in the fourth quarter of 2023 and early January 2024 related to technology issues. These included developments related to artificial intelligence (“AI”), connected and automated vehicles (“CAVs”), data privacy, and cybersecurity. As noted below, some of these developments provide companies with the opportunity for participation and comment.
I. Artificial Intelligence
Federal Executive Developments on AI
The Executive Branch and U.S. federal agencies had an active quarter, which included the White House’s October 2023 release of the Executive Order (“EO”) on Safe, Secure, and Trustworthy Artificial Intelligence. The EO declares a host of new actions for federal agencies designed to set standards for AI safety and security; protect Americans’ privacy; advance equity and civil rights; protect vulnerable groups such as consumers, patients, and students; support workers; promote innovation and competition; advance American leadership abroad; and effectively regulate the use of AI in government. The EO builds on the White House’s prior work surrounding the development of responsible AI. Concerning privacy, the EO sets forth a number of requirements for the use of personal data for AI systems, including the prioritization of federal support for privacy-preserving techniques and strengthening privacy-preserving research and technologies (e.g., cryptographic tools). Regarding equity and civil rights, the EO calls for clear guidance to landlords, Federal benefits programs, and Federal contractors to keep AI systems from being used to exacerbate discrimination. The EO also sets out requirements for developers of AI systems, including requiring 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.
Federal Legislative Activity on AI
Congress continued to evaluate AI legislation and proposed a number of AI bills, though none of these bills are expected to progress in the immediate future. For example, members of Congress continued to hold meetings on AI and introduced bills related to deepfakes, AI research, and transparency for foundational models.
- Deepfakes and Inauthentic Content: In October 2023, a group of bipartisan senators released a discussion draft of the NO FAKES Act, which would prohibit persons or companies from producing an unauthorized digital replica of an individual in a performance or hosting unauthorized digital replicas if the platform has knowledge that the replica was not authorized by the individual depicted.
- Research: In November 2023, Senator Thune (R-SD), along with five bipartisan co-sponsors, introduced the Artificial Intelligence Research, Innovation, and Accountability Act (S. 3312), which would require covered internet platforms that operate generative AI systems to provide their users with clear and conspicuous notice that the covered internet platform uses generative AI.
- Transparency for Foundational Models: In December 2023, Representative Beyer (D-VA-8) introduced the AI Foundation Model Act (H.R. 6881), which would direct the Federal Trade Commission (“FTC”) to establish transparency standards for foundation model deployers in consultation with other agencies. The standards would require companies to provide consumers and the FTC with information on a model’s training data and mechanisms, as well as information regarding whether user data is collected in inference.
- Bipartisan Senate Forums: Senator Schumer’s (D-NY) AI Insight Forums, which are a part of his SAFE Innovation Framework, continued to take place this quarter. As part of these forums, bipartisan groups of senators met multiple times to learn more about key issues in AI policy, including privacy and liability, long-term risks of AI, and national security.
Continue Reading U.S. Tech Legislative, Regulatory & Litigation Update – Fourth Quarter 2023
GAO Recommends Increased Guidance for DOD Mergers & Acquisitions Review
On October 17, 2023, the U.S. Government Accountability Office (“GAO”) published a report on mergers and acquisitions (“M&A”) in the defense industrial base. The report details the current M&A review process of the Department of Defense (“DOD”) and provides recommendations to proactively assess M&A competition risks.
Currently, DOD’s Industrial Base
Continue Reading GAO Recommends Increased Guidance for DOD Mergers & Acquisitions ReviewCovington Alert: U.S. Launches Outbound Investment Screening Targeting China with Further Developments Forthcoming
Earlier this month the Biden Administration released its long-anticipated Executive Order on Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern (“EO”), which imposes (1) prohibitions on certain outbound investments in the semiconductors and microelectronics, quantum information technologies, and artificial intelligence sectors, and (2)
Continue Reading Covington Alert: U.S. Launches Outbound Investment Screening Targeting China with Further Developments ForthcomingComments Due August 31 on FCC’s Proposal to Step Up Review of Foreign Ownership in Telecom Carriers and Establish Cybersecurity Requirements
Updated August 8, 2023. Originally posted May 1, 2023.
Last week, comment deadlines were announced for a Federal Communications Commission (“FCC”) Order and Notice of Proposed Rulemaking (“NPRM”) that could have significant compliance implications for all holders of international Section 214 authority (i.e., authorization to provide telecommunications services from points in the U.S. to points abroad). The rule changes on which the FCC seeks comment are far-reaching and, if adopted as written, could result in significant future compliance burdens, both for entities holding international Section 214 authority, as well as the parties holding ownership interests in these entities. Comments on these rule changes are due Thursday, August 31, with reply comments due October 2.
Adopted in April, the FCC’s item proposing the new rules also includes an Order requiring all holders of international Section 214 authority to respond to a one-time information request concerning their foreign ownership. Although last week’s Federal Register publication sets a comment deadline for the proposed rules, the reporting deadline for the one-time information request has not yet been established. However, because the FCC has fulfilled its statutory obligations regarding the new information collection presented by the one-time reporting requirement, carriers — as well as entities holding an ownership interest in these carriers — should prepare for the announcement of the reporting deadline.
The FCC’s latest actions underscore the agency’s ongoing desire to closely scrutinize foreign ownership and involvement in telecommunications carriers serving the U.S. market, as well as to play a more active role in cybersecurity policy. These developments should be of interest to any carrier that serves the U.S. market and any financial or strategic investor focused on the telecommunications space, as well as other parties interested in national security developments affecting telecommunications infrastructure.
Proposed Rule Changes for International Section 214 Authority
The FCC’s proposed changes to its regulation of international Section 214 authorizations generally concern additional compliance, disclosure, and reporting requirements. The FCC’s proposed rule changes are far-reaching, but the most notable of the proposals concern the following:Continue Reading Comments Due August 31 on FCC’s Proposal to Step Up Review of Foreign Ownership in Telecom Carriers and Establish Cybersecurity Requirements