Visa Reform: Cutting Back on H-1B and L-1 Body Shops

Does your workforce depend upon foreign labor? If so your workforce planning may suddenly be changed.

On March 18, 2013, Senator Charles Grassley (Republican, Iowa) introduced a “50-50” visa bill to promote hiring local U.S. workers.  One section would require companies with more than 50 employees to limit their number of U.S. employees on H-1B or L-1 visas to 50% of its workforce.  This would apply to both domestic and foreign companies with American subsidiaries.  In short, 50% of the workers employed in the U.S. would need to be American citizens or green-card holders. 

Such visa legislation would attack foreign “body shops” that rotate contractors to the U.S. in support of global sourcing.  Aside from targeting India, a 50-50 quota bill would also hurt foreign businesses from Western Europe and Latin America that send technical staff in management consulting and business change management to the U.S.  It would hurt smaller foreign companies that depend on foreign staff as they grow into the US market.

Will a 50-50 quota really increase U.S. employment levels for technical workers?  I see several scenarios:

• Yes, it promotes local hiring to replace foreign contractors.  (This assumes you can find the right talent here.)

• No, it encourages U.S. companies to set up foreign “vendor management” teams to manage foreign workers in offshore service delivery centers.

• No change.  In the short run, it will reduce utilization rates and operating profits of foreign service providers.  Over time, nothing will stop globalization.  Businesses will find a way to deal with this by more video conferencing and online collaboration tools.  Affected foreign service providers will hire more U.S. sales people (as well as technical personnel) to meet this quota.

• It’s irrelevant.  Foreign countries with existing “friendship, commerce and navigation” treaties are entitled to “most favored nation” treatment.  So they will lobby to eliminate such rules, or they could threaten retaliatory visa action against U.S. expatriate employees in foreign subsidiaries. 

In my view, this measure would not survive long, and it highlights the need for a comprehensive immigration reform that invites foreign technical workers (“STEM” – science, tech, engineering and math) to become residents and citizens.   

What do you think?

The Hot “New” Value of Copyrights for SaaS and other Software Apps

What’s the most cost-effective, practical way to protect intellectual property for your cool mobile app or your SaaS e-business?   The answer just changed as of March 16, 2013.   

Since this date, getting patent protection became harder.  Now, the first inventor to file a patent application will be recognized as the inventor of this U.S. patent, and the “first to invent” priority rule will no longer apply under the America Invents Act, enacted September 16, 2011.  A number of other changes became effective as well:  “prior art” now includes foreign publications.  In short, getting a U.S. patent will require more vigilance and investment in the patenting process.  And enforcing/defending a patent could still cost over $1.0 million or more. 

So is now the right time for a resurgence of copyright applications for software to protect intellectual property rights?   Yes, perhaps.  While copyrights cannot replace patents as a legal monopoly, for the smaller business or entrepreneur with limited funding and wanting a quick certification of ownership, copyright offers a simple, cost-effective solution. 

Unlike patents (which protect innovative ideas), copyrights only protect the particular expression of an idea, such as a story, or a software application.  There is some room for additional copyright protection against plagiarized “derivative” works, but not much, since the author of the “derivative” work need only show a minimal level of originality to defeat a claim of plagiarism. 

But, copyrights still have a lot of value.  A copyright owner can prevent others from copying and marketing clone software or even a clone product catalog.  You don’t need to register to own the copyright, but registration helps with enforcement.  The owner of a registered U.S. copyright can sue for damages and collect attorney’s fees.  (Owners of trade secrets can only sue for damages and normally cannot collect attorneys’ fees).  And you can register the copyright with U.S. customs authorities to prevent the importation of infringing products.  All this is a powerful incentive for preventing knock-offs.  The U.S. online copyright filing fee is only $35 per basic claim of authorship.

But, done wrong, registering a copyright can risk losing trade secret and/or patent rights.  If you deposit a copy of your source code for the app with the U.S. Copyright Office, it risks making public your confidential secret sauce, which would normally defeat trade secrecy and could endanger an unfiled patent application.  Done right, however, your copyright registration can avoid that risk by careful planning and limited disclosure of the secret sauce. 

Your copyright registration program should fit within a more holistic overall program to protect intellectual property including trade secrets.  The copyright deposit materials could be machine-readable object code, so that it becomes indecipherable without an operating system and a computer language.  Or the deposit materials could be fractions of a printout of the code.  All you need to do is prove that it compiles, and do it in a manner that prevents anyone from decoding.   Special rules apply, though, for apps that are derivative works or include some open-source components.

For low-cost and high legal value, copyright registration may become the method of choice for entrepreneurs and small app developers.   Patents should still be pursued as a defensive measure, but copyrights can be an important part of the plan.