Nevada: want in on the tech bubble 2.0? Get a better anti-SLAPP statute.

By J. DeVoy

Earlier this week, Facebook announced its $1B acquisition of hipster staple Instagram.  Everywhere you look, social media companies based on seemingly fragile social momentum are receiving gigantic valuations and making initial public offerings.  Zynga has $8.8 billion in market capitalization – it’s best known for FarmVille, brogrammers and abusing trademark law.  Groupon has lost more money than many firms will ever see, yet IPO’ed, reifying billions of dollars of wealth for shareholders.

Yet California does not have a monopoly on tech.  In fact, California is absurdly expensive.  Nevada, in contrast, is dirt cheap.  And, based on the success of firms like SirsiDynix and Adobe in Utah – seriously, Utah – it’s clear that Silicon Valley does not have a stranglehold on programming and tech manpower.  For all but the most elite developers, young workers will go where the work is – and even then, they will pursue the most challenging opportunities.

But this raises the question of why, exactly all of these wildly successful social media companies started in California.  What is it about California?  What is so profoundly different about the state that gives it a monopoly over these companies?

Maybe it’s one of the country’s best, oldest and most litigated anti-SLAPP statutes?

I know how much we like to wax poetic about the importance of 47 U.S.C. § 230 on this blog, and write about how liberating compliance with the DMCA is.  But the reality is that if some unethical shithead wants to try to grab some cash from your pocket, he/she can and will sue you on utterly frivolous grounds – and if it happens in a state without a good anti-SLAPP statute, and especially a hellhole like Florida or New York, you’re going to just have to grin and eat the costs of proving, for the eightieth time, that the Roommates.com case and its § 230-vitiating FHA violations are in fact an extreme outlier.

That is, unless you live in a state like California with a kick-ass anti-SLAPP statute.  Among others, I would include Washington, Oregon and Texas on the list of states with a good anti-SLAPP statute.  I think, too, that Nevada can and  should be one of these states.

There’s some really good stuff in Nevada’s anti-SLAPP statute.  In October 2011, I wrote about the following provision, which gives a slight testosterone injection to California’s fee-shifting regime:

 Reasonable attorneys’ fees are awarded independent of the Court’s discretion, and the prevailing anti-SLAPP movant has his own cause of action for compensatory damages, punitive damages, and attorney’s fees.  (source)

However, this is all meaningless if it applies only to expression made to a governmental entity.  If this statute is going to have teeth and apply to social networking services that are wrongly sued for third parties’ postings on them, the range of protected expression must be drawn more broadly.  California and Texas provide some good examples of how to define this.

While Zynga, Groupon, Facebook, Google and many others that have yet to publicly reveal their wealth are Delaware Corporations, they all do business in California – and are protected by Cal. Code of Civil Procedure 425.16.  Broad First Amendment protections.  Mandatory fee shifting for a successful motion.  Washington and Seattle-based Avvo Inc. are shaping up to be a similar success story, and a longer post about their recent anti-SLAPP victory is forthcoming.

An anti-SLAPP statute is not the cure-all for Nevada’s drive to diversify its economy, attract new businesses and encourage diversification.  California’s (and specifically the bay area’s) success in social media is attributable to numerous covariants including an entrenched, educated and highly skilled workforce, fed by CalTech, Stanford and UC Berkeley.  Silicon Valley is also host to a surfeit of venture capital and private equity firms; needless to say Las Vegas is not.  However, flying from Las Vegas to SFO is at most a proposition of $200 and… 90 minutes?  possibly less?  This is hardly a barrier to innovation and financing.

The cynic in anyone who understands markets is that the latest tech bubble (perhaps more accurately, the social bubble) is exactly that – an inflated payout for the investors in these services.  But good for them – they got paid, and you’re reading this blog.  Who’s the idiot now?  Regardless of how absurdly overvalued some of these services seem and doubtless are, billions of dollars in paper wealth are being created – and Nevada can capture some of it by making a small but important change to an existing law.  Making Nevada a hospitable place for social media ventures will create or attract jobs to Nevada, especially economically battered and casino-reliant Southern Nevada, and enrich those companies’ employees.  Like the Canadians in the South Park episode “Canada on Strike,” Nevadans must stand up and scream at their representatives: Give us Internet money!

As a tourism mecca, Las Vegas knows a lot about getting the world’s ultra-wealthy to leave a lot of their money here.  By providing sufficient protections to new media businesses, the same dynamic can play out with the rich investing in new businesses, rather than a blackjack table.

(I have nothing against blackjack.)