ACT - Protecting Small Business Innovation

Prices Down. Speed Up. Feb 2010 Edition

Is the drop in average computer chip price over the past year. The same computer processor that cost you $100 in February 2009, cost only $86 this past February according to the Bureau of Labor Statistics study released yesterday.

Is the number of months in a row that the average price for computer chips has dropped since 2000 according to the BLS numbers.

Is the average increase in speed and computation power in computer chips every 2 years. 

Is the number of industries with a comparable year over year price decreases and performance gains.

Why?

For all the allegations made by the Federal Trade Commission and others about Intel’s anti-competitive tactics, none of these has trickled down into consumer harm.  This reality will make it difficult for the FTC and is likely the reason the FTC chose to use its Section 5 authority rather than its authority under Section 2 of the Sherman Act.

This week in Antitrust

This Friday's round up of antitrust-related news highlights current activity in a number of different areas of interest including the rise of niche microchip manufacturers, Intel's continuing struggle to maintain dominance in the mobile device market, a move by airlines in Europe to placate fears of unfair business practices, and a drug company's efforts to clear its name from the ranks of dastardly monopolists.

Intel - Semiconductor IP: lntel vs. ARM and Tessera’s Expiring Patent | Sramana Mitra

Intel and ARM are not the only players in the smart device chip game but are certainly among the major providers of System on a Chip (SoC) platforms. For an increasingly important variety of gadgets that require completely integrated functionality and low power consumption on one microchip, the market is currently big enough to support a handful of specialty chip manufacturers who are slowly chipping away at Intel's (and ARM's) dominance. Sramana Mitra has some excellent analysis of the current chip state-of-affairs in her topical blog post from late last week. She writes on a niche operator that is capitalizing on camera-based handsets:

Tessera is looking to cash in on the growing market for camera-based handsets. Recently, it announced that Samsung Electronics has integrated Tessera’s OptiML Focus solution in its notebooks. Tessera has been building out its imaging and optics portfolio with the help of five acquisitions since 2005: part of Shellcase, a wafer-level image sensor packaging technology provider; Digital Optics, a micro-optical solutions developer; Eyesquad, a smart optics technology supplier; part of Dblur Technologies, a software lens technology developer; and FotoNation, an embedded imaging solutions provider.

Mitra also points out the significant portion of the 3G market space owned by InterDigital, a company focused on "advanced digital wireless technologies" and holder of a number of key patents for cell phone technologies.

InterDigital, which has a 55% share in the 3G handset license market, reported a 20% increase in fiscal 2009 revenue of $297.4 million and net income of $87.3 million or $1.95 per share, more than triple its 2008 income. During 2009, the company repurchased shares for $25 million under the $100 million share repurchase program authorized in March 2009. It ended the year with $409 million in cash.

For a mostly unheard of company, InterDigital is doing quite well, thank you, while Intel continues to struggle to forge lucrative IP deals in the face of ARM's smartphone product dominance. "Intel is welcome to the market, but at the moment, ARM rules the mobility market..." is how Mitra sums up the situation and with the numbers to back up her conclusion, she's right on target. Be sure to check out the entire piece for more stock market figures and a few explanatory graphs to complete a well-crafted look at the mobile microchip business.

British Airlines et. al - BA, American, Iberia offer EU concessions | Yahoo! News UK

A number of international kingpins in the airline business are coming under close European Union scrutiny after rival airline, Virgin Atlantic, cried "Foul!" in reaction to the "U.S./EU 'Open Skies' agreement, which liberalizes trans-atlantic aviation" that "would lead to higher prices for consumers." Virgin's superstar CEO, Sir Richard Branson, offers his thoughts on the European Commission's decision to drop its investigation:

"I continue to question why the Commission is even considering these proposals to try and put right the consumer harm of this monster monopoly when it does not seem to have any evidence of concrete consumer benefits," Richard Branson, president of Virgin Atlantic, said in a statement.

Branson, who met Competition Commissioner Joaquin Almunia this week to discuss the issue, said Virgin would attempt to show why the alliance should be stopped.

Branson might be barking up the wrong tree, as the airline industry has a long history of creating alliances in order to placate those who cry "Monopoly!" at the thought of increased route-sharing and profitability.

Alliances are seen as a lucrative alternative to mergers and large-scale investments.

The Commission said in a statement that the airlines had offered to give up some landing and take-off slots for routes from London to Dallas, London to Boston, London to Miami and possibly London to New York should competitive conditions change.

The carriers also proposed to allow access to their frequent flyer programs on those routes as well as London-Chicago and Madrid-Miami, and submit data on their cooperation.

The United States Department of Transportation (USDOT) is also in on the gig, with a tentative "All clear" given to the latest partnership but Branson would still have 45 days to lodge his complaint before receiving the final bad news. But not to worry, there will be other opportunites for Sir Richard's Revenge: "The Commission is also probing proposed alliances between members of Star Alliance, and members of SkyTeam, both rivals of Oneworld." Maybe they should just all join hands and form one mega-merger and bury the monopoly hatchet, once and for all.

Monsanto - Monsanto’s Seed Patents May Trump Antitrust Claims, Lawyers Say | Bloomberg News

Major food agribusiness leader Monsanto's legal woes continue to stack up but there may be some relief in sight for the beleaguered seed seller. Jack Kaskey and William McQuillen offer up some excellent reporting on how the US Department of Justice might just be the company's worst, and best friend, in its bid to continue what some are decrying as unfair, and monopolistic, business practices. They report:

Monsanto Co., facing antitrust probes into its genetically modified seeds, may benefit from previous court rulings in which intellectual property rights trumped competition concerns, antitrust lawyers say.

The Department of Justice and seven state attorneys general are investigating whether the world’s largest seed company is using gene licenses to keep competing technologies off the market. At issue is how the St. Louis-based company sells and licenses its patented trait that allows farmers to kill weeds with Roundup herbicide while leaving crops unharmed. The company’s Roundup Ready gene was in 93 percent of U.S. soybeans last year.

DuPont Chemical, a competing firm in the agribusiness marketplace, is hoping for some relief in their struggle to knock Monsanto off the top of the modified seed sales mountain.

“When you have that sort of monopoly power, it can lead to abuse, which is what we’ve been experiencing over the past several years,” said Thomas L. Sager, DuPont’s general counsel.

Wilmington, Delaware-based DuPont claims Monsanto protects its lead in biotech seeds, including the Roundup Ready seeds sold since 1996, by controlling whether competitors can add their own genetics.

Monsanto also has begun switching seedmakers and growers from Roundup Ready soybeans to the newer Roundup Ready 2 Yield version in advance of the original’s patent expiration in 2014. DuPont says Monsanto is using incentives and penalties to switch the industry to the new product in a way that unlawfully extends the Roundup Ready monopoly.

Whether Monsanto's cleverly-contrived plans to offer incentive and penalties that unfairly compressed seed sales into their hands is worthy of being called anticompetitive remains to be seen, but one thing is sure, at 93% of all soybean stock showing the presence of Monsanto's Round Up Ready genetic alterations, a true monopoly is only a few percentage points away.

Google/Microsoft - EC antitrust probe is latest clash in Google-Microsoft war | IT World

Microsoft is redoubling its efforts to make sure Google feels the pain of the antitrust "hurt locker" that is so well known by the Redmond, Washington software giant. Sharon Gaudin has some pertinent bits and pieces on this increasingly acerbic and serious game of IP brinkmanship for the constant reader to consider:

The EC announced late last month that it had initiated an antitrust probe into Google based on complaints from three European companies, two with connections to Microsoft.

Microsoft CEO Steve Ballmer last week acknowledged his company's role in pushing government regulators to pursue such investigations.

"We're not being silent; we're expressing some of the issues and frustrations we see. Certainly, sometimes that is unsolicited, but oftentimes, it's because we've been asked," Ballmer told an audience at the Search Marketing Expo in Santa Clara, Calif.

Microsoft's complaints to the EC are just the latest skirmish in an escalating battle between Google and Microsoft on several fronts, including the operating systems and enterprise apps markets, and the online search business in particular.

Indeed, Google is the dominant presence in the global Internet search market but sees a bit of thinly-veiled collusion in Microsoft's continued assault on its position. Microsoft hasn't helped matters much with its own attempts at pretending that it is just an innocent witness to the Google imbroglio.

Julia Holtz, Google's top antitrust lawyer, questioned Microsoft's motives in seeking an antitrust probe via complaints made to the EC by Ciao GmbH, a Munich-based company acquired by Microsoft in 2008, and Foundem, a Bracknell, England-based price comparison site and a member of the iComp trade group, which is largely funded by Microsoft."

I wonder if Google used some of its excellent search algorithms to sniff out Microsoft's relationship to Ciao and Foundem? And yes, Microsoft deflects some of the unwanted attention from its sly purchase with this rejoinder by Dave Heiner, vice president and deputy general counsel at Microsoft: "Ultimately, what's important is not who is complaining, but whether or not the challenged practices are anticompetitive."

Pfizer - Pfizer Still Dealing With Antitrust Issues | The Motley Fool

Well-known big pharma company Pfizer has successfully completed its acquisition of rival drug manufacturer Wyeth but continues to strive to placate European Union officials' concerns of monopolistic practices. Motley Fool Brian Orelli has a some words of insight to help shed light on Pfizer's sell-off of some less-desirable businesses:

Pfizer's (NYSE: PFE) acquisition of Wyeth has been done for months, but the pharma giant's still making moves to satisfy regulators. In order to keep the European Commission happy, today the company sold off some of its animal-health products marketed in the EU to Eli Lilly (NYSE: LLY). The terms of the deal weren't disclosed, but Eli Lilly did say that the products will come with a manufacturing plant to help make them.

This move should help Pfizer rebuff additional concerns over its ginormous market presence although it could also cost the company dearly with the loss of significant amounts of pet-centered product lines. Here's Orelli's take on what potential Pfizer stockholders should keep in mind:

...[I]nvestors shouldn't ignore animal-health products either. Added together, Pfizer's animal products contributed over $2.7 billion to its coffers last year and Eli Lilly's animal health division added $1.2 billion.

Good stuff, people. Have a great weekend, and see you again next week: same ACT time, same ACT place.

Bonus antitrust-related piece o' the week: Intel - Intel digs in to fight FTC lawsuit over chip competition| USAToday

This Week in Antitrust

The third in a series of round ups of the tech industry's various antitrust cases and related topics, this week's entry focuses on Apple's use of the ARM microchip in its coming blockbuster, the iPad, and how Intel seems to have missed the custom 'System on a chip' (SoC) boat entirely. Also included are a few pieces of interest on Microsoft, Google, and Yahoo! with competition and antitrust being the featured topics.

Intel - Analysis: Intel Faces Challenge In Smartphone Markets As Alliance with TSMC "Fizzles"| SiliconValleyWatcher

Tom Foremski, former Financial Times reporter who currently focuses on "the business and culture of disruption," takes a look at Intel's struggle to compete in the custom microchip market in a recent piece and highlights the failure of the chipfab titan to adapt to a rapidly changing market. Of particular interest is the choice of a competing chip model, ARM, for use in a growing number of smart gadgets, e.g., Apple's iPad and HTC's "Desire" phone.

A year ago, Intel, the world's top semiconductor maker, announced an alliance with TSMC, the world's largest chipmaker.

TSMC, headquartered in Taiwan, makes chips for other companies. It invented the "fabless" chip industry, which is now the largest sector of the global chip market.

In the first deal of its kind, Intel licensed its Atom microprocessor design to TSMC, so that third parties could design custom chips combining Atom, with technologies from many sources. The goal was to provide something similar to the UK's ARM microprocessor design, which is used in many custom chips, such as the A4 found in Apple's iPad.

But this hasn't worked out.

Intel's Atom chip works swell in devices with larger batteries to power its increased energy needs, but falls short in smaller, more complex, tech items such as the latest generation of smartphones. Foremski offers up some thoughts on what lies ahead for Intel if it can't get up to speed on its system on a chip (SoC) offerings, and quick. "Intel certainly has the talent and resources to make future Atom designs that are competitive with ARM in terms of power consumption and size. But the longer this takes, the more design wins for ARM. Once a company is committed to an architecture, it is very expensive to switch to a different one." And Intel even reveals their prospects for grabbing a larger share of the marketplace are are slim, admitting "...that a lack of customer demand has put the partnership [with TSMC] on hiatus for the short term. Which is to say, there will be no jointly developed Atoms arriving anytime soon."

Apple/Intel - For Chip Makers, the Next Battle Is in Smartphones | The New York Times

In her standout, full-length article, Bits Columnist Ashlee Vance digs into Apple's prescient choice of using a bespoke chip based on the ARM architecture instead of trying to make due with the outdated and power-hungry Intel Atom processor. Chip manufacturers are gearing up for an all-out Armageddon over market share in the rapidly growing SoC market and expect there to be casualties along the way. Vance details the battlefield for the gentle reader:

...[T]he chip wars are about to become even more bloody. In this next phase, the manufacturers will be fighting to supply the silicon for one of the fastest-growing segments of computing: smartphones, tiny laptops and tablet-style devices.

The fight pits several big chip companies — each trying to put its own stamp on the same basic design for mobile chips — against Intel, the dominant maker of PC chips, which is using an entirely different design to enter a market segment in which it has a minuscule presence.

Consumers are likely to benefit from the battle, which should increase competition and innovation, according to industry players. But it will be costly to the chip manufacturers involved.

Due in part to Apple's choice of a main processor based on the ARM model for the coming iPad touch-based tablet computer, Intel is trying to play catch up as quickly as possible but has some stumbling blocks to deal with first. More information on Intel's struggle from Vance:

...Intel is about to enter the phone fray, both to expand its market and defend itself against the ARM chip makers. Its Atom line of chips, used in most netbooks and now coming to smartphones, can cost two to three times as much as the ARM chips, according to analysts. In addition, the Atom chips consume too much power for many smaller gadgets.

But with 'deep pockets' and a long history of chip market domination, Intel shouldn't be counted out just quite yet but they certainly are spending a lot of time on the canvas these days and are rapidly approaching the need for the cut man to step in and do some triage.

Microsoft on Google - Microsoft CEO: Google merits regulatory scrutiny | KVAL.com

Earlier this week, Microsoft CEO Steve Ballmer sat down to have a chat with reporters during a search engine conference and clearly noted his intentions to "keep the regulatory heat on Google" to help increase Microsoft/Yahoo!'s own search market share. Michael Liedtke reports:

Ballmer said Microsoft believes Google Inc. has done things to gain an unfair advantage in the Internet's lucrative search advertising market. He didn't specify the alleged misconduct.

"We are expressing some of the issues and frustrations we see" with antitrust regulators, Ballmer said. "Sometimes (it's) unsolicited, sometimes because we have been asked."

Google declined to comment Tuesday. But it has said its actions are aimed at providing better experiences for Web surfers and advertisers.

This is not the first time in recent memory that Microsoft has attempted to turn up the pace and aggressiveness in pursuing legal means to crush Google's search engine dominance.

As part of its efforts to challenge Google, Microsoft has sought help from Twitter and Facebook - two popular services for sharing information and photographs.

Microsoft, like Google and Yahoo, pays an undisclosed sum for better access to Twitter's index of short messages. In a bigger partnership, Microsoft spent $240 million for a 1.6 percent stake in Facebook and processes search requests on that site.

Responding to questions, Ballmer played down the possibility of Microsoft buying Twitter or Facebook, which are both privately held.

The search engine crown is firmly held by Google but Microsoft is eagerly beavering away at any small fraction of the marketplace they can gain by almost any means necessary. With Google being accused of unfair and monopolistic practices in the European Union, Microsoft's previous experience navigating such lawsuits might come to its rescue and help them eventually increase the role their proprietary Bing search engine plays in bringing in the hits. For some reason, all I can think about after reading Liedtke's piece is something about pots, kettles, and the color 'black'...

Google - Google antitrust probe – Why Microsoft should sell Bing to Yahoo!| 4sysops.com

Microsoft has some garnered a large number of supporters for its claims of Google's "unfair" search engine ascendancy, including the likes of Michael Pietroforte, who writes up his ideas on why Microsoft should exit the search business altogether to focus on their core business, the Windows family of operating systems. Here's the meat of Pietroforte's riposte:

I always wanted to address this topic because I never liked Microsoft becoming a player in the search business. First, it appears to me that Microsoft’s top management neglected their core business by focusing on Google as their major competitor while others, most prominently Apple, had an easy play. This is the only explanation I have for the two most severe management mistakes in Microsoft’s history:

The Vista debacle was not at all about technical issues of the operating system. Technically, Vista was Microsoft’s greatest achievement since Windows NT. Vista is perceived by many as a failure only because the Windows ecosystem wasn’t prepared for this major update. There was enough time between Windows XP and Vista for Microsoft’s management to prepare business partners. But it appears that they hopelessly underestimated the importance of this task. Since they are all very smart people, it can only be because they were distracted by pondering why on earth they can’t beat Google.

The second big management mistake was neglecting Windows Mobile. How can a nobody in the smart phone business, like Apple, make a fool of all the major players in this market? Was it really so difficult to see that you can’t just run a slim version of Windows on a mobile phone?... And if all those resources that were bound up in hunting Google were focused on Microsoft’s core business – that is in creating and managing software ecosystems – it wouldn’t have been a big deal to come out with a really cool smart phone OS long before a couple of Cupertino guys were able to hack together the iPhone OS.

Search engine market share, Pietroforte suggests, is just the type of shiny object that mesmerized Microsoft's Redmond, Washington executive geniuses and caused them to neglect the very thing that made them the software giant they are today: Windows. Closing with an assertion that Google is indeed a monopoly, the author urges Microsoft to cut lose the burning ship of Bing and get back to its roots. Good advice? Only time will tell.

Intel - Apple's iPad: trouble for Intel's mobile push? | Reuters

 Ian Sherr's timely story offers additional evidence of Intel's struggle to adapt to a fluid and difficult smart device environment, including gems like this:

While Apple likely will not market the chip publicly, analysts say the new processor underscores how rival chip designs may eventually win out over Intel Corp's designs in the emergent hot category of mobile devices like smartphones and tablets.

Intel says the first smartphones using its chips go on sale by 2010's second half, as it tries to stake out a corner in the wireless market and replicate what it did for the formerly red-hot netbook category it now almost completely dominates.

But analysts point to an uphill battle against Nvidia Corp, Marvell and Qualcomm Inc, already making headway with cheaper, low-power processors based on designs by ARM Holdings PLC.

Intel is very heavily invested in the aging x86 chip architecture, which is holding back necessary and vital R&D efforts to bring down both the cost and power usage of its rival chip, Atom. "If you look at the stuff Intel's put out there at previous press events and developer forums, you see mobile Internet devices that are kind of clunky, really thick, low-battery life type of devices," [Wedbush Morgan analyst Patrick] Wang said. "They've been worried." As far as Apple's choice to go with their custom ARM-based chip, known as the A4: "'If it's a reminder that Intel is not ready for this kind of prime time, it is a sign that ARM is upscaling,' said IDC analyst Shane Rau. 'It's a sign that the ARM ecosystem is executing.'" Will Intel be able to turn its titanic x86 chip towards the New World of smartphones in time to avoid a collision with the looming iceberg of SoC irrelevance? Tune in next week to find out more!

This Week In Antitrust

Here is the second in a series of weekly round ups of the tech industry's various antitrust cases and "potential" antitrust concerns. Recent antitrust news has increasingly focused on European Union moves to curb American domination of the global tech market with some Stateside stories thrown in for good measure.

Microsoft - Microsoft's chief counsel Brad Smith sharp, able to relate to people | The Seattle Times - Business & Technology

Microsoft's general counsel, Brad Smith, brought not only a wealth of pertinent legal and antitrust knowledge to the table during the long, drawn-out negotiations with the European Union over the company's alleged monopolistic practices, but also offered a much-needed sense of humor and a penchant for putting a human face on an otherwise stark series of interactions. Sharon Pian Chan reports:

A joke can help even a billion-dollar fine.

Even when Microsoft was facing major antitrust sanctions from the European Union, legal counsel Brad Smith was laughing with Europe's antitrust lawyer about the similarities between the negotiations to the end of the movie "Fatal Attraction."

Each time they thought they had reached a settlement to resolve monopoly concerns about Microsoft Windows and Internet Explorer, someone would come back and try to kill the agreement, like psychopath Alex Forrest rising from the bathtub with a knife.

Settling the case was crucial, because in a previous ruling the European Commission had fined Microsoft $1.4 billion.

Although Microsoft has implemented a kind of user voting system for browser choice in its popular Windows operating systems in response to a separate EU case, the tech giant has yet to see how its appeal of the stunningly huge fine will play out. Surely Smith's easy style, combined with his solid legal arguments, will help ease things in a favorable direction.

Google - Digital book fight pits Google against Justice Department | The Buffalo News - Business Today

Online search and advertising titan Google is hoping it can overwhelm the powers-that-be with the depth of its antitrust knowledge and gain the upper-hand in a class action lawsuit over the company's on-going book scanning project, Google Books. From San Francisco, the Associated Press' Michael Liedtke provides more details on Google's upcoming battle with the US Department of Justice.

Determined to create the world’s largest digital library, Google Inc. is betting it knows more about U. S. antitrust and copyright laws than the government regulators enforcing them.

The Internet search leader took an audacious step toward realizing its book ambitions late Thursday with a 67-page brief filed in New York federal court.

Among other things, the documents dismissed the legal concerns that the U. S. Department of Justice has raised about a class-action settlement proposing to give Google the digital rights to millions of hard-to-find books.

The DOJ is calling the recent approval of the Google Books effort by U. S. District Judge Denny Chin "a bridge too far" and asserts its belief that Chin "lacked authority" to give the massive digital library the "all clear." That's not to say the DOJ isn't trying to slyly endorse Google's efforts with a bit of subtle nudging in the right direction. "Despite those red flags, the Justice Department endorsed the concept of Google’s digital library. The agency also outlined ways Chin could dictate changes that would satisfy some of its concerns." Every antitrust case has at least two sides but strangely enough, the DOJ is playing both good cop and bad cop in this particularly acrimonious instance.

Microsoft/Yahoo! - Microsoft Plus Yahoo vs. Google, So It Begins | Hitsgarden.com

Microsoft's CEO Steve Ballmer and Chief Council Brad Smith are quite excited at the recent decision by both the US Department of Justice and the European Union's Antitrust Commission, as evident in their quoted responses courtesy of article author, Jason. Ballmer offers his enthusiastic PR spin for the gentle reader:

“Although we are just at the beginning of this process, we have reached an exciting milestone,” said Microsoft Chief Executive Officer Steve Ballmer. “I believe that together, Microsoft and Yahoo! will promote more choice, better value and greater innovation to our customers as well as to advertisers and publishers.”

Then Microsoft General Counsel Brad Smith weighs in on the good news:

“We appreciate the thorough reviews conducted by the DOJ and the Commission and we welcome the thoughtful decisions reached by each agency. We also commend the collaborative efforts the regulators undertook to understand the search advertising market. Likewise, we are grateful for the efforts of regulators in Australia, Brazil and Canada who previously cleared the agreement, as well as those regulators we continue to work with in Korea, Taiwan and Japan,” noted Brad Smith, Microsoft senior vice president and general counsel.

Microsoft will offer its search engine, Bing, for use by Yahooligans while Yahoo will maintain control over the "relationship sales force for the duo’s premium search advertisers worldwide." Currently, the search market overseas is massively dominated by one player, Google, who controls more than 90 percent of the European market, and the MicroHoo deal aims to change that.

“We’re hopeful that this agreement is a first step for a viable competitor to emerge,” Smith added. “As we said when we announced the deal last July, the agreement required regulatory clearance in the U.S. and Europe before it could close. Now that we’ve received those approvals, we will begin the work of implementing the agreement. And we will continue to work with regulators in other relevant jurisdictions to ensure they have the information they need to evaluate the deal before it takes effect in those specific markets.”

Micron/Hynix/Infeon et al. - Long-Running Antitrust Litigation Against Computer Memory Manufacturers Nears an End | Law.com

In other antitrust news, a lengthy, and complicated legal case is drawing to a close. Dan Levine at The Register, explains how a ruling by Northern District of California Judge Phyllis Hamilton dealt a stunning blow to the 'indirect' plaintiffs in the case.

[Hamilton] ruled that the plaintiffs did not have standing to pursue a swath of claims against the companies. Under antitrust law, indirect customers did not participate in the same market as the DRAM manufacturers, Hamilton ruled.

"A contrary conclusion runs the risk of opening the floodgates to potential litigation," Hamilton wrote in 2008. "In today's current business climate, and with increasingly globalized markets, nearly all markets that service one another can be said to be 'related' to such a degree that the impact of one upon another could allegedly be 'proven' with the use of econometrics."

Hamilton acknowledged the "devastating" effect of her ruling on the plaintiffs' case. They appealed, but it was a risk: Should the 9th Circuit affirm Hamilton, her holdings would extend far beyond the DRAM case.

There still remains the matter of a final agreement by the indirect purchasers of the memory chips with the defendants in question, but as soon as Hamilton approves the contents of the final document, the criminal case will finally come to an end.

One Step Closer to a Single European Patent System

After several rounds of negotiations, the Swedish Presidency announced last week that the EU Patent System was one step closer.

We are of course very pleased to see that the dossier is moving forward; and we have continuously praised the Swedish Presidency for their great efforts. A good patent protection is essential to achieving the levels of innovation that European SMEs deserve.  And it appears many agree:

 “The EU patent will make it much easier and cheaper to protect innovations in the EU. This will give European industry better opportunities to compete on the global market," said Minister for Trade Ewa Björling.

“Today's agreement cannot be overestimated. It comes at a moment when it is most needed," said the EU's industry commissioner, Gunter Verheugen, after the deal was struck. 

Creating an ideal environment for EU innovative SMEs, including a strong unified IP protection system, would help to improve the overall innovation performance of Europe, which still lags behind that of the US and Japan. But conversations about a one-stop shop for patent protection across Europe are almost as old as the European Union itself so we can’t help but wonder, are we really there? 

The Swedish Presidency and the European Commission considered Friday’s development a very positive breakthrough. And it is, but will the next EU Presidency to be led by Spain be willing to take to take over?  Will they leave language differences aside? What role will the European Court of Justice and the individual Member States play in shaping the agreement? 

Friday’s agreement was an important step, but there are still outstanding issues that shouldn’t be overlooked before we sing victory.

Thoughts on the CrunchPad Saga

Earlier this week, influential tech blogger and aspiring cool product entrepreneur Michael Arrington announced that the eagerly anticipated CrunchPad was stillborn.  Popular Mechanics prematurely heralded the planned low-cost tablet computer as one of the 10 Most Brilliant Products of 2009.  While we will have to wait for more information to know the real story behind the dispute behind Arrington's company TechCrunch and its partner in the venture, Fusion Garage, there are some interesting issues raised by what Arrington has so far revealed.  [Note: although Fusion Garage has removed much of the content from its website, for the time being, a cache of Fusion Garage's blog/PR announcements can be found here].

Arrington claims that because TechCrunch and Fusion Garage jointly own the intellectual property behind the CrunchPad, "it's legally impossible for [Fusion Garage] to simply build and sell the device without [TechCrunch's] agreement."  Now, we don't know what agreements there were between these two companies, but joint ownership of intellectual property would not by itself keep any joint owner from using that property.  The US Patent Office, for example says the following about joint ownership (emphasis added):

Patents may be owned jointly by two or more persons as in the case of a patent granted to joint inventors, or in the case of the assignment of a part interest in a patent. Any joint owner of a patent, no matter how small the part interest, may make, use, offer for sale and sell and import the invention for his or her own profit provided they do not infringe another’s patent rights, without regard to the other owners, and may sell the interest or any part of it, or grant licenses to others, without regard to the other joint owner, unless the joint owners have made a contract governing their relation to each other. It is accordingly dangerous to assign a part interest without a definite agreement between the parties as to the extent of their respective rights and their obligations to each other if the above result is to be avoided.

Under US Copyright law, the rights are a little different: a joint "copyright owner has the right to commercially exploit the copyright, provided that the other copyright owners get an equal share of the proceeds."  Stanford University Libraries, Copyright Ownership: Who Owns What?, Copyright FAQs. 

Therefore, unless there were some agreement between TechCrunch and Fusion Garage that requires both parties to agree on how their joint intellectual property is to be used or licensed, there is no restraint put on either party.  If Arrington sues Fusion Garage, as he has threatened, I will be interested to see the complaint - perhaps there was such an agreement.

Another issue raised is that by sending an email with the following message to Fusion Garage CEO Chandra Rathakrishnan, an unnamed investor may have provided some of the evidence needed to pierce the corporate veil to make the investor liable if a court ultimately finds Fusion Garage wronged Arrington or TechCrunch in this dispute:

"We still acknowledge that Arrington and TechCrunch bring some value to your business endeavor…If he agrees to our terms, we would have Arrington assume the role of visionary/evangelist/marketing head and Fusion Garage would acquire the rights to use the Crunchpad brand and name. Personally, I don’t think the name is all that important but you seem to be somewhat attached to the name."

If this dispute ends up in court, the email to Fusion Garage would probably have been disclosed in discovery anyway, but Rathakrishnan unnecessarily highlighted the investor's direct involvement with the dispute by forwarding it to Arrington.  The limited liability provided by the corporate form is not absolute - investors who have sufficient ownership and control a corporation to such an extent that a court finds the corporation is a "mere instrumentality" of the investors may be liable for the corporation's acts.  See, e.g., Institute of Veterinary Pathology, Inc. v. California Health Laboratories, Inc., 116 Cal.App.3d 111, 119 (1981); Standard Wire & Cable Co. v. AmeriTrust Corp., 697 F. Supp. 368, 374 (C. D. Cal. 1988).

Both issues should serve to remind entrepreneurs (and investors) to be careful about ownership of IP and to be careful about corporate control and the dangers of discussing sensitive issues over email.

In any event, I personally hope that TechCrunch and Fusion Garage resolve the situation, release an innovative product, and make scads of money. 

IP and Guilty Pleasures Collide, Part Deux

This is a follow-up to my post last week about IP rights and the "for me, but not for thee" attitude we often see when assertion of rights makes an appearance in pop culture. Last time it was a contestant on "Project Runway" having to change course after being informed that some pre-printed t-shirts she'd planned to use were trademarked. I'll try to refrain from making this an annoying multi-part series, but here's another example of IP irony:

Celebrity gossip website TMZ.com is poking fun at singer-songwriter-musician Taylor Swift for joining on to a BMI copyright infringement lawsuit that apparently goes after bars that haven't paid proper licensing fees for the music played in the establishment and during karoke. Someone like Taylor Swift couldn't possibly need the couple of bucks a month that would come in from such fees, TMZ intones.

Or maybe it's more about the principle of the matter. And maybe that's why the bottom of the post on TMZ has a fun little symbol of a "c" with a circle around it. And why their own Terms of Use page says, "This Site and all materials incorporated by TMZ.com on this Site ("Material") are protected by copyrights, patents, trade secrets or other proprietary rights ("Copyrights") ...TMZ.com respects the intellectual property rights of others and asks users of this Site to do the same."

Where IP and Guilty Pleasure TV Collide

Over the weekend I watched the latest installment of “Project Runway” that my DVR had so thoughtfully recorded and about halfway through the episode we got to the part where something goes terribly wrong for one of the designers. (Just like other “reality” shows, every episode of ProjRun follows a similar plot arc and seems to have pre-determined characters.) This week it was for designated mean girl Irina who was designing her clothes for the finale with a New York theme, including some graphic t-shirts that she found somewhere and planned to incorporate. She’s nearing completion when she gets a call from Tim “Make it Work” Gunn telling her that the t-shirts have to go since the images are trademarked and she doesn’t have the rights to use them.

Dun dun duuuuunnnnnn.

Irina has to find another way to finish the looks. She is stressed and freaking out a little bit.

And there, of course, is the irony. By trying out for and competing on ProjRun, Irina assumedly has ambitions to be a real, honest-to-goodness, not-just-making-fun-sweaters-for-your-friends fashion designer.  And if she were to make a name for herself, or design a new print, or have a distinguishable logo, or any of the other intellectual property things that are part of the fashion design world, I’m sure Irina would be angry if some up-and-comer were trying to copy it, or use it without her permission. Heck, even on the show she’s gotten ticked off and accused other contestants of ripping off her ideas.

And it’s the same IP problem that we see in other parts of the IP world—a tension between IP creators and IP users, and how the line of acceptability is blurred when user becomes creator.  It’s the clichéd “for me, but not for thee” scenario. And for as much money as networks and distributors and production companies and everybody else spends to fight counterfeiting, unauthorized use, and improper distribution of their work, you’d think they’d take this smart opportunity to work a little IP messaging—seriously, what would it take? Ten seconds?--in to the show.

Hmmm. Then again, maybe they were long on time and Irina’s passionate defense of trademarks is sitting on the cutting room floor (next to the unused t-shirts and that hideous fur concoction on which she was working).

"Hey, Pot... It's the Kettle."

This news story from last week just about speaks for itself, and little commentary is needed. (And no, it's not a leftover from April 1.) It feels like something that should be on SNL's "Really?!?!?! With Seth & Amy." I mean, China... Really?!

Chinese Group Says Google Violating Copyrights

No Patent Troll Here -- Rewarding Innovation Down Under Through Patents

Slashdot's recent discussion of how an Australian research/tech transfer agency enforced its patent rights against 14 of the world's largest tech companies has what everybody should view as a happy ending: reinvestment.

Australia's CSIRO has "injected $150 million from the proceeds of its wi-fi technology to the once-defunct science and industry endowment fund, originally established by parliament in 1926" according to the Aussie news article. The article also has a great quote:

It's very important that when you have a success like this, you re-invest it back into the wellspring," CSIRO boss Megan Clark said.

Exactly! This is what the patent system is supposed to be all about. Rewarding innovation creation and providing incentives for new research. Here, it's a government agency that benefits. But it could be a small IT company that uses patents to also invest back into the "wellspring."