Exemption for jailbreaking shows, again, that the DMCA works!

July 28th, 2010 | Mark Blafkin

The Librarian of Congress and the Register of Copyright conducted another thorough review of requested exemptions to the DMCA and issued six new well-reasoned exemptions. ACT believes the exemptions issued demonstrate the flexibility of the DMCA to adequately protect copyright owners, provide incentives for new innovation, and enable consumers and innovators to utilize and enjoy copyrighted works.

The Librarian of Congress concluded the triennial rulemaking process and issued six exemptions to the DMCA’s prohibition on circumvention of technologies that control access to copyrighted works. Six classes of works were determined to be exempt- in other words, copyright users of these works can circumvent access controls of copyrighted works to make non-infringing uses.

The Librarian, upon the recommendation of the Register of Copyrights, has issued exemptions in each rulemaking since the enactment of the DMCA. These exemptions impacted only a small number of copyright users and went relatively unnoticed. However, a new exemption was added to the list yesterday and it had the tech world buzzing.

Owners of smartphones, basically iPhones, may now circumvent or “jailbreak” the access controls to the firmware in order to add and run interoperable third-party applications.

Read the rest of this entry »

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ACT Member Peter Carnes Storms the House!

July 22nd, 2010 | Morgan Reed

CT member Peter Carnes (CEO of Traffax, Inc.) testified before of the House Committee on Small Business today about “The Impact of Intellectual Property on Entrepreneurship and Job Creation”. Peter shared the stage with a really diverse group of IP owners – from ABRO, which has problems protecting its trademarks, to Rick Carnes, a songwriter who has written songs for Reba McEntire and Garth Brooks. The President of the Business Software Alliance and the CEO of t3 (they sell mainframe software) rounded out the mix.

The Committee has Peter’s oral testimony up on YouTube here, but for those of you who want to read the full version, here’s a link.

Overall, the witnesses really hammered on the message that IP was a key way for America to move forward, and that it wasn’t going to happen without some help from the government. Holleyman and Rick Carnes (Songwriter’s Guild) pointed out that the BRIC nations are really doing a number on US copyright holders – stealing software, music and movies as fast as we can make them. Peter talked about the need to get the USPTO fully funded, and to get the backlog of patents dealt with so that businesses that file for patents aren’t hanging out in the wind for nearly 2 years after their patent has been published.

Peter also pointed out that adding IP to international trade agreements had an impact not just on the macro level, but in day to day business as well. He noted that he had been dealing with China for years, and he has begun to notice that IP issues have now become “part of the narrative” of business negotiations, when before they weren’t even an afterthought.

On patents, Congressman Luetkemeyer referenced a constituent of his who said  ‘filing a patent lets your competitors see what you are doing, and then they just tweak it to work around, so why bother?’ Peter noted that this is the heart of the patent system; it drives innovation forward because by teaching others how you do things, they come up with ways to jump ahead. In exchange for sharing the secret of  how my invention works, I get a time restricted monopoly on my design.  I share so that I can get (temporary) exclusivity. But this delicate balance is being thrown out of whack by a patent system that takes far too long between publishing and granting. During that nearly 2 year gap of time the patent filer can do next to nothing to protect his idea.

We agree with Peter that something needs to be done to get USPTO on the right track of eliminating the patent backlog; in support of this, ACT has asked Congress to give the USPTO access to all the money it collects for FY2010 during FY2010, rather than wait a whole year to spend the money we’ve given them.  Here’s a copy of the letter we sent to the Senate Appropriations Committee.

Finally,  Peter talked about the difficulty small tech companies have had when trying to get a loan through SBA. Banks have almost no ability, and no interest, in granting loans to companies that have few tangible assets.  Innovation companies don’t buy buildings, they don’t buy furniture, they don’t buy trucks, they may not even buy computers.  Instead they pay wages for engineers, they hire software developers, they build and destructively test prototypes – none of which is a tangible asset that a bank can attach if you fail.   Peter asked Chairwoman Velazquez to work with SBA to improve how SBA deals with IP as an asset for the purposes of securing loans.

Overall, Peter was a rockstar today, and made all of us at ACT very proud to have him as a member.

Posted in Copyright, Entrepreneurship, Innovation and IP, Patents, Tech Regulation, Uncategorized | No Comments »

Supreme Court Upholds Software Patents in Bilski; “IP Sucks” Camp Mourns

June 28th, 2010 | Morgan Reed

Today, the Supreme Court of the United States issued its opinion in Bilski v. Kappos, finding that Bilski’s patent was not valid, but reaffirming the patentability of methods and software.  Those in the “IP Sucks” camp were hoping the court would embrace their vision and overturn the entire concept software patents.  Thankfully, their hopes and dreams lie shattered on the floor, soaked in tears, much like my hopes for a USA semifinal birth in the World Cup.

Here is the statement I put out earlier today:

“The Supreme Court reaffirmed what we have always known: the world of software is filled with inventions deserving of protection through the patent system. Just a few minutes playing with a Tivo, an iPhone, or Adobe Photoshop proves that beyond a shadow of a doubt.

Patent quality is still clearly a problem for PTO on software and other method patents, but the Supreme Court rightfully chose not to throw the baby out with the bathwater. Bad patents are the problem, not the patentability of methods and software. What is needed is real effort to reform the system and prevent bad patents from ever being granted.”

Some key lines from the decision include:

In discussing the foundations of patent law:

Section 101 specifies four independent categories of inventions or discoveries that are patent eligible: “process[es],” “machin[es],” “manufactur[es],” and “composition[s] of matter.” “In choosing such expansive terms, . . . Congress plainly contemplated that the patent laws would be given wide scope,” Diamond v. Chakrabarty, 447 U. S. 303, 308, in order to ensure that “ ‘ingenuity should receive a liberal encouragement,’ ” id., at 308–309.

An invention need not be a machine or create physical transformation:

The machine-or-transformation test is not the sole test for patent eligibility under §101.

The Court is unaware of any ordinary, contemporary, common meaning of “process” that would require it to be tied to a machine or the transformation of an article.

Patent Law Does Not Exclude Business Methods or Software Patents:

(c) Section 101 similarly precludes a reading of the term “process” that would categorically exclude business methods. The term “method” within §100(b)’s “process” definition, at least as a textual matter and before other consulting other Patent Act limitations and this Court’s precedents, may include at least some methods of doing business. The Court is unaware of any argument that the “ordinary, contemporary, common meaning,” Diehr, supra, at 182, of “method” excludes business methods. Nor is it clear what a business method exception would sweep in and whether it would exclude technologies for conducting a business more efficiently. The categorical exclusion argument is further undermined by the fact that federal law explicitly contemplates the existence of at least some business method patents:

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Posted in Innovation and IP, Open Source, Patents | No Comments »

A Modest Proposal for ICANN

June 21st, 2010 | Jonathan Zuck

When it comes to accountability, ICANN would rather be compared to other U.S. nonprofit companies than to the regulatory bodies it more closely resembles. If they truly wish to be treated like a nonprofit, rather than a regulator, there is a very simple solution: make all contributions strictly voluntary.

The ever-disappointed Accountability and Transparency Review Team for ICANN met with the ICANN board yesterday, and were told their expectations for real accountability mechanisms were simply TOO high.  Instead of attempting to model accountability mechanisms after the global regulatory bodies ICANN most resembles, an ICANN Board member suggested that new accountability measures should be based on those of US-based nonprofits. I think this is a BRILLIANT idea.

American-based nonprofits like International Red Cross and the Sierra Club have the ultimate accountability mechanism. If they stop serving the needs of their constituents, their constituents can simply end their support.

With such a simple, effective mechanism in place, comprehensive and redundant systems of checks and balances really aren’t necessary. Nonprofits know that they live and die on the trust and commitment of their supporters, and they act accordingly.

So if ICANN wants the community to get off its back about improving its accountability processes, the solution is simple. Instead of extracting a forced donation from every domain name registrant in the world, ICANN should make that donation optional.

On every registrar’s checkout page, ICANN could include a simple checkbox with the caption “click here if you’d like to donate a dollar to support DNS management.” If that change causes a minor drop off in ICANN’s funding, ICANN could supplement its income with a global pledge drive in which it highlighted its achievements and asked users for their support.

Some of ICANN’s executives may have to take pay cuts, and our beloved global meetings may have to be held in less exotic locations, but the accountability problem would be solved once and for all, and ICANN could have its wish of being compared not to regulators, but to other U.S. nonprofits.

Alternatively, ICANN’s board and staff can abandon the utterly spurious argument that it should be treated like other nonprofits, and set about trying to correct the serious accountability flaws that have plagued the organization since its inception.

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Senator Hatch Grills FTC’s Leibowitz on Antitrust Power Grab

June 14th, 2010 | Mark Blafkin

As we’ve discussed before, the FTC recently decided to dust off its Section 5 authority to go after “unfair methods of competition” in lieu of using its tradition antitrust authority (Section 2) to pursue some of its tougher cases. This has many antitrust experts concerned, most notably, Bob Litan, former Clinton administration. In a discussion of the FTC’s use of Section 5 authority in its Intel lawsuit, Litan argued that:

The FTC apparently seeks to avoid proving harm to competition under the established standards of Section 2 because the causal link between the conduct it challenges and any conceivable harm to competition is weak. At a minimum, therefore, the relief sought by the FTC should reflect the tenuous connection between the conduct it challenges and the potential for harm to competition.

Apparently, Senator Orrin Hatch (R-UT) is also concerned by the FTC’s use of Section 2

During June 9th Senate Judiciary Committee’s hearing on Antitrust, Senator Hatch asked FTC Chairman Jon Leibowitz some tough questions. Hatch asked (based on our unofficial but mostly accurate transcript of the event):

I have serious concerns about the FTC’s decision to bring what are essentially antitrust cases under Section 5 of the FTC Act rather than under the Sherman Act…My concern is that there is a breadth of case law under the Sherman Act that gives businesses clear guidance as to what types of conduct are lawful or unlawful… However, it does seem to me that, with the FTC’s decision to start bringing cases under Section 5 of the FTC Act, these companies may see themselves facing complaints for conduct that they had good reason to believe was allowable under the law…Should we not be concerned that the uncertainty inherent in the FTC’s use of Section 5 will prevent businesses from competing aggressively?

Leibowitz Does Little to Reassure Hatch and Others on Section 5 Use

Leibowitz explained that the “only purpose of Section 5” is “to make some things punishable, to prevent some things that cannot be punished or prevented under the antitrust law.” He then went on to suggest that the more rigorous economic analysis that has been required since then 1970’s means that the FTC needs to find a way around Section 2 restrictions.

And it’s extraordinarily important, and again, what the Chicago school did, I want to go back to this, because in the 1960s and 70s, there was no need to use our unfair methods of competition authority, or little reason to use it, because our antitrust authority was read so broadly. We’ve seen those laws circumscribed – I think for some very good reasons – and again, I think the Chicago school’s emphasis on efficiencies and rigorous economic analyses is a good thing. But, having said that, you want us to stop anticompetitive conduct that harms consumers. That’s what we’re trying to do, in an area in which antitrust has been limited, especially because of treble damages, which we’re not able to get. It’s appropriate, I believe, and I think a bipartisan majority of the Commission believes, to use this authority on occasion, not always.

It seems that Leibowitz is arguing that requiring actual economic analysis of alleged “harms to competition” is too high a bar for his agency. They need to be able to prevent business practices they believe are harmful to competition and consumers, even if the economic analysis suggests otherwise. And in this new regime, companies will have little guidance as to what the FTC will consider legal vs. illegal, and will only know what the actual “law” is once they go to court on an appeal.

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Posted in New Economy Competition, Tech Regulation, Uncategorized | No Comments »

Antitrust Experts Engage Debate (Virtually) Merits of FTC’s Use of Section 5 Authority in Intel Case

April 19th, 2010 | Mark Blafkin

Over the past few weeks an online debate has been brewing between antitrust scholars over the FTC case against Intel.  The focus of the debate has been the FTC’s decision to pursue most of its case using its Section 5 authority to prevent “unfair and deceptive” practices, rather than its Section 2 authority for combating anti-competitive behavior.

The discussion began with a piece by Bob Litan, former Deputy Assistant Attorney General in the Antitrust Division of the Justice Department in the Clinton Administration, entitled “The FTC’s Radical Application of Section 5.”  As the title suggests, Litan has some serious concerns about the FTC’s case in general and its application of Section 5.  It’s a pretty compelling piece that I recommend to all you antitrust geeks, but if you’re short on time/attention span I’ll try to summarize.

Litan believes (like we do) that the FTC has a pretty difficult case to make, given that:

  • The levels of innovation and price cutting from the semiconductor industry are unparalleled by any other industry (see our paper on Exponential Innovation)
  • The FTC seeks to prevent Intel’s above-cost discounting of chips, a practice that Supreme Court has regularly defended and cautioned against regulatory interference of such pro-competitive activities.

Therefore, he argues:

The FTC apparently seeks to avoid proving harm to competition under the established standards of Section 2 because the causal link between the conduct it challenges and any conceivable harm to competition is weak. At a minimum, therefore, the relief sought by the FTC should reflect the tenuous connection between the conduct it challenges and the potential for harm to competition.

Yet, the FTC is pursuing pretty heavy-handed remedies.

Litan then goes on to make make compelling cases for how the FTC’s proposed remedies transform Intel into a regulated utility, which could actually raise prices, reduce innovation, and create “a radical and sweeping re-interpretation of this nation’s antitrust laws, with potentially grave implications for private incentives to innovate and compete.”

Enter David Balto, former policy director of the FTC and current Senior Fellow at the Center for American Progress. Balto has been consistently supportive of the FTC’s case against Intel and took issue with the Litan’s reading http://www.americanprogress.org/issues/2010/04/balto_ftc_intel.html of the situation.  He argues:

These predictions of doom are exaggerated and misplaced. The reality is  far more straightforward.

Balto argues that three different foreign antitrust authorities have charged Intel with anticompetitive conduct, and Intel’s conduct effectively limited consumer choice through its “rebate schemes.”  Balto goes on to cover familiar territory by summarizing the arguments made the FTC and other antitrust regulators, and suggesting that Litan’s fears are far outweighed by the potential damage Intel could inflict on competition in the future, especially in the GPU market.  He summarizes his points with:

The FTC’s action is perhaps most important for its focus on dynamic  competition. Innovation is central to the growth of the U.S. economy.  Exclusionary conduct that dampens innovation extracts a significant cost  on the economy.

However, Balto never really addresses Litan’s concerns about the application of Section 5 in this case, but argues that the use of Section 5 authority is not radical and is in fact warranted in this case. While he does say that the FTC’s Section 2 case could stand on its own, Balto actually confirms Litan’s thesis that the FTC pursued the Section 5 claim to free itself from the bar of demonstrable consumer harm.

Section 5 enables the FTC to go beyond narrow competition concerns. As  the Supreme Court has held in FTC v. Sperry & Hutchinson Co., 405  U.S. 233 (1972), “like a court of equity, the Commission may consider  public values beyond simply those enshrined in the letter or encompassed in the spirit of the antitrust laws.”

Perhaps his most compelling argument for the use of Section 5 authority is the speed at which the administrative courts can reach a decision, but that is a double-edged sword.  Acting quickly can help the FTC address concerns before market opportunities are closed, but it can also magnify the cost of mistaken action as well. In the end, however, this was not one of Balto’s more compelling arguments for regulatory activism.

It wasn’t long before Geoff Manne of Lewis & Clark Law School offered his own rebuttal to the rebuttal.  On the Truth on the Market blog, Manne posted an article entitled “David Balto (and the FTC) gets it woefully wrong on  Intel <http://www.truthonthemarket.com/2010/04/14/david-balto-and-the-ftc-gets-it-woefully-wrong-on-intel/ .”

Manne highlights many of the failings of Balto’s piece.

  • He notes that Balto’s reliance on decisions by three foreign commission as evidence of Intel’s liability is misleading at best, given that “it is  well-accepted that conviction by a party acting as judge, jury  and  prosecutor is less than decisive.”  This is doubly true given that the FTC is pursuing conduct that the other jurisdictions never even looked at.
  • He also notes that, despite Balto’s assertion, none of the other Commission’s provided any evidence or specific conclusions that Intel’s conduct led to higher prices.

On Section 5, Manne provides his most effective rebuke of Balto, however.  Manne notes that Balto is completely dismissive of error costs concerns (such as those made by Litan) because of his certainty that agencies “don’t err in the cases they bring-only in the cases they don’t bring.” He then takes on Balto’s argument that the use of Section 5 is critical to ensuring “dynamic competition”

Balto finishes by praising the FTC’s focus on dynamic competition and  by comparing the case to the DOJ’s Microsoft case–as if to highlight  how perfectly off-base his assessment is.  The DOJ and the courts in Microsoft were so forward looking that they dismissed the threat to Microsoft  from Linux and didn’t even realize that there was a threat from Google.   Larry Lessig has announced that he “Blew It on Microsoft <http://webmonkey.wired.com/wired/archive/15.01/posts.html?pg=6> ” for failing to appreciate the dynamic market.   This case by the FTC is built on theoretical models of speculative harms and against copious evidence of present-day benefits to consumers.  If this is how the agency focuses on “dynamic” competition, count me out.

The debate (online and offline) over the FTC’s case and the use of Section 5 will certainly rage on, but it’s becoming increasingly clear that the FTC’s case is anything but a slam dunk.

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This Week in Antitrust

April 2nd, 2010 | Anthony Kuhn

This week’s look at antitrust news features a group of liquid-crystal display panel manufacturers accused of conspiring to fix prices, the Federal Trade Commission’s antitrust investigation of Intel and the effects it will have on the computer industry, a milk-pricing investigation in New York, and the dismissal of Novell’s antitrust complaints against Microsoft.

Samsung/Sharp – Samsung, Sharp Must Face Class-Action Antitrust Suit (Update3) | Bloomberg News

After admitting guilt to price-fixing, an international group of flat-panel producing companies will now have to stand another court-ordered assault against their money vaults. Karen Gullo reports on this development from San Francisco:

Samsung Electronics Co., Sharp Corp. and other makers of liquid-crystal display panels must face group claims in an antitrust lawsuit by purchasers of televisions, computer monitors and laptops, a judge ruled.

U.S. District Judge Susan Y. Illston in San Francisco certified the case as a class action on behalf of direct purchasers who bought the flat-panel screens or goods containing them from 1999 to 2006, according to a court filing yesterday. Consumers in 22 states and the District of Columbia also can sue the companies as a group for damages, Illston ruled.

And, interestingly enough, it’s not just the end-users that are getting their day in court.

Dell Inc., the third-largest personal computer maker; Nokia Oyj, the world’s largest maker of mobile phones; and AT&T Inc. also sued LCD makers in federal court in San Francisco claiming they were victims of price-fixing by the manufacturers.

The amount of money the group collectively stands to lose is significant but by throwing themselves on the mercy of the court, and settling rather than fighting, Samsung, Epson, Sharp and other involved parties might come out with some of their loot still in hand.

Intel – FTC’s Intel Anti-Trust Case Proposes Huge Changes to the Computer Industry | The Portlander

Although the article is a bit dated, Peter S. Kastner detailed look at the FTC’s complaints against chip manufacturing giant, Intel, reveals some of the inner workings of exactly how many pounds of flesh the US government hopes to remove, and in what way. Kastner writes:

The U.S. Federal Trade Commission’s (FTC) antitrust and competitive complaint has already faded from the 24×7 news cycle.  In an announcement December 16th entitled ‘FTC Challenges Intel’s Dominance of Worldwide Microprocessor Markets,’ the FTC stated it has sued Intel, charging that it has “illegally used its dominant market position for a decade to stifle competition and strengthen its monopoly.”

A close reading of the FTC’s contemplated relief for Intel’s alleged conduct shows the government mandating the most sweeping changes ever proposed as to how the Intel-compatible computer market works.  No surprise that Intel would be hurt badly by these mandates and have to adjust.  But these industry changes would also dramatically change the computer ecosystem, and the consequences would not be good for PC consumers.

Kastner correctly points out that should the FTC’s remedies be implemented, the result for chip makers and those who use their products (basically everyone these days) will be the reinvention of the digital wheel. There’s plenty of detailed analysis and some choice passages from the FTC’s proposed solution in the rest of Kastner’s piece. Click on, fearless, and constant, reader!

NY Dairy Farmers – Schumer, US antitrust official hear milk-pricing complaints from NY dairy farmers, consumers | StarTribune

Consolidation in the dairy industry has led some farmers to believe there are anticompetitive practices keeping them from getting their fair share of milk profits and New York’s Senator Charles Shumer plans to get to the bottom of things. His first move was to research the problem as the Associated Press’ Carolyn Thompson describes:

A report released by Schumer’s office in November found that the price paid to dairy farmers fell by almost half since January 2009. At the same time, the retail price of milk fell just 15 percent.

Others in the agriculture business are also lending credence to the claims by dairy farmers in New York that there is some malicious behavior afoot.

About 40 percent of what consumers pay for milk goes back to the farm where it was produced, said Jonathan Taylor of the New York Farm Bureau.

“Many in the dairy industry view this low farmer share in the retail price of milk as proof of anticompetitive behavior by dairy processors and manufacturers, which have undergone phenomenal consolidation over the past two decades,” he said. “Like David and Goliath, a family farm is at a distinct disadvantage in dealing with such businesses.”

Not even enough for grocery money get back into the hands of farmers such as the Maine family who “called 2009 ‘the worst year of our lives.’” Whether or not there are anticompetitive forces at work in the dairy business, one thing is sure: farmers are not making a living selling their milk while the people handling it and reselling it are. One company that buys milk from farmers for resale, Dean Foods, even reported “record profits” at a time when “dairy prices were in freefall across the country.”

Novell/Microsoft – Remaining Novell antitrust complaints against Microsoft dismissed | ZDNet

Although they recently scored a victory against software rival SCO, Novell didn’t fare quite so well in its bid to get the court system to force Microsoft to reveal interoperability secrets. After failing to gain a profitable market share against Microsoft’s Office Suite with their competing WordPerfect and Quattro Pro products, Novell decided to sue their way to happiness with less than satisfactory results. Mary Jo Foley provides much-needed clarity:

The U.S. District Court in Maryland dismissed the last two outstanding antitrust claims Novell filed against Microsoft in 2004 involving WordPerfect and Quattro Pro, two software products Novell owned between 1994 and 1996.

And here’s the beef:

Novell claimed Microsoft withheld interoperability information it needed to enable those products to run well on Windows. Microsoft tried to get Novell’s complaint dismissed, claiming that it was Novell’s “own mismanagement and poor business decisions” that tanked WordPerfect and Quattro Pro. Plus, Microsoft argued, since Novell sold WordPerfect to Corel now 12 years ago, their claims should be barred under the Statute of Limitations.

You can’t win them all, Novell. Sorry that your office productivity software products were so terrible that you couldn’t give them away but suing isn’t always the best way to get revenge.

Bristol-Myers Squibb Co. – Judge Tosses Antitrust Suit Vs. Bristol, Sanofi Over Plavix | Fox Business

A group of retails recently lost in their bid to prove ”that a proposed patent-litigation settlement among drug makers in 2006 deprived pharmacies of inexpensive, generic copies of the blockbuster blood thinner Plavix.” Bristol-Myers Squibb didn’t see it that way and the judge agreed.

Kroger and the other plaintiffs, including Walgreen Co. (WAG: 37.72, 0.64, 1.73%), CVS Caremark Corp. (CVS: 36.23, -0.33, -0.9%) and some drug distributors, filed their antitrust lawsuit beginning in 2006, arguing the proposed Plavix patent settlement was anticompetitive. They said the deal closed off the possibility of a more favorable settlement, one that might have avoided a trial and resulted in the availability of generic Plavix well before the 2011 patent expiration.

But Sanofi, Bristol and Apotex argued that the antitrust suit should be dismissed because Kroger and the other plaintiffs lacked standing under antitrust law.

Judge Michael Watson of the U.S. District Court for the Southern District of Ohio lays out the end game in this significant trial with smiles for the victors and silence from the vanquished:

“Plaintiffs fail to demonstrate that the alleged antitrust violation was a necessary predicate of Plaintiffs’ injury and the asserted injury is speculative,” the judge wrote in a 49-page opinion released Friday.

A Bristol-Myers spokeswoman said Bristol and Sanofi are pleased with the decision. A Kroger spokeswoman and a lawyer for Kroger and other plaintiffs couldn’t be reached. An Apotex spokesman couldn’t be reached.

Bonus antitrust piece o’ the week: Lawyers Galore in FTC’s Intel Case by Jenna Greene at The Blog of Legal Times (or BLT for short)

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This Week in Antitrust

March 26th, 2010 | Anthony Kuhn

Here’s another installment in ACT’s weekly review of antitrust news articles of note. This week we feature Monsanto’s on-going battle to disprove DuPont’s claim of the seed maker’s “monopolistic” behavior, an Ohio-based company’s court-ordered scrutiny of Google’s AdWord service, Intel’s assurance that the Federal Trade Commission’s antitrust lawsuit is “misguided” and a report on the decline of Microsoft’s Internet Explorer web browser after the implementation of a browser ballot in Europe.

Monsanto – The Seeds Of An Antitrust Disaster In Iowa | Forbes.com

Geoffrey Manne, Executive Director of the International Center for Law & Economics and Lecturer in Law at Lewis & Clark Law School, takes a closer look at inquiries being made into Monsanto’s seed business and discovers that the company’s contracts with purchasers of its genetically-modified seed stock are carefully negotiated to allow the purchase any intellectual property (IP) rights that the purchaser desires and he suggests DuPont’s claims “that Monsanto uses certain clauses in its licenses to prevent manufacturers from combining—or ‘stacking’—Monsanto’s seed” are unfounded.

Monsanto’s detractors have failed to demonstrate that its conduct harms competition. And meanwhile, its competitors—especially DuPont—continue to gain market share and to invest heavily in competing technology. In fact, in contrast to the claims it seems to be making to antitrust enforcers, in public filings and statements DuPont presents evidence of a robust, competitive industry. DuPont’s CEO, Ellen J. Kullman, recently told investors and analysts that the industry is in “an incredibly competitive period,” and the company gained market share in both the corn and soybean seed markets last year. This doesn’t sound like a market constrained by a rapacious monopolist.

Manne will be covering related news at a related event today where ”the Antitrust Division will join the U.S. Department of Agriculture in the first of a yearlong series of workshops focusing on competition in the agricultural sector.” There’s sure to be plenty of hot, legal action as Monsanto and DuPont assert their positions on the business of genetically-modified seeds.

IBM – IBM on antitrust defense in Europe | ZDNet

Dana Blankenhorn reports on a French software company’s complaint that IBM is acting unfairly by blocking the use of competing programs on its mainframe computers. He writes:

By tying use of its mainframe software to IBM hardware, TurboHercules charges, IBM is preventing open source from competing. The company’s complaint said it tried to do business with IBM last year, but was met by an intellectual property complaint.

The U.S. Justice Department has been investigating IBM’s mainframe business since last year, but given the EU’s recent $1.45 billion fine against Intel, its antitrust regulators are now feared more than their U.S. counterparts.

This case may go deeper, however. IBM has become recognized as an open source leader. You can argue that open source saved IBM, allowing it to unify product lines under Linux, offload development costs, and create new alliances.

IBM is no stranger when it comes to cries of unfair market practices but as the company is one of the major users and integrators of open source software, it is hard to imagine that TurboHercules’ claims will fall on sympathetic ears, even if they happen to be European ones.

Google AdWord – Google Must Answer Questions About Ad System | NationalJournal.com

If Google *were* hiding behind some kind of magical curtain, the man behind the curtain is about to be revealed. That is, if the man can be said to be Google’s extremely profitable, and at times, controversial, AdWord service. Neil Munro enlightens the gentle reader on this new twist that recalls dreams of being naked on stage before an un-admiring audience:

A small online-mall firm has won an Ohio judge’s approval to inspect the inner workings of Google’s closely-held online advertising software, which its high-tech rivals say is illegally rigged to help Google and hurt its competitors.

The decision Wednesday by Franklin County Common Pleas Judge John Bessey rejecting Google’s plea to delay discovery “gives us an opportunity to start gathering the evidence and documents that we need to prove our case… there’s no limits on what we can ask for” except relevance, said Joseph Bial, a D.C.-based special counsel in the antitrust group at New York-based Cadwalader, Wickersham & Taft representing Ohio-based myTriggers.com.

“Discovery will commence immediately,” he said.

“No limits for what we can ask for,” they say? Are there limits to what Google will have to provide in response to this limitless probing? This whole dog-and-pony show might just be a pretense for more mischievous machinations. Monro details the needful wishes of Google’s competitors:

The Ohio court case is significant because competing high-tech companies are hoping that Google becomes the target of a federal antitrust case. The company’s popular software makes it the market leader in the online advertising sector, but advocates for other companies — including Microsoft — say it is illegally abusing its market power.

Well, Microsoft should know a thing or two being accused of “illegally abusing its market power” and have, no doubt, already penned up a very long (and helpful) amicus brief for submission at the first possible (in?)convenient opportunity. Excellent stuff! Be sure to read what Google has to say about the claims by reading the entire piece at the link above.

Microsoft – Microsoft Browser Use Down Following Antitrust Settlement | redOrbit

After agreeing to create a web browser ballot for its European Windows OS users as a term of its EU antitrust case loss, Microsoft is seeing a disturbing trend in the installation of its Internet Explorer web browser application. The decrease in the popularity of Microsoft’s Internet Explorer is not great, but it could pick up steam as users become more aware that there are many other options to chose from via the ballot.

Internet Explorer use has decreased in Britain by 1-percent, Italy by 1.3-percent, and France by 2.5-percent, according to information provided to Reuters by Statcounter, a web statistics provider. Meanwhile, Opera Software reports that usage of their web browser has doubled across the continent, and tripled in select areas, including Italy, Poland, and Spain.

The shift in Internet browser popularity is due largely to the launch of browserchoice.eu, a website established by Microsoft in response to antitrust accusations levied by the European Union.

The site, which is being automatically displayed for more than 200 million users in select locations throughout Europe, shows Microsoft’s own Internet Explorer alongside some of its top competitors, including Safari, Google Chrome, Opera Turbo, and Mozilla Firefox.

The makers of the FireFox web browser are seeing increases in the number of people installing their software via the mandated browser and the company has been quoted as saying, ”We expect these numbers to increase as the Ballot Choice screen fully rolls out across all countries.”

Intel – Intel: FTC antitrust lawsuit is ‘misguided’ | ZDNet

Intel continues to defend itself against an ever-increasing litany of unfair practices in the computer chip market, and now has to add graphics processing units (GPUs) to the list of products that are of interest to the FTC. Matthew Broersma has more on this growing morass of intellectual property troubles for Intel:

“The FTC’s case is misguided. It is based largely on claims that the FTC added at the last minute and has not investigated,” the chipmaker said in a statement on Wednesday. “Intel has competed fairly and lawfully. Its actions have benefited consumers.”

The company said it had progressed “very far” in talks to settle the case, rather than bring it to court. However, the FTC had asked for remedies that would have made it “impossible” for Intel to conduct business, according to the chipmaker.

“This case could have, and should have, been settled,” said Intel senior vice president and general counsel Doug Melamed in a statement. “The FTC’s rush to file this case will cost taxpayers tens of millions of dollars.”

Rival GPU manufacturer NVIDIA is firmly behind the FTC’s on-going investigation of Intel’s business practices in the graphic chip marketplace and will certainly be watching the case closely as many hundreds of millions in profit hand in the balance.

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This Week in Antitrust

March 19th, 2010 | Anthony Kuhn

Yes, gentle reader, it’s that time again! Today’s the day you’ve been looking forward to all week: ACT Online’s “This Week in Antitrust” Friday feature covering antitrust-related news highlights with a special focus on the microchip industry.  Figuring prominently in this most recent selection of relevant and topical articles is video card superstar NVIDIA, who is pulling out all the stops in its significant support of the FTC’s on-going attack of Intel and their competing Graphical Processing Unit (GPU) line of chipsets. Also of note are rumored monopolistic practices in the food industry, a promise by a European company to play nice in response to antitrust charges, and an analysis of Google-Yahoo monopoly myths.

NVIDIA/Intel – The Case for Innovation: FTC, NY State, EU v. Intel| NVIDIA.com

As one of the premier manufacturers of Graphical Processing Units (GPUs for short), NVIDIA has long worked to create top-of-the-line video cards that integrate smoothly with computer chipsets manufactured by other industry heavies such as microchip titan Intel. After a long honeymoon of playing nice, NVIDIA found itself being locked out of key gateways to integrate their complex and expensive-to-develop GPUs with Intel’s various motherboard chips and decided to join in the dog-pile of litigation descending on Intel by the likes of the European Union and, closer to home, the Federal Trade Commission. By way of a backgrounder, the helpful people at NVIDIA have created a website specifically dedicated to tracking the on-going investigation against Intel for monopolistic practices, including the following trio of bad behaviors:

  • First, Intel has harmed competition in the markets for CPUs and GPUs. Intel has already paid fines and settlements totaling nearly $3 billion to address its anticompetitive conduct in the CPU market.
  • Second, consumers have not been able to choose from among the range of potentially available technologies that one would see in a healthy, functioning market. Technologies like NVIDIA’s game-changing graphics and chipset products have been kept in short supply or blocked from the market entirely by Intel’s anticompetitive practices.
  • Third, and perhaps most importantly, Intel’s conduct has stifled future innovation, inhibiting the development of new processor technologies that incorporate faster and more powerful graphics-based computing. This graphics-based computing not only provides a more enjoyable graphics experience for the consumer, but has the potential to improve our ability to achieve important social and economic goals through research and development.

Never let it be said that Intel is nothing if not a dominating force in the chip-fab market, no. But is it entirely fair to fling claims of monopolistic practices and bring forth yet another lawsuit yearning for a solid judgment that Intel is indeed acting in a manner that requires the intervention of the antitrust goons? In this case, Intel feels strongly enough that it is doing what is true and righteous to enlist a bit of “turn around is fair play” logic. Once again, some further explanation of what’s what by NVIDIA:

NVIDIA and Intel are in ongoing litigation pending in the Court of Chancery for the State of Delaware. At issue in those lawsuits is the scope of the companies rights’ under two license agreements signed in 2004, including whether Intel can block NVIDIA’s ability to connect its chipsets to Intel’s Nehalem CPUs.

A move to block NVDIA’s linking to Intel’s newer CPUs, such as the Nehalem line, would spell sure disaster for the GPU giant. So, NVIDIA is fighting back with it’s own counter-suit, seeking, among other things, “a legal declaration that the license agreements should be enforced as they were agreed to by the companies and that it is legally able to make chipsets compatible with Intel’s Nehalem CPUs. Likewise, NVIDIA is a seeking an injunction to stop Intel’s public statements that NVIDIA is not licensed to make chipsets for Nehalem.” There’s plenty more legal wrangling in store if you’ll simply click on the above linked site and take but a few moments to parse the facts for your very own self. I highly recommend it as a bit of pre-weekend gray matter exercise, if for no other reason.

NVIDIA/Intel – NVIDIA Launches Website Detailing Antitrust Case Against Intel- Hothardware.com

And for a less-tainted viewpoint on the NVIDA/Intel death-match, we turn to Joel Hruska and his timely yet topical review of NVIDIA’s explanatory (and possibly inflammatory) website. He writes on why there’s so much acerbic finger-pointing going on between the two chip behemoths:

There could also be a bit of personal enmity at work here. The two companies have been headed for a collision for several years. NVIDIA’s chipset division was a competitive threat against Intel’s while published benchmark comparisons left Intel lurching along like an arthritic, three-legged elephant. Then Intel announces that it’ll be getting into graphics and changing the entire way 3D rendering is done. NVIDIA counters those statements with some choice comments on how Intel’s GPU looks like something from five years ago, waits until Intel’s Atom is really making waves, and launches Ion. Two months later (immediately following legal paper-waving), Intel gets caught red-handed distributing internal FUD about NVIDIA’s Ion.

And how is Intel faring under the withering assault on its extremely dominant CPU market share?

As for Intel, the company has already taken quite a bit of heat from multiple governments and investigations worldwide. In all such cases Intel has maintained that it competes fairly and that its strategies do not harm consumers. To be fair, the company’s activities have never been found to be illegal in a court of law, but none of the administrative bodies (including the FTC) have ever found Intel’s argument compelling enough to not launch an investigation once the question of whether or not monopolistic abuse occurred was set before the organization.

Not so good for Intel, it seems. For now, both sides could be accused of playing “he said, she said” but with the US Federal government and European Union breaking out the Little Acme Junior Gman Investigation Kit, complete with heavy duty magnifying glass, Intel might end up with the short end of the stick. At the very least, there is probably some hand-wringing at headquarters as Intel struggles to catch up in the smartphone integrated chipset market.

Monsanto/Food Industry, et. al – Food sector faces sweeping antitrust investigation- Los Angeles Times

As luck would have it, not all of the antitrust legislation in the pipeline is focused on Intel. Seems there is an investigation by the U.S. Attorney General into widespread unfair and monopolistic practices in the food industry. P.J. Huffstutter reports on how the business of big food is coming under scrutiny for the missing money between farmer and consumer. From Ankeny, Iowa:

Speaking at a public workshop organized by the Justice Department and the U.S. Department of Agriculture at a community college, [U.S. Atty. Gen. Eric] Holder told the packed conference hall that “concrete action” would emerge from the unusual coordination between the two federal agencies.

The gathering was the first in a yearlong series of public meetings to examine whether consolidation in the food sector, and alleged monopolistic practices in agriculture, are driving food prices higher.

The government is also trying to ferret out reasons for the sometimes vast gaps between what farmers are paid for the food they produce and the retail prices that shoppers pay at the grocery store. Time and again, federal officials underscored that the government was going to push for more transparency in the food sector’s business practices.

Farmers who had gathered for the workshop heartily voiced their feelings that big food business is squeezing the smaller rural farmer out of the picture. Assistant U.S. Atty. Christine Varney, Holder’s antitrust chief offered some welcome ideas on how the Federal government will help them:

Varney, whom many people here say is spearheading the Justice Department’s ramped-up probe into big-business antitrust concerns, promised that the government was undertaking an “unrelenting quest to find the correct balance” within the agricultural industry.

That would mean, she said, ensuring healthy competition in the food sector — which would allow fair deals for farmers and fair pay for agriculture workers in processing factories, while making sure the public had “food on their table that’s safe, healthy and a decent price.”

That sentiment was met with cheers in the conference center at the Des Moines Area Community College. Every seat was full, occupied by hundreds of farmers and unionized food workers.

You can find additional reporting on this move by the US government to make sure big ag is playing fair in a related article, Ag antitrust enforcement vowed, at The Omaha World-Herald. As far as Monsanto is concerned, they are doing nothing but help small American farmers.

Monsanto officials defended the company’s market dominance in the seed industry, saying the firm had done nothing wrong. Its success, they said, was due to strong demand for so-called Roundup Ready seeds it developed to produce crops capable of tolerating its herbicide Roundup. The company’s patent expires in 2014.

“That’s why we have such a high market share,” Jim Tobin, vice president of industry affairs at Monsanto, told the crowd. “It’s not because you have to have Roundup Ready to grow soybeans. It’s because farmers chose it.”

Electricite de France - EU drops EDF antitrust charges | Yahoo! News

Aoife White, AP Business Writer, has the inside track on how far a promise can go in getting one’s self moved from the “Naughty” to the “Nice” list and reveals just how this slight-of-hand worked for one huge corporation.

BRUSSELS – European Union regulators on Wednesday dropped antitrust charges against French power company Electricite de France after it pledged to amend contracts with key corporate customers.

In a deal made legally binding Wednesday, EDF is promising to make sure that every year many large electricity users can pick rival suppliers. It will also allow them to resell power to others.

EDF can be fined up to 10 percent of yearly revenue if it breaks these commitments.

Also of interest is what EDF was forced to include in its promise. White clarifies for the constant reader:

EDF settled the dispute by agreeing that some 65 percent of the electricity that it sells under contract to large customers will return to the market every year because contracts will end or customers will be able to opt-out of the contract for free.

Future contracts with major energy users can’t be longer than five years unless the customer can opt out without cost at least every five years.

EDF must also now stop blocking its customers from buying part of their power needs from other suppliers — and stop preventing customers from reselling electricity.

Not exactly a “Get out of Jail Free” card but good enough, it would seem, to keep EDF on track and back in the black for a while.

Google/Yahoo! – Debunking the Google-Yahoo Antitrust Myths | The Precursor Blog

And what exactly are these “antitrust myths” about search megaliths? Scott Cleland hopes to answer that exact query in his aptly titled article and starts things off on the right foot with this first of many “myths” needing a bit of debunkification:

Myth #1: There can’t be an antitrust problem as long as consumers are just one click away from a competitive search engine.

  • This is intentional misdirection.
    • Google does not get paid by users, but by advertisers and websites.
    • The antitrust concern here is not about “competition” for free search engine use, but competition for paid search advertising.

Google is exploiting the “Internet choice paradox” where because users have near infinite choices to reach Internet content, they assume content businesses must have as much choice in advertising to Internet users as users have in reaching content. They don’t.

And to prove it, Cleland has 4 other pertinent items to round out his quintet of mythical reasons why he thinks that ”This antitrust investigation of Google is much deeper, broader, and more serious than the market appreciates.” Onwards, and upwards!

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Prices Down. Speed Up. Feb 2010 Edition

March 18th, 2010 | ACT


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.

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