Archive for the ‘Innovation and IP’ Category

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On price and value

Thursday, September 2nd, 2010

As this cartoon points out, the iPhone apps business isn’t all fame and fortune. Customers who don’t hesitate spending $5 on a quick, fancy cup of coffee think twice before paying less than a quarter of that for an app that may give them hours or days of enjoyment and productivity.

This highlights one of the challenges for entrepreneurs in the new economy: people still often equate value and cost with physical things. Creative works may require weeks or months of hard work by multiple people, yet consumers often feel these products should be free because no physical atoms are exchanged.

At the same time, consumers don’t always value their own intangibles. They are willing to give away tons of private information and let others monetize it. Companies like Facebook and Google are making billions taking advantage of this dynamic.

Success in the economy of intangibles requires a new mindset, along with a deep understanding of what drives and motivates people. The times are changing. Bob Dylan’s prophetic words of more than 45 years ago still ring true today. You better start swimming or you’ll sink like a stone.

Posted in Entrepreneurship, Innovation and IP | No Comments »

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

Wednesday, July 28th, 2010

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.

(more…)

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Posted in Copyright, Innovation and IP | No Comments »

ACT Member Peter Carnes Storms the House!

Thursday, July 22nd, 2010

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

Monday, June 28th, 2010

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 »

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

Monday, April 19th, 2010

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.

Posted in Innovation and IP, New Economy Competition, Patents, Tech Regulation | No Comments »

This Week in Antitrust

Friday, April 2nd, 2010

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

Friday, March 26th, 2010

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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Prices Down. Speed Up. Feb 2010 Edition

Thursday, March 18th, 2010


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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This week in Antitrust

Friday, March 12th, 2010

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

Posted in Current Affairs, Innovation and IP, International Trade | No Comments »

This Week in Antitrust

Friday, March 5th, 2010

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!

Posted in Innovation and IP | No Comments »

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