June 2013

Tech Firms Back Obama Patent Move

Technology companies welcomed the Obama Administration's decision to wade into the debate over patent litigation, seeing a chance to stem a flood of lawsuits they say is hurting innovation.

The Administration rolled out a package of executive orders and recommendations for legislation that takes aim at patent-holding firms, or what critics derisively call "patent trolls"—companies that buy up patents solely to press for licensing deals or payouts in court. Some observers cautioned that the measures won't do much to stop excess litigation without action by Congress and that they could have unintended consequences, such as making it harder for universities to protect their inventions. Congress is already considering proposals that are similar to those made by the White House. "The core of the initiative is the legislative proposals," said Ed Reines, a patent lawyer at Weil, Gotshal & Manges LLP. "The executive orders alone just aren't going to move the needle." But it was an unusual move by the White House, which rarely takes high-profile steps over perceived problems with the US legal system, regardless of the party in power. The Administration was swayed by a vigorous lobbying effort involving a number of industries, including the technology, financial and retail sectors.

Tactical Shift Put Patent Firms on Political Radar

Big technology companies like Cisco Systems and Google have been griping for years about "patent trolls," or companies that buy up patents to make money from them through licensing and litigation. But the White House and Congress started taking patent firms seriously, said people close to the push for a crackdown, only after some of the firms took aim at a different target: retailers and their customers.

"When the trolls started going after mom-and-pop coffee shops, community banks, fast-food restaurants, that's what put this on the radar," said Van Lindberg, the vice president of Rackspace Hosting Inc., a San Antonio cloud-computing company and member of a tech coalition that lobbied Congress and the White House. The letters sent shock waves through the retail industry, said Mallory Duncan, general counsel at the National Retail Federation. "Most retailers aren't technologists," he said. "They know about as much about the technology that goes into their cash register as you and I do about the technology in our cellphones."

Glass Tells Sprint Holders to Abstain

Glass, Lewis & Co., a major proxy-advisory firm, urged Sprint Nextel investors to abstain from voting on the wireless operator's $20.1 billion acquisition by Japanese telecommunications company SoftBank.

The advisory firm said shareholders should hold off in the vote scheduled for June 12 until Sprint's board makes clear its view of a rival $25.5 billion takeover proposal from satellite-television operator Dish Network. "With an ongoing board process to evaluate what appears to be a bona fide offer from an interested and capable third party, we believe approval of the existing agreement would be premature," Glass Lewis said. The recommendation comes days after Institutional Shareholder Services Inc. proposed that shareholders support the SoftBank takeover, while withholding judgment on whether the Dish proposal might be superior. The Dish proposal isn't yet binding. Both Glass Lewis and ISS advise big investors like mutual funds about how to vote in corporate elections.

Penguin CEO Testifies in Apple Trial

A publishing executive said that Apple’s entry into the electronic-book market in 2010 marked the beginning of a dramatic shift away from prices set by retailers to ones set by the publishers themselves. But the testimony of David Shanks, chief executive of Penguin Group (USA) since 2001, appeared at odds with allegations by the Justice Department that Apple conspired with Penguin and four other major publishers to hoist prices industry wide.

Far from conspirators, Shanks said during the second day of an expected three-week trial, Apple and Penguin clashed on many things. Shanks said, for instance, Penguin initially proposed an agreement with Apple in which the technology company would have set the prices of e-books sold in its digital bookstore. But Apple decided against that wholesale pricing model, opting for a so-called agency model that placed pricing in the hands of the publisher, while Apple received a 30% commission on each sale. Shanks said he tried unsuccessfully to get Apple to abandon price caps of $12.99 and $14.99, and a price-matching provision that ended up in the final contract between the two companies. Shanks said he sought assurances from Apple that his competitors were agreeing to the same terms—but only partly because he feared the repercussions of adopting the agency model without the other publishers. Penguin, a unit of Pearson, also wanted to be sure the selection in Apple's digital library was large enough to draw in customers, he said.

From Lottery to Oligopoly in Wireless Spectrum

For all its sleek iThing patina today, the origins of the wireless communications revolution had a decidedly Wild West feel. At the dawn of the cellular phone age, in the early 1980s, the federal government faced a crucial decision: who should get the rights to send signals across the public airwaves, potentially cracking the monopoly of the wired telephone companies?

At first, officials chose big cities to introduce the technology, conducting an endless bureaucratic procedure called “comparative hearings” in which they sought to select the best among rival bids. That proved so time-consuming that they soon turned to what seemed a more effective route: give away the rights to use the electromagnetic spectrum through a lottery. They were not prepared, however, for the gold rush that followed. Ostensibly committed to deliver cellular phone service wherever they won a license, many winners instead immediately sold the license to a bona fide phone operator. And they made a bundle. The only outfit that didn’t make any money from the process seems to have been the United States government. Now, Washington is back in the business of putting vast chunks of wireless spectrum on the market. It has learned an important lesson: since 1993, the Federal Communications Commission has leased spectrum to the highest bidder using Dutch auctions. From 2001 to 2010, it reaped a hefty $33 billion on behalf of taxpayers. But there is another lesson that the political system has not learned as well: how to foster competition.

Splitting Air Could Pay for Broadcasters

Content may be king. But in wireless circles, spectrum still reigns supreme. That is good news for owners of broadcast-television stations who hold licenses to large swaths of airwaves.

Amid lower ratings and potentially disruptive technology, that spectrum looks even more valuable and may help underpin some broadcasters' shares. Wireless operators are eager for new spectrum as mobile-data use rockets. Broadcast spectrum borders one of the main bands used for wireless networks and could also be used for that purpose. Getting that into the hands of wireless carriers has long been one of the Federal Communications Commissions' goals. In early 2012, Congress authorized it to auction broadcast spectrum, which it aims to do in 2014. Meanwhile, cracks have begun appearing in the traditional broadcast model. Aereo, for example, lets users stream broadcast-television signals over the Web. That threatens retransmission fees, which pay-TV operators pay to carry broadcasters' signals.

FCC’s Clyburn Gets 'Dingelgram' With Auction concerns

Rep. John Dingell (D-MI) is continuing to press his concern over reallocation of broadcast spectrum following the incentive auctions, this time sending one of his famed "Dingelgrams" seeking some answers from Acting Federal Communications Commission Chairwoman Mignon Clyburn.

In a letter dated June 4, Rep Dingell seeks answers to three questions about the FCC's authority to take certain auction-related actions, suggesting it may be exceeding its authority under the Middle Class Tax Relief and Job Creation Act of 2012, legislation that included authorizing the voluntary incentive auction of broadcast spectrum. "Does the commission believe it must complete international coordination with Mexico and Canada prior to reallocating and reassigning broadcast frequencies"; 2. "Does the commission believe [incentive auction legislation] grants it authority to revise its Office of Engineering and Technology Bulletin No. 69, a model used to predict broadcast interference." 3. "Does the commission believe [the legislation] permits it to conduct a weighted reverse auction?"; "What effect does the Commission estimate that a weighted reverse auction would have on the number of participants and the amount of spectrum recovered..."

Rep. Dingell, chairman emeritus of the House Commerce Committee, has given Chairwoman Clyburn until June 28 to respond.

Who do you like best: Google, Facebook or Apple?

Google beats out rivals Apple and Facebook when it comes to the all-important game of reputation, continuing its place on top of a Washington Post-ABC News poll measuring how respondents feel about some of the country’s top tech firms.

The shows that 83 percent of American adults contacted on cellphones and landlines have a “favorable” view of Google compared to 72 percent for Apple and 60 percent for Facebook. The overall results are similar to responses that users gave last year, when a Washington Post-ABC News poll found that Google had an 82 percent favorable rating, Apple 74 percent and Facebook 58 percent. All those changes are within the 3.5 percentage point margin of error on the poll. Digging into the demographic information shows how different people view each of the companies.

Obama email flap: White House defends top officials' use of 'secret' accounts

White House spokesman Jay Carney defended the Obama Administration’s commitment to transparency after an Associated Press investigation showed that some of the president’s top political appointees are using “secret” government e-mail accounts in a bid to avoid unwanted messages.

“This is a practice consistent with prior administrations of both parties,” he said. Having alternate e-mail accounts makes "eminent sense,” the press secretary said. He told of having his e-mail made public by his predecessor, Robert Gibbs, shortly before Carney assumed his current position. "I changed it so I wouldn’t be inundated with … tons of e-mails and spam and the like.... But that is a very reasonable thing to do.” Carney disputed the AP’s use of the “secret label” for unpublished e-mail addresses. “The issue here is are these accounts – these work accounts – secret, and the answer is no, because they are subject to FOIA requests and they are subject to congressional inquiry, just like their public addresses,” he said. He added, “This administration has made significant strides in improving FOIA practices, compared with all of our predecessors…. [We] have disclosed more information, invoked FOIA exemptions less frequently, and answered more requests.” The issue is a sensitive one, given a memo President Barack Obama issued on his first full day in the White House pledging that his administration was "committed to creating an unprecedented level of openness in government.” The document went on to say, "we will work together to ensure the public trust and establish a system of transparency, public participation, and collaboration."

E-book Buyers Are 21% More Likely to Be Female

From e-books to streaming music, people are moving to digital formats for their entertainment. But not all are moving at the same pace. The way we buy may be as much a factor of gender and ethnic group as spending power, according to this recent Nielsen U.S. Consumer Entertainment Report. Digital music buyers, for example, are 5 percent more likely than the average U.S. adult to be Hispanic. E-book buyers are 21 percent more likely to be female. And buyers of streaming services are 73 percent more likely to be Asian.

Benton

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