Wednesday, November 28, 2012

(BN) Lee Rues Singapore as Retirement Home Unless Birthrate Rises

Singapore Prime Minister Lee Hsien Loong said encouraging citizens to have more children is the biggest challenge confronting the island nation if it wishes to remain an economic juggernaut in the developed world.

The government hasn't succeeded in impressing on citizens that "this is going to be a retirement home and not a vibrant city" if the population is unsustained, Lee, 60, said in an interview in his office in Singapore on Nov. 26. "We'll be dealing with it over the next 10 years, and longer," he said of the legacy of a falling birthrate.

Lee, in his ninth year as prime minister, plans to unveil a package of measures in January aimed at boosting the fertility rate from 1.2 per woman. At stake is maintaining the achievements of an economy transformed by the embrace of free trade, fostering of higher-value manufacturing and nurturing of businesses and services such as gambling and health care.

"You have to be able to institutionalize what we have achieved," Lee said of the most important tasks for the country after its development under the leadership of former Prime Minister Lee Kuan Yew, his father.

While developed nations from Germany to Japan have struggled with falling birthrates, Singapore's size -- at 5.3 million on an island smaller than New York City -- means it lacks the domestic demand that larger economies can stimulate to sustain growth. Non-oil domestic exports are equivalent to more than half of the country's gross domestic product.

Global Challenge

"It's an issue which many countries are dealing with," Lee said. "None of them have come to any very satisfactory solution because the trade-offs are difficult ones."

More than four decades after independence, women in Southeast Asia's only advanced economy are barely producing enough children to replace one parent. Policy makers have tried and failed to reverse the declining trend since 1987, and handouts of as much as S$18,000 ($14,700) per child, extended maternity leave and tax breaks have done little to sway Singaporeans to have more babies.

The government will debate its population policy in Parliament in January, Lee said in the interview. Areas being considered include priority housing for couples with young kids, paternity or shared parental leave, the defraying of childhood medical expenses, better pre-school and improved cash benefits for having children, Lee said in August.

Aging Society

The median age of Singaporeans will rise to 43.1 in 2020 from 37.6 in 2010, Bank of America Corp. analysts estimated in an April report. That compares with 23.9 in the Philippines, 31 in Indonesia and 28.4 in Malaysia at the end of this decade.

"It's going to be tough, and we may only see a marginal increase in the birthrate," said Chua Hak Bin, an economist at Bank of America who has studied the impact of Singapore's immigration and foreign-worker policy. "Past attempts have met with little success. Without immigration and foreign workers, Singapore may suffer the same fate as Japan, which is a bleak outcome."

Immigration has filled the gap for employers, highlighted by a strike among dozens of Chinese national bus drivers in Singapore this week that disrupted some services. The city is host to 2 million foreign residents, compared with 3.3 million citizens, and the increase in the non-citizen population has put strains on the housing market and public services.

Home prices climbed to a record in the third quarter, even after the government introduced six rounds of measures since the beginning of 2010 to rein in demand.

Bubble Concern

"We have had a property boom, almost a bubble," said Lee, who previously headed the central bank, served as finance and trade minister and studied mathematics at the University of Cambridge. "It's because liquidity is sloshing around worldwide and real interest rates are negative," he said. "That's a difficult problem for us on the overall property market."

Singapore, which uses the exchange rate to manage inflation, probably won't shift to an interest-rate regime to have more control over its borrowing costs, the prime minister said.

"It would be very difficult," he said at his office in the Istana, which was constructed in British colonial days and renamed after self-government in 1959 for the Malay word for palace. "Our economy is so open. We are a financial center. For us to sustain high interest rates at a time where interest rates worldwide are at almost zero, I think is very hard. We'd be flooded with money."

Political Change

A widening wealth gap also has contributed to angst among voters, and rising support for the political opposition. The ruling People's Action Party last year saw its lowest share of the popular vote since independence in 1965, at 60.1 percent. Lee, the country's third prime minister, said the diminished PAP take hasn't been a surprise.

"It's what you would expect to happen as we have a change of generations amongst the population -- you are in a new age, much more open and interconnected," said Lee, who entered politics in 1984 after leaving the army, where he held the rank of brigadier general. "The question is in that environment, can we still get governments which take a long-term perspective beyond the immediate election."

The government is under pressure to placate voters without disrupting the influx of talent and labor that has helped the economy to more than double in size since 2004. Authorities have made it more expensive for companies to hire overseas workers by raising levies and requiring better educational qualifications for some categories of foreigners.

Facebook's Saverin

Even so, Singapore topped 185 economies to take first place in the World Bank's ranking of business conditions for 2013, and has attracted the likes of Facebook Inc. (FB) co-founder Eduardo Saverin, who renounced U.S. citizenship in 2011 to work and live in the city.

Nominal GDP, which isn't adjusted for inflation, more than doubled to $240 billion in 2011 from about $109 billion at the end of 2004, the year Lee took office. Singapore, located off the southern tip of the Malaysian peninsula and home to one of the world's busiest container ports, has diversified by luring pharmaceutical companies to build plants and ending a four- decade ban on casinos.

"Economically, it's been a great success," Lee said of the contribution of the casinos run by Genting Singapore Plc (GENS) and Las Vegas Sands Corp. (LVS) to the island's growth. "Socially, the impact has been about what we expected it to be," he said. "I think we did the right thing."

Maritime Disputes

Turning to foreign policy, Lee said negotiations on maritime disputes between Southeast Asian nations and China should be between countries that are claiming the waters. The Philippines and Vietnam, fellow members with Singapore of the Association of Southeast Asian Nations, have seen tensions escalate in the past year with China over areas of the South China Sea that may hold energy reserves.

Asean members have disagreed over whether to pursue talks on the dispute in multilateral gatherings, such as the East Asia Summit earlier this month attended by U.S. President Barack Obama. The Obama administration has elevated the role of Asia in American foreign policy, in a so-called pivot toward the region.

Lee said the U.S.'s focus on Asia should be "sustained over a long period of time, rather than spasmodically."

"I think it needs to be done across the board and in a benign but powerful approach, rather than in a belligerent fashion," he said.

With the next national election not due until 2016, Lee declined to identify his most important contribution as a leader, saying "I don't think we should give ourselves report cards."

"You cannot come to a verdict yet because these are long- term issues -- talking about population, talking about immigration, whether it works or not. You will only know after a generation but you have to think about them now," he said.

(BN) Pandora CEO Pushes Congress for Lower Music Royalties

Pandora Media Inc. (P), the biggest online radio service, is subject to an "astonishingly high royalty burden" that Congress should fix, Chief Executive Officer Joseph Kennedy told U.S. lawmakers today.

To contact the reporter on this story: Jack Kaskey in Houston at

To contact the editor responsible for this story: Simon Casey at

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"The current rate-setting structure is a clear case of discrimination against the Internet and innovative services," Kennedy said in testimony submitted to a House Judiciary subcommittee hearing today on music licensing. "This lack of a level playing field is fundamentally unfair and indefensible."

Pandora, based in Oakland, California, is pressing lawmakers to pass a bill that would bring Internet radio services such as Pandora under the same standard for paying performers that applies to satellite and cable radio services such as Sirius XM Radio Inc. (SIRI)

SoundExchange Inc., an organization that collects royalties for artists, says Internet radio services are charged fair royalties and that, if anything, Sirius XM and traditional broadcast radio stations should pay more.

"The claims that the current rates are 'too high' are wrong, overblown, and based on an incomplete and premature record," Michael Huppe, president of Washington-based SoundExchange, said in written testimony for the committee.

Pandora chose "to focus on building its audience -- and thus its usage -- while keeping its advertising load and subscription fees low," Huppe said. Musicians shouldn't be asked to accept lower royalties to subsidize Pandora's business decision to sell fewer ads, Huppe said.

'Major Catalyst'

This year, Pandora will pay SoundExchange almost $250 million, more than half of its revenue, while satellite radio services will pay 7.5 percent of their revenue and cable radio will pay 15 percent, Kennedy said.

The legislation backed by Pandora could cut its content costs by as much as half and be a "major catalyst" for the company's earnings, Rich Tullo, an analyst at Albert Fried & Co. in New York, said in a Sept. 24 research note.

The Pandora-backed bill was introduced Sept. 21 in the House by Representatives Jason Chaffetz, a Utah Republican, and Jared Polis, a Colorado Democrat. Ron Wyden, an Oregon Democrat, introduced the bill in the Senate.

"Internet radio should be a boon to the entire audio market," Chaffetz said at today's hearing. "But instead it's barely hanging on."

Rihanna Protest

Rihanna, Maroon 5 and Katy Perry were among 125 artists who signed a letter this month protesting the measure, saying it would "gut" royalties for thousands of musicians. MusicFIRST, a group representing the Recording Industry Association of America and musician groups, opposes the legislation, along with the NAACP and AFL-CIO.

Pandora, a publicly traded company, is urging a measure "that would cut royalties and deprive artists of the fair- market value of their work," Representative John Conyers of Michigan, the senior Democrat on the House Judiciary Committee, said at the hearing. For some musicians, "this is their only compensation," he said. "They depend on royalties and their careers aren't always that long either."

Pandora has urged its users to contact members of Congress in support of the legislation and formed a coalition with CC Media Holdings Inc. (CCMO)'s Clear Channel Media and Entertainment to lobby for the bill.

Royalty Board

Under the current system of performance royalties, Internet radio services pay a fraction of a cent for every song they play while satellite and cable radio pay a percentage of revenue. Rates are set by a three-person Copyright Royalty Board, appointed by the Librarian of Congress. Traditional radio pays no performance royalties for over-the-air broadcasts.

Webcasters' royalty rates expire at the end of 2015, and they want Congress to change the framework under which the rates are set before the royalty board's next rate hearing, Paul Gallant, a Washington-based analyst with Guggenheim Securities, said in a note yesterday. The royalty board will start its next proceeding in 2014 on rates for the years 2016 to 2020, according to Gayle Osterberg, a spokeswoman for the Library of Congress.

Closing 'Loophole'

While Inc. (AMZN) pays about 70 cents to rights holders and creators for every 99-cent download in its mp3 store, Pandora pays about a 10th of a penny to SoundExchange when a song is streamed, Jimmy Jam, a producer who has worked with Usher and Mariah Carey, said in testimony to the committee.

The Pandora-backed bill would "lower these already small payments by as much as 85 percent," he said. Before tackling rates, Congress should close the "loophole" that allows broadcast radio to avoid performance royalties, he said.

SoundExchange and musicFIRST support a draft bill from Representative Jerrold Nadler, a New York Democrat, which would bring digital radio from terrestrial, satellite, cable and Internet under the current royalty standard applied to Pandora.

The Internet Radio Fairness Act is H.R. 6480 in the House and S. 3609 in the Senate.

(BN) DuPont Sends in Former Cops to Enforce Seed Patents: Commodities

(Bloomberg) DuPont Co. (DD), the world's second- biggest seed company, is sending dozens of former police officers across North America to prevent a practice generations of farmers once took for granted.

The provider of the best-selling genetically modified soybean seed is looking for evidence of farmers illegally saving them from harvests for replanting next season, which is not allowed under sales contracts. The Wilmington, Delaware-based company is inspecting Canadian fields and will begin in the U.S. next year, said Randy Schlatter, a DuPont senior manager.

DuPont is protecting its sales of Roundup Ready soybeans, so called because they tolerate being sprayed by Monsanto Co. (MON)'s Roundup herbicide. For years enforcement was done by Monsanto, which created Roundup Ready and dominates the $13.3 billion biotech seed industry, though it's moving on to a new line of seeds now that patents are expiring. That leaves DuPont to play the bad guy, enforcing alternative patents so cheaper "illegal beans" don't get planted.

"Farmers are never going to get cheap access to these genetically engineered varieties," said Charles Benbrook, a research professor at Washington State University's Center for Sustaining Agriculture and Natural Resources. "The biotech industry has trumped the legitimate economic interests of the farmer again by raising the ante on intellectual property."

Farmers Sued

Monsanto controls about 28 percent of the soybean market in the U.S., the largest producer and exporter last year, while Dupont has about 36 percent. The weed-killer tolerant seeds and related licenses generated $1.77 billion in sales for Monsanto in the year through August, 13 percent of the company's total. DuPont had $1.37 billion in soybean revenue last year, 3.6 percent of total sales, according to data compiled by Bloomberg.

The grain is used to make animal feed, cooking oil, tofu and biofuels, and it's the biggest crop after corn in the U.S.

DuPont dropped 1.5 percent to $42.79 at 10:02 a.m. in New York. It has declined 6.6 percent this year, the fifth-worst performer of 31 companies in the S&P 500 Materials Index. (S5MATR) Monsanto has gained 27 percent, the sixth-biggest gain in the index.

Attacks on the modified food industry aren't new. Farmers criticized Monsanto in the 2008 Oscar-nominated documentary "Food, Inc." for contracts that keep them from saving seeds. The St. Louis-based company has sued 145 U.S. farmers for saving Roundup Ready soybeans since 1997, winning all 11 cases that went to trial, said Kelli Powers, a Monsanto spokeswoman. The U.S. Supreme Court last month agreed to consider the legality of such planting restrictions.

DuPont's Challenge

DuPont currently markets Roundup Ready soybeans under license from Monsanto, which is shifting to a newer version of the crop along with most of the rest of the industry. The new seeds produced an average of 4.5 bushels an acre more than the originals this year, Monsanto said today in a statement. Some farmers were anticipating a return to low-cost seed after patents on the original beans expire, Benbrook said.

Monsanto Chief Executive Officer Hugh Grant raised such a prospect in 2010 when he said that growers could replant Roundup Ready soybeans after the patents lapse.

"Our challenge is to get customers to understand the fact that strong intellectual property protection is a benefit that ends up at the customer level," Schlatter, who works for DuPont's intellectual property program office, said by phone. His company holds more than 225 soybean patents, he said.

"If we can't make a profit, we can't invest and we can't bring out new products."

Court Review

Monsanto widely licenses its technology, getting the two versions of Roundup Ready soybeans into 82 percent of the global crop last year and 94 percent in the U.S. Patents on original Roundup Ready beans expired in Canada last year and they expire in the U.S. in late 2014.

Soybeans are easier for farmers to replicate than other hybrid crops such as corn because second-generation beans don't lose vigor, tempting farmers to hold onto seeds.

The Supreme Court on Oct. 5 agreed to review a federal appeals court decision that Vernon Hugh Bowman, a farmer, infringed Monsanto's patents when he purchased and planted Roundup Ready soybeans from a grain elevator to save money. The U.S. Court of Appeals for the Federal Circuit, rejected Bowman's contention that Monsanto had "exhausted" its patent rights by the time he bought the seed.

Argentina Exit

Monsanto pulled out of the Argentine soybean market a decade ago after the country stopped enforcing Roundup Ready patents. Pirated Roundup Ready beans are ubiquitous in the country. Monsanto is working on agreements to get paid for a newer technology that would allow it to re-enter the market on a trial basis in a year, the company said today in a presentation on its website.

Monsanto, which carries out the same kind of farm visits as DuPont, is shifting enforcement efforts to its new Roundup Ready 2 technology, Powers said. It has switched most U.S. customers to the new genetic trait, with 32 million acres planted last year and about 40 million acres estimated for next year.

Dow Chemical Co. (DOW), which competes in the biotech seed market, doesn't need farm inspectors because it's licensing the new Roundup Ready 2 trait from Monsanto, said Garry Hamlin, a Dow spokesman.

Genetic Analysis

DuPont has contracted Saskatoon, Saskatchewan-based Agro Protection International for its farm audits. Agro typically hires retired police officers to visit growers, its President Dennis Birtles said. It has about 45 employees inspecting farms in Canada and is adding as many as 35 to begin work for DuPont in the U.S. next year, he said.

"Everyone always goes to the idea that we are trying to intimidate people and nothing could be further from the truth," Birtles said. "We are trying to create deterrence."

The inspectors are trained to remain polite and respectful as they examine planting and purchase records and tour farmers' fields, Birtles said. Crop clippings are sent to DuPont for genetic analysis.

Agro found no major violations in "a couple hundred" visits to DuPont's Canadian customers this year, Birtles said. Similar work for other clients typically find violations in about 2 percent of visits, he said.

Brian Corkill, who grows 500 acres of soybeans and 1,200 acres of corn in Galva, Illinois, said he knows another farmer who was caught holding on to modified seeds two years ago. Corkill said he would have no problem with inspectors visiting his farm.

Biotech Benefits

"I don't know if it's worth the risk of saving seed," he said by phone. "We have all reaped the benefits of biotech seed and we have to remember that."

Agro will begin U.S. farm inspections two years before the Roundup Ready patent expires in the country, so as to let growers know that alternate patent protections are in place, Birtles said.

"In my business, it is easier to slow the tide from the very beginning than to try diving in three years later and then get people to stop doing some bad habits," he said.

(BN) Why GivingTuesday is the Social Innovation Idea of the Year

The most adaptive, agile companies and organizations are figuring out how to leverage what they do best to take advantage of global, seismic shifts in media, technology and society. Today's newest and brightest example is a distributed philanthropic movement called GivingTuesday.

I've seen the underlying trend firsthand as an advisor to General Electric Co.'s Innovation Accelerator, an initiative led by GE's Chief Marketing Officer Beth Comstock in which GE convenes partners in academia, venture capital, business entrepreneurship, social entrepreneurship, branding and social media. They're discussing megatrends, such as Big Data, the future of MRI imaging, or how to build out ecoimagination into to new sustainability partnerships across sectors. Obama Administration officials describe a similar transition, manifested in their recent decision to preserve the social media arm from the 2012 campaign, as well as the recent national "listening tour" with potential partners and collaborators led by White House Chief Technology Officer Todd Park.

Increasingly, administration officials view the White House as a platform for convening power, rather than a monolith that hands down executive orders and speeches from upon high, including Jonathan Greenblatt, special assistant to the President and director of the Office of Social Innovation and Civic Participation in the Domestic Policy Council, and Alec Ross, senior advisor for innovation to Secretary of State Hillary Clinton.

This is just the beginning. The era of the command-and-control organization is over, at least for now. Its replacement is still taking shape. Companies like Cisco Systems Inc., GE and Genentech Inc. and are out in front, trying to restructure their legacy hierarchies into more collaborative networked organizations. It's a messy and inefficient process. Also, witness the U.S. Army's attempts to modernize its archaic structure, which, as Thomas Ricks' has documented in his latest book, The Generals, has not gone well. Change is indeed hard -- but critical to capitalize on pervasive change in technology and society.

New kinds of organizations are emerging where effective social entrepreneurship meets the networked effects of technology. My favorite case study of the moment is GivingTuesday, which describes itself as a "national day of giving at the start of the annual holiday season." What started just a few months ago as a small social media campaign has blossomed into a networked philanthropy that claims 2,000 partners across all 50 states. They include well-known social causes like Kiva and; companies, such as JC Penney and Microsoft; small nonprofits and charities, such as the Case Foundation and the Otsego County (New York) United Way; and local governments, including Atlanta. (Disclosure: I've been advising and supporting the founding team personally for some time now; my company, the BLKSHP, is a partner organization.)

The idea is simple. Instead of starting the giving season with shopping on Black Friday or Cyber Monday, people are encouraged to start on GivingTuesday with philanthropy. Co-founder Henry Timms, deputy executive director of New York's 92nd Street YMCA (92Y), contrasts Black Friday shopping and GivingTuesday philanthropy: "We have two days that are good for the economy. Here's a new day good for the soul."

American culture seems primed for this message, especially in the wake of superstorm Sandy. The way that GivingTuesday has proliferated has been quite remarkable to me. It came to life at the 92Y, in partnership with the United Nations Foundation, and then spread quickly across real and virtual social networks, attracting more organizations and people into its sway. I've watched with great admiration and excitement as the idea has developed into a movement.

How did it happen? Distributed leadership. We're living in a tribal society. The Web's nimble, networked structure allows organizations to tap vast, hive-like relationship clusters. Once a novel idea emerges, like GivingTuesday, and large institutions identify them and sign on to it, as JPMorgan Chase & Co. or the Salvation Army has, then a constellation of smaller non-profits or charities will follow suit. Before you know it, a movement is born. This is not unlike the way traditional consumer behavior often unfolds, as early adopters scale up toward mainstream adoption.

The combination of technology savvy, such as Mashable's and Facebook's, and public-service organizations, like the 92Y and the U.N. Foundation, can open new pathways for civic activity, allowing like-minded business leaders, social entrepreneurs, activists, technologists, opinion-makers and bloggers to follow suit. GivingTuesday portends big things for the future of citizen-focused, empathic, bottom-up social change in the government sector and society at large.

The movement is reinventing how a simple, good idea can reshape networks online and off. The revolution will be improvised.

Peter Sims is founder & a 'sir' of the BLKSHP, cofounder of the social venture Fuse Corps, and his latest book is Little Bets: How Breakthrough Ideas Emerge from Small Discoveries.

Monday, November 26, 2012

(BN) Record Online Holiday Sales Seen as Mobile Drives Growth

(Bloomberg): Online retailers are poised for a record $43.4 billion holiday sales season as shoppers increasingly rely on social networks and mobile devices to find and buy merchandise.

Internet sales will grow 17 percent from a year earlier and make up more than 10 percent of U.S. retail spending, excluding gas, food and cars in the last two months of the year, said Andrew Lipsman, vice president of industry analysis at ComScore Inc. (SCOR) That compares with $29.2 billion spent online during the same period in 2007, when electronic commerce made up 7.4 percent of total spending.

The growth of smartphones and tablets gives buyers the ability to shop anytime and anywhere, an opportunity that Web retailers have been eager to exploit by offering sales to coincide with traditional storefront deals. They're also offering applications to make mobile retailing more seamless while tapping into social media, where shoppers increasingly find and share information on merchandise.

"People are shopping on their mobile devices between 7 p.m. and midnight -- that's an occasion that just didn't exist in the past, and now we're seeing it happening in a big way," Lipsman said.

EBay Inc. (EBAY) began offering mobile-only deals starting at 5:23 p.m. New York time on Thanksgiving -- the exact moment when it expected diners to push away from their pie plates and start scouring the Web. Four days earlier, Inc. (AMZN) debuted a holiday deal site promising bargains to shoppers who used the company's mobile app or signed up for alerts on social networks such as Facebook Inc. and Twitter Inc.

Moving Online

Online sales already gained 17 percent on Thanksgiving day and 21 percent on Black Friday, according to research by International Business Machines Corp., signaling shoppers are no longer waiting for the so-called Cyber Monday that follows Black Friday discounts by brick-and-mortar retailers. Apple Inc.'s iPad was used for almost 10 percent of online shopping, followed by the iPhone at 8.7 percent, IBM said.

On Black Friday, online sales, excluding EBay and auction sites, surged to over $1 billion for the first time, according to ComScore. Amazon was the top retailer that day, with more than 57.3 million U.S. visitors, the researcher said.

That growth has been driven, in part, by mobile shopping, thanks to the growth of smartphones and tablets, along with faster networks, that can deliver a richer Web shopping experience even when away from personal computers and laptops.

"Mobile is a game changer," said Steve Yankovich, head of mobile business at EBay, the biggest online marketplace. "Consumers expect to shop on their own terms, and tablets and smartphones make every moment instantly shoppable."

Mobile Buying

Emarketer Inc. estimates that Web-based sales completed on phones will rise 53 percent in the U.S. this November and December and make up 5.2 percent of Internet buying. By 2015, mobile purchases will contribute 9.5 percent.

Photo-sharing sites such as Pinterest Inc. that invite users to "like" and share products -- from dress shoes to iron bed frames -- are helping to fuel growth in online sales, Lipsman said. The company has about 25 million users, four times what it had heading into the holiday season last year.

While shoppers still have to leave some social sites to buy items, services like Pinterest -- and more recent copycats such as Svpply Inc. and Thing Daemon Inc.'s -- can turn visitors into buyers by letting them see what their friends and style idols are buying.

"For a long time, we kind of talked about social commerce," Lipsman said. "People would be making product recommendations on Facebook and Twitter, but what really is starting to hit this theme on the head is Pinterest."

Social Shopping

Almost a quarter of online shoppers take advantage of offers delivered via social media, according to a holiday retail report by American Express Co., the biggest U.S. credit-card issuer by purchases.

CafePress Inc., which sells customized items such as T- shirts and coffee mugs, keeps a close eye on what images, buzzwords and products wax and wane in popularity on social- media websites to decide what to sell.

"All of our content is socially curated, so we have to really watch for what is emerging," CafePress Chief Executive Officer Bob Marino said in an interview.

Shoppers have also developed a habit known as showrooming: inspecting an item in a physical store and then searching online for a lower price. About one third of shoppers do this, according to ComScore.

Showrooming has been made possible by smartphones and tablets, as more people browse the aisles at stores such as Target Corp. (TGT) and Macy's Inc. (M) and instantly look up competing online prices.

Compared with last year, holiday shoppers this year are seeking more deals on smartphones, using more applications that scan bar codes for price comparisons and accessing more discounts through mobile apps, according to American Express.'s "Price Check" app lets users scan a bar code with a smartphone camera, which then calls up the online retailer's price. Users can then move the item to a shopping cart or order it on the spot.

(BN) Samsung’s Galaxy Note II Infringes Patents, Apple Says

(Bloomberg): Apple Inc. (AAPL) sought to add infringement claims over six more Samsung Electronics Co. (005930) products including the Galaxy Note II to its multibillion-dollar patent lawsuit against the South Korea-based company.

Apple has said that Samsung products running on the new Android "Jelly Bean" operating system, and other products running on the "Ice Cream Sandwich" system should be added to the case, according to filings in San Jose federal court in California. Jelly Bean is Google Inc. (GOOG)'s latest version of the Android operating system that runs on Samsung mobile devices.

Apple Nov. 23 asked the court to add to its case the Galaxy S III, running the new Jelly Bean system, the Galaxy Tab 8.9 Wifi tablet computer, the Galaxy Tab 2 10.1 and the Rugby Pro and Galaxy S III mini, according to court papers.

"Apple has acted quickly and diligently to determine that these newly released products do infringe many of the same claims already asserted by Apple, and in the same way that the already-accused devices infringe," the Cupertino, California- based computer-maker said in its filing.

The claims were filed as part of a second patent suit between the mobile-device giants in San Jose federal court in which Samsung is targeting Apple's iPhones, iPad and iPod Touch devices, while Apple has named more than 20 Samsung devices.

In an earlier lawsuit that went to trial in July, a jury found that Suwon-based Samsung infringed six of seven Apple patents at issue and awarded $1.05 billion in damages.

First Case

In the first case, U.S. District Judge Lucy H. Koh scheduled a Dec. 6 hearing for Apple's bid for a permanent U.S. sales ban on eight Samsung smartphone models and the Tab 10.1 tablet computer. She will also consider Samsung's bid to get the verdict thrown out based on claims of juror misconduct.

Nam Ki Yung, Samsung's Seoul-based spokesman, declined to comment on the filing.

The newer case is Apple v. Samsung Electronics Co. Ltd., 12-cv-00630, U.S. District Court, Northern District of California (San Jose). The previous case is Apple Inc. v. Samsung Electronics Co. Ltd., 11-cv-01846, U.S. District Court, Northern District of California (San Jose).


(BN) Apple, Fraden, A&R Collectibles: Intellectual Property

(Bloomberg): Apple Inc. (AAPL), the maker of the iPad and iPhone, is seeking a patent on a technology aimed at making it easier for a user to read a display on a mobile device.

Application 20120287163, published in the database of the U.S. Patent and Trademark Office Nov. 15, covers the scaling of a device's visual content depending on its proximity to the user's face.

Cupertino, California-based Apple explained in its application that while it is possible to expand or shrink many devices' display system by placing two fingers on the screen and spreading them apart or pinching them together, this can be inconvenient if the user moved the device to different distances multiple times.

A user may typically hold a device at arm's length, and then, when the arm becomes fatigued, may change positions multiple times, requiring multiple manual adjustments of the display's scale, Apple said.

The technology covered by the application would determine the distance between the user's face and the display screen, and then, using a calibration procedure involving one or more processors, would adjust the display's scale.

Sensors that would capture the image of the user's face for calibration purposes could include " an infrared distance sensing device; a laser distance sensing device; a SONAR distance sensing device; and an image capture device."

Apple filed the patent application in May 2011.

Fraden Gets Patent on Temperature, EMF Radiation-Sensing Phone

Fraden Corp., a closely held San Diego technology company, received a U.S. patent for a technology that would enable the use of a mobile phone to take a person's body temperature.

Patent 8,275,413 covers the use of a wireless communication device with integrated electromagnetic radiation sensors.

According to the patent, a hand-held device, such as a so- called smartphone, could incorporate sensors and signal conditioning modules for measuring signals from external sources of electromagnetic radiation (EMR) in the low, radio, ultraviolet and infrared spectrums.

The patent envisions a device that combines the functionalities of the built-in digital photo camera, a non- contact thermometer and a pattern recognition algorithm for guiding the user for a proper positioning of the mobile communication device, aimed at insuring the optimal conditions for obtaining a reliable temperature measurement.

The device could also be used for monitoring the signals of electro-magnetic fields for assessing ambient radiation levels.

Fraden said this could be useful given concerns about long- term health effects of electromagnetic radiation from a variety of mobile devices and proposed legislation on some countries placing limits on the amount of such radiation to which children and young adults could be exposed.

The company filed the application for this patent in November 2011.

Chinese Patent Issued for Herbal Treatment for Tubal Adhesions

China's Intellectual Property Office has granted a patent for an herbal remedy for fallopian-tube conditions that can prevent pregnancy.

Lee Xiaoping, a physician in China's Hubei province, was granted patent 201110031968 for an herbal compound used to treat tubal blockage and tubal adhesions. Ordinarily these are treated with surgery or laparoscopy.

The compound covered by the patent is also used to treat pelvic inflammation, according to a statement from Lee.

Trudeau's Glass Design Doesn't Infringe Bodum's, Court Rules

Trudeau Corp., a 123-year-old Canadian housewares company, has defeated an infringement claim by a unit of Humlebaek, Denmark's Peter Bodum A/S.

The dispute involved the design of double-walled drinking glasses. Bodum USA Inc. and Pi Design AG claimed that a glass made by Trudeau infringed two registered industrial designs. In Canada, such designs are protected by registration instead of design patents, as is the case in the U.S.

The plaintiffs had also accused Boucherville, Quebec-based Trudeau of unfair competition and trademarks infringement.

According to court papers, Trudeau was accused of infringing the designs for two different double-walled drinking glasses, one with a convex outer wall and one that has a concave surface.

The court said it weighed the arguments of the parties and the testimony of an expert witness who was industrial designer, and found that the Trudeau glasses didn't infringe. It also ruled that the Bodum glasses weren't entitled to industrial- design registration because they weren't sufficiently different from previous designs for double-walled glasses.

The case is Bodum USA Inc. and Trudeau Corp., 2012 FC 1128, Federal Court of Canada.

For more patent news, click here.


Artist Gets Cease-and-Desist Letter Over Doll Honoring Prince

A Seattle-based conceptual artist who created a 12-inch doll to honor one of his favorite performers has been sent a cease-and-desist letter by the performer's legal counsel, the Minneapolis City Pages reported.

Troy Gua made his "Le Petit Prince" doll in 2011 to honor the musician known as Prince, and created multiple outfits and props for his creation, including a miniature motorcycle, according to City Pages.

Gua used his Facebook Inc. (FB) social media page to inform his fans that the performer had objected to the figure, and told City Pages he was "shocked and upset at the outpouring of negativity for Prince" that resulted.

The artist said that while he could argue that the figure "my re-imagining, my recreation, my expression of the inspiration behind it, and that it is an artistic entity in and of itself," but chooses not to because "I won't argue with my hero," according to City Pages.

For more trademark news, click here.


A&R Collectibles Sues Over DMCA Takedown Notice for Moose Mugs

An Illinois manufacturer of gift items has sued a company specializing in Christmas items over a takedown request made to (AMZN) Inc.

A&R collectibles Inc. filed suit in federal court in Chicago Nov. 20, seeking a declaration it doesn't infringe the copyright to a moose coffee mug sold by A Christmas Story House Inc. of Cleveland. Additionally, A&R seeks an order barring the Ohio company from interfering with its relationship with

Wheeling, Illinois-based A&R said it commissioned the creation of a moose coffee mug in August 2006, and began selling them that year. The company claimed it hasn't ever changed the product's design or packaging.

In December 2006, A&R said it removed some "artwork, images and logos" in response to a request from Time Warner Inc.'s Warner Bros. unit with reference to its "National Lampoon's Christmas Vacation" film. In this film, several characters drink eggnog from moose-shaped glasses, according to court papers.

In April 2008, A&R said the provider of its Web service received a takedown notice under the Digital Millennium Copyright Act from Warner Bros. Warner Bros. then withdrew its request and has made no other objections since then, A&R said.

On Nov. 13, an attorney representing Christmas Story House filed a notice with requesting the delisting of all the A&R Christmas moose mug products, claiming that the products infringed that company's copyrights. A&R said it sold moose mugs long before the Ohio company began making its product.

A&R said it has lost substantial sales and market share to what it calls "willful, wanton and knowing" interference with its relationship with It says it's suffered irreparable harm in the process.

In addition to requests for the non-infringement declaration and the court order, A&R asked for awards of money damages, litigation costs and attorney fees.

Christmas Story House didn't respond immediately to an e- mailed request for comment. Seattle-based isn't a party to the litigation.

The case is A&R Collectibles Inc. v. A Christmas Story House Inc., 1:12-cv-09320, U.S. District Court, Northern District of Illinois (Chicago).

Friday, November 23, 2012

(BN) ‘Angry Birds’ Fuels Finland Game Boom as More Hits Emerge

The success of "Angry Birds" is helping Finland's other mobile-game fledglings take wing.

Enticed by the title's rapid rise to fame, venture-capital investors are flocking to the Nordic country in search of the next hit. The game developers attracting attention include the makers of "Clash of Clans," "Hay Day" and "Hill Climb Racing." Each of those has had millions of downloads, joining "Angry Birds" in Apple Inc. (AAPL)'s application store's top lists.

Expanding at an annual pace of 57 percent, gaming has emerged as a niche growth industry for the country of 5 million seeking to diversify its economy as once-dominant mobile-phone maker Nokia Oyj (NOK1V) shrinks and cuts thousands of jobs. "Angry Birds" maker Rovio Entertainment Oy attracting $42 million in venture money in 2011 has helped local rivals including Supercell Oy and Grey Area Oy also lure international backers.

"There's an amazing critical mass here," said Sean Seton- Rogers, general partner at London-based Profounders Capital, who joined thousands of investors and entrepreneurs in the Nordic region's biggest startup event, Slush, in Helsinki this week. "Once you start having a viable ecosystem, it feeds off itself."

Helsinki-based Supercell's "Clash of Clans" was the top- grossing iPhone app in the U.S. as of yesterday, meaning its players spent the most money, including in-game purchases, according to Oulu, Finland-based Fingersoft Oy's "Hill Climb Racing" was the most downloaded free game. Rovio's "Angry Birds" was named the most downloaded paid app ever this year by Apple, and its "Angry Birds Star Wars" edition is the most popular paid app now, according to

Mobile Boost

While Finnish startups are benefiting now from the extra engineering talent available as Nokia cuts jobs, the country's gaming industry is decades-old and began developing in the era of personal-computer titles. A shift in player preferences toward mobile phones and tablets, resulting in Rovio's success, gave the industry a shot in the arm, Seton-Rogers said.

"The market has really grown with the growth in mobile gaming," said Seton-Rogers, who helps manage 30 million euros ($39 million) of venture funds and first invested in a Finnish startup, mobile gaming cross-promotion network Applifier, last year. "As that's taken off, people pay more attention now."

Supercell got a $12 million investment last year from Accel Partners, which also has a stake in Rovio and was an early backer of Facebook Inc. Grey Area, maker of the location-based multiplayer game "Shadow Cities," has raised money from investors including Index Ventures and London Venture Partners.

'Insanely Powerful'

While Finnish game makers compete in some areas, they cooperate in others, sharing experiences as they seek global growth. Helping with that goal is Startup Sauna, a non-profit organization focused on polishing small businesses into world- beaters, based on pro bono input from coaches like Rovio Chief Marketing Officer Peter Vesterbacka and Supercell Chief Executive Officer Ilkka Paananen.

"It's all about the community, which makes it insanely powerful," said Vesterbacka, a co-founder of Slush, welcoming visitors in his trademark red hooded sweatshirt to the event whose attendance doubled from last year to 3,000. "It's cold and dark, but once you get inside, there are amazing startups."

Developers also tend to move around, spreading talent. Supercell CEO Paananen, for instance, has held top positions in companies including Digital Chocolate Inc. and Sumea Oy, which developed games in the early 2000s in cooperation with Nokia.

Gaming Cluster

Finnish game-industry veterans including Matias Myllyrinne are embracing the new competition. Myllyrinne is the CEO of Remedy Entertainment Oy, the developer behind "Max Payne" and "Alan Wake," which beat "Angry Birds" for Time magazine's game of the year in 2010.

"It's absolutely fantastic -- the birth of a gaming cluster is good for everybody in the field," he said in an interview. "The threshold for me to call up the guys at Supercell or Rovio is not very high, and vice versa."

In a change of pace from blockbuster titles developed for Microsoft Corp.'s Xbox 360, Remedy has also tried its luck in mobile gaming, selling more than 10 million digital copies of "Death Rally".

"We've started looking at tablets and mobile phones, there are fine opportunities for us to bring our knowhow," he said. "One can go see 'Lord of the Rings' on a big screen or watch YouTube clips, they serve a different function."

Plush Toys

As mobile games typically cost a maximum of a few dollars, and many are free, the revenue the startups generate from game sales is limited. Many target extra revenue from selling ads and in-game features, as well as merchandise such as the ubiquitous "Angry Birds" T-shirts, plush toys and candy.

The game industry in Finland grew 57 percent in 2011 to 165 million euros, according to the Finnish chapter of the International Game Developers Association. Growth has continued this year, with Supercell alone now grossing "clearly above" $500,000 a day, helped by "Clash of Clans" and "Hay Day," Paananen said in an interview. Apple takes a 30 percent cut of what a game on its system grosses, with the developer keeping the rest.

To help fuel the growth, Finland's government is planning tax breaks for minority investments in unlisted growth companies. Prime Minister Jyrki Katainen attended Slush, wearing colorful nail polish as he made his opening remarks, part of a publicity stunt for guitar-learning game "GuitarBots."

The nascent political support, coupled with the thriving game-industry community and the "Angry Birds" success, make it easier for startups to stay in Finland and less necessary to relocate to Silicon Valley to gain funding.

"Helsinki is the best city in the world to build games at the moment," Paananen said. "People understand that it's possible to become global from Finland -- to have an example like Rovio is very inspiring and motivating.

Tuesday, November 20, 2012

(BN) DuPont-Dow Corn Defeated by Armyworms in Florida: Study

Fall armyworms in southern Florida survived a pesticide engineered into corn by Dow Chemical Co. (DOW) and DuPont Co., the second insect to show signs of resistance to genetically modified crops in the U.S., according to a study.

Fall armyworms ate the leaves of corn engineered to produce an insecticidal protein and lived, according to 2012 field trial data presented Nov. 13 at a conference in Knoxville, Tennessee. The protein is marketed by Dow and DuPont as Herculex.

"This is most likely field resistance," Fangneng Huang, an assistant professor at Louisiana State University in Baton Rouge, said at the annual meeting of the Entomological Society of America.

The study follows last year's discovery in Iowa that rootworms have developed resistance to Monsanto Co. (MON)'s corn. Concern that the insecticides are failing is prompting farmers to apply more chemicals, unwinding the primary environmental benefit of pest-fighting crops, Michael Gray, an entomologist at the University of Illinois in Urbana, said in a Nov. 14 presentation at the conference.

Fall armyworms, the caterpillar stage of a moth, got the name because infestations move between fields like a marching army, typically in autumn. The insect can survive U.S. winters only in southern Florida and Texas, limiting its range as a pest to the southeast.

Dow hasn't seen Huang's data and can't confirm his claims, Garry Hamlin, a spokesman for the Midland, Michigan-based company, said in an e-mail. A finding of armyworm resistance "would seem to have little agronomic significance for U.S. growers operating north of Tampa," he said.

'Minimal Amount'

DuPont's Pioneer seed unit sells "a minimal amount" of corn with the Cry1F protein in Florida and doesn't expect a business impact, Josh St. Peters, a spokesman for the Wilmington, Delaware-based company, said in an e-mail. A Dow study earlier this year found no indications of armyworm resistance, he said.

Armyworm isn't a primary target of the insecticide produced by the crop, the companies said separately.

The companies will work with the U.S. Environmental Protection Agency, which regulates pesticides, to determine the next steps. Dale Kemery, an EPA spokesman, had no immediate comment when reached by phone yesterday.

Fall armyworm resistance to the insecticide was first discovered in Puerto Rico in 2006, prompting Dow and DuPont to voluntarily stop selling the product on the island, according to the EPA's registration for the product.

Biggest Business

DuPont's agriculture unit is its largest business, generating 24 percent of company sales last year, including $4.31 billion in corn seed revenue. Dow's agriculture unit, which doesn't break out seed sales, had $5.66 billion of revenue last year, according to data compiled by Bloomberg.

Also contributing to the armyworm study were scientists from the USDA, University of Florida, University of Minnesota and Louisiana State University.

Resistance to Monsanto's rootworm-killing protein is suspected in Iowa, Illinois, Minnesota and Nebraska, the EPA said last year. There's "mounting evidence" the engineered corn is losing its effectiveness in the Midwest, the agency said in August.

Syngenta AG (SYNN)'s Agrisure corn may have "cross-resistance" with Monsanto's insecticide, meaning the crop is vulnerable to the same rootworms that are no longer killed by Monsanto's toxin, according to other presentations at the conference this week.

(BN) Chrysler Dodges Tech Troubles by Letting Ford Blunder

Chrysler Group LLC is emerging a leader in touch screens by letting Ford Motor Co. and General Motors Co. jump ahead and stumble.

Blunders with the systems, which handle tasks from entertaining with Pandora Internet radio to reading text messages and mapping out directions, have dragged on Ford's (F) showings in surveys by Consumer Reports and J.D. Power & Associates. The No. 2 U.S. automaker said last month that it expects to fall short with quality metrics for a second straight year. GM's system for its Cadillac brand has drawn negative comparisons with Ford's in early reviews by Consumer Reports.

While its rivals plunged ahead with advanced controls and abandoned trusty knobs and buttons, Chrysler has moved more slowly with its simpler Uconnect system. In-car technology is gaining extra weight as industrywide quality of powertrains, design and interiors gets closer to parity.

"We've definitely seen a shift in terms of what breaks," Jake Fisher, the director of Consumer Reports' Auto Test Center, said in an interview at Bloomberg's Detroit bureau. He picked up his iPhone from a conference room table: "Now, it's this as opposed to transmissions and engines."

Consumer Reports, regarded as credible because it forgoes advertising and buys the cars it tests, published an Aug. 22 post on its website: "Why the MyFord Touch control system stinks." Plagued by issues with its electronics, Ford's namesake brand fell seven spots to second-to-last place in the magazine's auto-reliability survey announced last month. Its luxury nameplate Lincoln plunged 12 spots, the biggest drop.

'Growing Pains'

"We want to be a leader in technology, and so we're having a few growing pains," Bill Ford, the chairman of Dearborn, Michigan-based Ford, told reporters Nov. 19 in Detroit. "Our customers are telling us it's absolutely the right way to go."

Without improving its system, Ford may be unable to keep David Cheslow as a customer. The 65-year-old life insurance agent said that the screen in his 2013 Ford Edge "froze" and went black on three separate occasions yesterday. He's had similar problems since buying the sport-utility vehicle in July.

"I wouldn't go for another Ford unless I knew that it was working the way that it's supposed to," said Cheslow, who lives in Elizabeth, New Jersey, and owned two other Ford vehicles before purchasing the Edge.

GM (GM) sought to top Ford early this year with its Cadillac User Experience, or CUE, system with tablet computer-style touch screens. Early indications from Consumer Reports' testing is that CUE is "not any better" than Ford's system, Fisher said in an Oct. 29 interview.

More Designers

Chrysler, which introduced its Uconnect system in 2003, has been relatively quiet in marketing its technology compared with GM and Ford. The automaker has introduced updated versions of its touch screens into new models as they debut rather than blanketing its whole lineup with its latest up-to-date system.

"We're doing more thoughtful integration," Marios Zenios, Chrysler's head of connectivity, said in an interview from the Uconnect command center in Chrysler's Auburn Hills, Michigan, headquarters.

When Zenios joined Chrysler in 2008, the automaker employed three people who specialized in the field of human machine interface, in which designers and engineers work on the layout and software of devices to make them easy to use. Chrysler now has "quite a force" of such personnel, he said, declining to provide a specific figure.

Automakers' Challenge

Chrysler has reason to be mum about details concerning its Uconnect staff, said Andrew Watt, chief executive officer of iTalent LLC. Watt's recruiting firm has been tapped by automakers and suppliers for eight to 10 searches this year to fill positions related to mobile technology in vehicles.

"Any intelligence about what's going on when it comes to this talent, you keep to yourself," said Watt, who is based in Troy, Michigan. "These are niche skills and this is the kind of content that attracts young buyers to cars. The only way to get these people is to take them from someone else."

Automakers face a challenge because virtually all consumers say they want technology and tie-ins between their mobile phones and cars, Zenios said. Customers, though, vary in how much they use in-car systems. Also, users are less forgiving of technological mishaps from behind the wheel.

"As long as you manage technology, it will be your friend," said Zenios, who worked on in-car telecommunications systems for GM, Daimler AG (DAI), and Bayerische Motoren Werke AG (BMW) during his 22 years with Motorola Inc. "The minute you do something for technology's sake, it may not work out very well for you in automotive."

'Learning Curve'

Chrysler, majority-owned by Italian carmaker Fiat SpA (F), "didn't reinvent the wheel" in developing features such as the navigation system within Uconnect, said Consumer Reports' Fisher, a former engineer for Detroit-based GM.

"The Chrysler system is probably the best one that I've used," Dave Sullivan, a product analyst for Tustin, California- based AutoPacific Inc., said in a telephone interview. "It's the fastest, it's got great resolution. The screen has nice, big buttons on it. It doesn't crash. The navigation is simple."

Like Bill Ford, AutoPacific's Sullivan attributes Ford's first-mover strategy for the automaker's ills in consumer surveys. The namesake Ford brand slid to 27th from 23rd a year ago and fifth in 2010 in Westlake Village, California-based J.D. Power's initial-quality study that was released in June.

"There's a learning curve for all these automakers," Sullivan said. "They've never really been software people before. They've always been engineering nuts and bolts. This is what happens when you want to be first."

'Misplaced Progress'

The Cadillac CUE system debuted in the XTS and ATS sedans that GM introduced this year and is spreading throughout the brand's lineup. The world's largest automaker equipped its touch controls with haptic feedback -- meaning that the car's buttons vibrate when touched -- in an effort to outdo Ford's systems.

"The haptic feedback is nice, but we found that you still have to take your eyes off the road to make sure you're tapping the right spot," Jim Travers, a Consumer Reports associate editor, wrote in a June 22 review of the XTS. "Having to relearn how to use a button just for the sake of looking 'high tech' -- as there are no functional advantages to these flush controls -- is misplaced progress."

The CUE system's buttons are "fussy" and flipping through screens is a "chore," Tom Mutchler, a Consumer Reports engineer, said in an Oct. 19 review of the ATS. "That's really something of a shame, because the annoying controls detract from what otherwise is a really rewarding car to drive."

MyLink, IntelliLink

GM is taking a different approach from Cadillac for Chevrolet, its high-volume brand, with a system branded as MyLink, and for Buick and GMC with IntelliLink. With MyLink, GM uses a concept it calls "smart phone, dumb radio," in which the in-car system embeds features from the phone and amplifies them over a display, said Scott Fosgard, a GM spokesman.

"If you set CUE aside, GM's got a system in the Sonic and the Spark that's pretty competitive," said AutoPacific's Sullivan, referring to MyLink.

In addition to competitive pressures, U.S. automakers are being scrutinized by regulators led by Transportation Secretary Ray LaHood, who has said his department is on a "rampage" against behind-the-wheel distractions.

U.S. Guidelines

The government issued guidelines this year to quell in-dash distractions, recommending that no task for drivers take longer than two seconds and that cars be stopped and in park before users can enter navigation commands or use social networking sites such as Facebook (FB) and Twitter. The guidelines stop short of recommending limits on devices.

Chrysler put its latest Uconnect system in new pickups introduced late this year with a feature intended to curb distraction from texting while driving. A phone paired with the Uconnect system can notify a vehicle's occupants of a received text and "read" the message over the audio system. A reply to the message can be made audibly, using voice-to-text software developed by Nuance Communications Inc. (NUAN)

"I don't want the people touching the phone no matter what," Zenios said. "Keep it in your pocket or keep it in your purse, and then let the system alert you in the right way."

(BN) Medical Pot Novices Learn to Be ‘Bud Tenders,’ Avoid Jail

Tony Aquino, 58, is a self-described "1 percenter" who's bought and sold more than 30 Southern California properties from the coast to the desert. Walter Jimenez, 29, is a short-order cook and air-conditioning installer. They're joined by a common interest: California's latest Gold Rush, medical marijuana.

The investor and the cook shrug off federal crackdowns in an industry valued at $1.3 billion by the California Board of Equalization, the state's tax collector. They joined more than 30 people who paid Los Angeles-based MedMen University $100 to $250 for one-day courses on how to cash in as "bud tenders" and dispensary operators.

Since California first legalized marijuana for medical treatment of diseases such as cancer under a "compassionate use" law in 1996, the practice has spread to 17 other states. This month, Massachusetts became the latest, while Colorado and Washington went further, approving recreational use. There's nothing but growth ahead, said Adam Bierman, MedMen's co- founder.

"The momentum in the country is shifting and it's not going back," Bierman told pupils in a Santa Monica hotel conference room on a Sunday morning. "The cat's too far outside of the bag in California and you can't put it back."

Bierman, who said he doesn't use marijuana medically or otherwise, urged students to operate their businesses openly and to market themselves without fear of "harassment" by authorities.

'You're Protected'

"You're protected by the state," Bierman said. "Don't hide."

Federal law continues to ban use of marijuana, even for medical purposes with cancer and AIDS patients, and the U.S. Food and Drug Administration deems state medical-marijuana laws "inconsistent" with federal policy.

A commercial, for-profit industry was never intended to sprout around medical marijuana, said Scott Imler, 53, a West Hollywood minister who was an author of California's 1996 law.

"It was all supposed to be of, by and for the patients," said Imler, who said he used marijuana to deal with epileptic seizures caused by a 1993 skiing accident. "Unfortunately, that quickly went out of the window."

Into the breach stepped a new generation of entrepreneurs. Aquino, who lives in the Los Angeles neighborhood of Echo Park, said he's cultivating more than 500 marijuana plants in a "semi-legal" operation that brings him a profit and helps the suffering. It's also a hobby of sorts, Aquino said.

Pot Cultivator

"The way the plant responds when you're taking care of it -- to me, that's what motivates me," he said at the MedMen seminar, where he wore an orange T-shirt and purple Uggs boots. "I don't know how to explain it."

Jimenez, who lives in Watts, said he endured salary and benefit cuts as an air-conditioning technician and short-order cook during the recession in Florida before the prospect of medical-marijuana wealth lured him to California last year.

Jimenez, who said he uses marijuana, said he was drawn to the renegade nature of the industry. He took the "bud-tending" course to learn to grow and market marijuana with the dream of one day running his own dispensary, he said.

"This is a new industry that's mostly unregulated, so there's an opportunity to make some money in it," Jimenez said. "I see it like Google (GOOG) or the Gold Rush."

Bierman urged his students to view medical marijuana as a business "like a dry cleaner or a shoe store." That means spending money on advertising and marketing, and focusing on customer service, he said.

It's Business

"Since you're in business, be in business!" he said, raising his voice for the last three words. "Where else can you be in business and make seven figures in 1,200 square feet? I've never seen it before."

Authorities are closing down for-profit medical marijuana clinics and arresting their operators, said Thom Mrozek, a spokesman for the U.S. Attorney's office in Los Angeles. On Oct. 25, 12 people associated with nine dispensaries in Los Angeles and Orange counties were arrested on suspicion of violating federal drug-trafficking laws, the prosecutor's office said.

"All of the commercial storefronts we've seen across California are in violation of California law for two reasons: they are for-profit operations, which is not allowed under California law, and secondly, these storefronts are not functioning as the primary caregivers for patients," Mrozek said in an interview. "Certainly, the federal government's efforts in California are continuing."

Legal Bluff

Bierman and co-instructor Tyler Denham, a bearded 25-year- old who said he uses marijuana to deal with a bipolar disorder and depression, told their students that the law-enforcement efforts are bluster and will fail in court.

The classes were split between a lecture on how to avoid the hammer of the law and discussion of the fine points of the difference between the indica and sativa species of marijuana, and the relative medical benefits of smoking pot versus consuming it in brownies and other edibles.

Denham was careful to use medical terminology, referring to marijuana as medicine and users as patients.

Outside of the class, Bierman said that many users aren't smoking pot or eating brownies for medical purposes, at least not in the traditional sense. He said he has mixed feelings about the growth of a billion-dollar industry out of what began as small collectives serving people suffering from cancer, AIDS and other diseases.

"There's a problem with this whole word, 'medical,'" Bierman said in an interview. "How can you call something medical that you won't even allow a doctor to prescribe? If they want to make this purely medical, they can do it."

(BN) Apotex, Google, Lofgren, Uhlig: Intellectual Property

Apotex Inc. asked a judge to rule that its plan to market a generic version of the blood-pressure medicine Benicar won't infringe patent rights held by drugmaker Daiichi Sankyo Co. or its American unit.

In a petition filed yesterday in federal court in Chicago, closely held Apotex said a finding of non-infringement on one of two relevant patents will let it compete sooner with Mylan Inc., the maker of generic drugs that also intends to sell a version of the medication.

Mylan, which lost a challenge to the other patent in 2010, has exclusive rights to sell its version of the drug for at least 180 days after that patent expires because it was the first to seek the U.S. Food and Drug Administration's permission to do so.

Absent a ruling in its favor on a patent it claims Daiichi Sankyo let lapse in 2009, it will be deprived of sales while the public is deprived of its competition with Mylan, Toronto-based Apotex said.

Mylan is based in Canonsburg, Pennsylvania. Daiichi Sankyo is based in Tokyo. Its U.S. unit and co-defendant, Daiichi Sankyo Inc., is based in Parsippany, New Jersey.

The case is Apotex Inc. v. Daiichi Sankyo, 12-cv-9295, U.S. District Court, Northern District of Illinois (Chicago).

For more patent news, click here.


U.S. Said to Waver on Antitrust Case Against Google on Search

Google Inc. may skirt the most serious antitrust allegations under investigation by the U.S. as regulators waver on whether they can prove consumers are hurt by the way the company ranks its search results, three people familiar with the matter said.

Federal Trade Commission officials are unsure they have enough evidence to sue Google successfully under antitrust laws for giving its own services top billing and pushing down the offerings of rivals, said the people, who declined to be identified because the discussions aren't public. Regulators are also looking at whether the ranking system's benefits to consumers outweigh any harm suffered by rivals including NexTag Inc. and Kayak Software Corp. (KYAK), the people said.

The agency is under pressure to extract concessions from Google after winning a battle with the Justice Department's antitrust division over which regulator would probe the world's most popular search engine. The complaints about skewed search results represent a far greater threat to Google's business than any of the FTC's other concerns, said Keith Hylton, a Boston University law professor who has written several books on antitrust topics.

"The only part of the case that goes to the heart of what Google does is the search-biasing claim," Hylton said. "If that drops out of the FTC's case, then you have something that doesn't seem to be all that interesting in terms of antitrust law."

FTC Chairman Jon Leibowitz told Google to propose a resolution to a host of antitrust concerns in the coming days or face a lawsuit, two people familiar with the matter said last week.

The issues include Google's exclusive agreements to provide search services to online publishers and allegedly misusing patents to try to block rivals' smartphones from coming to market. The FTC also is treating seriously complaints that Google has used customer reviews from other websites without permission, the people said.

"We continue to work cooperatively with the Federal Trade Commission and are happy to answer any questions they may have," said Niki Fenwick, a spokeswoman for Mountain View, California-based Google. She declined to comment specifically on the search allegations.

Peter Kaplan, an FTC spokesman, declined to comment on the probe.

A final vote by the agency's five commissioners on whether to file a lawsuit, and what its scope should be, is expected before the end of the month, the people said.

Ramsay Seeks U.K. Rights to Batali Restaurant Name Spotted Pig

Gordon Ramsay has applied for the U.K. trademark on The Spotted Pig, the name of the New York gastropub whose celebrity owners include the musicians Jay-Z and Bono and the chef Mario Batali.

The British television chef's company, Gordon Ramsay Holdings International Ltd., submitted the application on Oct. 2 and it was published for comment on Nov. 9, according to the U.K. government's Intellectual Property Office website.

Batali and the Spotted Pig's chef-owner April Bloomfield didn't immediately respond to voice-mails seeking comments on the application. Gordon Ramsay Holdings had no comment.

Anyone who opposes the U.K. application has two months in which to enter an objection. This wouldn't be the first time a Batali restaurant has been flattered in this way. London has a Babbo, which is the name of one of Batali's venues in New York.

"We didn't have a trademark for England," Batali said in an interview last year. "You need a specific one for England. We had one for Italy, we have one for Spain, we have one in Thailand. I don't know why we didn't have one in London."

Ramsay's application was earlier reported by the Sunday Mail, in Scotland, which cited an unidentified spokesman for the chef's company as saying it regularly seeks trademarks and there were no current plans beyond that.

Bloomfield and the Spotted Pig's founder, Ken Friedman, have expressed an interest in opening a restaurant in London.

"I would love to come back and open somewhere," Bloomfield said in an interview in October. "Ken and I talk about it all the time. I don't know if it would be like the Pig."

Batali was cited in the Observer in January 2009 as saying he wouldn't accept bookings from Ramsay's office. That was after the U.K. chef called Batali "Fanta Pants." The New Yorker said Ramsay would need to call him personally for a table.

"I've never met him face to face," Batali said in the Bloomberg interview. "We've traded insults in the papers a couple of times, not because we know each other or even not like each other. Our medias just pushed us apart. I'm sure I would like him in person."

Batali has other detractors. He apologized in November 2011 after comparing bankers to Hitler and Stalin. Ramsay's last known brush with a pig was when he compared the Australian TV reporter Tracy Grimshaw to one. Ramsay also apologized.

For more trademark news, click here.


Lofgren Seeks Help from 'Free Speech Warriors' on Copyright Bill

U.S. Representative Zoe Lofgren has turned to Reddit, a social-network website, for assistance in formulating intellectual-property legislation.

Lofgren, a Democrat whose district comprises much of California's Silicon Valley, specifically asked Reddit users to look at the issue of Internet domain-name seizure in connection with copyright-infringement cases.

She said she was giving "Internet policy experts and free speech warriors" an opportunity to weigh in on an issue that has raised the ire of many website owners.

More than 700 websites have been seized over allegations of copyright infringement by the U.S. Justice Department and U.S. Immigration and Customs Enforcement since 2010, according to a background statement Lofgren released Nov. 19.

Lofgren said she is concerned that some of the domain-name seizures caused the removal -- without notice or a hearing for their owners -- of websites containing lawful content.

Such seizures amount to "prior restraint of free expression" and "impair legitimate businesses that are unfairly targeted and discourage online entrepreneurship," she said. Lofgren said she is seeking a way to require the government to provide notice and an opportunity for website owners to defend themselves in advance of domain-name seizure.

For more copyright news, click here.

Trade Secrets/Industrial Espionage

Uhlig Wins $4.6 Million Trade-Secret Misappropriation Award

Uhlig LLC, a Kansas-based publishing house, was awarded $4.6 million in a trade-secrets case.

A federal court in Greenville, South Carolina, said yesterday that Uhlig was entitled to recover the damages, attorney fees and litigation costs from John Adam Shirley and Prism Content Solutions LLC.

Uhlig sued in 2008 after acquiring Cox Custom Media, where Shirley was the highest-paid employee. Uhlig and Shirley held talks over hiring him as a consultant and independent contractor, according to court papers.

Instead, Shirley left the company and took intellectual property, including a customer database, Uhlig said. He then began calling on clients and passed the content off as his own, Uhlig said.

In December, a jury said that Uhlig proved its trade-secret theft claims against both Shirley and Prism, and that he breached an employment agreement, violated his duty of loyalty and interfered with Uhlig's customer relationships.

In addition to making the damages awards, the court ordered Shirley and Prism to quit using Uhlig trade secrets, which were related to custom publishing services for apartments and senior- living facilities.

The case is Uhlig LLC v. Shirley, 08-cv-01208, U.S. District Court, District of South Carolina (Greenville).

Monday, November 19, 2012

(BN) Apple, Google, Gevo, Dish, Kixeye: Intellectual Property

Apple Inc. and Google Inc.'s (GOOG) Motorola Mobility unit are talking about a way to resolve part of their dispute over patents related to critical smartphone technology, according to a court filing.

The companies have been exchanging proposals on using binding arbitration to reach a licensing agreement over patents that are essential to comply with industry standards on how phones operate. Such an agreement could lead to a global settlement of all of their patent disputes, Apple said in a Nov. 15 filing.

Motorola Mobility first raised the issue of arbitration on Nov. 5, before a federal judge in Madison, Wisconsin, threw out a breach-of-contract case that Apple had filed. The Cupertino, California-based maker of the iPhone claimed its mobile-phone competitor was misusing standard-essential patents to demand unreasonable royalties.

"We have long sought a path to resolving patent issues and we welcome the chance to build on the constructive dialogue between our companies," Google General Counsel Kent Walker said in a Nov. 13 letter to Apple that was filed with the court.

Apple, the world's most valuable company, has argued that competing handsets running on Google's Android operating system copy the look and unique features of its iPhones. A continuing battle with Samsung Electronics Co., which has the biggest share of the global market for smartphones, is being waged across the globe.

Even so, Apple has recently shown a willingness to settle some of the disputes. It announced a 10-year licensing agreement with Taiwan's HTC Corp. (2498) on Nov. 10. The company earlier settled a patent dispute with Nokia Oyj. (NOK1V)

"Apple's goal has always been to find a mutual and transparent process to resolve this dispute on terms that are fair, reasonable and non-discriminatory without the threat or taint of exclusionary remedies," Apple General Counsel Bruce Sewell said in a Nov. 8 letter to Google that was included in the filing.

Spokeswomen Kristin Huguet of Apple and Niki Fenwick of Google declined to comment.

Microsoft Corp. (MSFT) has its own battles with Motorola Mobility over standard-essential patents, and a non-jury trial is under way in Seattle. U.S. District Judge James Robart could issue a ruling establishing a fair rate for the Motorola Mobility patents. That could lead to an agreement between those two companies, said Victor Siber, former chief intellectual property counsel for International Business Machines Corp., and now with Baker Hostetler in New York.

The cases are: Apple Inc. (AAPL) v. Motorola Mobility Inc., 11cv178, U.S. District Court for the Western District of Wisconsin (Madison); and Microsoft Corp. v. Motorola Mobility Inc., 10cv1823, U.S. District Court for the Western District of Washington.

Gevo Wins Appeals Court Ruling in Butamax Patent Dispute

Butamax Advanced Biofuels LLC, a joint venture of DuPont Co. and BP Plc (BP/), lost an appeals court bid to block Gevo Inc. from selling some of its biofuels products while a patent- infringement case is pending.

Gevo has raised "a substantial question of validity" of the Butamax patent, the U.S. Court of Appeals for the Federal Circuit said in upholding a judge's decision not to issue a court ban. The court did say that U.S. District Judge Sue Robinson in Wilmington, Delaware should reconsider her interpretation of the patent. The case is part of a broader dispute between the two companies over genetically engineered microorganisms used to produce biofuels.

The case is Butamax Advanced Biofuels v. Gevo Inc. (GEVO), 12- 1490, U.S. Court of Appeals for the Federal Circuit.

For more patent news, click here.


Dish Files Applications to Register 'Hopper Transfers' Marks

Dish Network Corp. (DISH), which is involved in a copyright infringement case with News Corp. (NWSA)'s Fox Broadcasting unit, has filed multiple applications to register "Hopper Transfers" as a trademark.

According to the database of the U.S. Patent and Trademark Office, Englewood, Colorado-based Dish filed three applications Nov. 8 to register the term for use with telecommunications services, software for streaming video and audio, and digital video recorders. The Hopper service itself is at issue in a case in federal court in Los Angeles.

Fox had tried unsuccessfully to block Dish's ad-free primetime television service and its so-called AutoHop feature in advance of resolution of the copyright dispute. The company is appealing U.S. District Judge Dolly Gee's Nov. 7 order denying Fox's request.

According to the case file, the parties must file their briefs in that appeal by Dec. 7.

The case is Fox Broadcasting v. Dish Network, 12-04529, U.S. District Court, Central District of California (Los Angeles).

World Marketing Seeks Court Order for Surfer's Deposition

World Marketing Inc., owner of the Visitor, Kahuka Bay and Poeta Moda brands of consumer goods, asked a federal court in San Francisco to order a professional surfer to appear for a deposition in a trademark case.

QS Wholesale Inc. of Huntington Beach, Florida, filed suit in federal court in Santa Ana, California, seeking a declaration that its VSTR brand didn't infringe World Marketing's "Visitor" trademarks.

In its complaint, QS, which manufactures and distributes clothing under the Quiksilver, Roxy and DS Shoes brands, argued that the way its VSTR brand name was pronounced involved saying the name of each letter rather than as "visitor" and that it didn't infringe the World Marketing trademark.

World Marketing said that it learned that Robert Kelly Slater, a professional surfer, is the creator of and spokesman for the VSTR brand. The company alleged that Slater pronounces "VSTR" as "visitor," and seeks testimony from him to that effect.

Slater hasn't made himself available to be deposed, World Marketing said, even though he was served a subpoena and Nov. 14 was scheduled for his deposition.

The surfer didn't appear at the deposition, World Marketing said, and he has claimed he can't appear until January because he is "preparing full time" for the Association of Surfing Professionals World Championship Tour.

With a Dec. 21 cutoff date for discovery in the case, World Marketing argued that it's essential to have his testimony. The New York-based company said in its filing that the judge in Los Angeles has said there is no flexibility in the dates set in the case.

World Marketing asked the court to compel Slater to appear for a deposition on or before Dec. 14.

The case is QS Wholesale Inc., v. World Marketing Inc., 8:12-cv-00451-DOC-RNB, U.S. District Court, Central District of California (Santa Ana).

For more trademark news, click here.


'Simpsons' Actor Azaria Sues Craig Bierko Over Voice Rights

Hank Azaria, an actor on Fox television's "The Simpsons," sued a fellow actor, Craig Bierko, over the rights to the voice of a fictional baseball announcer in an Internet comedy program.

Azaria said his character, named Jim Brockmire, appeared in a video for the Web show "Funny or Die." He also said his plans to develop a movie based on the announcer have been "significantly impeded" by Bierko's claim to rights, according to a filing dated Nov. 14 in federal court in Los Angeles.

Bierko, who appeared in the 2012 movie "The Three Stooges," also created the voice of an announcer, Azaria said in the complaint. After the "Funny or Die" video appeared, Bierko demanded that Azaria stop using the announcer's voice, according to the complaint.

"Bierko's claim has created a cloud over the rightful ownership of the Azaria voice," the complaint states. "Would- be financiers and possible licensees of the asset would have valid doubts as to who is the proper copyright holder of the Jim Brockmire character."

Jill Littman, Bierko's manager, didn't immediately respond to messages seeking comment.

Azaria seeks a judicial declaration that he has the copyright to the Brockmire character, "which incorporates the Azaria voice." He also wants a declaration that no contract between him and Bierko was ever made.

The complaint states that Azaria created the announcer voice as early as 1983 and performed with it at his college. Someone who knew that Bierko also did an announcer voice put the two men in touch in 1990, according to the court filing. For several years, each used his own announcer voice in phone messages to the other, Azaria states.

After the "Funny or Die" video appeared, Bierko claimed that he had created the voice, according to the complaint.

The Brockmire character in the video has "a penchant for making obscure and off-the-wall cultural references when commenting on a baseball game," according to the complaint.

Azaria, whose movies include "The Birdcage" and "Godzilla," is also the voice of Moe the bartender on "The Simpsons."

The case is Azaria v. Bierko, 12-09732, U.S. District Court, Central District of California, Western Division (Los Angeles).

For more copyright news, click here.

Trade Secrets/Industrial Espionage.

Kixeye Files Response to Zynga's Trade Secret Theft Claims

Kixeye, the San Francisco-based games company, filed a countersuit against Zynga Inc. (ZNGA) in a trade-secrets dispute.

Zynga filed the initial suit Oct. 12 in state court in San Francisco, claiming its former studio general manager Alan Patmore took company files with him when he joined Kixeye.

Also located in San Francisco, Zynga claimed the files contained revenue information, and monetization strategy for its games, plus design documents for more than 10 unreleased games, in addition to 14 months of confidential e-mails reserved exclusively for Zynga's executive staff.

It alleged that Kixeye, which like Zynga, releases free-to- play online social games, had "failed to achieve success" because it lacked Zynga's know-how. Zynga said that on Patmore's final day of employment, he refused to confirm he had returned company data, and refused to sign a termination certification document.

In its Nov. 13 cross complaint, Kixeye said there was nothing Zynga had that it wanted. "Comparing Kixeye's games to Zynga's games is like comparing a Ducati racing motorcycle to a minivan. Both are motorized vehicles, but Ducati motorcycles, like Kixeye's midcore games, appeal to a small but passionate group of users who are focused on quality and performance," the company said in its pleadings.

Kixeye dismissed Zynga's work as "cranking out games that will fit the whole family without offending anyone" and claimed that Zynga is "notorious for copyright and cloning the games of its competition, often trampling those competitors' intellectual property rights in the process."

The motivation behind Zynga's suit, Kixeye claims is to scare any of its employees that might want to leave and work at the competitor, and to use the case as a "Trojan Horse" to gain access to Kixeye's inner workings and trade secrets.

In its filing, Kixeye asked the court to bar Zynga from interfering with its right to recruit and hire Zynga employees, and to prohibit the company from threatening to file or actually filing suits against its own employees in efforts to dissuade them from coming to work at Kixeye.

The case is Zynga Inc. v. Alan Patmore, CGC-12-525099, Superior Court of the State of California (County of San Francisco).

(BN) Political Gridlock Leaves U.S. Facing Cyber Pearl Harbor

There's almost universal agreement that the U.S. faces a catastrophic threat from cyber attacks by terrorists, hackers and spies. Washington policy makers just don't seem able to do anything about it.

Even with the consensus about vulnerabilities in U.S. networks, and with hundreds of billions of dollars at stake, Congress failed to pass cybersecurity legislation that was four years in the making and had sponsors from both parties.

The measure succumbed in August amid partisan gridlock and aggressive lobbying, even though lawmakers had heard warnings for years about holes in corporate and government systems that imperil U.S economic and national security.

"Based on my experience, very few people on the Hill get this," said Shawn Henry, who stepped down as executive assistant director of the FBI in April. "You can't see it, touch it or taste it, so it's somehow not real."

Senate Majority Leader Harry Reid, a Nevada Democrat, yesterday failed to muster enough votes to revive the measure. The bill's demise reveals how partisan bickering, tactical errors, industry lobbying, conflicting interests, and ignorance can trump even national security concerns, according to documents and interviews with advocates and opponents in the Senate, the administration and the business community.

The legislation's collapse leaves President Barack Obama with few options, administration officials said in interviews. One possibility officials have discussed is an executive order aimed at achieving some of what the legislation could have done to shore up private-sector networks.

Obama Directive

Last month, Obama signed a separate cybersecurity directive authorizing the National Security Agency and other military units to take more aggressive action to defeat attacks on government and private computer systems.

An Oct. 4 Bloomberg Government study by Afzal Bari and Jason Wilson concluded that any future order from Obama likely would promote almost real-time monitoring of crucial systems, which "may require companies to provide network information through systems connected to the federal government."

"We are still going to need legislation to do the things that we think need to be done," White House Cybersecurity Coordinator Michael Daniel said in an interview. "An executive order is not an adequate substitute."

All sides concede that they made mistakes that contributed to the failure of the bill. The Senate measure was championed by Senators Joseph Lieberman, a Connecticut independent who is retiring, and Susan Collins, a Maine Republican.

Senate Bill

The White House focused its efforts on a gridlocked Senate rather than on the Republican-controlled House, which had passed several less ambitious cybersecurity bills.

Congressional Democrats sought to give the Department of Homeland Security ill-defined powers to set new cybersecurity standards and failed to come up with credible estimates of what those standards would cost.

Many Senate Republicans took their cues from the U.S. Chamber of Commerce and businesses that framed the debate not as a matter of national security, but rather as a battle between free enterprise and an overreaching government, according to documents and descriptions of lobbying efforts.

The Senate bill "would have created a new bureaucracy that would have slowed down the process and forced companies to focus on compliance with new government mandates that would not insure better and faster notifications of cyber threats," Kay Bailey Hutchison of Texas, the top Republican on the Senate Commerce Committee who also is retiring, said in an e-mail.

Liability Suits

Many companies also feared that regulation would expose them to a greater risk of shareholder liability suits in the event of an attack, an issue compounded by the fact that it's easier to estimate the cost of stiffer defenses than to guess the price of a possible attack, said congressional aides who worked on the Lieberman-Collins bill and discussed it on condition of anonymity.

Add to those uncertainties the fact that no bill can offer perfect protection, said the White House's Daniel.

"Currently, bad actors don't have to be sophisticated to cause significant consequences," he said. "We want the bad actors to not be able to succeed as easily," even though that's "not going to stop them from trying."

The latest warning about the peril of terrorist-led cyber attacks came yesterday from the National Academy of Sciences, which cautioned in a report that an assault on the U.S. power grid could leave millions of people in the dark for months and cause billions of dollars in damage.

Latest Warning

The report is the latest in a long string of alarms about the vulnerability of the nation's Internet backbone, underscored by constant probes and attacks on government, banking and other computer networks. The next attack, Defense Secretary Leon Panetta said in an Oct. 11 speech, could derail passenger trains, spill toxic chemicals or cause widespread blackouts.

"The collective result of these kinds of attacks could be a cyber Pearl Harbor; an attack that would cause physical destruction and the loss of life," Panetta said. "In fact, it would paralyze and shock the nation."

Congress's failure to pass a cybersecurity bill has left the U.S. unprepared and ill-equipped to cope with an Internet assault on the computer networks that control much of the nation's physical and financial nervous system, Panetta said.

Almost from the beginning, though, congressional aides said in interviews, the Lieberman-Collins bill was hampered by the secrecy that blankets government cyber programs and the difficulty in grasping the technology behind attacks and defenses. Only a handful of lawmakers understood the threat, people who briefed them regularly said.

Simulated Attack

The government's top cybersecurity officials staged a classified demonstration for dozens of senators in March in an effort to change that. They simulated a cyber attack that paralyzed New York City's power grid, causing multiple deaths and billions of dollars in damage, two officials said.

While government researchers had identified a vulnerability in the nation's electrical grid years ago, lawmakers said during a congressional hearing in 2008 that no U.S. or state agency could compel power companies to act.

"That was really the key moment," said Jacob Olcott, a former Democratic staffer on the Senate Commerce Committee and a cybersecurity specialist. "That's when we realized that there was a gap in the existing regulatory authority, and the private sector was doing little to improve security on its own."

DHS Targeted

The bill Lieberman and Collins introduced in February granted that authority to the Homeland Security Department, which handles civilian cybersecurity issues. The choice of DHS, already under fire for its airport-screening procedures, was an immediate target for Republicans.

Under the bill, DHS would regulate computer systems that could cause mass casualties or significant economic damage if they were manipulated or destroyed. Those vulnerable points would be identified by a public-private review process.

In interviews, several Republican aides said the review process could take years, and the bill would leave DHS free to define the limits of its own power.

"When before have we given an agency regulatory authority without defining who would be regulated?" said Brian Rogers, a spokesman for Senator John McCain, an Arizona Republican.

Another business concern, echoed by Senate Republicans, was that making DHS the switchboard for exchanging threat reports would disrupt existing information-sharing arrangements, for example between defense and technology firms and the NSA.

Business Opposition

Advocates of new federal standards found themselves facing opponents that included the Chamber of Commerce, the nation's largest business lobby, AT&T Inc. (T) and Verizon Communications Inc. (VZ), as well as energy companies and electric utilities.

Private industry, business lobbyists argued, could adapt to changing cyber threats faster than government could, and new federal standards would curb their freedom to innovate.

The Lieberman-Collins bill's proposed standards also were so vague, Senate Republican staffers said, that the nonpartisan Congressional Budget Office was unable to score the legislation.

"Until someone can argue both the national security and the economic parts of it, you're going to have these dividing forces," Melissa Hathaway, a White House cyber official in the Bush and Obama administrations who left in 2009, said in an interview. "Most likely, big industry is going to win because at the end of the day our economy is still in trouble."

Situation Room

Administration officials brought Senate staffers from both parties to the White House Situation Room for cybersecurity briefings in 2011. The goal, said an official familiar with the effort, was to create a sense of urgency in the room where the president had monitored the raid that killed Osama bin Laden.

By this summer, though, business and Republican opposition to new federal standards had hardened. With weeks to go before the Senate's summer recess, the measure's sponsors diluted their proposal on July 19 to attract more Republican support.

The revised bill made infrastructure standards voluntary and offered incentives such as liability protection and expedited government security clearances. The new standards would be overseen not by DHS but by a multi-agency council.

Responding to criticism from privacy and civil-liberties advocates, though, the new bill still put DHS, a civilian agency, in charge of the information-sharing provisions.

The compromise didn't win a single Republican vote.

"The lobbyists smelled blood in the water," said Olcott, now a principal at Good Harbor Consulting LLC, a security-risk firm based in Arlington, Virginia.

Last-Ditch Appeal

The administration then called up the troops to make a last-ditch appeal to Republicans. Army General Keith Alexander, the head of the NSA, which helps guard the government's computer networks, told lawmakers on July 30 that the U.S. had evidence that adversaries have penetrated civilian networks. He compared the moment to 1993, the year of the first World Trade Center bombing, which was a precursor to Sept. 11, 2001, attacks.

"They're practicing," Alexander said.

His warning shook many of the lawmakers, while opponents' remained determined to kill the measure.

The next day, July 31, Senate Minority Leader Mitch McConnell, a Kentucky Republican, signaled that Republicans weren't even planning to debate the bill. Instead, their first amendment to it would repeal Obama's health-care overhaul.

Republicans seeking a compromise took one last shot. In a tense meeting between the Chamber of Commerce and a group of senators on Aug. 1, the day before the scheduled vote, Indiana Republican Dan Coats argued that legislators had to be open- minded and flexible, according one eyewitness.