Thursday, July 31, 2014

Invention of the Day - Instant Messaging

It's hard to imagine today's life without instant messaging. The service has become one of the Dominant Designs in the Internet era. As we write in Scalable Innovation (Chapter 13):

Dominant Design is an implementation of a new functionality that the market adopts as the prototype for future implementations. Simply put, the dominant design is what everybody thinks all products or services in the new category should imitate.

US Patent 6,449,344

Today's IT giants — Google, Facebook, IBM,  Microsoft, Yahoo, Alibaba, and others provide instant messaging services as a "must have" feature. Recently, Facebook paid $19B for Whatsup, a company that built its mobile service using the instant messaging ideas. 

The original technology was developed in 1996 by an Israeli company Mirabilis and released during the same year as ICQ chat software. The service was extremely successful, even despite being characterized as the world's "ugliest website.

In 1998, AOL bought Mirabilis for $287M - a pitiful sum by today's Internet M&A standards. Eventually, AOL rebranded the service as the AOL Messenger. 

Instant Messaging had other important implications for the world of technology. First, ICQ influenced the development of other peer-to-peer (P2P) services, such as Napster, Gnutella, Skype, and others, which revolutionized content distribution and communications in the beginning of the 21st century.

Second, the business success of Mirabilis put Israel on the global map of Internet innovation and served as a catalyst for the creation of a thriving tech entrepreneurship culture in the country. 

Third, Instant Messaging helped initiate the Internet services era that exploded with the introduction of the iPhone and other smartphones.

Arguably, the invention of Instant Messaging is as important to the world as Graham Bell's invention of the phone in 1876. 

tags: invention, innovation, facebook, google, microsoft, dominant, design, 10x

Friday, July 11, 2014

(BN) Telecom, Apple, AB InBev, Getty: Intellectual Property

(Bloomberg ) Squeezed out of the mobile-phone market by trendier offerings, Nokia Oyj (NOK1V), Ericsson AB (ERICB) and other one-time leaders are selling chunks of their patent portfolios, often to the litigious licensing firms the industry has derided.

The companies are being driven by their need for greater profit, and are finding that with changing business models, tough economics and investor pressure, there is little reason to hold on to patents for computer memory, wireless infrastructure and other technology that can still fetch good prices.

Ericsson, Panasonic Corp. and Hewlett-Packard Co. sold almost 5,000 patents in the first quarter combined, according to Innography Inc., an Austin, Texas-based maker of software to analyze patent portfolios. Nokia on July 7 said it had sold a group of phone patents to licensing company Wi-Lan Inc.

Picking up the pieces are licensing firms whose sole mission is to buy castoff patents and then demand royalties from other companies in a strategy to make a profit.


Apple May Fight Copycat Stores With Trademarks, EU Court Says

Apple Inc. (AAPL) may be able to seek a German trademark that would stop retailers mimicking the layout of its flagship stores, the European Union's top court said.

Apple can try to register an image of its store layout if it can show that it can distinguish its goods from others, the EU Court of Justice said. Apple is challenging a refusal by the German patent office to accept the picture as a trademark. A national court will decide the final details of the appeal.

The Cupertino, California-based maker of iPads and iPhones registered a U.S. three-dimensional trademark for the design of its stores in January, according to the Los Angeles Times.

AB InBev Buys Brewer in Budweiser Rival's Czech Home

Anheuser-Busch InBev NV (ABI), the world's largest beer maker and the brewer of Budweiser, bought a brewery in the hometown of Budejovicky Budvar, a rival it has battled over trademark rights for more than a century.

InBev bought Pivovar Samson a.s. and is considering expanding the brewer's Budweiser brand, the company said in a statement without disclosing the details of the deal. Through the takeover, InBev acquires beer production in the Czech Republic city of Ceske Budejovice, known as Budweis in German, which is the source of the name claimed by both it and Budvar.

Each brewer has won or lost the right in rulings in different countries to use brands linked to the city's name.


Getty Images Demands Fee From Blogger for Unlicensed Photo Use

A resident of a Portland, Oregon, suburb says Getty Images Inc. is demanding that she pay a $926 fee for using a photo of dogs on her blog, ABC television's Portland affiliate KATU reported on its website.

The blogger said that although she removed the image immediately, she didn't pay the initial demand of $480, and Getty escalated it to $926, according to KATU.

Seattle-based Getty sent KATU a statement saying that the blogger's site advertises a real estate broker and needed a license to use the image, and that the demand was increased because the matter had to be referred to outside counsel.

Trade Secrets/Industrial Espionage

Yahoo Hacks Highlight Cyber Onslaught Japan Rushing to Thwart

Shortly after the alert sounded at 9:10 p.m., Yahoo Japan Corp. (4689)'s risk team knew it had a problem. More than 20 million usernames and passwords belonging to its customers were being dumped into a file, primed to be stolen.

The April 2013 breach of Yahoo Japan was an attempt to grab the user identities of the nation's most visited website.

Now, after a series of hacks on targets from the nation's space agency and its largest defense contractor to Bitcoin exchange operator Mt. Gox, Japan's government is set to pass a law in fall to beef up cybersecurity in the world's third-largest economy. Less than 25 percent of Japanese companies have a business continuity plan in case of a cyber-attack, according to the National Information Security Center, a government agency.

The proposed new law would name NISC as the central cybersecurity coordinator reporting directly to Japan's Cabinet, said Takuya Hirai, a lawmaker with the ruling Liberal Democratic Party who drafted the bill. 

Wednesday, July 09, 2014

(BN) Tesla, Jones Day, Fuel Cell, PR: Intellectual Property

(Bloomberg ) Tesla Motors Inc. (TSLA), the electric-car marker led by Elon Musk, was sued in China for trademark infringement in the latest example of the difficulties foreign companies face doing business in the country.

Zhan Baosheng, who registered the rights to the name before the U.S. carmaker entered China, is requesting that Tesla shut its showrooms, service centers and supercharging facilities there; stop all sales and marketing activities in the country; and pay him 23.9 million yuan ($3.9 million). The lawsuit was filed July 3 in Beijing and seen by Bloomberg News.

Zhan is the one attempting to steal the U.S. carmaker's property, a Tesla spokesman, Simon Sproule, said in an e-mailed response to questions. The company, which has lodged complaints against Zhan with Chinese authorities and won, hasn't been served with or seen the suit, he said.

Chinese regulators last year sided with the U.S. carmaker's claim that Zhan's trademarks were invalid, a decision he is appealing.

For Tesla, maker of the Model S sedan, the experience puts it with Apple Inc. (AAPL) and Burberry Group Plc (BRBY) among multinational companies that have clashed over their branding rights in the world's second-largest economy.

Jones Day Threatens Infringement Action Against Detroit Website

Law firm Jones Day LLP threatened the operator of a website critical of Detroit's emergency manager with a trademark-infringement lawsuit.

The website,, is named for the former Jones Day partner who serves as emergency financial manager for Michigan's biggest city, which filed for bankruptcy last year.

The site uses the Jones Day marks and says that "Detroit's economic coup d'etat has been brought to you" by the firm, according to a June 10 letter Jones Day sent to the site's registered owner. The firm demanded that its marks be removed.

The Electronic Frontier Foundation, a San Francisco-based digital-rights group, responded on behalf of the website, saying that the registrant won't comply with the request.

The law firm's threats "are not supported by law and plainly seek to interfere with protected speech," EFF said in a letter to Jones Day.

EFF's letter closed with an expression of "hope" that Jones Day "will have the good sense not to trouble a court of law with this matter."

John Wayne Enterprises in Showdown With Duke University

John Wayne Enterprises LLC, a family business set up to protect rights associated with the late movie actor, asked a federal court to declare that its trademarks don't infringe those of Duke University.

In a complaint brought July 3 in federal court in Los Angeles, John Wayne Enterprises said it filed applications with the U.S. Patent and Trademark Office in 2013 to register "Duke John Wayne" and "Duke" as trademarks for alcoholic beverages.

Wayne, who died in 1979, was variously known to family and fans as Duke Wayne, Duke, Duke Morrison and The Duke, according to court papers.

According to filings with the patent office, the Durham, North Carolina-based university opposes the marks, claiming the public would be confused and falsely assume a connection to the school.

John Wayne Enterprises filed a response to Duke's opposition June 12, saying there is no likelihood of confusion.

The case is John Wayne Enterprises LLC v. Duke University, 14-cv-01020, U.S. District Court, Central District of California (Los Angeles).


Mantra Venture Group Gets U.S. Patent on Lighter Fuel Cell

Mantra Venture Group Ltd. (MVTG)'s Mantra Energy Alternatives got a U.S. patent on a fuel cell technology that uses liquid fuels instead of gaseous hydrogen.

Patent 8,709,680 covers an invention that the British Columbia-based company said will yield lighter-weight lower-cost fuel cells that are less complex to produce.


Singapore Changes Law to Give Web Content Owners More Power

Singapore amended its copyright law to give copyright owners the ability to block websites where their content is used without permission, China's Xinhua news service reported.

The owners, who must apply to the court for a blocking order, don't have to establish liability by the network service provider to have the order issued, according to Xinhua.

Content owners in the past had to send a takedown notice to the service provider, seeking either removal of the infringing content or a block on access to the offending site, Xinhua reported.

Australia PR Firms Sign Agreement to Avoid Infringement Claims

Public relations companies in Australia signed an agreement with the country's Copyright Agency that will give them a safe harbor from copyright infringement actions, AdNews reported.

Under the three-year agreement, agencies get discounted access to copyrighted material and avoid fines if they eventually take a license to the content they use, AdNews said.

Tuesday, July 08, 2014

(BN) Bitcoin Startup Xapo Sets $40 Million Fundraising Record

(Bloomberg ) 

Xapo, a provider of secure online storage for bitcoins, said it doubled the amount of money it has raised from investors to $40 million, the most gathered by a startup focused on the virtual currency.

Greylock Partners and Index Ventures led the $20 million funding round, with additional investments by Emergence Capital Partners, PayPal Inc. co-founder Max Levchin, venture capitalist Yuri Milner, and Yahoo! Inc. co-founder Jerry Yang. The investors join earlier backers Benchmark, Fortress Investment Group LLC and Ribbit Capital. Greylock's Reid Hoffman and Index's Mike Volpi will join Xapo as board observers.

Bitcoin startups are amassing funds after the virtual currency captured the attention of investors, technologists and governments last year, fueling a rally that drove it to a record of about $1,200 from $12. In May, bitcoin-payment service BitPay Inc. raised $30 million. Last week, venture capitalist Tim Draper said he bought almost 30,000 bitcoins, worth more than $18 million at current market prices.

"Now you see almost all VCs in Silicon Valley invested in bitcoin," Wences Casares, Xapo's founder and chief executive officer, said in an interview. "It's hard to find a top-tier firm that's not in bitcoin, and it's a big shift and a very positive change for bitcoin."

Xapo plans to use the funding to double its workforce of about 30 people within months and develop products, he said. The company already offers secure bitcoin storage and wallet services, and by the end of this month plans to introduce a debit card for use at retail stores.

"We want to be the leading bitcoin bank," Casares said. "If you have dollars, you keep them with Bank of America, and if you have bitcoins, you keep them with Xapo."

(BN) Banks Dreading Computer Hacks Call for Cyber War Council

Banks Dreading Computer Hacks Call for Cyber War Council

Wall Street's biggest trade group has proposed a government-industry cyber war council to stave off terrorist attacks that could trigger financial panic by temporarily wiping out account balances, according to an internal document.

The proposal by the Securities Industry and Financial Markets Association, known as Sifma, calls for a committee of executives and deputy-level representatives from at least eight U.S. agencies including the Treasury Department, the National Security Agency and the Department of Homeland Security, all led by a senior White House official.

The trade association also reveals in the document that Sifma has retained former NSA director Keith Alexander to "facilitate" the joint effort with the government. Alexander, in turn, has brought in Michael Chertoff, the former U.S. Secretary of Homeland Security, and his firm, Chertoff Group.

The document sketches an unusually frank and pessimistic view by the industry of its readiness for attacks wielded by nation-states or terrorist groups that aim to "destroy data and machines." It says the concerns are "compounded by the dependence of financial institutions on the electric grid," which is also vulnerable to physical and cyber attack.

'Widespread Runs'

"The systemic consequences could well be devastating for the economy as the resulting loss of confidence in the security of individual and corporate savings and assets could trigger widespread runs on financial institutions that likely would extend well beyond the directly impacted banks, securities firms and asset managers," Sifma wrote in the document, dated June 27.

Liz Pierce, a spokeswoman for Sifma, declined to comment on the document, adding that the group "is doing everything possible to help the industry prepare for and defend against cyberattacks." Caitlin Hayden, spokeswoman for the White House National Security Council, declined to comment.

Alexander had been pitching Sifma and other bank trade associations to purchase his services through his new consulting firm, IronNet Cybersecurity Inc., for as much as $1 million per month, according to two people briefed on the talks.

He has made much the same argument to Sifma as the association is now making to the government about the emergence of new kinds of software assaults. For several months beginning in fall 2012, major U.S. bank websites were hit by what is known as distributed denial-of-service attacks, in which hackers flood systems with information to shut them down.

'Effectively Defend'

The next wave of attacks "in the near-medium term" is likely to be more destructive and could result in "account balances and books and records being converted to zeros," while recovering the lost information "would be difficult and slow," according to the Sifma document.

"We are concerned that the industry may not have the capabilities that we would like to effectively defend against this newer form of potential attack, the capability that we would like to stop such an attack once commenced from spreading to other financial institutions, or the capability we would like of effectively recovering if an initial attack is followed by waves of follow-on attacks," the document says.

Computer intrusions also have been a concern of regional and small banks. Camden Fine, president of the Independent Community Bankers of America, said today that an account-draining cyberattack is "a question of when." He predicted the government would have to grapple with difficult questions including whether the Federal Deposit Insurance Corp. would cover any losses.

'Train Wreck'

"When it does happen, the hue and cry will go up," Fine wrote in an e-mail. "Who will be liable? What will the FDIC do? It is like watching a train wreck in the making and there is nothing you can do to stop it."

The Sifma document, while noting that the coordination between industry and government on cyber threats has improved in recent years, said a joint council would produce a more focused response.

The government-industry group would develop plans for "much quicker, near real-time" dissemination of information from agencies to the private sector and ways to "actively defend the industry" if preparations for a cyber attack are discovered in advance. Sifma is also seeking "pre-discussed and mutually understood protocols" for the industry to request government help during and after an attack.

Pre-emptive Strike

Representative Alan Grayson, a Florida Democrat, said today he was concerned that industry members in such a joint group could improperly get involved in pre-emptive strikes against a person or state planning an assault on the U.S.

"This could in effect make the banks part of what would begin to look like a war council," Grayson said in an e-mail. "Congress needs to keep an eye on what something like this could mean."

In its proposal, Sifma also called for greater protection for the U.S. electricity grid, which it says is "vulnerable to physical destruction of transformers and other equipment in a small number of undefended substations."

"The core problem is that if transformers and critical equipment were destroyed at these sites, it could take months to build the replacement equipment," Sifma wrote.

The Senate Intelligence Committee plans today to take up a bipartisan bill -- sponsored by Senators Dianne Feinstein, a California Democrat, and Saxby Chambliss, a Georgia Republican - - aimed at improving private-sector cyber-defenses. The bill includes rules that would insulate banks from liability arising from sharing information for cybersecurity, addressing a point financial institutions have raised in the past.

Monday, July 07, 2014

(BN) Seed Theft, Microsoft, World Cup: Intellectual Property

(Bloomberg ) A seventh Chinese national was indicted in a trade-secrets case involving the theft of genetically modified corn seed.

Mo Yun is accused of conspiring to steal trade secrets from 2007 to 2013, U.S. prosecutors in Des Moines, Iowa, said in a July 2 statement. She is married to Shao Genhuou, chairman of Beijing Dabeinong Technology Group Co. (002385), and is the sister of Mo Hailong, an employee of the Chinese company who was indicted with five others in December.

They are accused of stealing the seeds belonging to Monsanto Co. (MON), DuPont Co.'s Pioneer Hi-Bred unit, and AG Reliant Genetics LLC's LG Seeds unit from production fields in Iowa and Illinois in order to ship them to Kings Nower Seed, a unit of the Chinese company.

Mo Hailong was arrested after he was found digging in an Iowa cornfield, prosecutors said.

The case is U.S. v. Yun, 14-mj-00160, U.S. District Court, Southern District of Iowa (Des Moines).


Collegium Gets Patent on Abuse-Prevention Drug Formulation

Collegium Pharmaceutical Inc., a Massachusetts-based pharmaceutical company, received a patent on a drug formulation aimed at preventing abuse of some drugs, such as opioids.

Opioid abuse is a growing problem and efforts to design abuse-resistant or abuse-deterrent formulations have been largely unsuccessful, the company said in the patent.

Patent 8,758,813, issued June 24, covers a formulation that prevents the immediate release of a substantial portion of the drug, even if the tablet is crushed or chopped, with the resulting material placed in water, snorted or swallowed.

This is accomplished by bonding the drug to fatty acids that constitute as much as 15 times the molecular weight of the active ingredient or by dispersing the drug within microparticles composed of a material that is either slowly soluble or insoluble in water.

Collegium applied for the patent in April 2013 with help from San Francisco's Cooley LLP.

Microsoft, Canon Agree to Cross-License Patent Portfolios

Microsoft Corp. (MSFT) and Canon Inc. (7751) agreed to cross-license patent portfolios, according to a joint company statement.

Products and services covered by the patents include digital imaging and mobile consumer products, the companies said. They didn't disclose financial terms of the agreement or specify which patents are included.

Redmond, Washington-based Microsoft said that since its licensing program began in 2003, the software company has entered into more than 1,200 licensing agreements.


BP Fails in Attempt to Register Green Color as Aussie Trademark

BP Plc (BP/), the British oil company, cannot register a particular color of green as a trademark in Australia, the U.K.'s Guardian newspaper reported.

IP Australia said the oil company failed to provide convincing evidence that the average gas purchaser would inevitably link the company to a color of green known as Pantone 348C, according to the Guardian.

The company had attempted to register the color as an Australian trademark since 1991, the newspaper reported.

Elan-Polo, Adidas Settle Dispute Over Shoe-Design Trademark

Elan-Polo Inc., a Missouri-based shoe and clothing designer, settled a trademark lawsuit against Germany's Adidas AG (ADS) for undisclosed terms, according to a July 1 court filing.

The designer sued in federal court in St. Louis in November seeking a declaration that a shoe design it created for Wal-Mart Stores Inc. (WMT) didn't infringe Adidas's three-stripe trademark for shoes.

Elan-Polo said although it had contractually indemnified Wal-Mart for infringement claims against the shoe design, Adidas demanded that the retailer stop selling the shoe and pay damages. Adidas also filed infringement claims against Elan-Polo.

The case is Elan-Polo v. Adidas America Inc., 13-cv-02322, U.S. District Court, Eastern District of Missouri (St. Louis).


World Cup Copyright Enforcement Most Successful Through Facebook

Orange SA (ORA)'s Viaccess-Orca unit, a content-protection company, has sent out 2,000 takedown notices to platforms hosting or linking to World Cup games streamed without authorization, the TorrentFreak anti-copyright news website reported.

David Leporini, executive vice president of marketing for Viaccess-Orca, told TorrentFreak that his company managed to get about 35 percent of the streaming links disabled before a particular World Cup game ends.

The company said it was most successful taking down unauthorized links to streaming game content that had been posted on Facebook Inc., with a 51 percent rate of link removal, according to TorrentFreak.

FIFA, professional soccer's governing body, previously contacted some website operators requesting that infringing content be removed as soon as possible, according to TorrentFreak.

(BN) VW Adds Fighter-Pilot Display to Passat to Challenge BMW

(Bloomberg ) Volkswagen AG (VOW) will upgrade the Passat, its best-selling sedan, with safety technology inspired by fighter jets to lure buyers away from upscale nameplates.

When it goes on sale in the fourth quarter, the mainstream model will be VW's first car available with a head-up display. The system -- similar to features pioneered on planes like the F-16 -- projects data such as speed and navigation instructions onto a retractable screen over the steering wheel to keep the driver's focus on the road. Other high-tech safety options include functions that can bring the car autonomously to a halt if the driver falls asleep.

"Competitors struggle to keep pace with VW," said Juergen Pieper, an analyst with Bankhaus Metzler in Frankfurt. The Passat, which was presented yesterday in Potsdam, Germany and is one of Volkswagen's top four profit earners, "looks set to maintain VW's dominance in the segment."

Volkswagen is seeking to reclaim its lead in the European sedan market after sales of the Passat fell behind Bayerische Motoren Werke AG (BMW)'s 3-Series last year. That means luring buyers with technology normally reserved for luxury models. VW can afford the features because the car shares key components with models including the Golf and Audi A3 compacts, which in turn lowers costs.

Defending its traditional stronghold is critical to the Wolfsburg, Germany-based manufacturer as it targets tripling profitability at its namesake brand.

Powerful Push

The Passat "introduces technologies and features in the mid-market that are otherwise only available in higher segments," Chief Executive Officer Martin Winterkorn said at the unveiling. "The new Passat is going to the Volkswagen brand a powerful push."

Sales of the Passat in Europe, its main market, are forecast to surge 65 percent to 228,000 vehicles next year, beating out the 3-Series and Daimler AG (DAI)'s Mercedes C-Class for the segment lead, according to IHS. Deliveries of the Ford (F) Mondeo, the closest mass-market competitor, are due to be less than half the Passat's level.

Higher sales and lower development and production costs from VW's parts-sharing strategy could help double the Passat's profit margin to as much as 8 percent of sales, according to Metzler's Pieper.

Volkswagen, which will also offer a plug-in hybrid version of the Passat with an all-electric range of 50 kilometers (31 miles), made "massive" investments in development as well as in the production sites for the car, Winterkorn said. "I am convinced that it will pay off."

Barista Cart

The German carmaker, which doesn't provide financial details on individual models, could use the boost. The operating margin for the VW brand dropped to 1.8 percent in the first quarter from 2.4 percent a year ago. The company's target for its biggest nameplate is a 6 percent margin.

VW complements the new technology with a sleeker look for the new Passat, which is smaller than the U.S. version. The car starts at about 25,875 euros ($35,200), at least 3,400 euros cheaper than rivals from Mercedes-Benz and BMW.

"It's a fiercely competitive market that works via pricing, including dumping prices," said Frank Ostermann, managing director at auto dealer Rosier Group in Menden, Germany. "The new model looks more racy and significantly more attractive, but it'll remain a sales person's car primarily."

Rosier, which sells VW, Mercedes and Peugeot (UG) vehicles at more than 10 outlets in northern Germany, plans to lure in the segment's thrifty shoppers by offering finger food and a barista cart with cappuccino when the sedan hits showrooms.

Shrinking Segment

Every little bit helps in segment that's shrinking. Sales of mid-sized cars in Europe have fallen by more than half over the past 10 years because of "the rise of niche models such as SUVs and the pressures on customers to downsize in light of the economic downturn," said Ian Fletcher, a London-based analyst with IHS Automotive.

VW, which plans to triple its lineup of SUVs, currently offers just the 24,725-euro compact Tiguan and the upscale 50,850-euro Touareg. Until the new SUVs arrive, VW needs the eighth generation of the Passat to woo buyers from BMW.

"The battleground for the VW brand is to effectively draw a line where premium stops and mass market begins," said Mike Tyndall, an analyst at Barclays Capital in London. With the new features for the customer and lower manufacturing costs, the Passat should bring "a meaningful improvement" to VW's profit.

(BN) Who Owns the Tesla Trademark in China?

(Bloomberg ) Tesla Motors Inc. (TSLA), the electric carmarker led by Elon Musk, was sued in China for trademark infringement in the latest example of the difficulties foreign companies face doing business in the country.

Zhan Baosheng, who registered the rights to the name before the U.S. carmaker entered China, is requesting that Tesla shut its showrooms, service centers and supercharging facilities there; stop all sales and marketing activities in the country; and pay him 23.9 million yuan ($3.9 million) in compensation, according to a lawsuit filed July 3 in Beijing and seen by Bloomberg News.

Zhan is the one attempting to steal the U.S. carmaker's property, Tesla spokesman Simon Sproule said in an e-mailed response to questions. The company, which has lodged complaints against Zhan to Chinese authorities and won, hasn't been served with or seen the lawsuit, he said.

The lawsuit would need to overcome a ruling last year in which the Chinese regulator sided with the U.S. carmaker's claims that Zhan's trademarks were invalid, though he's appealing the regulator's decision. For Tesla, maker of the Model S sedan, the experience puts it with Apple Inc. (AAPL) and Burberry Group Plc (BRBY) among multinational companies that have clashed over their branding rights in the world's second-largest economy.

"We'll be watching how China deals with this very closely," said Paul Haswell, a Hong Kong-based technology law partner at Pinsent Masons. "So-called trademark trolls watch Western brand development and seek to register brands in China that are relatively well known in the rest of the world before they have any brand recognition in China, then use those trademarks as the brands expand into the East."

Court Filing

Zhan, 36, paid a filing fee of 161,500 yuan for the lawsuit, according to a court receipt seen by Bloomberg News. An official at the Beijing Third Intermediate Court, who asked not to be identified because of court policy, confirmed a lawsuit had been filed against Tesla by Zhan.

Zhan had applied to trademark the name in English in September 2006 -- three years after Tesla was founded in the U.S. -- for auto-related uses and it was granted by the trademark office in June 2009 for a period of 10 years, according to the website of the State Administration of Industry and Commerce, or SAIC, which oversees trademarks.

He subsequently applied to register more Tesla-related trademarks, including the logo and Chinese transliteration of the name.

Trademark Review

SAIC's Trademark Review and Adjudication Board then revoked his Tesla trademarks in July 2013 in response to the U.S. carmaker's request. Zhan, who also has the Internet domain redirect to his Twitter account, said he's appealed and the case is under review. Trademark rulings become official when appeals end, according to Chinese law.

"We have brought multiple actions against Zhan on account of his theft of our trademarks, and various Chinese authorities that have ruled on the matter have agreed with Tesla," Sproule said. Zhan's lawsuit "will not stop us in any way from operating in China," he said.

Besides Tesla, Zhan has also registered trademarks for Loremo, Cobasys and Cuill in China, according to the SAIC's website. Zhan said he filed for the first trademark because it was an abbreviation for "Local/Remote/Mobile," while the other two were registered for friends.

He said he's not aware of German automaker Loremo, Robert Bosch GmbH's Cobasys or the now-defunct search engine Cuil. Hamdi Taspinar, an investor relations representative for Loremo, said he wasn't aware of any trademark registration of the brand name in China, while spokesman Udo Ruegheimer said Bosch no longer has interest in the Cobasys brand name.

'Say Sorry'

Zhan also said he's never had any disputes over trademarks with any company other than Tesla.

"Tesla is violating my rights every day by selling their vehicles in China," Zhan said in an interview on the day he filed the lawsuit. "I want them to say sorry."

Tesla had contacted Zhan in 2012 about buying over the trademark, according to an e-mail provided by Zhan that's written in Chinese by a Tesla employee on behalf of Diarmuid O'Connell, who is in charge of business development at the automaker.

They met in November that year in Hong Kong, where Tesla offered $50,000 to buy the trademark, Zhan said. The offer was raised sixfold, to 2 million yuan, in May 2013 by then Tesla China General Manager Kingston Chang, who has since left the company, according to Zhan. Zhan said he rejected both offers.

'Cynical Attempt'

"We believe that Zhan has not acted reasonably in returning our trademarks to us, which is why we opened the various proceedings before the Chinese administrative bodies," Tesla's Sproule said in response to queries about the meetings with Zhan. "There can be no legitimate dispute that we used these trademarks first as we were the ones that created them. Zhan's is a cynical attempt to steal a property that we spent time and effort creating, and put into use long before Zhan's crass attempts to steal them from us."

Tesla isn't the first company to face hurdles with its brand in China.

Apple paid $60 million in 2012 to settle a two-year-old dispute over the iPad trademark in the country with Proview International Holdings Ltd. (334), which had applied to Chinese customs to block local shipments of the U.S. company's tablets.

Burberry, the U.K. luxury-goods maker, said in November 2013 it was appealing a decision by Chinese regulators to restrict the company's trademark on its hallmark checkered pattern for leather goods.

China Expansion

For Palo Alto, California-based Tesla, the lawsuit comes as it gears up to expand in the world's largest auto market. It delivered the first Model S cars in Shanghai and Beijing in April, and is working to send the cars to customers in Shenzhen and Hangzhou. Chief Executive Officer Musk has said he expects to produce cars in China within four years.

Zhan, who says he graduated from Nanjing Tech University and is from southwestern Jiangxi province, said he registered the Tesla trademark after inventor Nikola Tesla -- the U.S. carmaker is also named after the same inventor. He said his wealth exceeds $1 million and currently runs skincare company Cengceng Inc.

(BN) Silicon Valley’s Talent Grab Spawns High-School Interns

(Bloomberg ) Facebook Inc. (FB) rolled out the red carpet for Michael Sayman when the social network hired him for a job that started last month, including flying him out to meet Chief Executive Officer Mark Zuckerberg.

Sayman, 17, brought his mom along on the trip. The position Facebook recruited him for: summer intern.

"When I got the e-mail saying -- oh my god -- Mark Zuckerberg wants to meet you, I had to make sure nobody was playing a prank on me," Sayman, who wears braces and recently graduated from high school in Miami, said in an interview. "It was just incredible to be able to meet him."

Landing top talent is getting so tough in Silicon Valley that technology companies are trying anything for an edge -- including hiring interns out of high school and boosting new recruits' perks. Facebook said it just started wooing interns before their freshman year of college, while LinkedIn Corp. (LNKD) opened its summer program to high schoolers two years ago. Startups including Airbnb Inc. have also nabbed interns as young as 16 years old.

For the companies, it's all about keeping up with Silicon Valley's youth-oriented culture, especially as the young and technically inclined are sometimes encouraged to create their own startups instead of joining large organizations. Early Facebook investor Peter Thiel pays people under 20 years old $100,000 to quit school to pursue their passions. Others aspire to follow the path of Summly Ltd. founder Nick D'Aloisio, who became a millionaire at 17 last year when Yahoo! Inc. (YHOO) acquired his mobile application.

CEO Recognition

The importance of young hires is recognized at the very top. On an earnings call in May, LinkedIn CEO Jeff Weiner gave a shout-out to his 2014 intern class, saying "talent is our number one operating priority and our most important asset, and this incoming group will continue to add to our team."

The drive for youth is being spurred by more people getting into technology at a younger age. With online coding tutorials and Web communities for collaborating on software, high schoolers don't have to get a computer science degree before producing their own mobile apps. Many find their way to events such as hackathons and contests to find bugs in software, which attract whoever has the skills to compete.

Why Wait?

James Anderson got his internship at Portland, Oregon-based Web startup Planet Argon LLC last year through just this route. At age 13, he went to a conference focused on the Ruby on Rails programming language and met Planet Argon's founders on a company hike. He later asked for -- and got -- a summer internship before starting high school.

"I felt like age shouldn't hold me back as long as I can code," said Anderson, now 15 and a soon-to-be sophomore at Flintridge Preparatory School in La Cañada, California, who taught himself several programming languages and built apps based on online tutorials.

In the push for candidates, summer interns are getting treated better, too. It's become standard for engineering interns to snag free housing, transportation and salaries of more than $6,000 a month, according to job-search site Glassdoor Inc. That compares with the $4,280 average monthly income for U.S. households in 2012, according to the U.S. Census Bureau. Of the top 10 companies paying the most for interns, all are technology companies except for Exxon Mobil Corp. (XOM), Glassdoor said in February.

'Insane' Pay

"It's kind of insane that as a 19- or 20-year-old, you can make more than the U.S. average income in a summer," said Daniel Tahara, 21, who interned at big data startup Hadapt Inc. last summer and mobile-security startup Lookout Inc. the year before. Tahara, who declined to say how much he was paid, started a job with online storage startup Dropbox Inc. this month.

Other perks abound. Microsoft Corp. (MSFT) puts on a free concert for summer interns, last year booking Macklemore & Ryan Lewis and Dedmau5. Dropbox pays for interns' parents to fly to San Francisco and learn about the company. Google Inc. (GOOG) provides standard workplace benefits to interns, including on-site massages and laundry service.

Unexpected Snafus

Yet underage interns can sometimes present hurdles for companies. Consider the extra paperwork that Airbnb, the San Francisco-based online room-rental service, had to take on last year when recruiters stumbled upon the Twitter profile of Conrad Kramer, who was 16.

"We actually had to get a work permit for him," said Bern Coh, Airbnb's head of intern recruiting, to comply with California law that requires permits for workers under 18. Kramer interned last summer, she said, and since then the company has "been keeping in touch with him various ways."

Kramer didn't respond to requests for comment.

Young interns also bring more parents into the picture. Doris Tong, senior manager of LinkedIn's global campus recruiting, said she once met a contestant at a company hackathon who she recalls "was 12 or 15."

"I remember needing to get a parental release because we hadn't ever had that young a person participate," Tong said.

Not all companies want younger interns. Google requires interns to be at least college freshmen and encourages them to finish their degrees. The Mountain View, California-based company finds other ways to look for recruits, said Kyle Ewing, Google's head of global staffing.

"We do have a former professional ballerina, a former professional baseball player who used to throw a 90-mile-per-hour fastball, a student who raps in Chinese competitively," Ewing said of the company's interns.

Discovering Sayman

Facebook found Sayman last year because the teen was using the social network's Parse developer tools to build a mobile game called 4Snaps. The game, which involves people taking four pictures and sending them to friends as clues for guessing a word, has more than 500,000 players.

Sayman taught himself to make mobile apps at 13, partly to help his mother, a driver for Lyft Inc., and father, an audio engineer, to pay the bills after a foreclosure four years ago.

"He was the one paying for everything in the house, at 13, 14, 15," his mother, Cristina Sayman, said in a phone interview.

As downloads of 4Snaps climbed last year -- at one point becoming the top word game in Apple Inc. (AAPL)'s App Store -- Facebook's Parse team contacted Sayman to feature the app on the company blog. They also asked him to make a video explaining how the app was built.

The video, which Sayman made in his pajamas, was shown to Facebook's entire staff in September. It got the attention of the intern recruiter, who told the teen about the summer program.

Eyes Peeled

Facebook's head of global recruiting, Miranda Kalinowski, said there's "no hard and fast rule" on intern ages at the Menlo Park, California-based company, though it typically tries to meet college freshmen and recruit from universities.

"The point is we're always on the lookout for really top talent," she said.

In November, Facebook flew Sayman out to meet Zuckerberg. The two discussed 4Snaps, while his mother marveled at the Web company's headquarters where her son could get his hair cut, his laundry done and eat whenever he wanted for free.

"They have plenty of food, everything for free, they just have to focus and work," Cristina Sayman said.

Sayman, who's working with the Parse team this summer, said he isn't sure if he'll go to college. He's getting into his life in Silicon Valley, including snapping a selfie last month with Apple CEO Tim Cook.

"If Facebook were to extend my offer for a full-time position I would definitely take that," Sayman said. "It's my dream job."

Invention of the Day: Thinking Inside the Box

When we participate in invention workshops and other creative activities, as I often do, we hear the moderator urge us to think "outside the box." Most often, though, nobody knows where the box is. As a result, we often get from one box into another, which is even worse than the first one.

Despite common "creative" wisdom, thinking inside the box can be extremely productive. One of the great inventions in economics of the 19th century was the Edgeworth Box, named after Francis Ysidro Edgeworth (1845 – 1926). While trying to figure out an efficient allocation of limited resources between two people, Edgeworth decided to represent their positions graphically inside a two-dimensional box.

For example, in a simplified model the patent war between Apple and Google can be described as a fight for a position inside the box (Figure 1). At the given moment, the number of patents is fixed, the amount of money at stake is also fixed. Outcome 1 (p1, m1) shows the initial position where Apple has more patents, but less money. Since the number of patents and money is fixed, Google is positioned in exactly the same spot, at the Outcome 1 dot. From Apple's perspective, the purpose of the war is to move the situation from O1 to Outcome 2 (p1, m1), where some of Google's money goes to Apple in exchange for patents. As a result, Apple will have more money, and fewer patents.

The Edgeworth box is extremely useful for analyzing allocations of fixed resources. It is essential to modern finance and economics when it comes to understanding and explaining equilibrium states. (See for example, Financial Theory course from Yale. Econ 251).

For an inventor, it is critical to know where the box is before starting to think "outside the box." Our goal would to discover a dimension where the trade-off inside Edgeworth Box becomes irrelevant.

tags: creativity, trade-off, tradeoff, economics, invention, innovation

Lunch Talk: Vinod Khosla interviews Sergey Brin and Larry Page

(BN) Amazon, Fairchild, NORML, Katy Perry: Intellectual Proper

(Bloomberg ) Inc., the world's largest online retailer, sued a former Web-services manager who left to join Google Inc. (GOOG), seeking to enforce a non-compete agreement.

The former employee did business-development work with Amazon's cloud-computing business, according to a complaint filed in Washington state court June 14. While there, he signed an agreement barring him from working with a competitor for 18 months after leaving Seattle-based Amazon, the company said.

Amazon claims the ex-employee is now working in Google's Partner Reseller group, doing substantially the same work he did with Amazon. The online retailer asked the court to enforce the noncompete agreement and to bar the ex-employee from working with Mountain View, California-based Google in a similar area for the full 18 months.

Google isn't a party to the suit.

The case is Inc. (AMZN) v. Szabadi, 14-2-18167-1 SEA, King County Superior Court (Seattle).


Power Integrations Wins Order Against 65 Fairchild Products

A federal court in Delaware granted Power Integrations Inc. (POWI)'s request for an injunction against 65 Fairchild Semiconductor International Inc. products found to infringe three patents.

The court said that Fairchild must tell customers, distributors and others who bought the products about the order.

The court in March 2013 upheld most of an April 2012 jury verdict of infringement. U.S. District Judge Leonard P. Stark said in his June 30 order that he rejected Fairchild's claim that Power Integrations failed to demonstrate that it would be harmed without the injunction.

Power Integrations said in a July 1 statement that financial damages from the infringement are to be determined at a future court hearing. Both companies are based in San Jose, California.

The case is Power Integration Inc. v. Fairchild Semiconductor International Inc. (FCS), 08-cv-00309, U.S. District Court, District of Delaware (Wilmington).


Iowa State University Officials Sued Over Marijuana T-Shirt Ban

A change in Iowa State University's trademark-licensing policy prompted two students to file a civil rights lawsuit against school officials.

The students are members of the university's chapter of the National Organization for the Reform of Marijuana Laws, known as NORML, according to the complaint filed July 1 in Iowa federal court. They said they received approval for T-shirts bearing the head of the school's mascot together with an image of a cannabis leaf and the slogan "Freedom is NORML at ISU."

After a photo of a student wearing the shirt appeared on the front page of the Des Moines Register newspaper, the school rescinded approval and changed its trademark licensing guidelines to bar use on items that suggest promotion of illegal products, the students said in their filing. Marijuana use isn't legal in Iowa.

The students say their free-speech rights were violated by the policy change and asked the court to declare that the new policy is unconstitutional.

The case is Gerlich v. Leath, 14-cv-00264, U.S. District Court, Southern District of Iowa.


Gospel Musicians Sue Katy Perry Saying 'Dark Horse' Infringes

Pop singer Katy Perry and her music label were sued for copyright infringement by a gospel music group.

According to a July 1 complaint filed in federal court in St. Louis, the four gospel musicians claim that Perry's "Dark Horse" song infringed their "Joyful Noise" song. They say they find the alleged infringement particularly objectionable because their song's "devoutly religious message" has been tarnished by the associations with witchcraft and paganism evoked by Perry's song.

Perry's label, Vivendi (VIV)'s Capitol Records LLC, didn't respond immediately to an e-mailed request for comment on the suit..

The case is Gray v. Perry, 14-cv-01183, U.S. District Court, Eastern District of Missouri (St. Louis).

Trade Secrets

Move Wins Order Barring Zillow's Use Of Trade Secrets

Move Inc. (MOVE), the San Jose, California-based operator of a network of real estate websites, won a court order barring its former chief strategy officer, Errol Samuelson, and Zillow Inc. (Z) from unauthorized use of its trade secrets.

In a March 17 complaint filed in Washington state court, Move claimed Samuelson's "vast knowledge" of the company's trade secrets will make it "impossible" for him to function in his new job at Seattle-based Zillow without divulging confidential information.

King County Superior Court Judge Barbara Linde said in her June 30 order that Move had demonstrated a "substantial likelihood of success" on its claims, and barred Samuelson from a range of activities at his new company.

Samuelson isn't to participate in planning advertising displays on Zillow's website or discuss Zillow's ad strategy, she ordered. He is also barred for nine months from engaging in efforts to obtain information about listings for rental properties, real estate outside the U.S. and commercial real estate, she said. He and Zillow were also ordered to return any Move trade secret information by July 7.

The case is Move Inc. v. Zillow Inc., 14-2-07669-0-SEA, Superior Court for the State of Washington, King County (Seattle).


Sunday, July 06, 2014

(Not so secret) Secrets of Creativity

Below are a few quotes from an Atlantic article about creativity studies. [ To BUS 74 students: I recommend reading the entire thing.]
- creative people are better at recognizing relationships, making associations and connections, and seeing things in an original way—seeing things that others cannot see.

- having a high IQ is not equivalent to being highly creative. ...above a certain level, intelligence doesn’t have much effect on creativity: most creative people are pretty smart, but they don’t have to be that smart, at least as measured by conventional intelligence tests. An IQ of 120, indicating that someone is very smart but not exceptionally so, is generally considered sufficient for creative genius.

- Although we have a definition of creativity that many people accept—the ability to produce something that is novel or original and useful or adaptive—achieving that “something” is part of a complex process, one often depicted as an “aha” or “eureka” experience. This narrative is appealing—for example, “Newton developed the concept of gravity around 1666, when an apple fell on his head while he was meditating under an apple tree.” The truth is that by 1666, Newton had already spent many years teaching himself the mathematics of his time (Euclidean geometry, algebra, Cartesian coordinates) and inventing calculus so that he could measure planetary orbits and the area under a curve. He continued to work on his theory of gravity over the subsequent years, completing the effort only in 1687, when he published Philosophiœ Naturalis Principia Mathematica. In other words, Newton’s formulation of the concept of gravity took more than 20 years and included multiple components: preparation, incubation, inspiration—a version of the eureka experience—and production. Many forms of creativity, from writing a novel to discovering the structure of DNA, require this kind of ongoing, iterative process.

- Many creative people are autodidacts. They like to teach themselves, rather than be spoon-fed information or knowledge in standard educational settings. Famously, three Silicon Valley creative geniuses have been college dropouts: Bill Gates, Steve Jobs, and Mark Zuckerberg.

- Many creative people are polymaths, as historic geniuses including Michelangelo and Leonardo da Vinci were.
The arts and the sciences are seen as separate tracks, and students are encouraged to specialize in one or the other. If we wish to nurture creative students, this may be a serious error.

- Creative people tend to be very persistent, even when confronted with skepticism or rejection.

- Do creative people simply have more ideas, and therefore differ from average people only in a quantitative way, or are they also qualitatively different? One subject, a neuroscientist and an inventor, addressed this question in an interesting way, conceptualizing the matter in terms of kites and strings:

In the R&D business, we kind of lump people into two categories: inventors and engineers. The inventor is the kite kind of person. They have a zillion ideas and they come up with great first prototypes. But generally an inventor … is not a tidy person. He sees the big picture and … [is] constantly lashing something together that doesn’t really work. And then the engineers are the strings, the craftsmen [who pick out a good idea] and make it really practical. So, one is about a good idea, the other is about … making it practical.

Wednesday, July 02, 2014

Lunch Talk: Lean Startup

Chuck Eesley discusses the customer development methodology and the lean startup. In the video, he talks about how the scientific method can be applied to the process of entrepreneurship

Tuesday, July 01, 2014

(BN) Renewable Energy’s Expansion Exposing Grids to Hacking

(Bloomberg ) Making the electricity grid greener is boosting its vulnerability to computer hacking, increasing the risk that spies or criminals can cause blackouts.

Adding wind farms, solar panels and smart meters to the power distribution system opens additional portals through which hackers can attack the grid, according to computer security experts advising governments and utilities. Where traditionally the grid took power from a few sources, it's now absorbing it from thousands.

The communication networks and software that link green energy sources to the grid as well as the electronic meters that send real time power usage to consumers and utilities are providing new back-door entry paths for computer hackers to raise havoc with the grid. The disclosure this week that hackers known as "Dragonfly" and "Energetic Bear" gained access to power networks across the U.S. and Europe in the past 15 months is a reminder of how vulnerable the system has become.

"Attacks against the grid have moved from theory to reality," said Raj Samani, chief technology officer for Europe, Middle East and Africa, at McAfee Inc., a unit of Intel Corp. (INTC) that's one of the biggest security software providers.

Utilities, already grappling with other challenges to the grid, may spend what may run into the billions of dollars for computer security. A new multitude of energy inputs is forcing grid managers to run systems that communicate real-time data on power flows to consumers and power plants, bringing networks that were previously closely controlled into contact with computer and telecommunication systems used by millions.

'Documented Attacks'

"There have been documented attacks, both cyber and physical on the electric grid which resulted in equipment damage, service disruption and long term repair," said Sean McGurk, global manager for critical infrastructure protection at Verizon Communications Inc. (VZ), the largest U.S. wireless carrier.

In the U.S., President Barack Obama signed an executive order in February calling for work to assess which parts of the grid are most at risk. Many utilities aren't waiting for the government's findings. Dominion Resources Inc. (D), owner of Virginia's largest electric company, told investors in February it will spend $500 million over five years to harden critical substations. American Electric Power Co. (AEP)'s Ohio utility has asked regulators to grant the right to levy a special charge for cyber security.

"We cannot predict potential costs," said Melissa McHenry, a spokeswoman for the company, based in Columbus, Ohio.

About a third of the 61 power and utility companies surveyed by Ernst & Young LLP said they're spending more than $3 million a year -- at least $183 million in total -- on information security including protection from cyber threats.

'Situational Awareness'

Utility chief executive officers began meeting last year with senior Homeland Security officials on ways to detect attacks, block them, and prepare to restore power quickly when one succeeds, said Scott Aaronson, senior director for national security policy at the Edison Electric Institute, a utility trade group based in Washington.

"In the past 18 months, we've done more to improve situational awareness that we had in the previous five years," Aaronson said.

In Europe, the story is much the same. Consulting and testing services associated with cybersecurity at utilities there will more than double to 412 million euros ($564 million) a year by 2016, according to International Data Corp. (IDC), a market researcher based in Framingham, Massachusetts.

Smart Meters

Already, the energy industry was the sixth-most targeted sector worldwide last year. It was the top target in the U.S., accounting for 59 percent of the 256 attacks recorded last year by the U.S. Department of Homeland Security. Almost all the specifics of the incidents are kept quiet to prevent damage to the companies victimized.

In the past, all power use was measured by mechanical meters, which required a utility worker to inspect and read them. Now, utilities are turning to smart meters that communicate data on flows minute by minute both to customers and utilities. In Britain, the government wants most homes to have smart meters by 2020, opening millions of new access points for attackers. Similar programs are in place across the U.S. and Europe.

"Anytime you introduce more software, you introduce more complexity and inevitably more potential holes to the system," said Gavin O'Gorman, a threat intelligence analyst at Symantec Corp. (SYMC), the security company based in Mountain View, California, that identified the "Dragonfly" threat.

Rogue Programmer

Energy companies are only starting to understand the vulnerabilities that smart meters bring, said Nick Hunn, chief technology officer at WiFore, a U.K.-based wireless technology consultant.

Every meter being deployed in the U.K. has a "relay" that can disconnect a household from the power supply. This is controlled by the utility from a computer keyboard. Since the same code goes into all meters, it would take just one small piece of code inserted by a rogue programmer to disconnect the power from millions of meters and disable the remote connection to the utility, Hunn said.

"If you talk to the utilities about what you have to protect against, it's about transformers shorting out and trees falling on lines," Hunn said. "That's what they've been dealing with for the past 100 years."

'Dragonfly' Incident

In the "Dragonfly" incident, hackers thought to be in Eastern Europe started targeting power companies with spam in February 2013 and gained access to networks at three companies a few months later. Symantec didn't name the companies. It said most of the incidents were in Spain, the U.S., France and Italy.

Renewable energy companies were targeted. The "Dragonfly" hackers used a French website of a clean power provider as a "watering hole," where victims from the targeted company visit and pick up infected code, Symantec said.

They were able to compromise industrial control systems and install malware that can replicate itself and spread to other computers.

"Dragonfly" was the latest in a series of breaches affecting energy companies. In June, the U.S. traced dozens of surveillance sorties in 2012 and 2013 on gas pipelines and electric utilities to the People's Liberation Army in China.

Teenage Breach

"There's a reluctance to talk about attacks because no one wants to disclose their vulnerabilities," said Sameer Patil, associate fellow of Gateway House, a researcher in Mumbai specialized in terrorism and national security. It has seen attacks from Chinese and Pakistani hackers against Indian utilities.

In one of the very few cases that reached the public, a 17-year-old in the Netherlands was arrested in March 2012 in Barendrecht for breaching hundreds of servers maintained by KPN NV (KPN), a telecommunications company providing smart-meter services to utilities.

Peter Terium, chairman of the management board of RWE AG (RWE), Germany's second-largest power company said even the most secure and well tested networks are not entirely impregnable. "Nothing is un-hackable," he said.

(BN) Google’s Siren Song Lures Banks to Tech Startups: Israel Markets

(Bloomberg ) Israel's largest banks are finally getting into the technology startup game, and Google Inc. (GOOGL)'s acquisition of Waze Inc. may have had something to do with it.

Bank Hapoalim Ltd. (POLI) and Bank Leumi Ltd. (LUMI), the nation's two largest lenders, say they plan to increase lending and adapt services to meet the needs of technology startups. Both say they can no longer stay away from a segment that accounts for about half of industrial exports and last year prompted the most venture capital-backed deals in a decade.

"We are seeking ways to grow," Bank Hapoalim Chairman Yair Seroussi said in a June 17 interview at the lender's headquarters in Tel Aviv. "The high-tech industry is such a big portion of the economy you can't ignore it."

Israel's high-tech industry, which raised $6.6 billion in 85 deals last year, gets most of its money from foreign funds, according to IVC Research Center. Google, the world's biggest search provider, paid $969 million last year for Waze, an Israeli navigation-software company.

Under Pressure

Banking revenue is under pressure amid the lowest interest rates since 2009, weaker corporate credit demand and tougher regulation such as caps on mortgage lending. The sector posted a 3.1 percent drop in net interest income in the first quarter, according to central bank data. Israeli banking shares traded at 0.8-times book value through yesterday, compared with 0.96-times for Europe's Stoxx 600 Banks Index and 1.4-times for the MSCI Emerging Markets Financials Index, data compiled by Bloomberg show.

"The banks are likely to generate more fee income from services provided to these companies than from credit," Terence Klingman, head of research at Psagot Investment House Ltd. in Tel Aviv, said by phone yesterday. "But this will not be a game changer, as what the banks need is for interest rates to be higher and a lot of relief from regulation."

Israel's central bank left its benchmark rate unchanged at 0.75 percent on June 23, after cutting it 10 times since 2011 in an effort to boost growth and weaken the shekel to help exports. The currency has climbed almost 5 percent against the dollar in the past 12 months, making it the sixth-best performer among 31 major currencies tracked by Bloomberg. Economic growth is expected to slow to 3.1 percent this year from 3.3 percent in 2013, according to a central bank forecast in March.

Leumi said last month it will allocate 2 billion shekels ($582 million) to a new technology unit, LeumiTech, for credit to startups. Both banks say they're also adjusting their policies to enable them to fund companies at an earlier stage of development and provide added services, such as English documentation.

"The banks want a piece of the cake," Koby Simana, chief executive at IVC, a Tel Aviv-based research company that tracks the information technology industry, said in a phone interview yesterday. "Companies need different kinds of funding at different stages of their development, so the initiative by the banks is welcome."

'Special Needs'

Google's Waze and Cisco Systems Inc. (CSCO) $475 million purchase of Intucell Ltd. last year contributed to a total $47 billion of technology mergers and acquisitions in the past decade, according to IVC. Bank debt makes up about 33 percent of technology companies' capital structure in the U.S. and 10 percent to 15 percent in Israel, data from Bank Leumi show.

"Traditionally banks haven't been a player in the industry as they have been deterred by the lack of information around these companies and their special needs," Yifat Oron, chief executive officer of LeumiTech said in an interview at the company's office in Tel Aviv on June 22. Banks are targeting the industry now as it has proven to be "significant in terms of amounts of money" and not a passing trend, she said.

Leumi's net income is forecast to jump 11 percent to 2.16 billion shekels in 2014 and Hapoalim's net is expected to rise 4.5 percent to 2.7 billion shekels, according to an estimate of 3 analysts surveyed by Bloomberg. Hapoalim shares fell 1.6 percent to 19.91 shekels at the close in Tel Aviv. Leumi fell 1.7 percent.

When an Israeli company is sold overseas or sells shares on a foreign exchange, each dollar of the price represents a loss of more than $3 for the country's economy, according to the Israel Securities Authority.

"The funding will supply the industry with enough fuel to allow them to grow to later stages and stay independent longer," LeumiTech's Oron said. That will help with "creating jobs and using local services," she said.

(BN) Apple, Las Vegas Sands, Fracking: Intellectual Property

(Bloomberg ) Apple Inc. (AAPL) pushed organizations such as Major League Baseball to adopt its format for streaming live video, causing them to infringe a patent, a lawyer for Emblaze Ltd. (BLZ) told jurors at the start of a federal trial.

Emblaze, based in Hertzliya Pituach, Israel, argues its U.S. patent issued in 2002 covers a process for delivering live-streaming video over wireless networks without interruption.

Apple lawyer Mark Fowler told jurors June 30 that the iPhone-maker's success has made it a target of patent suits. Emblaze, by comparison, is a failure "trying to make up for that lack of success in the courtroom," he said.

Emblaze manufactured and sold audio products and attempted to sell its technology to wireless carriers and then phone companies, failing each time, Fowler said.

In a separate lawsuit filed in the same court, Emblaze accused Microsoft Corp. (MSFT) of infringing the same patent.

The case is Emblaze v. Apple, 11-cv-01079, U.S. District Court for the Northern District of California (San Jose).


Time Warner Unit Loses Challenge to Spanish TV Company's Mark

Time Warner Inc. (TWX)'s Cartoon Network unit lost a trademark challenge to Spain's Boomerang TV SA, Broadband TV News reported.

The dispute was over the Cartoon Network's Boomerang archive of classic cartoons, according to the industry news website.

Cartoon Network argued unsuccessfully that consumers might confuse the Spanish television company with the Boomerang archive, according to Broadband TV News.

The 6th Chamber of the European Court said that Cartoon Network's appeal of an adverse lower court ruling was unfounded, Broadband TV News reported.

Las Vegas Sands Sues Operators of 35 Chinese Gambling Websites

Las Vegas Sands Corp. (LVS), a Nevada-based casino operator, sued registrants of 35 Internet domain names for trademark infringement.

According to the June 27 complaint, the casino company says the domains are using Chinese characters that are equivalent to its name together with its Venetian design trademark to give the false impression they are affiliated with Las Vegas Sands.

These sites, which are accessible to U.S. citizens, then lure prospective gamblers to overseas online casinos, the company said. Las Vegas Sands said it is a strong supporter of the Coalition to Stop Internet Gambling and "is presently engaged in publicity and lobbying campaigns aimed at defeating measures that would legalize Internet gambling in the United States and elsewhere."

Unauthorized use of its marks by the Chinese domain names threatens to "dilute and detract" from the casino company's efforts to halt online gambling, according to court papers.

The casino company asked the court to order domain name registers to remove or disable domain name server information for the accused domains.

The case is Las Vegas Sands Corp v. Unknown Registrants of, 14-cv-01049, U.S. District Court, District of Nevada (Las Vegas).


Copying Unprotected Elements in Architect Plans Not Infringement

An architect from Schenectady, New York, who sued some of his former licensees in 2011 after they built houses that were modified versions of his designs, lost his appeal of his copyright infringement claims.

A federal appeals court said that while the architect's copyrights on his designs were valid, they also contained many elements that weren't protected by copyright law. The copying was of unprotected ideas rather than their concrete expressions, the court said.

The case is Zalewski v. Cicero Builder Dev. Inc., 12-3448, U.S. Court of Appeals for the Second Circuit (Manhattan). The lower court case is Zalewski v. Cicero Builder Dev. Inc., 11-cv-01156, U.S. District Court, Northern District of New York (Syracuse).

Trade Secrets/Industrial Espionage

Pennsylvania Doctor's Challenge to Fracking-Secret Law Fails

A Pennsylvania kidney specialist's challenge to a state law that bars a medical professional from revealing to others confidential information about the ingredients in hydraulic fracturing fluid was rejected by a federal court in Scranton, Pennsylvania.

In a June 30 order, U.S. District Judge A. Richard Caputo said Dr. Alfonso Rodriguez lacked standing to bring the suit over what the doctor called the "Medical Gag Rule" because he failed to show that he suffered an injury under the confidentiality requirement.

The case is Rodriguez v. Abruzzo, 12-cv-01458, U.S. District Court, Middle District of Pennsylvania (Scranton).

Lunch Talk: Good design by design

Jonathan Kuniholm is the President and Founder of the Open Prosthetics Project, and the Founder of StumpworX, Inc., a startup focusing on prosthetic arm R&D. He served in the United States Marine Corps from 1997 to 2006, as a combat engineer officer and platoon commander for the 1st Marine Division in Operation Iraqi Freedom II. In 2006, he was honorably discharged after being wounded in combat and losing his right forearm. He is a Presidential appointee to the National Council on Disability, the microagency that drafted the ADA.