(BN) In Russia's Bizarro World, Google Is an Underdog in Search and King in Music

(Bloomberg ) Google is having a tough time getting people to use its search engine in Russia, but the company has found a way to draw a crowd there: by putting on a free concert.

Dozens of young people lined up outside Arma17, a nightclub in downtown Moscow, to attend the YouTube Music Awards last week. Russian pop, punk and rap musicians performed on stage at the event under a banner promoting Google's online video website. While Google organized similar concerts in London, New York, Rio and Seoul, the Moscow gathering is of particular importance as the company tries to attract listeners in a country known for its copyright violations.

Unlike most places in the world, local Internet players rule in Russia. Yandex's search engine has 62 percent of the Russian market, compared with 27 percent for Google, according to researcher LiveInternet.ru. The homegrown social network Vkontakte, comprised mostly of Russian speakers, is more popular than Facebook in the region, and it's adding 130,000 users a day, according to George Lobushkin, a VK spokesman. Google+ is barely on the map.

Google's YouTube is a different story. The site's world dominance in music videos is no exception in Russia. While Google doesn't disclose its sales in the country, music is one of the top three sources of revenue for YouTube there, said Kirill Litovinsky, YouTube's content partnership manager in Russia.

The $96 million market for online video advertising in Russia is tiny compared with the U.S.'s $4 billion, but it's expected to grow. Video-ad revenue in Russia is estimated to increase to $152 million next year and reach $233 million by 2015, according to a report by East-West Digital News.

A universal truth is that Internet companies can charge more for professionally produced content. That's partially why Google is emphasizing music over cat videos on YouTube. Many popular bands in Russia have their own channels on the video site, where they show ads and get a cut of the revenue.

While Russia has local online cinemas similar to Netflix, YouTube stands out. It's the largest online video service in Russia with 50 million users. The site's main competition in the country is illegal streaming and downloads. That comes mainly from VK, according to the International Intellectual Property Alliance, which defines the social network as Russia's "largest single distributor of infringing music."

Piracy isn't seen as shameful act in Russia, as it's been portrayed elsewhere in the world. In many circles, it's actually kind of cool. With the Moscow concert, Google is trying to demonstrate that YouTube is cool, too. The company hopes to boost its popularity among music fans in the country with these types of events and by encouraging new bands to post their songs on YouTube.

"I am glad that TV is disappearing, and music content is limping over to the Internet," said Igor Lobanov, leader of alternative-rock band Slot. "On the Web, it's all fair. When you post a song, user hit count shows whether it's good or not."

That's one feature VK doesn't have.

Lunch talk: Origins of Consciousness (UC Berkeley)

UC Berkeley Cognitive Science C102 - Lecture 25, by prof. John F. Kihlstrom. The content starts at 2:29. Click on the link or forward to the time mark in the video below.



tags: lunchtalk, psychology, creativity,

Emotion and perception: brighten up!

A study published in 2012 by Yale cognitive scientists (Song, H., et al, 2012) shows that people perceive smiling faces as being brighter than frowning ones. The paper also mentions a field of research that investigates psychological truths behind common metaphors,

For instance, immoral or guilty feelings increase the perception that one is physically dirty (Zhong & Liljenquist, 2006), a sad mood biases people's visual attention in the vertical plane (Meier & Robinson, 2006), and feelings of loneliness are experienced as physical coldness (Bargh & Shalev, in press).

So, if you feel cold, dirty, and see mostly vertical lines it might be the right time to smile.

tags: psychology, biology, control, emotion, science

(BN) Huawei Targets ‘Step by Step’ Growth

Nov. 6 (Bloomberg) -- Huawei Technologies Co., the third-largest smartphone vendor, is focusing on a gradual growth strategy instead of acquisitions to chase Samsung Electronics Co. and Apple Inc. for market share, its deputy chairman said.

"We're not expecting an explosive development of our smartphone business, rather we want to grow that business step by step," Eric Xu told reporters in London yesterday. "Ultimately we want to be the leading brand worldwide in smartphones, but it will take a while to get there."

Xu confirmed Huawei's smartphone growth target of 10 percent this year and next. The company is relying more on handsets while it fights cybersecurity concerns that have restricted its access in U.S. and Australian phone-equipment markets. Huawei, China's largest supplier of telecommunications networks, isn't planning an acquisition to bolster its position because of potential product overlaps, he said.

The comments would damp speculation over a linkup by the Chinese company with takeover targets such as France's Alcatel-Lucent SA and BlackBerry Ltd of Canada. Huawei hasn't held any discussions with BlackBerry, said Xu, who is also acting chief executive officer under a rotating arrangement set up two years ago by the closely held company based in southern city of Shenzhen.

European carriers are accelerating their expansion of fourth-generation networks, and Huawei will focus on upgrading existing customers in the region to faster services, Xu said.

As telecommunications operators move toward consolidation in the region, Xu said Huawei has found operators prefer having choices in their vendors, comparing it to the fashion industry in that "customers' needs are changing constantly."

Long Run

Huawei shipped 12.5 million smartphones in the third quarter, taking 4.8 percent of the global market, trailing only Samsung's 31 percent and Apple's 13 percent, researcher International Data Corp. said last month.

Huawei is closely trailed by Lenovo Group Ltd., which held 4.7 percent of the global smartphone market in the quarter with 12.3 million units shipped, and LG Electronics Inc. at 4.6 percent with 12 million unit shipments, according to IDC.

"We don't know if we can keep that spot next quarter and we don't care much about being No. 3 at any given quarter," Xu said. "We want to be an athlete in the long run and grow step by step."

Smartphones helped boost Huawei's sales 11 percent in the first six months this year to 113.8 billion yuan ($18.7 billion). Its 10 percent annual smartphone growth could raise consumer devices to 25 percent of the company's sales in 2017 from 22 percent last year, Deputy Chairman Guo Ping said in April. Sales of network equipment will fall to 60 percent of revenue in 2017 from 73 percent in 2012, Guo said.

A U.S. congressional committee last year said network equipment from Huawei and ZTE Corp. could provide opportunities for spying by Chinese intelligence services. Huawei has denied those claims and called for governments and industry to develop globally consistent standards on cybersecurity.

The concerns "have had no significant impact on our smartphone business in the U.S.," Xu said. "What customers care about most is a good smartphone."

(BN) Samsung Plans Acquisitions to Keep Lead Over Apple.

Nov. 6 (Bloomberg) -- Samsung Electronics Co., holding $39 billion in net cash, will pursue more deals as Asia's biggest technology company seeks to grow beyond its core consumer electronics amid fears those businesses are nearing saturation.

The maker of Galaxy smartphones will be more aggressive in making deals after spending about $1 billion investing in 14 companies since 2010, Chief Financial Officer Lee Sang Hoon told a briefing in Seoul today. The company also is considering setting its dividend at 1 percent of its average stock price, a move that could double its cash payout to investors.

The biggest maker of smartphones, televisions and memory chips held its first analyst briefing with top management since 2005 amid concern those segments are peaking as low-cost Chinese producers undercut prices. Samsung shares face their first annual decline in five years as the company becomes more dependent on smartphones, where analysts warn of slower growth even as Samsung sells one of every four handsets globally.

"We will expand our mergers-and-acquisitions strategy beyond a few target areas to pursue opportunities across a wide range of fields," Lee said. The company wants to "enhance the competitive edge of our current businesses and capture new chances for future growth," he said.

Prior investments include Sharp Corp., Novaled AG and Medison Co. as the Suwon, South Korea-based company tries to better integrate its hardware and software offerings.

 Spending

"Samsung has grown into a global technology behemoth and needs to open itself up more to outsiders," said Marcello Ahn, a Seoul-based analyst at Quad Investment Management. "At least it's good to know that Samsung's thinking about shareholder returns."

The company has earmarked a record 24 trillion won in capital expenditure this year and had spent about 63 percent of the total as of Sept. 30. The spending this year is larger than the market value of Sony Corp.

Death by partnership with Google

In 2006, Facebook (FB) decided to partner with Microsoft (MS), rather than Google, to serve ads to its US-based users. One year later, FB and MS extended this partnership worldwide. This choice may have helped FB to become dominant in the social media market. Despite multiple attempts by Google to friend its way into Facebook's business, e.g. through social search services, Zuckerberg treated them as rivals, not partners. And for a good reason.

Two other major companies that chose to partner with Google — Yahoo and Apple — ended up loosing their market share when their partner turned into a dominant competitor. In 2000, Yahoo hired Google to provide search results for its web portal. After a couple of years, most search requests ended up on Google's site, not Yahoo's. According to comScore, Google now has 2/3 of the search market in the US.

Source: comScore, August 14 Press Release.

In 2006, Steve Jobs partnered with Google to provide email, map, and youtube video services to launch the iPhone. Several years later he found himself staring in disbelief at the growing market share of Google's Android smartphones, which now account for a staggering 81% of the total.

Source: CNet, Oct 31, 2013. Android Snags Record 81 Percent of Smartphone Market.

With Yahoo's help, Google got themselves a ticket into the web-world, including maps and email; taking ideas from Apple propelled the company into dominance in the world of mobile media services. In both cases, Google outsmarted their business partners. Just like that was the case with Microsoft partnerships in the 1980-90s, Google's highly intelligent technologists took advantage of their close proximity to huge new markets discovered by others.

Since its early days, Google has been eager to acquire ideas and startups. The original adoption of the search-relevant ad model has brought them the bulk of today's revenues. Acquisitions of startups that developed interent-based maps, docs, videos (Youtube), social navigation (Wase) etc., provide for the bulk of the company's most popular services. Due to its dominance in search, Google is in a great position to detect early user trends and buy growth before most people recognize it. Having learned from their own industry experience, Googlers would rather acquire a potential "disruptor," than give it an opportunity to become a powerful competitor. Nobody can pull off a google-style partnership on Google itself!

It's all fair (Steve Jobs famously disagreed calling Google Android "a highway robbery") and we should probably "like" the company for being a relentless innovator. What bothers me is Google's increasing emphasis on lobbying its case in Washington. This year, Google was ranked #8 lobbyist in the US, a position that no Silicon Valley company has ever tried to attain before. The Steve Jobs' generation of innovators grew out of California counterculture. They considered it to be wrong to rely on the government to advance your business case. Obviously, the times have changed. As Bloomberg reports,

Google passed two Washington power tests when it escaped an FCC probe in 2012 of improper data collection with a $25,000 fine, and the FTC dropped an antitrust probe in January. Now lobbyists for the company are working on protecting its reputation amid revelations about U.S. spying.

When the next Google antitrust probe comes up for consideration who is going to resist the high-power lobbyists? As the ancient question goes, "Who is watching the watchman?"

P.S. The lack of checks on Google should work well for their stock price.

tags: technology, innovation, business, google, facebook, system, growth, startup

(BN) Wages for Donning Safety Gear Debated at U.S. High Court

** I find it hilarious to pay people for protecting themselves on the job. 

(Bloomberg ) U.S. Supreme Court justices questioned whether federal law guarantees that unionized factory workers receive compensation for time spent putting on and taking off safety equipment.

Pittsburgh-based U.S. Steel is being sued by workers at its Gary, Indiana, facility. The workers say they spend as much as an hour before and after their shifts donning protective gear, including flame-retardant clothing and steel-toed boots, and then traveling to their work stations.

The workers' lawyer, Eric Schnapper, today contended that "clothing" typically refers to items that provide comfort or decency, and not to things that primarily protect against workplace hazards.

The employees also contend they aren't "changing" clothes unless they are substituting one article for another, and not if they are simply adding or subtracting items.

The company has the Obama administration's support in the case, which the court will resolve by July.

(BN) Nokia, Twitter, Victoria’s Secret: Intellectual Property

(Bloomberg ) Nokia Oyj (NOK1V) said Samsung Electronics Co. (005930), the world's largest mobile-phone maker, agreed to license its patents for five more years, a boon for the Finnish company as it seeks to rebuild revenue after selling its handset unit.

Samsung agreed to pay Nokia additional compensation starting Jan. 1, according to a statement from Espoo, Finland-based Nokia yesterday. The amount will be settled in a binding arbitration expected to be concluded in 2015. The previous agreement was set to close at the end of this year.

Patents will be one area of focus for Nokia after the former mobile-phone market leader agreed to sell its handset division to Microsoft Corp. (MSFT) in September. Without phones, the company's largest business will be network equipment, and it is also retaining patents to generate licensing income.

"This deal demonstrates the opportunities for the new Nokia in intellectual property rights," said Sami Sarkamies, an analyst at Nordea Bank AB (NDA) in Helsinki. "It's significant because it relates to Samsung, the client with the biggest potential in such rights. It's good timing for Nokia and shows they will be able to benefit from the device-unit divestment from the first day."

Samsung, based in Suwon, South Korea, overtook Nokia as the largest mobile-phone maker last year and has also become the biggest producer of smartphones, the most lucrative and fastest-growing part of the handset market. Malin Roennmark, a Samsung spokeswoman in Stockholm, confirmed the agreement, declining to comment further.

Mark Durrant, a Nokia spokesman, declined to comment on the terms of the deal. He said Nokia has average annual revenue of about 500 million euros ($675 million) from agreements with more than 50 licensees.

"This extension and agreement to arbitrate represent a hallmark of constructive resolution of licensing disputes, and are expected to save significant transaction costs for both parties," Paul Melin, Nokia's chief intellectual property officer, said in the statement.

Twitter Accused by IBM of Infringing Patents

Twitter Inc., which is set to price its shares tomorrow and begin trading the New York Stock Exchange (NYX), said it has been accused of infringing patents held by International Business Machines Corp. (IBM)

The San Francisco-based operator of the microblogging site said in a regulatory filing yesterday that IBM wrote the company "alleging that we infringe on at least three U.S. patents held by IBM, and inviting us to negotiate a business resolution of the allegations," according to the filing.

In dispute are IBM's patents 7,099,862, which relates to a networking technique based on common contacts; 7,072,849, covering a method of showing advertisements without interfering with an interactive site; and 6,957,224, pertaining to the use of interconnected computers to reduce Web traffic.

Armonk, New York-based IBM, which has been the biggest recipient of U.S. patents for the past two decades, gets about $1 billion a year in licensing revenue. The company rarely files infringement lawsuits. It spent four years talking with Amazon.com Inc. (AMZN) before suing over Internet-commerce related patents in October 2006. The companies settled seven months later with Amazon.com paying an undisclosed amount.

Twitter had just nine patents and 95 pending applications as of Sept. 30, far fewer than its competitors or other companies in the industry. The company said that could make it a target for litigation, and it would be limited in its ability to fight back by asserting its own patents.

Trademark

Victoria's Secret Sued for Infringing Hanky Panky's Trademarks

L Brands Inc. (LTD)'s Victoria's Secret unit was sued for trademark infringement by a self-described maker of "ultra sexy lingerie."

New York-based Hanky Panky Ltd. accuses Victoria's Secret of infringing two of its registered U.S. trademarks, "After Midnight" and "Indulge Your Inner Flirt."

Victoria's Secret is offering an "After Midnight" collection of an aphrodisiac candle, aphrodisiac massage oil, a perfume product and a room spray, according to the complaint filed Oct. 31 in federal court in New York.

Hanky Panky also objects to Victoria's Secret's ad used with a line of sleepwear that urges potential buyers to "indulge your inner flirt."

This use of the phrases by Victoria's Secret "betrays a studied and deliberate misappropriation of Hanky Panky's valuable intellectual property," according to court papers.

Hanky Panky also complained that because of Victoria Secret's larger size, advertising budget and resources,'' the larger company's use of the two phrases will "overwhelm and swamp" Hanky Panky's.

The New York-based lingerie company asked the court to bar Victoria's Secret's use of the disputed trademarks, together with an order for the destruction of all promotional material containing them.

Hanky Panky also seeks money damages, including compensation for the cost of corrective advertising aimed at mitigating any consumer confusion resulting from the unauthorized use of its marks. Additionally, Hanky Panky asked for awards of attorney fees and litigation costs, and for a tripling of the damages in order to punish Victoria's Secret for its actions.

Victoria's Secret, based in Columbus, Ohio, didn't respond immediately to an e-mailed request for comment.

The case is Hanky Panky Ltd. v. Limited Brands Inc., 1:13-cv-07742-PAC, U.S. District Court, Southern District of New York (Manhattan).

Titan Trademark Challenge to Saint Sent Back for Reconsideration

Titan Industries Ltd., (TTAN) a Bangalore, India-based maker of watches and jewelry must face further scrutiny in its opposition to a trademark filed by competitor Saint Watches Ptv. Ltd., India's Business Standard reported.

India's Intellectual Property Appellate Board has ruled that the deputy Registrar of Trademarks must consider one more issue raised by Saint Watches in the registrar's dismissal of Titan's opposition, according to Business Standard.

Saint Watches is arguing that Titan didn't file its notice of opposition within the required time period, the newspaper reported.

Previously the deputy registrar said the two companies' locals were sufficiently dissimilar as to prevent the possibility of deception or confusion, according to Business Standard.

Copyright

TorBoox to Dump 41,000 EBooks Onto Internet Free of Charge

TorrentFreak, the anti-copyright news site, reported that a German website that offers unauthorized downloads of e-books said it planned to dump about 41,000 books onto the Internet free of charge beginning yesterday.

The site, TorBoox, told TorrentFreak it had tried unsuccessfully to affiliate with the German publishers' association to make a deal to offer the books legally for a flat rate.

TorBoox had set up a paywall and users who paid 3.33 euros ($4.50) a month could download as many books as they wanted, according to TorrentFreak.

The TorBoox operator told TorrentFreak he's quitting because so much money came in that a "decent and reasonable ending" to the venture became "out of sight," and the attempt to go legitimate had failed.

Tokyo Court Says Japanese Copyright Group Blocks Others' Entry

The Tokyo High Court ruled that the Japanese Society for Rights of Authors, Composers and Publishers has made it "extremely difficult' for rival copyright management groups to enter the market, Japan Times reported.

The court canceled an order by Japan's Fair Trade Commission, withdrawing a cease and desist order it issued against the rights group for allegedly violating that country's anti-monopoly law, according to the newspaper.

E-License, a competitor, had the grounds to challenge JSRAC, the court ruled, according to Japan Times.

The court found that JASRAC's flat-rate payment system made it unattractive for broadcasters to use music managed by other groups such as E-license, Japan Times reported.

(BN) Google’s 8th Ranked Lobbying Machine Takes on Spy Debate

(Bloomberg ) Google Inc. (GOOG) is moving its Washington office closer to Capitol Hill after spending $18.2 million on lobbying, more than Northrop Grumman Corp. (NOC) and enough to rank the technology company as the eighth-biggest advocacy spender. 

It's an investment that's already paying off in increased influence. Google has hired lobbyists and boosted political giving on its way to wins at the U.S. Federal Communications Commission and Federal Trade Commission, and it has entrée to the White House where an employee is helping fix the ailing Obamacare website.

The buildup from an office with two full-time lobbyists ten years ago to one now with at least 11, and the resulting web of connections, will help as Google seeks to end National Security Agency intrusions into its data that the company calls an "outrage."

"Google has put itself in the position of being heard when they need to be heard," Jeffrey Birnbaum, president of BGR Public Relations, a Washington-based media strategy firm, said in an interview. "Decision makers at least know what Google is thinking and what policies it prefers."

The operator of the world's most-popular Internet search engine has learned a lesson that Microsoft Corp. (MSFT) absorbed the hard way, when neglect of Washington in the 1990s preceded an antitrust lawsuit.

Google adopted the tools for gaining influence: campaign cash, attentive lobbyists and friends on both sides of the partisan divide. Last year the Silicon Valley company hired former Republican Representative Susan Molinari to lead its Washington office, and Chairman Eric Schmidt was a high-profile contributor and backer of President Barack Obama's re-election.

Need Lobbyist

"Really it just mirrors what Microsoft learned," Melanie Sloan, executive director of the watchdog group Citizens for Responsibility and Ethics in Washington, said in an interview. "Silicon Valley has had this view that Washington is irrelevant, and what they do is the future. Eventually you realize that may be what you think in your heart of hearts, but you're still going to need a lobbyist."

Google passed two Washington power tests when it escaped an FCC probe in 2012 of improper data collection with a $25,000 fine, and the FTC dropped an antitrust probe in January. Now lobbyists for the company are working on protecting its reputation amid revelations about U.S. spying.

Google was "outraged" after a report the NSA intercepted data from its networks, David Drummond, the Mountain View, California-based company's top lawyer, said in a statement Oct. 31. The incident, detailed by the Washington Post, "underscores the need for urgent reform," Drummond said.

Spying Outrage

The NSA's spying is "not OK" and "perhaps illegal," Schmidt said in an interview with the Wall Street Journal published yesterday.

Google is asking Congress for the ability to publicly release how often technology companies turn over customer data in response to government orders. Companies joining in the push to provide more transparency to its customers include Facebook Inc. (FB), Apple Inc. (AAPL), Microsoft and AOL Inc. (AOL)

"Assertions in the press that our compliance with these requests gives the U.S. government unfettered access to our users' data are simply untrue," Drummond said in a June 11 letter to Attorney General Eric Holder and Robert Mueller, then head of the Federal Bureau of Investigation.

Obama's administration opposes allowing the companies to reveal data about government orders. The Justice Department in a court filing said allowing the companies to disclose statistics on surveillance orders would help adversaries. The NSA director, General Keith Alexander, said the agency hasn't infiltrated the servers of Internet companies such as Google and Yahoo! Inc. (YHOO)

Lobbying Force

An independent privacy board that's reviewing court-authorized NSA programs may recommend reducing the agency's ability to retain and mine bulk phone records to three years from five years, the panel's chairman, David Medine, told reporters in Washington yesterday.

The Privacy and Civil Liberties Oversight Board, which was created by Congress, also may recommend that foreigners have more privacy protections under an NSA program that intercepts e-mails and other Internet communications, Medine said.

To make its case, Google can rely on its lobbyist corps along with a host of outside advocates also on its payroll. The company contracted with 20 firms in the three-month period that ended Sept. 30, lobbying disclosure documents show. Google subsidiary Motorola Mobility, a smartphone maker, accounted for $1.7 million of the 2012 lobbying bill.

'Massage Chair'

The workers soon can use a 55,000-square foot office less than a mile from Capitol Hill. That's about half the distance of the office that Google occupied in 2008, when it issued a blog posting touting "signature Google touches like a massage chair, lava lamps, and a game room (with, naturally, Republican and Democratic foosball teams)."

It's a change from 2003, the year Google first registered federal lobbyists. Then, it spent less than $100,000 and relied on two lobbyists, both employees of the firm Public Policy Partners LLC, according to lobbying disclosure documents.

For the 2012 elections, Google employees and groups donated $3.8 million to political campaigns, including $802,000 to Obama and $40,000 to his Republican opponent, Mitt Romney, according to the Center for Responsive Politics. Google's political-giving committees distributed $876,000 roughly equally to Republicans and Democrats.

Niki Fenwick, a spokeswoman for Google, declined to comment in an e-mail.

'Caught Up'

"They have caught up" after a slow start in Washington, John Feehery, a former Republican leadership aide in the House, said in an interview. "From their reputational standpoints, they have to be strong in condemning NSA. They can't be seen as puppets."

Google joined Red Hat Inc. (RHT), Oracle Corp. (ORCL) and other technology companies contributing computer engineers and programmers to help the Obama administration fix the U.S. health-insurance exchange website created under the 2010 Patient Protection and Affordable Care Act. A Google worker on leave is participating.

That may build goodwill with the administration even as Google takes on the NSA, yet it may carry risks in Congress.

To the extent Google helps the White House, it may irritate Republicans, Feehery said. He cited the example of General Electric Co. (GE) Chief Executive Officer Jeffrey Immelt heading a jobs panel for the Obama White House.

"Republicans look at that and say, 'OK you're helping Obama' - what in the hell are you doing?'" said Feehery, who is president of QGA Public Affairs. "It could definitely cause friction on the other side."

(BN) Patent Tug-of-War Prompts Congress to Catch Up to Courts

(Bloomberg ) U.S. lawmakers, influenced by companies including Cisco Systems Inc. (CSCO), Eli Lilly & Co. (LLY) and Qualcomm Inc., are considering the second set of patent-law changes in three years as the courts try to race ahead of Congress.

The goal is to rein in entities that buy patents and demand royalties from as many companies as possible. Often derided as "trolls," such firms filed 19 percent of all patent lawsuits from 2007 to 2011, the Government Accountability Office found.

Finding a balance among protecting products from knockoff competition, rewarding inventors for making their ideas public and limiting nuisance suits has been debated for more than 200 years, even more so now that some lawsuits are targeting users of ubiquitous technology like e-mail and Wi-Fi.

"There's just a lot of pressure being put on Congress and the courts to address the abusive practices," said Tom Molino, head of government relations for BSA - the Software Alliance, based in Washington, whose members include Microsoft Corp. and Oracle Corp. (ORCL) "Both sides are trying to assert their authority where they can to move the dial."

The U.S. Supreme Court is considering when to penalize patent owners for filing questionable claims, while the federal courts' administrator has proposed disclosure rules that may lessen litigation costs.

The legislation Congress is considering would do some of the same things -- make patent companies pay the other side's legal fees if they lose and tell the courts to change their discovery rules.

"You do not need Congress to mandate things courts are already willing to consider," Circuit Judge Kathleen O'Malley of the U.S. Court of Appeals for the Federal Circuit, which handles all patent appeals, said in a Sept. 17 speech to the Intellectual Property Owners Association.

Three-Way Split

The struggle between the courts and Congress has divided companies along the lines of who gets sued more often.

Google Inc. (GOOG), Cisco and other technology companies in the Coalition for Patent Fairness back legislation introduced Oct. 23 by Representative Bob Goodlatte, a Virginia Republican who heads the House Judiciary Committee. It would allow collection of legal fees from licensing companies that lose at trial and require they provide more details about patents and how they were infringed.

Companies like Qualcomm Inc. (QCOM) that own many patents and make money from licensing them say weakening patents would hurt their business. The Qualcomm-backed Innovation Allianceseeks limited congressional action, and is pushing lawmakers to stop diverting money from the U.S. Patent and Trademark Office, which is funded entirely by user fees.

The Coalition for 21st Century Patent Reform -- made up of General Electric, Johnson & Johnson (JNJ), Eli Lilly and other patent holders -- says the Goodlatte bill takes some power from courts.

Venue Struggle

Industries reliant on patent protection for revenue, which include technology companies, drugmakers, and manufacturers, had 3.9 million jobs and accounted for $763 billion, or 5.3 percent of gross domestic product, in 2010, according to a 2012 Commerce Department report.

Patent litigation is expensive. The cost of defending a patent suit through trial, not including damages, starts at about $650,000 and can reach several million dollars, an American Intellectual Property Lawyers Association study found.

Goodlatte said at an Oct. 29 hearing his bill is the bailiwick of Congress and "the Supreme Court has long recognized that the prescription of court procedure falls within the legislative function."

Some companies say Congress is getting it wrong.

"You've got this incredibly powerful organized lobby that wants to kill innovation because it's a threat to them," said Loudon Owen, chairman of I4i LP, a Canadian designer of software for drug companies that won a $200 million verdict against Microsoft in 2011.

2011 Law

A wide-ranging patent law passed in 2011, called the America Invents Act, started as a push by companies like Microsoft to make it easier to challenge patents and limit damage awards. Those provisions never made it in the final law - - because the courts addressed the issues.

Microsoft curtailed its push for legislation after winning three court rulings between 2007 and 2011 that limited damages in patent suits.

The public debate "leads to legislative changes where legislative change is needed," said Horacio Gutierrez, Microsoft's head of intellectual property. "It crystalizes issues that can be resolved by courts in a faster and more effective way."

Sledgehammer, Scalpel

Companies are spending millions to influence lawmakers. In 2011, three groups alone spent $2.4 million lobbying on the America Invents Act. So far this year, they've spent more than $1.1 million, according to Senate disclosure records. That doesn't include campaign contributions or media buys.

The Coalition for Patent Fairness and the National Retail Federation, a Washington trade group, paid for a newspaper advertising campaign deriding "patent trolls" this year. Innovation Alliance responded with "Who's Trolling Who," saying "fringe abuses" are being used to weaken patent rights.

The Supreme Court announced Oct. 1 it would hear two cases that would make it easier for targets of patent suits to collect attorneys' fees, which could deter groundless lawsuits.

The Federal Circuit is considering whether patent owners can block competitors from selling products based on a finding of infringement of a feature of a complex device -- such as a way to scroll through pages on a smartphone.

The courts are limited because "they only can deal with the facts of the cases and legal questions presented before them," said Mark Chandler, general counsel for San Jose, California-based Cisco.

While Goodlatte is pushing his committee to vote on the proposal quickly, the companies' split over certain segments may give the courts time to tackle the so-called trolls.

"In general, courts are always a better way to fix things than Congress," said Ron Laurie, managing director of Inflexion Point Strategy, which counsels companies on intellectual property. "Congress uses a sledgehammer and courts use a scalpel."

(BN) Google Taps Video Growth With $608 Million Finnish Investment

(Bloomberg ) Google Inc. (GOOG), owner of the world's most popular search engine, plans to spend 450 million euros ($608 million) to expand its Finnish data center as mobile video demand increases.

"Google is in Finland for the long term," Dieter Kern, manager of the data center, told reporters in Hamina, about 150 kilometers east of Helsinki. "We're digging deep roots, both figuratively and in a concrete way."

Google, based in Mountain View, California, is stepping up investments to cope with increasing volume from wireless devices as it chases advertising revenue. Its third-quarter capital expenditure, mainly on equipment, data centers and real estate, rose to $2.29 billion from $1.6 billion in previous quarter.

Companies in need of more capacity as data demand grows are increasingly looking toward the Nordic region, attracted by a stable electricity grid as well as the chilly climate which helps save on equipment cooling costs.

Microsoft Corp. said on Sept. 3 it will invest 250 million euros in a new data center in Finland. Facebook Inc. opened its first data center outside the U.S. in Luleaa, Sweden, in June. London-based Telecity Group Plc, which hosts Spotify Ltd.'s music services, last year bought Helsinki-based data-center operators Academica Oy and Tenue Oy with plans to expand capacity.

Creating Jobs

Google bought the former newsprint mill in Hamina in 2009 for 40 million euros with an initial investment of 160 million euros to convert it into a data center. It added further 150 million euros to expand the site last year. Construction of more data center space has already started, Kern said.

The construction will provide jobs to 800 engineers and builders and the data center's staff count will increase from the current 125, according to a statement.

Finland's government is seeking to fuel the data-center boom by reducing the energy tax collected from companies investing in data storage starting next year. That would reduce their energy tax rate to a similar level as other industrial companies, Prime Minister Jyrki Katainen said today. The proposal needs approval from the European Commission, the executive arm of the 28-member European Union, he said.

"This is one of the biggest foreign direct investments into Finland," Katainen told reporters. "These extensive investments also say something about Finland. We're able to offer a competitive environment to international companies.".

(BN) NRG and Exelon See Batteries Spurring Demand for Solar

(Bloomberg ) NRG Energy Inc. and Exelon Corp.'s Constellation unit say interest in combining solar power with battery storage has soared in the year since Hurricane Sandy knocked out power to millions of homes and businesses on the East Coast.

They are among more than a dozen solar providers that have introduced or enhanced in the past year systems that combine rooftop solar panels that generate power and batteries that retain electricity to use later.

People with solar-powered homes and businesses were frustrated to discover that losing power from local utilities also knocked out the inverters that connect rooftop panels to the grid, leaving them unable to tap the electricity they were producing. Adding battery storage solves that problem, said Tom Doyle, chief executive officer of NRG's solar unit. It's also a growing threat to utilities.

"When Sandy came along we really didn't have a product to keep solar power flowing during blackouts," Doyle said in an interview yesterday at the Solar Power International conference in Chicago. "Now we can install systems that continue operating when the grid fails, and the costs are coming down."

Battery storage can add more than 20 percent to the cost of a typical 10-kilowatt solar system for a four-bedroom home, Brendon Quinlivan, director of solar development at Constellation, said in an interview.

"It provides an extra layer of security," he said. Some people are also using natural gas microturbines or fuel cells to generate their own electricity.

Becoming Mainstream

SolarCity Corp., Kyocera Solar Inc., S&C Electric Co., Standard Solar Inc. and Blackstone Group's Vivint Solar unit have also expanded their rooftop solar offerings to include battery storage.

"To really get solar mainstream, you need storage," Tony Clifford, chief executive officer of Rockville, Maryland-based Standard Solar, said in an interview.

Invention of the Day: Relevant Advertisement.

Today, Google makes billions of dollars a year, by serving ads relevant to user searches. Bill Gross, of IdeaLab, is generally credited with inventing the business model. We use this example in class (Principles of Invention. BUS 74) and Scalable Innovation to illustrate a couple of points:

1. The difference between Invention and Innovation (for more detail see Scalable Innovation, Prologue. Soft Barrier 2: Invention vs Innovation. page xxxi).
2. Breaking, rather than accepting a broadly accepted trade-off, often leads to a major innovation breakthrough. That is, in 2000 when Yahoo dominated the web and used Google search engine to serve user requests, it made money by serving annoying banner ads. In short, Yahoo was locked in a trade-off between making more money and making user experience unbearable (very similar to today's Facebook situation). Google took Bill Gross' original idea and broke the trade-off, by making ads useful (see Scalable Innovation, 2013. Prologue, Internet Advertisement. page xxxvii). As the result, the constraint on revenue and user experience disappeared, making Google the dominant force on the Internet.

New developments in the world of patent litigation show that the concept of relevant ads was invented not by Bill Gross, but by Richard Skillen and Fred Livermore, of Nortel. US Patent 6,098,065 describes a search system that "correlates the received search argument to a particular advertisement." Derived US patents claim multiple aspects of their original idea.

In 2011, Apple, Microsoft, and others bought thousands of patents from bankrupted Nortel for $4.5B. Now, they are suing Google, Samsung, and the rest of the Android universe for patent infringement. The Skillen and Livermore patents are an element of the lawsuit. Of course, the suit will not stop Google from dominating search on the web and mobile. Rather, it is likely to result in a monetary settlement or damages awarded by the courts. The best part of it is that we now know the original inventors of a new powerful business mode. And they are Canadians!

Why Toronto, Canada is not Silicon Valley is another story.

tags: invention, patent, internet, business, model

(BN) Top Business Books

Oct. 1 (Bloomberg) -- In "Circle of Friends," Charles Gasparino gives us all the elements of the insider-trading genre: bundles of cash, informants wired by the FBI, bickering regulators.

The only problem, he says, is that those regulators were investigating the wrong thing.

Here's a list of recommended business books.

"After the Music Stopped: The Financial Crisis, the Response and the Work Ahead" by Alan S. Blinder (Penguin Press). Blinder, a former vice chairman of the Federal Reserve, proves adept at making accessible the complex events leading to the financial crisis and the ways in which policy makers responded.

"Antifragile: Things That Gain From Disorder" by Nassim Nicholas Taleb (Random House). The author of "The Black Swan" returns with a book about thriving amid disorder. He focuses on systems that aren't resistant to stress but actually profit from it. The human body, for example, gets stronger with the stress of exercise, weaker with indolence.

"Are You Smart Enough to Work at Google?" by William Poundstone (Little, Brown). A guide to brain-bending interview questions asked at Google and other innovative companies. "You are shrunk to the height of a nickel and thrown into a blender," one begins. What do you do in the 60 seconds before the blades start whirring?

"The Art of the Sale" by Philip Delves Broughton (Penguin Press/Portfolio). The journalist who brought us "Ahead of the Curve," a chronicle of how he earned an MBA at Harvard Business School, uncovers the dark arts of sales -- a discipline absent from the HBS curriculum.

"Bailout" by Neil Barofsky (Free Press). The former special inspector general policing the $700 billion Troubled Asset Relief Program lifts the lid on the U.S. Treasury and settles scores in this angry yet illuminating memoir.

"The Battle of Bretton Woods" by Benn Steil (Princeton University Press). This masterful account dismantles the idyllic picture of the 1944 Bretton Woods international economic conference, situating it firmly in the tense atmosphere of the final months of World War II.

"The Billionaire's Apprentice" by Anita Raghavan (Business Plus). The Galleon Group insider-trading scandal involving Raj Rajaratnam and Rajat Gupta featured arrogance, greed and, ultimately, prosecution. To Raghavan, that's a sign that Indian-Americans have finally arrived.

"The Buy Side" by Turney Duff (Crown Business). A memoir by a former Galleon Group trader details his drug and alcohol-fueled implosion while providing a timely window into sleazy practices that have become the focus of federal prosecutors.

"Circle of Friends" by Charles Gasparino (Harper Business). While the markets were coming undone in 2008, securities regulators were busy investigating the wrong crime, Gasparino says. Instead of digging into the fraud that helped fuel the crisis, they were on a crusade to end insider trading.

"A Disposition to Be Rich" by Geoffrey C. Ward (Knopf). Ferdinand Ward, the Bernie Madoff of the Gilded Age, comes to life in this elegant and perversely fascinating biography of the swindler who ruined Ulysses S. Grant.

"Down the Up Escalator: How the 99 Percent Live in the Great Recession" by Barbara Garson (Doubleday). Garson writes less about the terrible things that have happened to Americans since the crash than about the resigned/resourceful ways they're coping.

"End This Depression Now!" by Paul Krugman (Norton). The Princeton economist makes his case for more government spending and less austerity. You can almost hear his teeth gnash as he takes on the "Austerians."

"Engines of Change" by Paul Ingrassia (Simon & Schuster). Ingrassia, who shared a 1993 Pulitzer Prize for writing on management turmoil at General Motors Co., presents a quirky history of American culture as seen through 15 cars.

"Finance and the Good Society" by Robert J. Shiller (Princeton). The influential Yale University economist argues that finance, for all its manifest failings of late, remains a force for good in society.

"Financial Turmoil in Europe and the United States" by George Soros (PublicAffairs). This is a compilation of op-ed articles that the billionaire investor wrote as the euro crisis boiled up. As a retread, it displays Soros's knack for assessing market linkages and psychology on the fly.

"The Firm" by Duff McDonald (Simon & Schuster). McDonald has put together an instructive history of McKinsey & Co., though he never quite answers the question of whether hiring the global fix-it firm is worth it.

"Getting It Wrong" by William A. Barnett (MIT). Poor monetary data were a root cause of the financial crisis, argues Barnett, a University of Kansas economist and former Federal Reserve Board staff member.

"Hedge Hogs" by Barbara T. Dreyfuss (Random House). Brian Hunter's out-of-control trading in the natural-gas market led to the collapse of Greenwich, Connecticut-based hedge fund Amaranth Advisors LLC. Dreyfuss does a great job of providing the historical context.

"The (Honest) Truth About Dishonesty" by Dan Ariely (Harper/HarperCollins). We like to think of ourselves as honest. Yet experiments show that we all cheat, says the behavioral economist.

"The Hour Between Dog and Wolf" by John Coates (Fourth Estate/Penguin Press). During his 12 years at Goldman Sachs Group Inc., Merrill Lynch & Co. and Deutsche Bank AG, Coates began to wonder whether testosterone and other hormones were impairing the judgment of traders -- and fueling bubbles and busts. So he retrained as a neuroscientist and conducted tests on trading floors. He synthesizes his findings in this highly speculative and absorbing book.

"The Idea Factory" by Jon Gertner (Penguin Press). A rich history of Bell Labs, a hothouse of 20th-century innovation.

"Lean In: Women, Work and the Will to Lead" by Sheryl Sandberg (Knopf). The Facebook executive offers advice to women, urging them not to pull back from career challenges years before having children.

"Luck" by Ed Smith (Bloomsbury). Serendipity molds everything from sports to politics and finance, argues the former cricketer.

"A Nation of Deadbeats" by Scott Reynolds Nelson (Knopf). The U.S. was founded by bankers who used their political connections to make lots of money. Sound familiar?

"The New Geography of Jobs" by Enrico Moretti (Houghton Mifflin Harcourt). A persuasive look at why some U.S. cities have prospered in recent decades while others have declined.

"Octopus" by Guy Lawson (Crown). Hedge-fund manager Sam Israel, who faked suicide in 2008 to escape a prison sentence for running a $450 million Ponzi scheme, was himself the victim of a con artist.

"Other People's Money: Inside the Housing Crisis and the Demise of the Greatest Real Estate Deal Ever Made" by Charles V. Bagli (Dutton). Buying Stuyvesant Town/Peter Cooper Village was an ill-advised deal for Tishman Speyer and BlackRock even before the financial crisis. Bagli recounts the horror story with clarity and authority.

"Plutocrats" by Chrystia Freeland (Penguin Press). "Being self-made is central to the self-image of today's global plutocrats" Freeland says. "It is how they justify their luxuries, status and influence."

"The Power of Habit" by Charles Duhigg (Heinemann/Random House). Dipping into neurological case studies, Duhigg explores how our brains form habits and how we can change them. Examples range from murderous sleepwalkers to Goldman Sachs.

"The Price of Inequality" by Joseph E. Stiglitz (Allen Lane/Norton). Economic growth and democracy suffer when the top 1 percent of Americans earns a fifth of the country's income and controls more than a third of its wealth, the Nobel Prize-winning economist says.

"Red Ink" by David Wessel (Crown Business). The Wall Street Journal economics editor presents a slim primer on the people and politics driving the U.S. budget war.

"Wait" by Frank Partnoy (Profile/PublicAffairs). From F-16 pilots to speed traders, the best performers are those who learn to delay their responses, argues Partnoy, a former Morgan Stanley banker.

"What Money Can't Buy" by Michael Sandel (Allen Lane/ Farrar, Straus and Giroux). The Harvard University professor who wrote "Justice" explores the moral limits of markets in civil society, from baseball to death bonds.

"White House Burning" by Simon Johnson and James Kwak (Pantheon). A survey of how the U.S. government, ignoring Alexander Hamilton's precepts, piled up more than $15 trillion in debt.

"Winner Take All" by Dambisa Moyo (Allen Lane/Basic). China has embarked on a "commodity crusade," making it the pre-eminent buyer of resources ranging from metals to food, says the former Goldman Sachs banker. The result may be "famine, conflict and worse" for everyone else in the decades to come.

"Why Nations Fail" by Daron Acemoglu and James Robinson (Crown/Profile). Why do some nations prosper while others remain mired in poverty? The answer lies in politics, the two economists argue in this compelling and readable study.

(Laurie Muchnick is an editor for Muse, the arts and leisure section of Bloomberg News. The opinions expressed are her own.)

(BN) Google, Oracle Workers Enlisted for Obamacare Tech Surge

Nov. 1 (Bloomberg) -- Google Inc., Red Hat Inc., Oracle Corp. and other technology companies are contributing dozens of computer engineers and programmers to help the Obama administration fix the U.S. health-insurance exchange website.

The help is arriving as the government's main site for medical coverage remains plagued by repeated outages a month after its Oct. 1 debut. Michael Dickerson, a site reliability engineer on leave from Google, and Greg Gershman, innovation director for smartphone application maker Mobomo, are among those helping, the Obama administration said yesterday.

"They are working through the analytics of what happens on the site to prioritize what needs to be fixed," Julie Bataille, a spokeswoman for the Centers for Medicare and Medicaid Services, told reporters on a conference call. Dickerson is working to improve the stability of the website, while Gershman is "helping the development process be more agile."

The administration began touting a "tech surge" on Oct. 20, to cure the software errors underlying healthcare.gov that have hindered people from enrolling in coverage and insurers from collecting data. Kathleen Sebelius, the U.S. Health and Human Services secretary, apologized before Congress two days ago and said her agency has pulled in outside help to achieve "an optimally functioning" exchange by the end of November.

Offering Help

"I know it's a very political topic," Oracle Chief Executive Officer Larry Ellison said yesterday at the software maker's annual meeting. "As an information technology company we are doing everything we can to help."

Oracle, based in Redwood City, California, is the world's largest database-software maker. Mountain View, California-based Google and Raleigh, North Carolina-based Red Hat declined to comment.

The federal website is the main portal for millions of uninsured people in 36 of the 50 U.S. states to shop for private health insurance plans, with the help of government tax credits, as part of the Patient Protection and Affordable Care Act of 2010. Fourteen states have created their own exchanges.

An estimated 7 million people will gain coverage in 2014 through the federal and state exchanges, according to the Congressional Budget Office.

Top Adviser

The administration hasn't previously quantified the tech surge. Jeffrey Zients, President Barack Obama's incoming chief economic adviser, was brought in to advise Bataille's agency, and the project's management has since been reorganized, with UnitedHealth Group Inc.'s Quality Software Services unit now overseeing the entire operation.

The site previously had no lead contractor. It was largely built by a unit of Montreal-based CGI Group Inc. UnitedHealth's QSSI built the "data services hub" that collects information about customers from the Internal Revenue Service and other agencies, and feeds it to the federal and state websites.

Dickerson is working with QSSI, while Gershman is working with CGI Group, Bataille said yesterday.

The Centers for Medicare and Medicaid Services, led by Marilyn Tavenner, had been responsible for building and running the exchange website. She appeared before the House Ways and Means Committee this week and blamed the contractors for the website woes.

Her comments followed a hearing a week prior where units of CGI Group and UnitedHealth said a branch of the health agency was responsible for the end-to-end testing of the site that should have been done months earlier. The government conducted final tests just days before the site went public Oct. 1, while similar projects are tested for months, the contractors said.

Enrollment Deadline

About 8.6 million people visited the federal website in the first week, encountering software flaws and long waits that prevented many from even registering. HHS has said that capacity is being added to the system and multiple upgrades are being made to the software code, though as of two days ago error messages were still being displayed for some users.

Getting the site fixed soon is critical as Americans who don't have health insurance by March 31 may have to pay a fine of as much as 1 percent of their income.

(BN) Wife Poisoning Husband’s Lover Tests Weapons Law at High Court

(Bloomberg ) What began as attempted revenge for marital infidelity has turned into a U.S. Supreme Court showdown over the power of the federal government.

The high court will hear arguments on Nov. 5 in the case of Carol Anne Bond, a microbiologist who tried to poison her husband's lover -- and was prosecuted under a U.S. law enacted to implement a chemical-weapons treaty. Bond says her crime is a local one that never should have involved federal prosecutors.

The case poses the most important test of the federal government's authority since the Supreme Court upheld President Barack Obama's health-care law last year.

"The case is hugely important because it's about a fundamental principle of constitutional law, which is limited federal power," said Nicholas Quinn Rosenkranz, a Georgetown University Law Center professor.

Bond, a Pennsylvania woman, is challenging a 1920 high court ruling that said Congress can use its constitutional power to implement treaties as a mechanism to regulate local conduct.

The Obama administration, backed by the chemical industry, defends the prosecution and the 1920 ruling. The administration says Bond's argument would undermine the president's ability to strike agreements with other countries and cut against a centuries-old understanding of the Constitution's treaty power.

"In international affairs, the federal government has complete sovereignty and acts on behalf of all the citizens of the nation," U.S. Solicitor General Donald Verrilli argued in court papers. "And it follows from the national government's exclusive power to make treaties that it must have the power to ensure treaty compliance."

Enraged Wife

Those weighty constitutional questions come to the court through a tale worthy of a soap opera.

Bond was thrilled when she learned in 2006 that her closest friend, Myrlinda Haynes, was pregnant. That excitement turned to rage when Bond discovered that her husband, Clifford Bond, was the father.

Bond, who worked for the chemical maker Rohm & Haas Co. outside Philadelphia, then stole a bottle of an arsenic-based substance from her employer. She used the Internet to order a second toxic chemical, potassium dichromate, which is commonly used in printing photographs. Dow Chemical Co. (DOW) bought Rohm & Haas in 2009.

24 Tries

Bond, now 42, tried to poison Haynes 24 times over the next several months, spreading the chemicals on her doorknob, car door handles and mailbox. Although Haynes usually noticed the substances and avoided touching them, on one occasion she suffered a chemical burn on her thumb. Postal inspectors eventually installed surveillance cameras and identified Bond as the perpetrator.

Federal prosecutors then charged her with violating the 1998 Chemical Weapons Convention Implementation Act, a law that carries out a 1997 treaty covering the development, production, stockpiling and use of chemical weapons. The treaty, which supplements an earlier accord that applies in wartime, was designed in part to protect against the use of chemicals by terrorists.

Bond pleaded guilty and was sentenced to six years in prison, while reserving her right to appeal and try to overturn the conviction. Had she been prosecuted under Pennsylvania state law for assault, she would have served no more than two years and one month, according to Paul Clement, the lawyer who will be arguing on her behalf. She was released from prison last year.

Second Try

Clement, who was solicitor general under President George W. Bush, said in court papers that Bond's circumstances "are far removed from the United States' treaty obligations or any issues of national or international importance."

Bond's case is before the Supreme Court for the second time. The justices ruled in 2011 that she had the legal right to challenge her conviction as unconstitutional.

Richard Pildes, a New York University law professor, said the U.S. Constitution's framers created a broad treaty power to address what he calls the "Treaty of Paris problem."

That 1783 accord, which ended the Revolutionary War, promised respect for the property rights of people who had been loyal to the British king. States ignored that guarantee, seizing Loyalist property and reneging on debts to British creditors. At the time, the states were bound only by the Articles of Confederation, the loose agreement that preceded the Constitution.

U.S. Promises

"This was actually one of the central problems with the Articles of Confederation," Pildes said. "The United States could not make credible promises to other countries because the enforcement of those promises depended on whether the states did or didn't agree."

The 1920 Supreme Court case, Missouri v. Holland, centered on a law implementing a treaty to protect birds that migrated between the U.S. and Canada. Missouri challenged the law, arguing that a treaty can't be used to expand Congress's powers.

Writing for the court, Justice Oliver Wendell Holmes rejected that contention. While "the great body of private relations usually fall within the control of the state," Holmes wrote, "a treaty may override its power."

Bond says the court may have to overrule the Holland decision, an outcome that Rosenkranz, whose 2005 law review article sparked a drive to overturn the 93-year-old ruling, says would eliminate a constitutional anomaly.

No Limits

"It's a basic axiom of our Constitution that Congress has limited legislative power," Rosenkranz said. "But if Missouri v. Holland is right, then there really are no limits. The president and Senate can use treaties to increase Congress's power at will."

The justices have at least two options should they wish to duck that constitutional question.

Clement says the court should interpret the chemical-weapons law so that it applies only to "warlike conduct," and not to Bond's actions.

Another possibility is one suggested by Verrilli: upholding the law and Bond's conviction without addressing the reach of the treaty power. Verrilli contends the law also is a legitimate use of Congress's constitutional authority over interstate commerce because it is part of a larger effort to promote the legitimate trade in toxic chemicals.

The American Chemistry Council, a Washington-based group that represents the industry, is making similar arguments in support of the law.

Given the stakes, Pildes says the justices may be happy to adopt one of those narrower options.

"It would not be surprising if they searched for some acceptable way of avoiding a final resolution of the profound question at the bottom" of the case, he said.

(BN) Soda Tax of 20% May Cut U.K. Obesity Rate by 180,000

(Bloomberg ) A 20 percent tax on sugary drinks in the U.K. would cut the nation's obesity rate by 1.3 percent, with the greatest benefit for people under 30, a study found.

The tax, proposed by the U.K.'s Academy of Medical Royal Colleges, would result in about 180,000 fewer adults with a body mass index of 30 or more, researchers from the universities of Oxford and Reading wrote in the journal BMJ. Among people ages 16 to 30, who are the greatest consumers of sugary drinks, the tax would reduce obesity by 7.6 percent, the study showed.

About 26 percent of adults in the U.K. are obese, the second-highest rate in Europe behind Hungary, which has adopted taxes on salt and sugar. While other European nations and some U.S. states tax soft drinks, most levies are less than 10 percent. Today's findings show that while a tax wouldn't be a panacea, it could help reduce the diabetes, heart disease and tooth decay linked with the drinks, the authors wrote.

"The more pressing question is whether policy makers can implement a tax this high," Jason Block, an assistant professor at the Harvard Medical School's obesity prevention program in Boston, wrote in comments accompanying the study. "We now need policy makers to act and provide opportunities for real-world evidence."

Diet Surveys

The study used data from household spending and diet surveys, together with systems for estimating the effect of tax increases on drink purchases, and changes in energy intake on body mass index. Body mass index is a measure of body fat, calculated by using a person's weight and height.

Based on their findings, the researchers predicted that the tax would reduce the number of overweight people, defined as those with a BMI of 25 or more, by 285,000, or 0.9 percent.

It would also raise 276 million pounds ($443 million) a year in revenue and reduce consumption of concentrated sugar-sweetened drinks by 15 percent, according to the study.

The Academy of Medical Royal Colleges, which represents about 220,000 British doctors, in February proposed testing the tax for a year as one of 10 recommendations for curbing obesity.

The U.K. government's health department said companies including Tesco Plc (TSCO) and Coca-Cola Co. have agreed to reduce sugar in their drinks under a voluntary plan aimed at improving public health.

Reducing Sugar

"The voluntary action we have put in place will help people to make healthier choices but we keep all international evidence under review," the department said in an e-mailed statement.

Taxing soft drinks won't curb obesity, partly because its causes are complex, Gavin Partington, director general of the British Soft Drinks Association, said in an e-mailed statement.

"Trying to blame one set of products is misguided, particularly when they comprise a mere 2 percent of calories in the average diet," he said.

The sale of sugar-sweetened drinks in schools is banned in the U.K., as is advertising them on children's television.

Soft-drink taxes in France and Ireland have been associated with reductions in consumption, though their health impact hasn't yet been studied, the authors wrote.

A sugar tax in Denmark was abandoned in November after it was criticized for raising prices and driving consumers to shop in neighboring countries that don't have the tax.

American Consumers

In the U.S., 34 states and the District of Columbia have food taxes that affect sugar-sweetened drinks, and studies there have shown that a 20 percent tax would bring about significantly higher reductions in energy intake than today's research predicts. Still, Americans consume more than three times more energy per person per day from sugar-sweetened drinks than Britons, the authors wrote.

In September 2012, New York City's Board of Health approved Mayor Michael Bloomberg's plan to restrict sales of sugary soft drinks to no more than 16 ounces (454 grams) a cup. In March, New York Supreme Court Justice Milton Tingling barred the proposal from becoming law, saying it had too many loopholes and violated the jurisdiction of the City Council. Bloomberg, the founder and majority owner of Bloomberg News parent Bloomberg LP, has appealed the decision.

Mexico's Senate yesterday backed a 1 peso (8 cents) per-liter tax on soft drinks and an 8 percent tax on junk food. The nation has the highest obesity rate of any major country after Egypt, and is the world's top consumer of soft drinks at 163 liters per capita a year, 40 percent more than the U.S., according to the World Health Organization.

(BN) Kindles Power Up for Flight as Airlines Vie to Be First

(Bloomberg ) One of airline travel's least-cherished rituals, powering down electronic devices before takeoff and landing, is nearing an end -- with qualifications.

When and how you're allowed to use your Amazon.com Inc. (AMZN) Kindle or Apple Inc. iPhone on U.S. flights will depend on what airline you're flying, what device you're using, what aircraft type you're on, and maybe the weather outside.

Device makers led by Amazon.com, users who want to stay connected, and members of Congress who agitated for the Federal Aviation Administration to change its rules, claimed victory yesterday after agency chief Michael Huerta said it will let airlines apply to broaden electronics use by passengers.

JetBlue Airways Corp. (JBLU) and Delta Air Lines Inc. (DAL) today said they became the first carriers to allow passengers to leave their electronics powered up during flights.

"I've been waiting and waiting and waiting for this change," said Southwest Airlines Co. (LUV) frequent flier Nick Skytland of Houston, a partner at the management consulting company SecondMuse. "I think this ruling will single-handedly make me 50 percent more productive."

The FAA initially will allow smartphones, tablet computers and MP3 players to stay on throughout flights, including during takeoff and landing phases, if they're set to so-called airplane mode, which turns off cellular connections.

Users will be able to read or listen to content already on their devices. To surf the Web, download content or play online games at altitudes below 10,000 feet, their flight will have to be equipped with a Wi-Fi service designed to work during those phases. Heavier devices will have to be stowed at those times.

Gogo Limits

The FAA now prohibits use of personal electronic devices while a plane is below 10,000 feet, with the exception of portable recorders, hearing aids, heart pacemakers and electric shavers. The restrictions are intended to prevent interference with flight controls, radios and navigation equipment.

Mobile-phone calls and text messages will remain forbidden at any time during flight. They are separately banned over concerns that the signals may interfere with ground networks.

Customers of Gogo Inc. (GOGO), which says it has 82 percent of the inflight Wi-Fi market in North America, won't initially benefit from the new rules as its service doesn't work below 10,000 feet.

The company will evaluate "lots of engineering trade-offs" as it considers whether to make adjustments to allow connections at lower altitudes, Chief Executive Officer Michael Small said in an interview yesterday.

In-Air Connectivity

There's no "fundamental technological barrier" to making the changes with the system that relies on 200 ground towers in the U.S., Small said. He declined to elaborate.

Gogo rose 80 cents, or 4.5 percent, to $18.64 in New York yesterday, after trading as high as $19.20.

The company, based in Itasca, Illinois, says it provides in-air connectivity on more than 2,000 aircraft flown by AMR Corp.'s American Airlines (AAMRQ), Delta, United Continental Holdings Inc. (UAL)'s United Airlines and US Airways (LCC) Group Inc., among others.

Allowing broader use of on-board electronics will help Amazon.com, as Kindle owners may have more time to buy and download content, as well as Qualcomm Inc. (QCOM), which won preliminary regulatory clearance in May for an air-to-ground broadband service.

'About Time'

"This is a big win for customers and, frankly, it's about time," Drew Herdener, an Amazon.com spokesman, said in an e-mailed statement.

JetBlue has qualified its entire fleet for passenger electronics during all portions of flights, it said in an e-mailed statement. JetBlue, which doesn't offer its passengers Wi-Fi, is planning to add that service on some planes by the end of the year, Jenny Dervin, a spokeswoman, said in an e-mail.

Delta allowed its domestic passengers to stay logged on starting at 4:15 p.m. New York time, Paul Skrbec, a spokesman, said in an e-mail. The change doesn't apply to flights operated by regional carriers under contract with Delta, Skrbec said.

American Airlines said in statements that they've started the process of asking the FAA to approve broader device usage. American will submit its plan to the FAA today, Andrea Huguely, a spokeswoman, said in an e-mail.

Brett Snyder, who writes the blog Cranky Flier and does consulting work for airports and airlines, said the rules "will create a bit of policing problem" for flight crews.

"For me, I think one of the concerns is that people are going to pay less attention on the ground to safety demonstrations -- not that a ton of people pay attention anyway -- but it's just going to cause more distraction," he said.

'Hall Monitors'

It will be important for passengers to stop using devices and pay attention during the safety briefing before each flight, Huerta said.

The Air Line Pilots Association, North America's largest union for flight crews, said it shares concerns about how the new process will be enforced.

"We remain concerned that relying on passengers to selectively turn off their devices in areas of extremely poor weather is not a practical solution," the union said in a statement.

Flight attendants at American Airlines welcome the changes because they are "frankly tired of feeling like hall monitors when it comes to this issue," Laura Glading, president of the group that represents them, the Association of Professional Flight Attendants, said in a statement.

Uniform Standards

A coalition of flight attendant unions at United, US Airways and other carriers called for uniform standards for which devices must be stowed on takeoff and landing so passengers aren't confused.

Reaction from Congress was divided.

"This is great news for the traveling public -- and frankly, a win for common sense," said Senator Claire McCaskill, a Missouri Democrat who had threatened to force changes through legislation.

Senator Jay Rockefeller, the West Virginia Democrat who has oversight over aviation as chairman of the Commerce, Science and Transportation Committee, was more skeptical.

"Having access to e-mail or a movie is not worth compromising the safety of any flight," he said in a statement.

Zero Visibility

The bar for airlines to get permission to expand electronics use will be higher if a carrier wants its passengers to be able to surf the Internet while pilots land in zero visibility, which requires them to follow radio beams instead of seeing the runway.

Devices allowed on one fleet of aircraft may be prohibited on another under the new policy, and that may mean the speed of implementing the changes will vary, Huerta said. He urged passengers to heed instructions from flight attendants.

"What we're really striving for is consistency," he said. "We're committed to moving very expeditiously."

Most aircraft in airline service have already passed tests showing they are hardened against radio waves emitted from devices, he said. The new standard updates rules put in place in the 1960s.

"I did feel that, like any regulation that has been around for a long time, the world has changed a lot in the last 50 years, so let's take a look," Huerta said at a press conference in Washington's Reagan National Airport. "And that's what we did."

(BN) Facebook Holds Line on Balance of Ads for User Experience

// Facebook biz model is still locked in a tradeoff between user satisfaction and ad revenue. 

// The tradeoff is similar to that of Yahoo's circa 2000. At the time, Google found a way to break the tradeoff and eventually displaced Yahoo as the web leader.

// despite Facebook's current dominance, they are still vulnerable.

(Bloomberg ) Facebook Inc. (FB) has decided not to push the limits of how many online advertisements people can tolerate.

The world's largest social-networking company said this week that it doesn't plan to increase the balance of ads that it shows to users in their news feeds, the main hub for content on its services. Facebook said ads took up 5 percent of the posts in news feeds in the second quarter and have risen only modestly since then. That amounts to about one ad for every 20 photos, status updates or other posts.

Chief Executive Officer Mark Zuckerberg is trying to keep users happy with plenty of content from their friends without distracting people with ads, while inserting enough marketing messages to boost revenue. The delicate balancing act is one that Internet companies from Twitter Inc. (TWTR) to LinkedIn Corp. (LNKD) also face and will affect how they generate sales over the long run.

Now the Menlo Park, California-based company will need to increase revenue by pulling other levers, including higher ad prices and more user accounts.

"You've got to find other ways to monetize other than increasing the volume of ads," said Hussein Fazal, CEO of AdParlor, part of AdKnowledge, a digital marketing firm. "It's just all about user experience. The one thing that scares investors in Facebook the most is that people start using other sites outside of Facebook -- and ads could be a big reason."

Users Engage

The company is pulling back on an ad expansion even as users are engaging more with the service. Daily active users rose to 728 million in the third quarter, or 61 percent of the monthly-active user base, from 58 percent in the year-ago period. At the same time, revenue surged 60 percent to $2.02 billion, exceeding the average projection for $1.91 billion, according to data compiled by Bloomberg.

"As we think about the future, we do not expect to significantly increase ads as a percentage of News Feed stories beyond where we were at the end of" the quarter, Chief Financial Officer David Ebersman said.

With news feed ads, promotions are placed amid updates from friends, including on desktop computers and on mobile devices, which is driving sales growth. So someone can see a promotion for McDonald's Corp. (MCD) between baby photos and engagement announcements. By contrast, traditional online banner ads are stuck in a static area of a Web page or on a smartphone.

Setting Precedent?

"We are very focused on managing this for the long-term to create a great experience for users because ultimately that's what's most valuable for them, and advertisers who want to reach them," said Will Cathcart, product management director at Facebook.

The results of Facebook's decision will be closely watched by competitors such as Twitter and LinkedIn that also place ads in content feeds that can be scrolled through on desktops and mobile phones, said James Borow, CEO at Shift Inc., which specializes in social marketing.

"People will continue to see that Facebook's respect for the user will lead to monetary success," Borow said. "If you get people using your service more and more, you do have more opportunities to monetize, and I think that's a precedent they're setting."

Companies that overwhelm Web surfers with ads pollute the experience, said Clark Fredricksen, an analyst with EMarketer Inc. in New York. Facebook's former nemesis, MySpace, forced more advertising on users after the company was purchased by News Corp. (NWSA) in 2005 for $580 million and members eventually tired of the excessive marketing, he said. News Corp. agreed to sell MySpace in 2011 for $35 million to Specific Media Inc. after it lost its lead to Facebook.

Cluttered Experience

"Ultimately, that contributed to a very cluttered user experience that, combined with the emergence of Facebook, contributed to its downfall," Fredricksen said. He added that the balance of ads is less important in pushing revenue increases than growth in users and pricing of ads.

That benefits Facebook, with Ebersman noting that the average price of online ads rose more than 40 percent in the third quarter compared to an increase of 13 percent in the second quarter. In the U.S. and Canada, mature markets for the company, the gain was more than 60 percent, he said.

As Facebook limits the frequency of its ads, the company is also working to increase their quality. It is getting help from outside marketing developers, who are building custom tools and features to manage and evaluate the effectiveness of advertisements for their own customers. On a call with investors this week, Facebook Chief Operating Officer Sheryl Sandberg said the program is an "important trend influencing our growth."

More Resources

Facebook also moved over sales executive Mike Randall three months ago to run the preferred marketing developer program. He will focus on developers who have international and mobile experience, areas where Facebook wants to better target users with ads. Many developers also have expertise in industries like pharmaceutical and auto, so they can build better tools for Facebook marketers and take a cut of the profits.

"There's so many marketer objectives that it would be nearly impossible for us to follow all of those on our own," Randall said. "We've had an ecosystem out there for a while, but now we have to take the next step and focus on the developers in the areas that are important to Facebook."

Last month, Facebook said it was expanding a service to let companies target users based on their online activity outside of the social network. Facebook's Instagram photo-sharing service is also set to start selling promotions.

A limit on ads can be good for advertisers as well, especially since they want promotions placed on services that people actually visit online, said John Tuchtenhagen, a vice president at Publicis Groupe SA's Digitas unit.

"We want to reach users in an environment that they enjoy and that they positively connect with," Tuchtenhagen said.

(BN) Facebook, Apple Ask Congress for NSA Spying Restraints

(Bloomberg ) Facebook Inc., Apple Inc. and four other U.S. technology companies asked lawmakers to restrain the National Security Agency, saying they want to "counter erroneous reports" they give intelligence agencies direct access to their servers.

"Our companies believe that government surveillance practices should also be reformed to include substantial enhancements to privacy protections and appropriate oversight and accountability mechanisms for those programs," the companies wrote yesterday to Senator Patrick Leahy, a Vermont Democrat who leads the Senate Judiciary Committee, and three other lawmakers.

The companies, including Microsoft Inc., Google Inc., Yahoo! Inc. and AOL Inc., also want permission to publish statistics about how often they turn over customer data in response to legal orders by the U.S. government.

The NSA is under mounting scrutiny in Congress and abroad in response to revelations that it has spied on foreign leaders, broke into fiber-optic cables abroad and gathered the e-mails and bulk phone records of innocent Americans. Most of the revelations were exposed by former NSA contractor Edward Snowden, who remains in Russia under temporary asylum.

Server Access

"The volume and complexity of the information that has been disclosed in recent months has created significant confusion here and around the world, making it more difficult to identify appropriate policy prescriptions," the companies said in the letter.

Allowing companies to be transparent about interactions with the government will help them correct impressions that they give the NSA access to their servers or help the agency collect bulk Internet records, the companies wrote.

The NSA has tapped fiber-optic cables overseas in order to siphon off data from Google and Yahoo, according to an Oct. 30 report in the Washington Post.

Director of National Intelligence James Clapper told the Senate intelligence committee yesterday that agencies aren't tapping the networks of Google, said Senator Dianne Feinstein, a California Democrat and chairman of the panel.

The NSA said in a statement yesterday it will "collect the communications of targets of foreign intelligence value, irrespective of the provider that carries them."

"U.S. service provider communications make use of the same information super highways as a variety of other commercial service providers," the agency said. "NSA must understand and take that into account in order to eliminate information that is not related to foreign intelligence."

Company Lobbying

Leahy joined with Republican Senator Michael Lee of Utah, a favorite of Tea Party activists, as well as Representatives James Sensenbrenner, a Wisconsin Republican, and John Conyers, a Michigan Democrat, to introduce a bill Oct. 29 that would prohibit the NSA from collecting the bulk phone records of millions of Americans.

The legislation also would allow technology companies to report the number of government orders they have complied with and the number of users or accounts affected by government demands.

Apple, Facebook and Yahoo listed lobbying expenses on legislation related to NSA demands for data for the first time in third-quarter reports submitted to Congress.

"Allowing companies to be transparent about the number and nature of requests will help the public better understand the facts about the government's authority to compel technology companies to disclose user data and how technology companies respond to the targeted legal demands we receive," the companies wrote in their letter.

Competing Bills

The Senate intelligence committee yesterday approved a competing bill that's silent on allowing the companies to disclose the data. The bill, approved 11-4, also wouldn't end the NSA's collection of bulk phone records.

It would codify most of what NSA already does and require more reports to Congress and the secret court that oversees the agency.

"The collection of phone numbers, which can be run when a terrorist target in another country calls an American number, is something in my view which protects this country," Feinstein told reporters after the committee vote. "I don't believe this is an imposition on people's privacy rights."

The collection of bulk phone records is conducted under the 1978 Foreign Intelligence Surveillance Act. Most NSA spying abroad is done under the authority of a separate executive order. Feinstein said her panel doesn't have adequate oversight of spying the agency is doing under the order and she has initiated a review of those programs.

International Spying

Google was "outraged at the lengths to which the government seems to have gone to intercept data from our private fiber networks," David Drummond, the company's top lawyer, said in a statement.

"We do not provide any government, including the U.S. government, with access to our systems," and the spying "underscores the need for urgent reform," Drummond said.

There appears to be little appetite in Congress to limit NSA spying on foreign leaders or fiber-optic cables abroad.

Senator Saxby Chambliss of Georgia, the top Republican on the Senate intelligence committee, said he has no intention of stopping the foreign spying and doesn't oppose it.

"They do it to us," Chambliss said in an interview. Asked who spies on the U.S., he said, "You'll have to ask the folks that do it."

Change Coming

Senator Ron Wyden, an Oregon Democrat who has spoken out against spying on innocent Americans, said the statements made by intelligence officials about spying on foreign leaders "is consistent with the understanding that I have had for years as a member of the intelligence committee."

"If people want to revise the rules for collecting on foreigners, I'm certainly open to discussing that," Wyden said in an interview. "Surveillance certainly has implications for our foreign policy."

NSA Director Keith Alexander has conceded there will be some new constraints on spying methods at home and abroad, while warning they may make the U.S. more vulnerable to terrorist attacks.

Changes may include restricting the kind of data NSA can collect, how its databases can be mined, limiting the ability to eavesdrop on foreign leaders and requiring the agency to defend its requests against a privacy advocate before the Foreign Intelligence Surveillance Court.

The U.S. and allies need to determine if there's a better way for countries to protect their national interests when "everybody is spying on everybody else," Alexander said Oct. 30 at a Bloomberg Government cybersecurity conference in Washington.

"Catastrophic attacks are in our future," Alexander warned. "If we take away the tools we increase the risk and we ought to go into that with our eyes wide open."