(BN) GM Bringing 4G Broadband to New Autos in 2014 With AT&T

(Bloomberg ) General Motors Co. (GM), the largest U.S. automaker, said its OnStar unit will begin offering 4G LTE service in vehicles next year in a partnership with AT&T Inc. (T)

The faster mobile data speed will first be available in most 2015 model year vehicles in the U.S. and Canada, GM said today in an e-mailed statement. Additional markets and service providers will be announced in coming months, the company said.

"We're making a global commitment to embed 4G LTE mobile broadband across all of our vehicles," Mary Chan, president of GM's Global Connected Consumer, said in an interview. "This is the largest commercial deployment of 4G LTE services in the auto industry."

The move marks an evolution for GM's OnStar, which has 6 million subscribers in the U.S. and Canada for the in-car communication service. The Detroit-based automaker traditionally emphasized OnStar's operators while other automakers have developed programs that used onboard navigating systems with video screens or systems that piggybacked off of connections with smart phones.

GM's OnStar operator-emphasis strategy is changing with the introduction of new telematic systems in Cadillac and Chevrolet and today's announcement.

"This is a big deal," said Thilo Koslowski, an industry analyst with Gartner Inc. based in San Jose, California. "They want to actually have embedded connectivity in their connected vehicles rather than relying on a mobile phone going forward, that's a pretty big shift in terms of where other vehicle manufacturers are today."

Faster Speeds

Long-term evolution, or LTE, is a higher speed, fourth- generation wireless technology compared with third-generation, or 3G. AT&T, Verizon Communications Inc. (VZ), Sprint Nextel Corp. (S) and T-Mobile USA Inc. are adding LTE to their networks. LTE allows mobile users to load videos and stream music as much as 10 times faster than 3G, according to the statement.

With 4G, GM said it could include in-vehicle Wi-Fi hot spots, streaming videos and faster application downloads.

"This enables them to actually have the capabilities to support all kinds of innovative services and needs that consumers may evolve or may desire in the future by having this technology available," Koslowski said.

GM didn't disclose pricing details.

"There's going to be different tier levels of service that customers can choose and buy from," Chan said. The faster service won't be available for older vehicles, she said.

AT&T, the second-largest wireless carrier, said the OnStar agreement will boost prospects for the Dallas-based company.

"We think telematics will be a $1 billion business for AT&T," said Glenn Lurie, head of emerging businesses at AT&T Mobility. "Moving forward with GM and OnStar is a big step in that direction."

(BN) Pinterest Valued at $2.5 Billion Following Investment by Valiant

(Bloomberg ) Pinterest Inc., an online bulletin board where members share photos of clothing, food and art, raised $200 million in a financing round that values the company at $2.5 billion.

The funding was led by Valiant Capital Management, San Francisco-based Pinterest said yesterday in an e-mailed statement. Existing investors Andreessen Horowitz, Bessemer Venture Partners and FirstMark Capital also contributed.

Pinterest is now worth more than publicly traded Internet companies Zynga Inc. (ZNGA), Yelp Inc. and Pandora Media Inc., even though it has yet to generate revenue. The number of unique users is growing at more than 300 percent from a year earlier, leading to increased interest from investors, said Rick Heitzmann, a partner at FirstMark in New York and board observer for Pinterest.

"We think we'll build a really big business in discovering and curating all the things people love in their lives," Heitzmann said in an interview. "It's really resonating with people."

The investment makes Pinterest one of the most valuable venture-backed Internet companies. Twitter Inc., the microblogging service, was valued at about $9 billion after early employees sold shares to a fund managed by BlackRock Inc., three people with knowledge of the matter said last month. Dropbox Inc., a file-sharing service, raised money in late 2011 at a $4 billion valuation, while room-sharing site Airbnb Inc. was raising capital at a valuation of about $2.5 billion late last year, people familiar with the matter said in October.

Virtual Pinboard

Pinterest operates a social-networking website where users can collect and share photos on the Internet by pinning them to a virtual bulletin board. Users can re-pin others' finds, which include recipes, wedding dresses, party ideas and creative educational tips. The company will use the capital to build its service, including developing new technology and recruiting top engineers, designers and businesspeople.

In May, the company raised $100 million in a financing round that valued it at about $1.5 billion, a person with knowledge of the matter said at the time.

(BN) Wi-Fi Flaws Turn Off Outdoor Users, Cost Mobile Web Traffic

(Bloomberg ) Wi-Fi networks, having become a household fixture in the past decade, remain too annoying to use outside the home for many, hindering carriers' ambitions to leverage the wireless Internet technology.

As hotspots pop up across cities and public transportation, multiple passwords, spotty coverage, extra charges, and phones that connect to unauthorized Wi-Fi by mistake and disable wireless data are turning some customers off. Home remains the most popular place to use Wi-Fi -- some operators see as much as 75 percent of mobile traffic carried on personal routers, while as little as 5 percent goes over outdoor hotspots, industry group Wireless Broadband Alliance found in a November survey.

"The phone connects to the network automatically: you appear to have Wi-Fi and all connection is in fact lost," said Dave Field, a public relations consultant in London who uses Sky's Cloud Wi-Fi service and Virgin Media Inc. (VMED)'s hotspots in the Underground subway. "Auto-connect is also a real pain as you often need to complete long forms and bank cards -- quite difficult on an iPhone."

Such complaints make it more difficult for providers such as Vodafone Group Plc (VOD) and AT&T Inc. (T), which are increasingly counting on the technology to ease traffic on their mobile networks, and companies like BT Group Plc (BT/A) and British Sky Broadcasting Group (BSY), which want to use Wi-Fi to win user loyalty.

Wi-Fi Dreams

At the Mobile World Congress this week, over 70,000 are gathering to discuss the future of wireless communications. Companies' ambition of streaming videos through wireless networks and marketing to consumers by location largely depend on full and frequent access to the mobile Web. To assist bloggers, analysts and media swarming the Fira Gran Via convention center, organizers have promised 50 percent more Wi- Fi hotspots than last year for 250 percent more capacity.

The WBA is working to ease access, pushing for so-called next-generation hotspots to cut the need for user names and passwords. More than 50 companies, including AT&T, BT and China Mobile Ltd. (941) agreed in December to roaming deals integrating Wi- Fi networks, billing and security as part of the initiative. It will begin deploying in the first half of this year.

The group is also testing a system using mobile-phone smartcards to identify users so they won't have to log in. By using SIM cards, which store a user's identity in the phone, customers won't have to log in to the best available networks and their credentials will work across them all, said WBA program director Tiago Rodrigues.

Managing Traffic

"It's a mechanism that is in some ways similar to the experience we have on our mobiles when we go abroad," Rodrigues said. "Our mobiles select the network that is available automatically."

As carriers expand their Wi-Fi hotspots in public places, they have to ensure they can handle the traffic so users aren't driven away as soon as they try to get on. In the U.K., Wi-Fi use drops to its lowest points when customers leave home, a Nielsen survey of people with devices using Google Inc.'s Android found in September. It accounts for about 90 percent of data use between 8 p.m. and 5 a.m. and drops to a low of about 65 percent at midday, according to the study.

Most operators saw less than 20 percent of smartphone traffic offloaded onto Wi-Fi networks, the WBA survey found.

BT, with 4.5 million U.K. hotspots, has sought to boost non-home usage. It's tripled the minutes of traffic in the last year when people are out in part by partnering with retailers and places such as train stations where people have to wait, said Andy Baker, the Wi-Fi division head.

Duty-Free Shopping

BT aims to ease frustration by adding Wi-Fi access to broadband packages and offering the service through retailers such as Starbucks Corp. (SBUX) and John Lewis Plc, Baker said. BT also has an application for iPhones, Windows, BlackBerrys and Android devices to point users to hotspots.

Partnerships also open new lines of business for providers that can compile data on how customers move around a store, for example, or what they buy for tailored coupons. One service BT plans would allow an airport to track how long passengers spend in duty-free shops and how often they visit, Baker said.

"You'll see a lot of pretty cool stuff over the next 12 to 18 months," Baker said.

FCC Vote

BT rose 0.3 percent to 278 pence at 8:54 a.m. in London. BSkyB gained 0.2 percent to 828.5 pence.

Worldwide, governments and carriers are finding ways to facilitate outdoor Wi-Fi access. The Federal Communications Commission last week voted to write rules opening more airwaves to Wi-Fi devices to help ease wireless congestion in places such as airports and conference halls.

China Mobile boosted the number of sites to 2.2 million by the end of 2011 from 300,000 that June. The world's biggest wireless carrier then saw traffic jump 103 percent in the first half of last year, according to the WBA.

NTT DoCoMo Inc. (9437) and U.S. Wi-Fi service provider Boingo Wireless Inc. (WIFI) announced a roaming agreement in December that gives the Japanese carrier's customers access to 600,000 hotspots globally. In New York, Norwegian Cruise (NCLH) Line has sponsored free access to clients on the subways and airports this month through a sponsorship deal with Boingo. Google also partnered with Boingo to offer free Wi-Fi in exchange for advertising to users in New York City last summer.

"Over the last two or three years, there's been a dramatic increase in the number of places where that is free," BT's Baker said. "It's a much easier world now, you're not in the world of passwords."

(BN) Chery Hires Porsche Designer to Oversee Car Design From Shanghai

(Bloomberg ) Chery Automobile Co., the state- owned Chinese maker of the low-cost QQ mini car, hired Hakan Saracoglu from Porsche AG to head its design center in Shanghai in a bid to improve its styling.

Saracoglu, 47, joined Chery as design director in October, according to the Wuhu, Anhui province-based automaker. The Turkish-born German national worked for 15 years at Porsche, where he helped design the exteriors for models including the 918 Spyder, Boxster and Cayman.

Chery is the latest among Chinese automakers hiring foreign designers to help boost their brand image and reverse a loss in market share to overseas automakers such as General Motors Co. (GM) and Volkswagen AG. (VOW) The hirings are part of a broader hunt for international talent, with salaries for foreign auto engineers in China reaching three times that in the U.S. and Europe, according to Sanford C. Bernstein & Co.

"Having somebody with a known profile gives you more credibility," said Bill Russo, Beijing-based president of auto consultancy Synergistics Ltd. "But it's going to take a long time to really embed those capabilities."

Other Chinese companies have also looked abroad for help with styling. Beijing Automotive Group Co., which traces its roots to producing sidecar motorcycles for use in the Korean War, hired Ferrari Daytona designer Leonardo Fioravanti as chief design officer last year.

Foreign Designers

Great Wall Motor Co. (2333), China's biggest maker of sport- utility vehicles, appointed former Mercedes-Benz designer Andreas Deufel as design director in 2011. Former Volvo Car chief designer Peter Horbury joined Zhejiang Geely Holding (175) Group Co. the same year as senior vice president in charge of design.

Saracoglu, who said he had never visited China before being approached by Chery, started his career at Ford Motor Co. (F)'s Cologne offices as part of the team on models such as the Focus and Mondeo. He received a degree in transportation design from the Art Center College of Design in Pasadena, California.

In Shanghai, Saracoglu will lead a team of 30 to come up with new concepts for models from sedans to SUVs.

"Chery is not just QQ, we're going to change that," he said in a phone interview on Feb. 22. "The company is redefining itself. Chery's standing for value, for design and gaining customer confidence. That's where we want to go."

Chery has a 50-50 joint venture to produce Tata Motors Ltd. (TTMT)'s Jaguar Land Rover in China. It also co-owns startup carmaker Qoros Auto Co. with Israel Corp.

Asked how much of a salary increase he was offered to leave Porsche, Saracoglu said, "I cannot comment on that. Let's say I'm not unhappy."

(BN) Fast-Food Calorie Consumption Declines in U.S., CDC Says

Americans say they're filling up less on fast food and pizza, according to a U.S. survey.

Adults consumed an average of 11.3 percent of their daily calories from fast food in 2007-2010, a drop from 12.8 percent in 2003-2006, the Centers for Disease Control and Prevention in Atlanta said in a report today. The largest proportion of fast food calories consumed was among obese people, the survey shows.

While researchers couldn't say why adults were eating less fast food, the decline coincides with a leveling off in the prevalence of obesity, according to January reports from the CDC. More than 78 million U.S. adults and about 12.5 million children were obese in 2009-2010, according to those studies reported in the Journal of the American Medical Association.

"More than one-third of U.S. adults are obese, and frequent fast-food consumption has been shown to contribute to weight gain," Cheryl Fryar, a health statistician at the CDC's National Center for Health Statistics, wrote in today's report.

The U.S. has the largest fast-food industry in the world, generating $191 billion in annual sales, according to IBISWorld, a research company based in Santa Monica, California. McDonald's Corp. (MCD), the world's biggest restaurant chain, generated $27.6 billion in sales last year, data compiled by Bloomberg show.

During 2007-2010, the highest percentage of calories from fast food was consumed by adults who were age 20-39 or non- Hispanic black or obese, according to the CDC survey. Among young non-Hispanic black adults in that age group, more than one-fifth of their daily calories was from fast food.

Pizza Places

Respondents in the survey were asked to identify where they got food within the past 24 hours, and places identified as "restaurant fast food/pizza" were considered fast food. No restaurant names or specific food items were disclosed.

"The reason we looked at it is fast food consumption has a link to obesity, and we did find that," Fryar said by telephone. A total of 11,181 adults were queried, she said.

McDonald's, based in Oak Brook, Illinois, has begun posting calorie information on menu boards. A federal regulation proposed in April 2011 would require chain restaurants with more than 20 locations to display calorie contents.

The percentage of daily calories from fast food decreased with age, with adults age 60 and over consuming the least at 6 percent, according to the report. The percentage rose as weight status increased.

The percentage didn't differ significantly between men and women, according to the report.

No significant differences were found between non-Hispanic whites and Hispanic adults, the CDC said. However, among adults age 20 and over, consumption was higher among non-Hispanic black adults than non-Hispanic white and Hispanic adults.

Child Trends

No difference was observed by income status in the percentage of calories eaten from fast food. However, in the youngest age group -- those 20 to 39 -- consumption dropped significantly with increasing income level.

In a separate study also released today, the CDC found calorie intake of all food among youths age 2 through 19 fell between the 1999-2000 period and 2009-2010. The percentage of calories from protein, carbohydrates and fat fell within recommendations for this age group, the study shows.

The share of calories from saturated fat, 11 percent to 12 percent, was still more than the 10 percent recommended in U.S. dietary guidelines, according to the report.

(BN) Google Debuts Touchscreen Chromebook in Hardware Push

(Bloomberg ) Google Inc. (GOOG), owner of the world's most popular search engine, debuted a touchscreen version of the Chromebook laptop, stepping up its challenge to Microsoft Corp. (MSFT) and Apple Inc. (AAPL) in computer hardware.

A Wi-Fi only version of the Pixel Chromebook will go on sale in the U.S. today for $1,299, Google said at an event in San Francisco. In April, the company plans to introduce a $1,449 version with access to so-called long-term evolution wireless networks, the fastest available.

Google, already leading in the market for smartphones with its Android software, is expanding in hardware to lure more users to its Web-based services with Chromebooks that rely on Internet applications instead of built-in software. The company is taking a risk by pushing into the high end of a personal- computer market that's been slammed by diminishing demand. Laptop purchases have tapered off as consumers and businesses increasingly favor smartphones and tablets.

"There's a limited number of things you can do well with these types of machines," said Al Hilwa, an analyst at IDC. "The price is fairly high."

In June, Google unveiled a $199 touchscreen tablet, Nexus 7, to compete with Apple's iPad as well as the Surface, a tablet introduced that month by Microsoft. An older Chromebook made by Acer Inc. (2353) costs $199, while some versions from Samsung Electronics Co. and Hewlett-Packard Co. (HPQ) cost more than $300.

Hardware Forays

Google, based in Mountain View, California, has stumbled with some previous forays into hardware. The company's Chrome laptops have been slow to gain traction with consumers, as have the Google TV set-top boxes and high-definition televisions.

"First it was the battle of hardware, then it was the battle of software, now it's the battle of hardware, software, browsers and eyeballs," said Laurence Balter, an analyst at Oracle Investment Research.

The Pixel machine will be built by a manufacturer in Taiwan, Google said, without naming the company. It has 4.3 million pixels, more than twice as many as a typical high- definition television, and features a 12.85-inch screen, Google said. The device has a glass touchpad, and it runs Google's Chrome operating system.

'High End'

"Touch is here to stay and is the future," Sundar Pichai, senior vice president for Chrome, said at the event. "We wanted to design something which was very high end and premium for power users -- people who are very, very demanding of their laptops."

Best Buy Co. will sell the Pixel Chromebook on its website, as will Google.

The new Chromebook features an Intel Corp. chip to enhance speed and performance. The computers, which come with a free terabyte of storage for one year, are encased in an anodized aluminum alloy and come with three micophones that assist in noise cancellation. Google is betting high-end features will appeal to some discerning consumers, said Frank Gillett, an analyst at Forrester Research Inc. (FORR)

"This sounds strategic," Gillett said. "This is a long- term bet that they can make this more interesting for people down the road."

(BN) Alcatel-Lucent, Google, Lions Gate: Intellectual Property

(Bloomberg ) The French government is weighing options including an investment in Alcatel-Lucent SA (ALU) as it looks to protect the unprofitable network equipment maker's patents, people with knowledge of the deliberations said.

Taking a minority stake in Alcatel-Lucent, potentially through the Fonds Strategique d'Investissement state vehicle, is among alternatives being considered by the French administration, said a government official, who asked not to be identified as he wasn't authorized to be cited by the media. Such a move would give France more influence at the company after a 2 billion-euro ($2.6 billion) financing deal criticized by officials, other people familiar with the matter said.

The French government has been considering options for Alcatel-Lucent since the December announcement of the loan, underwritten by Credit Suisse (CSGN) Group AG and Goldman Sachs Group Inc. (GS), that's secured in part by the manufacturer's intellectual property portfolio, the people said.

Other plans that have been considered by officials include encouraging a merger between Paris-based Alcatel-Lucent and rival Nokia Siemens Networks, or an investment in Alcatel- Lucent's undersea cable business, said the people.

The state may ultimately decide not to take a stake in the company or intervene, the people said. Alcatel-Lucent announced Feb. 22 that Michel Combes, a former Vodafone Group Plc executive, will replace Chief Executive Officer Ben Verwaayen, who stepped down this month after a three-year turnaround plan failed to return the company to profit. The selection of a new Alcatel CEO may help speed a government decision, people familiar with the situation have said.

A government investment in Alcatel-Lucent would be a new chapter in the history of a onetime French industrial giant, with former operations ranging from spaceflight to cutting-edge theoretical physics, that's been weakened by Asian competition and slower spending on network equipment by mobile carriers.

The FSI, which acquires minority stakes in companies it deems crucial to France's competitiveness, has invested in businesses such as smartcard manufacturer Gemalto NV (GTO) and Nexans SA (NEX), a supplier of power and fiber-optic cables.

A spokesman for the French finance ministry declined to comment. Representatives of Alcatel-Lucent, Credit Suisse and Goldman Sachs declined to comment. A representative of the FSI couldn't immediately comment.

Apple Seeks Patent for 'Slap Bracelet' Wearable Video Device

Apple Inc. (AAPL), maker of the iPhone and iPad, has applied for a patent on a video-display device that is part of a so-called slap bracelet.

According to application 20130044215, published in the database of the U.S. Patent and Trademark Office Feb. 21, the device would have a flexible display coupled to a bi-stable spring.

The Cupertino, California-based company explained in the application that this spring, commonly called a "slap bracelet" is typically nine inches long and about one inch wide. It is normally flat, but when slapped across a wrist, it will curl around the wrist and stay relatively stable.

Most conventional accessories for electronic devices "are not easily wearable," Apple said. They typically involve clips "or may even rest precariously on an ear" or "have to sit in a pant or coat pocket."

The device covered by the application would "capitalize on the easily wearable nature of a bi-stable spring," Apple said.

Apple filed the application for the patent in August 2011.

Trademark

Google May Clinch EU Settlement After 'Summer,' Almunia Says

Google Inc. (GOOG) may reach a settlement of a European Union probe into its search business in the second half of the year, the bloc's antitrust chief said Feb. 22.

Joaquin Almunia said he may be able to start checking Google's January settlement offer with rivals and customers "in the coming months" after officials finish analyzing what Google has put forward. If that process ends without a hitch, the EU could make Google's offer legally binding and drop possible fines for the operator of the world's largest search engine.

"We could have an accord after the summer vacations, if this all works," he said. "That would be my favorite solution, but it doesn't depend on me."

Google submitted a settlement proposal to EU regulators after it was asked to address allegations that the company promotes its own specialist search-services, copies rivals' travel and restaurant reviews, and has agreements with websites and software developers that stifle competition in the advertising industry.

Almunia said Feb. 22 that he has received further complaints against the company and that he hasn't yet decided whether to formally investigate them. Android, Google's operating system for mobile phones and tablets, is among other things that regulators are examining, he said.

Al Verney, a spokesman for Google in Brussels, said the company continued to work cooperatively with the commission.

Almunia, the EU's top antitrust official, declined to say whether a separate investigation of the use of patent injunctions by Google's Motorola Mobility unit may also be settled.

He previously said the situation in Europe "is not the same" as in the U.S., where Mountain View, California-based Google agreed to lift court injunctions to settle allegations that it violated agreements to license key technology to rivals.

An EU settlement avoids any decision on whether a company broke antitrust rules. Companies can be fined as much as 10 percent of their yearly revenue if they break the terms of a legally binding settlement. Almunia first told Google in May that he wanted to settle the case.

The U.S. ended an investigation into Google's search business last month, saying there was no evidence that the company's actions harmed consumers.

In 2010, the EU began investigating claims Google discriminated against other services in its search results and stopped some websites from accepting competitors' ads. While Microsoft and partner Yahoo! Inc. (YHOO) have about a quarter of the U.S. Web-search market, Google has almost 95 percent of the traffic in Europe, Microsoft said in a blog post in 2011, citing data from regulators.

Lions Gate '50/50' Infringement Ruling Upheld by Appeals Court

Lions Gate Entertainment Inc. (LGF), a film producer based in Santa Monica, California, persuaded a federal appeals court to uphold a lower court's dismissal of a trademark-infringement suit.

Eastland Music Group LLC sued Lions Gate in federal court in Chicago in November 2011, claiming the trademark "Phifty- 50" used by its rap duo of the same name was infringed by Lions Gate's 2011 "50/50" film about a young man with a rare form of cancer.

The case was dismissed in July, after which Eastland filed an appeal.

In its Feb. 21 ruling, the appeals court said that the case had been properly dismissed. The court said that the music company had failed to demonstrate that any potential customer was confused by the alleged similarity between the names. The court also said that "Phifty-50" could be registered as a U.S. trademark only because it was a made-up name sounding like a familiar phrase -- 50/50 -- which "in ordinary usage is suggestive or descriptive."

The phrase "50/50" has been in use in intellectual property for a long time, the court said, noting that at least eight films and at least three pop songs have been produced with that title.

"Phifty-50 entered a crowded field and its rights are correspondingly weak and narrow," the court said.

The lower court case is Eastland Music Group LLC v. Lionsgate Entertainment Inc., 1:11-cv-08224, U.S. District Court, Northern District of Illinois (Chicago). The appeal is Eastland Music Group LLC v. Lionsgate Entertainment Inc., 12- 2928, U.S. Court of Appeals for the Seventh Circuit (Chicago).

South Africa Agencies Seek Block to 'Rooibos' Trademark in EU

South Africa's Department of Trade and Industry, together with several other government agencies, is objecting to a French company's attempt to register "South Africa Rooibos" and Roobibos" as trademarks, South Africa's Mail & Guardian reported.

Rooibos, a tea made from leaves of an indigenous South African shrub, is consumed for its supposed health benefits, including the prevention of cancer and heart disease, according to the newspaper.

The government agencies have complained to the European Union delegation in Praetoria and the French Embassy in South Africa, saying local rooibos producers' marketing efforts overseas would be harmed if the French company had exclusive rights to the mark, the Mail & Guardian reported.

"Rooibos" already enjoys protected trademark status in South Africa, according to the newspaper.

Copyright

Fox's 'Touch' TV Program Didn't Infringe Novel, Court Rules

News Corp (NWSA)'s Fox Entertainment Group didn't infringe the copyright to a novel about an autistic child, a federal judge has ruled.

Everette Hallford sued Fox in federal court in Manhattan in March, claiming the television producer's "Touch" program starring Kiefer Sutherland infringed his screenplay "Prodigy."

He said there were too many similarities between the two works, both of which were about a child with singular abilities that accompanied their disabilities, and that his novel was "willfully and intentionally" copied.

He asked for an order barring further infringement, including the production and broadcast of "Touch," together with awards of money damages, profits Fox realized from the alleged infringement, attorney fees and litigation costs.

U.S. District Judge William H. Pauley III found no infringement, and said that many of the claimed similarities between the two works wouldn't be recognized by "the average lay observer -- no matter how discerning."

In dismissing the infringement complaint, the court said the plot and sequence of the two works are substantially different, as well as the characters, setting and pace, and total concept and feel.

The case is Everette Hallford V. Fox Entertainment Group Inc., 1:12-cv-01806-WHP, U.S. District Court, Southern District of New York (Manhattan).

Trade Secrets/Industrial Espionage

Ocean Tomo Adds Trade-Secret Management, Monetization Practice

Ocean Tomo LLC, the Chicago-based financial services company known for its intellectual property auctions, has expanded its practice to cover trade-secret management and monetization.

The company said its specialty service aimed at non-patent intellectual property was developed in response to an increase in trade secret-related litigation in courts and before the U.S. International Trade Commission, together with President Barack Obama's Jan. 14 signing of the Foreign and Economic Espionage Penalty Enhancement Act of 2012.

The Ocean Tomo trade-secrets practice will cover litigation damages, strategic planning, investment due diligence, risk management, valuation and transactions.

The practice is headed by Dean A. Pelletier, who joins from Chicago's McAndrews Held & Malloy Ltd. There his practice focused on trade-secret litigation and client counseling.

Ocean Tomo said in a statement that in 2012, its clients earned payments or were awarded damages for trade-secret misappropriation as high as $75 million.

Lunch Talks: (@TED) Reinventing cities.

How can we fit more people into cities without overcrowding? Kent Larson shows off folding cars, quick-change apartments and other innovations that could make the city of the future work a lot like a small village of the past.

tags: ted, lunchtalk, infrastructure, distribution

Irresistible by Design and Science: Junk Food.

 The NYT (Feb 24, 2013) published "The Extraordinary Science of Junk Food," an article how over the years the food industry used sophisticated consumer studies to develop irresistible junk foods. Even the most health conscious people have hard time dealing with the temptation:

In 2011, The New England Journal of Medicine published a study that shed new light on America’s weight gain. The subjects — 120,877 women and men — were all professionals in the health field, and were likely to be more conscious about nutrition, so the findings might well understate the overall trend. [The researchers] found that every four years, the participants exercised less, watched TV more and gained an average of 3.35 pounds. The researchers parsed the data by the caloric content of the foods being eaten, and found the top contributors to weight gain included red meat and processed meats, sugar-sweetened beverages and potatoes, including mashed and French fries. But the largest weight-inducing food was the potato chip. The coating of salt, the fat content that rewards the brain with instant feelings of pleasure, the sugar that exists not as an additive but in the starch of the potato itself — all of this combines to make it the perfect addictive food.

Food scientists and advertisers found a way to hack into our biology, exploiting the body's reliance on taste to provide quality nutrition. Nowadays, even pets started suffering from extra weight because their owners can't control the pets' diet.

tags: health, control, trade-off, problem, solution

A False Trade-off: Heart vs Mind

This is a popular image of a trade-off between emotional and rational selfs. Traditionally, people believe that when we think without emotions we think logically and rationally. In "Thinking Fast and Slow," Daniel Kahneman shows that this view is wrong. Our minds (and hearts) have two modes of thinking: intuitive (System 1) and deliberate (System 2). System 1 likes "jumping to conclusions" based on cursory analysis and/or previous experiences; System 2 likes to evaluate evidence in a slow, systematic manner. System 1, either emotional or not, tends to make "stupid" mistakes when we face a intuitively easy problem.
For example, more than half of Princeton students gave a wrong (intuitive) answer to this problem:

A bat and a ball cost $1.10 in total. The bat costs $1 more than the ball. How much does the ball cost?

Not surprisingly, high IQ correlates with patience.  Maybe this is the reason we confuse (intuitively) patience with Mind.

tags: creativity, trade-off, psychology,

(BN) Sprint CEO Hesse Seeking More Deals as Data Demand Surges: Tech

// a good example of a distribution bottleneck when a system transitions from the early growth stage. 

(Bloomberg ) Sprint Nextel Corp. Chief Executive Officer Dan Hesse said he's on a hunt for wireless spectrum after watching Verizon Wireless and AT&T Inc. devour more and more of the mobile-phone industry's most precious resource.

Sprint, the third-largest U.S. wireless carrier, needs to add capacity to keep its data service from buckling in the future as more users watch sports and music videos on phones and tablets. The company is looking for deals with other companies or through government sales, Hesse said in an interview.

A cash infusion is helping Hesse get more aggressive. In the two months after Softbank Corp.'s October agreement to spend $20 billion to take over Sprint, Hesse's company agreed to $2.6 billion in purchases, mostly in an attempt to seize control of Clearwire Corp. In the previous 12 months, Sprint had spent almost nothing, standing by as its two biggest competitors cobbled together more than $5 billion in purchases.

"Clearwire would give us a strong spectrum position for a period of time," Hesse said in an interview this month. "But we also have a very long-term view, and we would want to acquire more spectrum."

Sprint's options may include buying more capacity from smaller carriers such as U.S. Cellular Corp. or Leap Wireless International Inc. or buying them outright, said Phil Marshall, chief research officer at Tolaga Research. A deal with Hesse's regulatory nemesis, Dish Network Corp. Chairman Charlie Ergen, is also a possibility, Marshall said. Or Sprint could acquire licenses in government auctions.

Scarce Resource

While radio waves are all around us, they're not abundant enough for mobile-phone companies. The U.S. government treats airwaves as a public good, dividing them up and selling licenses to companies, including wireless carriers, to use for their communications. Those licenses are becoming tougher to find, and more expensive, as the Federal Communications Commission runs low on new frequencies it can offer for sale.

Extra spectrum would help fill out gaps in Sprint's coverage, and the acquisitions could add more users, helping the company increase revenue and scale.

Hesse's appetite for acquisitions depends on his ability to close the deal with Softbank. As part of the October takeover agreement, the Tokyo-based company said it would supply Sprint with $8 billion in capital so it could begin making purchases and investments. The deal is under regulatory review.

Billion-Dollar Deals

Sprint has lots of work to do if it aims to catch up to Verizon and AT&T in capacity. Verizon Wireless acquired $3.9 billion in airwaves from cable companies led by Comcast Corp. and Time Warner Cable Inc. And AT&T, in an effort to make up for lost ground during its failed takeover of T-Mobile USA Inc., said last month that it had signed 50 spectrum deals in the past year, including a $600 million purchase of NextWave Wireless and a $1.9 billion agreement to buy spectrum from Verizon Wireless itself.

"Spectrum availability is a core competitive weapon in a mini arms race," said Craig Wigginton, head of telecommunications strategy at Deloitte & Touche LLP in New York.

With more people using smartphones and tablets, traffic on wireless networks is increasing. In the fourth quarter, smartphones accounted for 77 percent of Sprint's retail phone sales, the company said during its fourth-quarter earnings call.

Total worldwide mobile traffic will increase 13-fold through 2017 at a compound annual rate of 66 percent, according to a report this month from Cisco Systems Inc.

Sprint's Moves

Sprint began making moves in November, with a $480 million deal to gain network capacity and customers in Chicago and St. Louis from U.S. Cellular. In December, with Softbank's urging, Sprint agreed to buy all of Clearwire, its national wireless broadband joint-venture partner, for $2.97 a share. While that acquisition would help replenish Sprint's spectrum needs, the company will require more in the future, Hesse said.

"Given the increases in data usage we are seeing, we will continue to be interested in spectrum as it comes to market," Hesse said in the interview. "It could be more deals like spectrum from other companies like we did with U.S. Cellular or it could be FCC auctions."

Dish, co-founded by billionaire Ergen, has made a counterbid to Clearwire of $3.30 a share, an offer that is complicated because Sprint is Clearwire's majority owner. Sprint, which has wrangled with Dish over regulatory approval for airwaves Ergen's satellite-TV company owns, called Dish's bid "illusory.''

Secondary Market

Even so, Sprint could end up acquiring spectrum from Englewood, Colorado-based Dish if the satellite-TV company doesn't find a partner for a mobile-phone service and decides to sell its airwaves. Such purchases of unused spectrum, in the so- called secondary market, are a possibility, Marshall said.

Acquiring entire companies would help Sprint expand its customer base in addition to getting more airwaves. U.S. Cellular, based in Chicago, has 5.8 million customers and had $4.4 billion in revenue in the 12 months through last September.

"Sprint could use a better presence in the Midwest market," Ron Westfall, research director for service provider infrastructure for Current Analysis, said in an interview.

Leap could be in play as well, said George Ford, a former FCC economist who is now chief economist at Phoenix Center, a public-policy research group in Washington. Leap serves 5.6 million customers, offering no-contract mobile-phone plans.

"This year, Leap and U.S. Cellular and the smaller regional carriers are the only potential targets in the market," said Coleman Bazelon, a principal at consulting firm Brattle Group who specializes in phone and video regulation.

Another Merger

Greg Lund, a spokesman with Leap, declined to comment on takeover possibilities. Steve Carlson, a spokesman for U.S. Cellular, didn't reply immediately to a request for comment.

Two other competitors, T-Mobile USA and MetroPCS Communications Inc., are in the process of sealing their own merger, which must be approved by shareholders and regulators.

"If you look at the top four, Sprint and T-Mobile are the ones with the most need for spectrum," said Marshall.

The FCC is also planning more spectrum license auctions, providing another opportunity for Sprint to gain capacity. There are potentially attractive airwaves next to some that Sprint already owns, Bazelon said.

Buying Time

U.S. Cellular has customers and spectrum in cities that would help bolster Sprint's coverage. San Diego-based Leap has pay-as-you-go customers that could offer Sprint a revenue boost. Leap said in a November 7 earnings call that it has $3 billion worth of spectrum.

Last month, Shing Yin, an analyst with Guggenheim Securities, issued a report highlighting Leap's potential attractiveness as a takeover. Left out of recent wireless consolidations and struggling to hang on to customers, Leap trades at about an 80 percent discount to U.S. Cellular.

The planned addition of Clearwire spectrum buys Sprint some time to complete the construction of a network using long-term evolution technology to offer faster speeds, said Kevin Smithen, a New York-based analyst for Macquarie Group Ltd. Eventually, it will need more capacity for growing demand, he said.

"Sprint's focus this year will be on getting Clearwire done and building the LTE network," said Smithen. "I think 2014 and 2015 are probably the big years for Sprint as far as spectrum deals.

(BN) Robot Surgery for Hysterectomy Doesn’t Give More Benefit

(Bloomberg ) Surgery to remove the uterus with a $1.45 million robot from Intuitive Surgical Inc. costs thousands of dollars more without reducing complications compared with standard less-invasive surgery, a study found.

Researchers examined data from 264,758 women who had a hysterectomy for benign conditions such as fibroids at 441 U.S. hospitals from 2007 to 2010. The robot operations cost hospitals $2,189 more per procedure than performing the same surgery without the robot, according to the study released today in the Journal of the American Medical Association.

The research illustrates how the adoption of expensive medical technology can outpace data proving its benefits, said Jason Wright, a gynecologic oncologist at Columbia University College of Physicians and Surgeons and the study's lead author. Robot operations rose to 9.5 percent of hysterectomies in 2010 from 0.5 percent in 2007, the data showed. Yet there are few large studies charting the benefits over conventional less invasive operations, he said.

"The major concern is that the robotic procedure really didn't show a lower complication rate yet it was substantially more expensive," Wright said. Why the robot took off so fast "is the million dollar question."

With standard minimally invasive surgery, called laparoscopy, surgeons manipulate instruments through several tiny incisions in the abdomen while looking inside the patient through a camera called a laparoscope.

Finer Control

Robotic surgery is similar, except that the surgeon sits at a console a few feet away and maneuvers robotic arms while looking into a high-definition display. Unlike the standard equipment, the robotic instruments have wrists, potentially enabling finer control and movement.

Hysterectomy is one of the most common operations, with about 600,000 performed in the U.S. annually, mostly for benign conditions, Wright said.

The study found complication rates were 5.5 percent for robotic hysterectomy and 5.3 percent for laparoscopic surgery, a difference that wasn't statistically significant.

The costs of robot operations were higher even when the fixed price of buying the robot was excluded, Wright said. How hospitals make back the extra cost is unclear as most insurers don't pay a higher rate for robot operations, he said.

The study found one clear benefit: as use of the robot increased, there was a decrease in the percentage of women who received a traditional "open" hysterectomy, in which the uterus is removed through a large incision in the abdomen.

Hospital Competition

Hospitals without a robot may have increased their use of minimally invasive operations to compete with hospitals that had a robot, Wright said.

"The message I get from this paper is with the advent of robotics you are seeing more patients being done minimally invasively and that is good," said Myriam Curet, chief medical adviser for Sunnyvale, California-based Intuitive Surgical, said in a telephone interview. "Robotics is clearly allowing more patients to have a minimally invasive surgery."

She said the Columbia cost analysis was limited because it didn't look at potential longer-term benefits of robot surgery, such as whether it helps women recover and get back to work sooner. The study also didn't examine whether minimally invasive surgeons need to convert less often to open surgeries when they use the robot, as Intuitive's analysis indicates, she said.

Different Uses

The robot was cleared by the U.S. Food and Drug Administration in 2000 and became popular among urologists performing prostate cancer surgery, where minimally invasive methods had been uncommon. The robot was approved for gynecologic procedures in 2005.

For hysterectomies, multiple types of minimally invasive surgery have been available for years, Wright said. In addition to laparoscopic hysterectomy, doctors often can remove the uterus through the vagina, the least invasive method, he said.

"Patients need to be aware there are a lot of different options for hysterectomy," Wright said. More studies need to be performed to understand whether there are certain subgroups of women who clearly benefit from using the robot over other minimally invasive options.

Mario Leitao, a gynecologic oncologist at Memorial Sloan- Kettering Cancer Center in New York who uses the robot, said the study results won't change how often he uses the device.

"It is like asking a jet fighter pilot to go back to a World War II airplane because it is cheaper," said Leitao, who has consulted for Intuitive. "The robot is here to stay."

(BN) Pentagon Budget Stuck in Last Century as Warfare Changes

(Bloomberg ) The Obama administration foresees 21st century wars fought with fewer boots on the ground and more drones in the air, while the Pentagon continues buying weapons from the last century.

In his Feb. 12 State of the Union address, President Barack Obama said America no longer needs to deploy tens of thousands of troops to occupy nations or meet the evolving threat from new extremist groups. Cyber-attacks are the "rapidly growing threat," he said.

Nevertheless, the defense budget contains hundreds of billions of dollars for new generations of aircraft carriers and stealth fighters, tanks that even the Army says it doesn't need and combat vehicles too heavy to maneuver in desert sands or cross most bridges in Asia, Africa or the Middle East.

GRAPHIC: Defense Budget at Center of Spending War

"There's a fundamental need to have a conversation about what kind of military we need to have and what we should expect it to do," Andrew Bacevich, a West Point graduate and former Army colonel who now teaches at Boston University, said in an interview.

In the absence of such a conversation, the Pentagon faces the prospect of $500 billion in automatic cuts over the next decade, beginning March 1, with no consensus on what to trim. Instead, the budget is driven largely by champions of existing programs in Congress, the defense industry and the uniformed services. As a result, predicts Bacevich: "The behemoth of an entity called the Pentagon is not going to shrink."

Contracts Plunge

Uncertainty has proven painful for defense contractors, especially smaller companies that don't have deals locked in for months or years to come. Pentagon contracts plunged to $12.1 billion in January, a 67 percent decrease from December, according to data compiled by Bloomberg, as the military reined in spending in anticipation of the cuts that may be coming.

The Standard & Poor's Aerospace and Defense Index gained 7.5 percent in the past 12 months, trailing the 13 percent gain for the broader Standard & Poor's 500 Index.

Pentagon spending cuts, should they remain in force over a decade, would mean "changes in the portfolios of Lockheed, Northrop Grumman, General Dynamics and Boeing," the biggest U.S. defense contractors, Byron Callan, a defense analyst in Washington at Capital Alpha Partners LLC, said in an interview. "Five years from now they'll look different."

Information technology units may be spun off and then consolidated, while slow-growing operations such as shipbuilding and armored-vehicle manufacturing may end up in the hands of private equity investors, Callan said.

Major Weapons

The U.S. spent $689 billion on defense in 2011, more than 40 percent of all such spending globally in 2011, according to data compiled by the Stockholm International Peace Research Institute. According to the U.S. Government Accountability Office, the Pentagon had $1.58 trillion of major weapons projects on its books. Those include the F-35 jet fighter, which is seven years behind schedule and costing 70 percent more than planned; the Navy's Littoral Combat Ship, plagued by cracks, flaws and a price that's doubled to $440 million each; and M1 tanks the Army doesn't want.

Even if the budget cuts happen, U.S. defense spending is projected to grow about 2.4 percent annually through 2021, according to the Congressional Budget Office.

The military, the defense industry and their allies in Congress have gone to war over the automatic cuts, called sequestration, with Defense Secretary Leon Panetta, Army General Martin Dempsey, the chairman of the Joint Chiefs, and other leaders saying they would devastate the military.

Deployments Canceled

If their budgets are cut, they argue, ship deployments will be canceled, training will be curtailed, maintenance will be delayed, weapons contracts will be withheld and the military will be unable to respond to contingencies.

"We've gone past cutting the meat -- we're into the bone," Representative Howard "Buck" McKeon, the California Republican who heads the House Armed Services Committee, told a Feb. 6 news conference. He's proposed reducing the number of federal employees and freezing congressional pay to preserve military spending.

Lost in the political melee over defense spending, said Bacevich, is the need for a 21st Century military strategy to keep pace with the changing nature of warfare and guide the drawdown of military forces and spending after more than a decade of wars in Iraq and Afghanistan.

A year ago, Obama and the Defense Department issued a blueprint for a "smaller and leaner" military that would be "agile, flexible, and ready for the full range of contingencies."

Every Possibility

Instead, the military's effort to prepare for every possibility has encouraged the Pentagon and defense contractors such as the three largest -- Lockheed Martin Corp., Chicago- based Boeing Co., and Northrop Grumman Corp. based in Falls Church, Virginia -- to keep developing ever more complex and costly weapons.

While the increased military spending of the last decade helped the Pentagon advance several battlefield capabilities, the Defense Department still has "too many programs that are not appropriate and do not provide the next-generation capabilities" needed, said Barry Blechman, co-founder of the Stimson Center, a Washington policy research institute.

Blechman cited the F-35 Joint Strike Fighter as an example of a weapons program that "provides some marginal improvement over existing F-16s, but nothing compared with the amount the Pentagon is planning to invest in it." The program, which includes variants for the Air Force, Navy and Marine Corps, could be cut or scaled back, Blechman said.

Increased 70%

The Pentagon estimates the cost for development and production of 2,443 F-35s at $395.7 billion, a 70 percent increase since the initial contract with Bethesda, Maryland- based Lockheed Martin was signed in 2001. The jet is designed to replace the F-16 fighter, the A-10 "Warthog" ground attack plane, F-18C/D Hornet fighter and the Marine Corps' AV-8B Harrier jump-jet.

Although the Army's strength is set to decline by 72,000 by 2017, General Raymond Odierno, the Army Chief of Staff, has said the service must be able to send units large or small to any part of the globe. While the service should reorient itself toward engaging with allies and partners to prevent conflicts, it should be ready to "win wars on land," Odierno wrote Feb. 4 in Foreign Policy magazine.

Nevertheless, the Army's plan to spend as much as $32 billion to buy 1,904 new Ground Combat Vehicles, tank-like replacements for its Bradley Fighting Vehicle, "would be a mistake," Blechman said. Instead, the Army needs improved capabilities for small forces that can move quickly to trouble spots, Blechman said. "I don't know that the slightly improved version of the current ground vehicles is necessary."

Vehicle's 70 Tons

The new 70-ton vehicle may not be easily transportable by air or sea, and is likely to raise questions about "how quickly it could be deployed in the event of a conflict," according to a January report by the Congressional Research Service.

While even the Army brass have said they don't need an an updated version of the M1, the combat vehicle that was developed to go track-to-track with the Soviet Union's tanks on the North German Plain, Congress wants to keep paying Falls Church, Virginia-based General Dynamics Corp. to gut and rebuild older tanks.

The Navy is building two versions of the Littoral Combat Ship instead of one as it had planned. Once billed as a low- cost, versatile ship for coastal patrols, the LCS's price has doubled to $440 million a ship, and Pentagon testers have found that the ship's guns are ineffective and the vessels may not survive combat.

Pacific Focus

One attraction of the LCS is that buying it will help the Navy reach its target of 300 ships, making it easier to fulfill the Pentagon's plan to position 60 percent of its ships in the Pacific by 2020, an increase from the current equal division between the Pacific and Atlantic fleets.

That increased focus on Asia needs to be better spelled out, according to former Director of National Intelligence Dennis Blair, a retired Navy admiral who also once headed the U.S. Pacific Command, based in Honolulu.

"There's no there there beyond a general appreciation of East Asia's importance," Blair said of the Obama administration's emphasis on Asia. "It's not a basis for how we solve a very difficult problem of ensuring we have a hedge against Chinese military aggression without launching ourselves into a spiraling arms race based on mutual suspicion and worst- case analysis."

Not 'Sacrosanct'

While they warn that further budget cuts would cripple the military, Panetta and Dempsey, as well as former Defense Secretary Robert Gates, have said the Pentagon can cut costs by eliminating jobs and waste.

"Not every defense dollar is sacrosanct," Gates said in September at an event organized by the Center for Strategic and International Studies in Washington. "One need only spend 10 minutes walking around the Pentagon or any major military headquarters to see excess and redundancy."

As defense chief in 2009, Gates managed to cull 20 weapons systems he considered unnecessary or that had become too expensive. He stopped production of the F-22 fighter, canceled the VH-1 presidential helicopter and reduced the scope of Boeing's Future Combat Systems.

Health-Care System

Weapons aren't the only part of the Pentagon budget that has proven difficult to rein in. Rising operations and maintenance costs as well as "significant increases" in the military's health-care system, which has been politically sacrosanct in the past, will be the primary causes of defense budget growth through 2030, the Congressional Budget Office said in a July report.

Promised savings mostly have eluded presidents and defense secretaries going back to the 1980s, said retired Marine Corps Major General Arnold Punaro, who's been advising former Nebraska Republican senator Chuck Hagel, Obama's nominee to succeed the retiring Panetta.

While military officials protest cuts to their forces, operations, maintenance and training, they've allowed their own staffs to grow, said Punaro, who's now a consultant and last year headed a Defense Business Board panel to identify such excess.

Chiefs' Staff

The size of the Joint Chiefs of Staff office has more than tripled to 4,244 in 2012 from 1,313 in 2010, according to the Pentagon's annual manpower report.

"The Pentagon's leadership should set an example" by reducing their staffs, Punaro said in an interview. "If senior people in the Pentagon can't cut the size of the staff and the size of office of the secretary of defense, then how can they expect the rest of the department to tighten its belt?"

The increase stemmed mostly from the joint staff absorbing many employees of the Joint Forces Command in Norfolk, Virginia, which was shuttered by Gates in 2011, Dempsey said in an e-mail. The additions were necessary because the joint staff "assumed responsibility for core missions" previously done by the Joint Forces Command, which was created in 1999 to lead the post-Cold War transformation of the U.S. military, Dempsey said.

Still, while the Pentagon is cutting combat forces, "We are not cutting the overhead proportionately," Punaro said. "People have been trying to get at this issue in the Pentagon for 50 years. And frankly we haven't really put a dent in the overhead costs. It's not for the lack of trying."

(BN) Muddy Waters Secret China Weapon Is on SEC Website

(Bloomberg ) Muddy Waters LLC, whose analyst reports triggered $7 billion in losses for Chinese stocks, used an unlikely secret weapon for its research: the public website of the U.S. Securities and Exchange Commission.

Carson Block, the 36-year-old short-seller who heads Muddy Waters, said he's an avid reader of letters from the SEC's corporation-finance experts to executives about the adequacy of disclosures in regulatory filings.

"The CorpFin accountants do a good job of spotting issues in the companies' filings," said Block, co-author of "Doing Business in China for Dummies." "We've read some astute questions from CorpFin on a range of issues."

Informed by such correspondence, the research firm's 2010 report on Chinese waste treatment company Rino International Corp. helped drive that firm's stock from $13 to almost zero, erasing about $370 million in market value. It wasn't a fluke.

Block gained fame for his short-selling calls on Chinese stocks after regulators halted trading in four of his first five targets, starting in June 2010. A lawyer and a New York native who founded Muddy Waters in 2010 in Shanghai, Block moved the company to Los Angeles later, saying Chinese officials were harassing his analysts.

The SEC, set up in 1934 to lift confidence in securities markets during the Depression, reviews 4,000 companies a year with special attention to new filers and industries in the spotlight, from Facebook Inc. to big banks. SEC letters and company responses aren't posted to the regulator's website until a month after they are sent, receiving no fanfare to alert interested investors.

Forces Disclosures

As a result of the correspondence, the agency often forces companies to amend or make additional disclosures to inform investors of material risks. Some investors spot the required amendments to annual reports or registration statements. What's missed by many is the detailed discussion of shortcomings in a company's business that can warrant a bet against the stock.

Take the backstory about Rino in its correspondence with the SEC. As early as 2007, the agency quizzed Rino over the departure of its accountant, saying it must disclose any disputes with professionals in its filings. Rino at first insisted there were none.

The SEC pushed back, telling the company that investors must be told if an auditor expressed "uncertainty regarding the ability to continue as a going concern." Rino amended a filing to say there were no disagreements over financial statements -- "except" that the auditor doubted the company was viable.

Almost Zero

Four years later, the SEC stopped trading of Rino because it didn't tell investors that investigators hired to probe fraud allegations had also left. By then, Rino had fallen from $34, briefly becoming the Nasdaq's top short-seller target. Block piled on with his Nov. 10, 2010, report.

That report finally caught the attention of Rino holders who had missed or ignored accounting-violations clues in SEC letters, perhaps dazzled by the lure of riches to be made by investing in a booming China. Investment advisers were touting China's gross domestic product, which the World Bank said rose 10.4 percent in 2010 and 9.2 percent in 2011.

That growth helped drive up the price of PetroChina Co. enough for it to pass Exxon Mobil Corp. as the world's most valuable company by market capitalization in 2009.

Roth Capital Partners, a U.S. investment bank with an office in Hong Kong that's been bullish on Chinese stocks, said in 2010 that China's growth would outpace other economies "for the foreseeable future," boosting the country's U.S.-listed stocks.

China Mania

While Block was getting started with his research, China fans clung to shares such as Sino-Forest Corp., now bankrupt, and New Oriental Education & Technology Group Inc. New Oriental, usually known as EDU for its stock symbol, was investigated by the SEC and staved off a stock collapse until 2012, perhaps because investors didn't do their SEC homework, said Peter Henning, a former SEC lawyer who teaches at Detroit's Wayne State University.

"That's the obligation of every investor," he said. "A company amends its filings because information is already out in the market that needs to be corrected or updated."

Chinese companies in recent years were the object of at least 19 lawsuits and other enforcement actions targeting 64 defendants in all, according to SEC data. They ranged from China Natural Gas Inc., accused last May of defrauding investors, to now-defunct China Energy Savings Technology Inc., sued in 2006 for stock manipulation. Deloitte & Touche LLP was among at least six auditing firms named in four of the actions. In addition, trading in seven Chinese companies' shares, including Rino's, was suspended.

Stocks Deregistered

About 50 foreign securities have been deregistered in recent years and more than 40 foreign issuers were sued for fraud, sometimes years after early warnings about accounting irregularities appeared in agency correspondence.

Pushing foreign executives toward use of U.S. reporting standards is the daily work of the SEC's corporation-finance teams, agency correspondence shows. For example, Rino was ordered to tell shareholders about insider ties that might hurt their interests.

The SEC noticed in a registration statement that Zou Dejun, Rino's CEO, and Qiu Jianping, its board chairman, were married. The agency asked for a statement about the potential conflict that might cause. Rino added a disclosure in 2008 that the couple then owned 100 percent of Rino equity and also said: "As such, we cannot assure you that Mr. Zou, in his capacity as our CEO and director, will act in the best interest of the company." Rino was eventually listed in the U.S. in May 2008.

Math Problem

EDU, a Muddy Waters target that says it is China's largest private education provider, had difficulty calculating its net income initially. One affiliate supposedly contributed 99 percent of revenue and only 27 percent of net income. Challenged by the SEC, the company agreed to show in future filings that almost all of net income came from the affiliate -- if its various parts were added up.

EDU also had to be told there is a legal form for certifications, and it can't be changed to use different words or punctuation in endorsements of its financial information.

After being scrutinized from 2009 about everything from revenue reporting to terms of contracts, EDU said last July that the SEC was investigating whether its Beijing New Oriental Education & Technology entity was appropriately consolidated in financial statements. The next day, Muddy Waters posted a "strong sell" recommendation on its website, saying "it is probable that EDU will have a significant restatement" of results. Block said he read the SEC letters sent to EDU, and the company's responses.

'Fairly Helpful'

"The back and forth between the two was overall fairly helpful to us during our research," he said.

In one letter, EDU responded to the SEC query about the affiliate's net income contribution. Going through the numbers, Block said he believed EDU failed to include the effect of certain taxes that could have amounted to about one-seventh of reported 2008 profit. A later disclosure gave different results for the same entity, he said.

Sisi Zhao, EDU's investor-relations director, didn't respond to e-mails asking for an update on the SEC probe and comment on Muddy Waters's report. Rino Chief Financial Officer Ben Wang didn't answer e-mails seeking comment on Rino's experience with the SEC or Muddy Waters. Byron Roth, Roth Capital's chief executive officer, didn't respond to e-mails seeking comment on the firm's bullishness on Chinese shares.

Focus Media

Despite SEC letter data, Block hasn't had much success keeping down shares of Shanghai-based advertising firm Focus Media Holding Ltd., which is going private with Carlyle Group LP. He has posted six reports on the company on Muddy Waters's website since Nov. 21, 2011.

Focus Media said Jan. 18 that the SEC was looking at its past acquisitions. The SEC had queried the company in 10 letters, prefiguring its current investigation.

Writing down eight newly bought advertising businesses and handing them back to their owners at a discount, Focus Media was told in 2010 to disclose losses and explain this "apparent pattern." Muddy Waters noted the trend in a Nov. 21, 2011, report, saying investors should worry "where cash actually moved."

"There were some notable exchanges" between the SEC and Focus Media, Block said.

Questionable Deal

Reading SEC demands in the 2010 letters for more disclosure on Focus Media's sales of stakes in Internet ad-service company Allyes Information Technology, Block concluded the regulator found the deal "questionable," he said.

Using a list drawn up for the SEC of acquired mobile and Internet ad companies that Focus Media resold to their owners, Block was able to research the purchases and conclude they never occurred, he said.

Focus Media briefly fell to $15.43 from $25.50 after Block's first report said its ad network was smaller than claimed. The shares rebounded to the $20 range after an August buyout bid by Carlyle Group-led investors, which was accepted in December.

Focus Media has said it is cooperating with the SEC in its probe. Jing Lu, a company spokesman in Beijing, didn't answer e- mails seeking comment on Block's reports.

As warnings, SEC letters aren't as vivid as Block's reports and stories. Writing of "cooked books" and "sub-par" technology, he said five out of nine "purported" customers he interviewed denied buying Rino's desulfurization systems and that one buyer was "not satisfied."

Cooked Books

In the Rino case, Block beat the SEC to the punch in saying the company had two sets of books. He had read Chinese disclosures and saw that 2009 China revenue was 94 percent lower than its U.S. numbers.

"In reality its revenue is under $15 million," his November 2010 report said.

The SEC mentioned for the first time "the existence of two separate and materially different sets of corporate books" when it halted trading in April 2011.

The regulator asks foreign companies how they report at home "as appropriate," SEC spokesman John Nester said.

On the other hand, the SEC pushed Rino starting in 2008 to disclose how sales were counted, how it depended on customer approval, and why it had so many paper assets or receivables -- all issues later taken up by Block.

Forced Disclosure

The SEC forced Rino CEO Zou Dejun to revise a 2008 registration statement eight times over seven months. An Aug. 19, 2008, report dealt with "non-reliance on previously issued financial statements." The report was demanded by the SEC in an Aug. 11, 2008, letter reminding Rino that it had restated results after "material errors."

Sometimes Block does on-the-ground reporting to supplement his review of filings and SEC correspondence. After visiting the steamy factory and old machinery operated by Baoding, Hebei- based Orient Paper Inc., he decided to short the company's stock, he told Bloomberg News last year.

In a short sale, investors borrow stock from current holders and sell it, hoping to profit by repurchasing the securities later at a lower price and returning them to the holder.

Some China stocks dipped on revised filings required by the SEC, indicating Block wasn't alone in watching disclosures. Still, with investor mania about China strong, some of those stocks went up again.

Stock Rebound

Fushi Copperweld Inc., made to disclose how a possible $7 million legal judgment would hurt liquidity, fell from about $9 to $7 after the company said June 9, 2009, that it owed the money. The stock surged to $12.76 April 2010 and was taken private in December 2012 at $9.50.

Rino tumbled to $2 from $10 after a June 11, 2008, annual report revision of "material errors." The next year it was 17 times higher.

"No question, a disclosure is more important than a short sale report," said retired short seller David Rocker of New York-based Rocker Partners, whose past targets included AOL Inc. "Both are merely starting points, and then you should do your own homework."

Sometimes Muddy Waters goes where the SEC can't. It targeted Sino-Forest, the bankrupt tree grower delisted from the Toronto Stock Exchange, and Olam International Ltd., the Singapore-backed peanut merchant. Both escaped SEC grilling because they weren't required to file disclosures in the U.S.

Sino-Forest

Hedge fund manager John Paulson sold his Sino-Forest stake at a loss of about C$105 million ($105 million) after Block's report. Paulson spokeswoman Armel Leslie declined to comment.

While the SEC provided investors some of the earliest warnings about Chinese accounting in its correspondence, it became more direct after former Chairman Mary Schapiro got an April 2011 letter on the subject from Patrick McHenry, a North Carolina Republican who chairs the House financial services and government reform committees.

"Review the company's SEC filings," the SEC said in a June 2011 bulletin on its website about Chinese companies. "Be aware of companies that do not file reports with the SEC. Be skeptical."

The answer for some Chinese companies seeking to avoid SEC scrutiny is to flee U.S. exchanges. Some have done so, citing stringent SEC rules. Focus Media, whose $3.7 billion buyout will be China's largest, was one of 49 companies that said it will go private, Roth Capital said in November.

As useful as the hidden-in-plain-sight SEC correspondence can be to investors as an early warning of unknown risks, the letters might be even more useful if published in real time, Block said.

"In the investment world, information is always more valuable when made public sooner," he said. "SEC correspondences sometimes contain important red flags, and publishing them sooner would give more investors a chance to read them before making investment decisions."

tags: 10x, finance

(BN) Sewage Status Grows as Resource for Utilities to Skiers

(Bloomberg ) United Utilities Plc and Severn Trent Plc, Britain's biggest publicly traded water companies, are increasingly feeding human waste into tanks of bacteria whose methane emissions generate electricity.

Sewage-derived power supplies 22 percent of Severn Trent's energy, almost double that of 2005. At United Utilities, it's 14 percent. British utilities are shifting fecal matter to vats of bacteria that consume the waste, releasing biogas that's burned to drive water treatment. The result is lower energy bills and surplus power sent to the grid that heat more U.K. tea kettles.

Water businesses in Britain aren't the only ones finding value in waste. Companies in Europe and China are turning more to biogas to counter fossil-fuel costs and energy price volatility. Microsoft Corp., the largest software maker, uses effluents to help power a data center in Wyoming. Skiers in northern Arizona speed down slopes on artificial snow made entirely from treated wastewater.

"We live in a resource-constrained world, we're going to have to squeeze more and more out of our waste," said Christopher Gasson, the publisher of Global Water Intelligence in Oxford, England. Sewage sludge "smells like money to an increasing number of entrepreneurs."

Some investors in Europe see an opportunity in such a market. Last year, Bayerische Motoren Werke AG heiress Susanne Klatten, Germany's wealthiest woman, bought 20 percent of Paques BV, a Dutch biogas technology business.

There are about 2,250 facilities in Europe now using sewage sludge to produce biogas that can generate power, according to the European Biogas Association.

Germany and Switzerland have the highest concentration with 980 and 463. The U.K. and Sweden have at least 100 each.

Berlin Water

Berliner Wasserbetriebe, Germany's biggest water provider that serves 3.7 million people in and around the capital, has turned sewage sludge into power and heat for at least two decades, said Stephan Natz, a spokesman.

Last year it produced 22 percent of the electricity the utility consumed, mainly from sewage sludge. The company produces power and heat from sewage sludge at all six of its wastewater-treatment plants, Natz said on Feb. 18.

While Gasson estimates more than two-thirds of wastewater utilities in northern Europe are investigating the technology compared with less than 10 percent in 2008, that's not quite the case in the U.S.

American Water Works Co., the largest U.S. publicly traded water company, has no plants that produce energy from sewage. It's being considered and is at a very preliminary stage of discussion, the company said by e-mail in response to questions.

'Minority Taste'

Sewage sludge is broken down in a process called anaerobic digestion, which is also used to convert food waste into power.

Aqua America Inc., the second-biggest U.S. water utility by market value, said it has one anaerobic digestion facility that doesn't produce electricity and they're unlikely to build any such plant for power.

"The technology remained a minority taste until about five years ago," according to Gasson of GWI, a U.K. market research firm. Rising gas prices in Europe forced wastewater utilities to focus on energy bills "at the same time renewable energy was attracting serious investment: Anaerobic digestion technology suddenly came back to life."

The European Biogas Association and Gasson both say Europe is leading the way with the most established market while China is one of the fastest-growing areas.

Waste Streams

The proportion of wastewater collected and treated in China more than doubled from 2004 to 2010 from 33 percent to 74 percent. The nation will spend about $68 billion to 2015 collecting and treating wastewater, showing "significant" potential for energy from biogas, Gasson said.

By 2020, electricity produced from waste streams may be equivalent to meeting the energy demands of about 2.5 million British homes, or 10 percent of U.K. households, according to a Ernst & Young LLP report that cites the think-tank CentreForum.

Water companies already treat about 66 percent of Britain's sewage sludge using this process.

Fluctuating energy prices and the rise in fuel costs are helping spur utilities' investments.

The shift is a "mind-set change" as the industry starts to view the by-product of the wastewater process as something of value rather than an inconvenience that's costly to dispose of, said Mark Turner, water sector leader at Ernst & Young.

Pennon Group Plc through its Viridor Ltd. unit is investing about 1 billion pounds to 2015 developing at least 300 megawatts of facilities that turn waste from homes and businesses into energy. That project pipeline will drive the company's growth, Chairman Ken Harvey said in November.

Biogas Beetle

United Utilities, which has biogas plants at 23 of its sites, said this makes "good" business sense and it plans to invest more. Diverting waste from landfills saves regional provider Wessex Water Services Ltd. millions of pounds, it said.

Seeking to exploit rising landfill taxes, water businesses are expanding their expertise to generate power from food waste. Wessex Water built a food waste pre-treatment facility to help chains find an alternative way to dispose of scraps.

Wessex Water said clients including supermarkets also ask whether sewage-gas can be used to power their trucks. It showed the technology by operating a Volkswagen Beetle car on biogas.

Severn Trent, based in Coventry, treats excrement from about 4 million homes and businesses and turns it into electricity equivalent to power 50,000 U.K. households. Wessex Water said it produces sewage-derived electricity equivalent to power 12,000 homes.

'Delivering Value'

Southern Water Plc processes human waste equal to 1,120 Olympic-size swimming pools, plans to start four new plants in 2013, and Anglian Water Group Ltd. last year generated energy equivalent to supplying 11,500 U.K. homes with power for a year.

"It's about controlling our costs and ultimately delivering value to our customers and it's about doing the right thing for the environment and the U.K. in terms of renewables and carbon reduction," said Jonathan Davies, general manager for group business development at Severn Trent.

Severn Trent and Anglian Water have seen a cost-reduction from their facilities partly through government incentives that currently grant them two Renewable Obligation Certificates per megawatt-hour of electricity produced, equating to about 82.96 pounds ($128) a megawatt-hour at current ROC prices.

Southern Water Ltd. exports about 10 percent of its electricity and United Utilities last year fed 9 percent into the grid.

Biogas gas be used as a fuel to generate electricity and power cars as well as for heating and cooking.

Which means that "technically you could wake up one morning and be cooking your breakfast with gas derived from human waste," said Mohammed Saddiq, general manager of Geneco, Wessex Water's clean-energy unit.

(BN) San Jose Pot Shops Use IPads to Lure Silicon Valley Techs

(Bloomberg ) At the medical marijuana clinic in San Jose, California, known as Palliative Health Center, iPads are posted around the shop to cater to technology workers who buy their pot there.

The dispensary is four miles from Cisco Systems Inc. and 10 miles from Cupertino-based Apple Inc. About 40 percent of the shop's clients are tech workers who use the iPads to select their buds before stepping up to the counter, said Ernie Arreola, the assistant manager.

"They're the ones who really raved about it the most," Arreola said of the high-tech answer to a price list. "We're seeing people from some semiconductors, lots of engineers, lots of programmers."

San Jose is the medical-marijuana capital of Silicon Valley with 106 clinics, about twice as many per square mile as Los Angeles. The number soared after 2009, when President Barack Obama's administration told federal prosecutors not to file charges against legitimate dispensaries and their patrons.

The number of shops in the state's third-largest city compares with 24 in San Francisco, the fourth-biggest, and five operating with permits in Oakland, the eighth most populous, according to officials.

The San Jose dispensaries are sprinkled amid the headquarters of technology giants including Cisco Systems Inc., Adobe Systems Inc. and EBay Inc. A short drive away are Mountain View-based Google Inc. and Redwood City-based Oracle Corp. Both communities have blocked similar dispensaries. Other neighboring towns have done the same or severely restricted them.

Federal Threat

While California voters became the first to legalize medical-marijuana sales in 1996, distributors and retailers operate under constant threat of federal prosecution because marijuana is a controlled substance under U.S. law. San Jose taxes the businesses at 7 percent of gross receipts, amounting to $3.6 million in fiscal 2012, said Angelique Gaeta, an assistant to the city manager.

The city is awaiting a California Supreme Court decision on whether communities can ban dispensaries, Gaeta said.

"They're all illegal -- our zoning ordinance does not allow them -- but our hands have been pretty much tied by the uncertainty in the law," San Jose Mayor Chuck Reed said in an interview.

Their numbers in San Jose are "certainly many more than are necessary to meet the medical needs of our population," Reed said. "It's a demonstration that this is mostly about recreational drug use."

Doctor Recommended

Those buying pot at a dispensary are required to show that a doctor has recommended the drug for ailments as common as migraine headaches or arthritis, "or any other illness for which marijuana provides relief," according to the 1996 ballot measure that started it all. Doctors charge about $40 for a recommendation.

Marijuana use is "extremely common" among tech workers, said Mark Johnson, 34, chief executive officer of San Francisco- based Zite. The company, owned by Time Warner Inc.'s CNN news channel, produces an application that offers a personalized news stream on iPads, iPhones and Google's Android mobile phone.

"In the industry in general, from what I can tell, people just don't care," Johnson said in an interview. "If you do, you don't need to hide it and if you don't, you accept that there are people around you that do."

The tech industry employs a lot of intelligent people, Johnson said.

'Functional' Drug

"A lot of smart people smoked pot in college, and it's a habit that never faded," he said. "Pot is an extremely functional drug. Coders can code on it, writers can write on it."

Johnson said he has bought marijuana in San Jose and San Francisco and smokes it daily to feel more relaxed.

"For me, pot is just a regular occurrence," he said.

Per square mile, San Jose has about 1.7 pot dispensaries. That's twice the density of Los Angeles, where 472 operating shops, or 0.94 per square mile, were documented in September, in a study by the University of California, Los Angeles.

MedMar Healing Center, a San Jose dispensary, offers a marijuana-infused chocolate toffee called "Veda Chews" that especially appeals to the roughly 15 percent of customers who are technology workers, said Douglas Chloupek, 35, the chief executive officer and co-founder.

"It does not give the high or intoxicated feeling that you would typically get from a lot of medical cannabis," said Chloupek, whose shop is a half mile from Adobe headquarters. "Those who are coding for 15 hours a day with cramping hands, that is the product that allows them to have mental clarity and still get pain relief."

Work Stress

"They either need something for the stress from work to relieve them or for the pain that they physically have, whether that's from arthritic hands from typing for 15 to 20 hours in a two-day time period, to sitting down at their desk for multiple hours on end," Chloupek said.

Veda Chews sell for $13. The shop also stocks $10 marijuana cigarettes with names like "Sour Grapes," "Skunk" and "Super Silver Haze," along with cannabis-infused breath sprays, brownies and chocolate.

John Lee, a 57-year-old San Jose resident, said he uses medical marijuana to manage pain resulting from a car accident and as a sleep aid.

Lee, who works part-time as a quality systems auditor at a semiconductor foundry he declined to name and as an independent consultant, said he tends to buy flowers and concentrates about once a week.

Lee, who said he doesn't use marijuana at work, said that pot consumption is common among his technology-industry peers, for both medical and recreational purposes.

Pioneer Users

"It's been accepted in this area for a very long time," Lee said. "It's not looked down on, partly because many Silicon Valley pioneers have acknowledged their use of marijuana."

Steve Jobs, Apple's co-founder, began smoking marijuana between his sophomore and junior years of high school, according to a biography written by Walter Isaacson.

"I got stoned for the first time that summer," Jobs is quoted by Isaacson in the book. "I was 15, and then began using pot regularly."

Part of Silicon Valley's legacy is tied to the 1960s counterculture, said Paul Saffo, a managing director at Discern Investment Analytics Inc. in San Francisco, which advises institutional investors.

Youth Culture

"Anti-establishment is one of the deepest traits," he said. "Silicon Valley is a youth culture. When you have a young workforce, they're bringing their habits to their work."

Indeed, the number of potential tech industry employees showing positive results in pre-employment drug screening has increased, said Dr. Barry Sample, director of science and technology for Quest Diagnostics Employer Solutions. The company is a unit of Quest Diagnostics Inc., a clinical laboratory chain based in Madison, New Jersey.

"The Silicon Valley data supports recent news reports citing some employers who say they are having a hard time finding candidates that can pass the preemployment drug test," Sample said.

Adobe doesn't conduct drug testing, the company said in a statement, though "the use of illegal drugs and intoxicants is prohibited on Adobe premises."

Cisco forbids use or possession of "illegal drugs while on Cisco owned or leased property, during working hours, while on company business or while using company property," Robyn Jenkins-Blum, a company spokeswoman, said in a statement.

Voters Legalized

Besides California, 17 states and the District of Columbia have legalized medical marijuana. Voters in Colorado and Washington made their states the first to legalize recreational use.

At Palliative Health, three iPads are perched on silver, waist-high posts. Patients can scroll through and check prices on moss-like buds with names such as "Sour Diesel" and "Master Budda."

The dispensary, which provides monthly classes on cooking with marijuana-infused products, draws tech workers from employers including Adobe, EBay, Cisco, Hewlett-Packard Co. and Applied Materials Inc., said Arreola, a 38-year-old San Jose resident.

Clients from tech companies tend to stop by late in the evening and buy more per visit while shopping less frequently than typical customers, Arreola said.

Limited Resources

San Jose could close the dispensaries "but there are so many, and it is an issue of resources and where we want to focus those resources," said Gaeta, the assistant to the city manager. Enforcement focuses on shops that aren't paying the marijuana business tax, are too close to a school or are creating a nuisance, she said.

The city's 2011 efforts to limit the number of pot clinics to 10 were stymied by the medical-marijuana industry, which challenged rules approved by the City Council to regulate the shops. That left the door open and the industry has flowered.

The marijuana dispensaries "go where they think they can make a buck," said Mayor Reed. "We don't have the capacity to stop them from operating."

Johnson, the Zite CEO, said recreational marijuana use is essentially legal in California.

"Lots of people leaving college have smoked a joint or two or know friends who have smoked pot and realized that it's not the demon that it's made out to be," Johnson said. "I see good days ahead for pot.

(BN) Apple Win in Google Case to Be Reviewed by Trade Agency

(Bloomberg ) Apple Inc.'s preliminary victory in a patent-infringement case brought by Google Inc.'s Motorola Mobility unit over a phone sensor will be reviewed by a trade agency that has the power to block imports of the iPhone.

The U.S. International Trade Commission said yesterday it will take a second look at parts of ITC Judge Thomas Pender's findings that the Motorola Mobility patent is invalid. Notice of the decision was posted on the agency's website. The commission is scheduled to make a final decision April 22.

The patent, for a sensor that prevents the phone from accidentally hanging up when close to a person's face, is all that's left of a case Motorola Mobility brought against Apple in 2010. The ITC in August said Apple didn't infringe two Motorola Mobility patents related to wireless technology used throughout the mobile 3G patents.

Apple, with $78.7 billion in iPhone sales last fiscal year, has sued companies, including Motorola Mobility and Samsung Electronics Co., making handsets that run on Google's Android operating system. Apple contends they copied features that make the iPhone and iPad tablet computer unique. It's part of a battle for bigger share of the global mobile-device market that researcher Yankee Group expects to double to $847 billion by 2016.

Google, based in Mountain View, California, paid $12.4 billion for Motorola Mobility in large part to get access to its trove of more than 17,000 patents and gain leverage against Apple.

Not Close

Pender in December said the Google patent is invalid because it isn't different enough from an earlier invention for a sensor to prevent accidental dialings. "In making this finding, I note that I do not consider the issue to be close," the judge said in his full opinion.

Motorola Mobility argued the earlier invention was limited to push-button keys, not touch screens. The judge did say that, were the patent valid, Apple was infringing it. Apple asked the commission to review the infringement finding if it decided to consider Motorola Mobility's arguments on validity.

The commission said it is reviewing what the phrase "touch sensitive input device" means and would look at both validity and infringement.

Apple and Google didn't immediately respond to requests for comment.

Motorola Mobility and Cupertino, California-based Apple have lobbed patent-infringement complaints against each other in Wisconsin and Florida. The Wisconsin cases, transferred to Chicago, were thrown out and are currently on appeal, while the Florida cases are pending.

Apple filed its own patent-infringement case at the ITC against Motorola Mobility and lost. The appeal in that case is scheduled to be heard March 7 before the U.S. Court of Appeals for the Federal Circuit in Washington.

The case is In the Matter of Certain Wireless Communication Devices, Portable Music and Data Processing Devices, Computers and Components Thereof, 337-745, U.S. International Trade Commission (Washington).