(BN) Next Facebook May Be Chinese as Sites Innovate, Not Copy

(Bloomberg )Instagram, the photo-sharing app bought by Facebook Inc. (FB) last year, offers special effects that can give pictures a weathered black-and-white cast or retro tints. In Beijing, Xu Chaojun's PaPa app does that, too. In addition, it lets users attach voice messages that can sound like robots or cats.

PaPa notched 10 million downloads in five months from iPhone and Android users and the company released an English- language version, Wave, on Apple Inc. (AAP)'s iTunes on March 10.

Chinese Internet companies, such as Alibaba.com Ltd. (1688), have been dismissed as imitators of successful U.S. enterprises like EBay Inc (EBAY) (EBAY). Some have been content to profit from their vast home market. Yet Xu's firm and others aim to compete globally and many Chinese entrepreneurs are improving on the Western products that inspired them, said Kai-Fu Lee, the former head of Google Inc. (GOOG)'s China operation and founder of venture capital fund Innovation Works.

"Innovation, if it's defined as inventing the light bulb, might still be a stretch for China," said Lee, who helped fund PaPa. "To be the first to conceive of the next iPhone may be still a little difficult, but the prospect of making a Facebook, a Twitter or an Instagram, I think that is now, for the first time ever, within reach for the Chinese startup."

Success Stories

The companies Lee says are closest to that kind of success -- two years away, he predicts -- aren't exactly startups. He points to WeChat, an instant-message app with 300 million users that's owned by Tencent Holdings Ltd. (700), and Weibo, a Twitter-like microblog with more than 500 million registered accounts, run by Sina Corp. (SINA) Tencent is China's largest Internet company by market value, and Sina is listed on the Nasdaq.

China's early Internet companies like Alibaba learned "a lot" from western companies like EBay, Lee said. Alibaba didn't simply copy any foreign model and came up with its own solutions like payment escrow services to address a lack of consumer credit cards in China, said John Spelich, an Alibaba spokesman.

Innovation Works, founded in September 2009, manages $500 million in assets, including funding from YouTube co-founder Steve Chen and Foxconn Technology Group. The fund is based in the Zhongguancun district of northwestern Beijing, China's equivalent of Silicon Valley. So far, Lee's invested in roughly 50 companies, with a goal of five success stories a year.

While Instagram is available in the country, through app stores including China Mobile Ltd (941).'s Mobile Market, Facebook isn't. The Menlo Park, California-based social network, along with Twitter and Google Inc (GOOG).'s YouTube, are censored and blocked from local users.

Instagram hasn't caught on in China because it was missing a key ingredient for local tastes, which was voice, said PaPa's Xu.

'Crowded Environment'

"Chinese people like to use their voices," Xu said. "You go to a Chinese restaurant and it's very noisy. You go to an American restaurant and it's very quiet. We live in a crowded environment so we are used to noise. We like noise."

Intel Corp (INTC).'s venture fund, Intel Capital, has invested about $670 million in more than 100 Chinese technology companies since 1998. Richard Hsu, managing director of Intel Capital China, said many of the roughly 40 companies in his portfolio have had to develop new business models to succeed.

Shanghai-based Uucun, which helps set up and run app stores for more than 300 smartphone makers, gives away its products, making money from ads and promotions embedded in the apps. The ads reach 30 million users and the company has attracted more than $10 million in investment from firms including Intel Capital and Vickers Capital, Uucun Chief Executive Officer Zhang Zhendong said.

Financing Access

China added 51 million Internet users last year, bringing its total to 564 million. In a speech on March 4, President Xi Jinping urged "boosting innovation-powered development in order to make China an economic heavyweight." Yet censorship by the government hampers entrepreneurs and keeps China from taking "its rightful place in terms of innovation," said Duncan Clark, chairman of BDA China, a technology consulting company.

Another problem: reduced access to financing abroad. The number of Chinese initial public offerings in the U.S. last year declined to three, less than one-tenth the peak in 2010, as allegations of accounting fraud weakened investor demand.

Still, China has become "a fast-paced entrepreneurial launchpad," Clark said.

PaPa's Xu, 33, said he and Li Xiaobao, 24, finished the first version of their photo- and audio-sharer a month after conception. Xu estimated that PaPa will hit 50 million users this year and 200 million within three years. That would outpace Instagram, which reached 100 million users in February, almost two and a half years after its introduction.

PaPa, a 30-employee company based in a reclaimed Mao-era factory, has raised more than $10 million from firms including Innovation Works and Sequoia Capital. It's already sold its first paid advertisements and Xu said it'll do even better once he hires a sales team.

Yet he's resisting urges to attempt an IPO.

"PaPa now is only at the start of our ambition," he said.

(BN) Cisco, Nikon, Redskins, Google: Intellectual Property

(Bloomberg ) Cisco Systems Inc. (CSCO), the world's largest maker of networking equipment, must pay patent-licenser XpertUniverse Inc. $70 million in civil fraud damages in connection with a failed partnership, a federal jury decided.

After a two-week trial, the jury of six women and two men in federal court in Wilmington, Delaware, also decided Cisco infringed two patents for contacting experts online to answer questions and owes more than $33,000 on those counts. In dispute were patents 7,366,709 and 7,499,903.

XpertUniverse, based in New York, sued San Jose, California-based Cisco in 2009, contending officials strung it along for more than six months, holding out the possibility of a lucrative partnership, without revealing that Cisco had rejected the deal.

Alleging "fraudulent concealment," XpertUniverse lawyer Charles Cantine told jurors Cisco's actions "led to destruction of the company," when it might have pursued potentially more- profitable alliances and survived.

Cisco's lawyer, Brett Schuman, told the jury that XpertUniverse "never had a product, customers or revenue," that Cisco was at first interested in a partnership and backed out after realizing the only result of the smaller company's research was "a demo" for a future product.

Schuman told the jury "mismanagement" and "lack of leadership" caused XpertUniverse's failure.

"XpertUniverse is a small company with intellectual property as its primary asset," it said in court papers. The software-development firm was founded in the 1990s by Ukrainian immigrant Victor Friedman as Homework911 to help schoolchildren. It changed its name as it switched to the richer corporate call- center market, Friedman testified when the trial began March 12.

Cantine said his client was "very happy that Friedman and the company were vindicated."

"We are surprised and extremely disappointed with the jury's verdict," Kristin Carvell, a Cisco spokeswoman, said Friday in an e-mailed statement. "We are confident that Cisco's conduct was appropriate throughout our relationship with XpertUniverse."

She said that Cisco didn't believe "the evidence presented at trial supports this verdict," and that the company may appeal.

The case is XpertUniverse Inc. v. Cisco Systems Inc., 09- cv-00157, U.S. District Court, District of Delaware (Wilmington).

Nikon LCD Patent Suit Brought by Anvik Revived by Appeals Court

Nikon Corp. (7731), Samsung Electronics Co. and other makers of electronics using liquid crystal displays must face a revived patent-infringement suit brought by Anvik Corp., a U.S. appeals court ruled Friday.

A lower court had ruled the three Anvik patents invalid for failing to describe the best way of emulating the inventions. The U.S. Court of Appeals for the Federal Circuit in Washington said there "remain disputed issues of material fact" on that issue, so remanded the case for further proceedings. The court's opinion was posted on its website.

Other companies named in the suit by Anvik included AU Optronics, Sharp Corp., LG Electronics Inc. (066570) and Chi Mei Optoelectronics Corp.

Anvik filed the first case in the series in March 2005. That case is Anvik Corp. v. Nikon Precision Inc., 1:05-cv-09891- AKH-LMS, U.S. District Court, Southern District of New York. The appeal is Anvik Corp. v. Nikon Precision Inc., 12-1320, U.S. Court of Appeals for the Federal Circuit.

Trademark

'Redskins' Trademark Cancellation Bill Sent to Congress

A non-voting delegate to the U.S. Congress has authored a bill that would cancel all trademark registrations for "Redskins."

Representative Eni Faleomavaega, an American Samoa Democrat, wrote H.R. 1278, which would amend the Trademark Act of 1946 regarding "the disparagement of Native American persons or peoples through marks that use the term 'redskin,' and for other purposes."

The measure has been referred to the House Committee on the Judiciary. The bill's introduction follows a hearing before a board at the U.S. Patent and Trademark Office March 7 at which a group of American Indians argued for the cancellation of the mark, which is used by Washington's National Football League team.

According to the patent office database, a number of the team's trademarks were at issue at this hearing, including "Redskinettes," "the Redskins," and "Washington Redskins."

The team has argued in its filings that the name was intended to honor American Indians, an honor that some representatives of various native groups find dubious.

In February, a symposium -- Racist Stereotypes and Cultural Appropriation in American Sports -- was held at the National Museum of the American Indian in Washington. The Washington Post reported that Robert Holden, deputy director of the National Congress of American Indians, said "Honors like that we don't need."

Rival Golf Club Will Oppose 'St. Andrews' Trademark Application

The director of a golf-course development in Scotland has characterized St. Andrews Links Trust's application to register "St. Andrews" as a trademark as farcical and arrogant, the U.K.'s Courier newspaper reported.

Ewan McKay, director of St. Andrews International Golf Club told the Courier his company will file objections to the registration for fear of possible restrictions to the name of his club.

McKay said the trust can't claim sole credit for the fame of St. Andrews in the golf world, according to the Courier.

Copyright

Google Clash With Publishers Pivots on Meaning of Snippet

As German authorities consider the exact definition of a snippet -- the short text from a website that's displayed alongside links in search results -- Google Inc. (GOOG) and other online aggregators in Europe face a potential squeeze on their profits in the region.

A landmark copyright bill that would allow publishers to charge for such online uses of their material is working its way through Germany's legislature and is being closely watched by neighboring countries. Although it's been watered down during its legislative journey, the bill may still leave room for a judge to side with publishers and allow them to charge for significant use of news articles, including in search.

The legislation, part of Chancellor Angela Merkel's coalition platform, pits Google against media conglomerates, such as Axel Springer AG (SPR), publisher of Die Welt and Bild, and Hubert Burda Media Holding GmbH & Co., which specializes in fashion and lifestyle magazines. It's seen by both Google and European media companies as a vital front in the search giant's battle with European newspapers.

The bill could allow publishers to form a royalty collection group for newspaper snippets -- akin to ASCAP (the American Society of Composers, Authors & Publishers) for journalism -- and gain leverage with Google, which has more than 85 percent of the search market in Germany.

Google's sales in the U.K., the only European market where the company breaks out revenue, rose 23 percent to $1.3 billion in the three months through December, more than Axel Springer's total revenue that quarter. Google shares have jumped about 15 percent this year, compared with 13 percent gain for French publisher Lagardere SCA (MMB) and a 6.2 percent increase at Axel Springer.

The search-engine operator notched an important victory days before the bill passed out of the German lower house on March 1, winning an exemption for "individual words or the smallest excerpts of text."

"Although the law creates some uncertainty," said Ralf Bremer, a Google spokesman in Germany, "we believe it makes clear that regular snippets remain legal."

Axel Springer public affairs head Christoph Keese said aggregators will still need permission to use text beyond headlines, and should the issue go to court, "we feel comfortable with what the legislative intent established."

Rihanna Costing 49% More as Australia Probes Apple Pricing

Rihanna's album "Unapologetic" is 49 percent more expensive to buy from iTunes in Australia than the U.S., prompting the nation's parliament to summon content owners including Apple Inc. (AAPL) and other technology companies to explain how they set prices.

Microsoft Corp. (MSFT) and Adobe Systems Inc. (ADBE) also were called by Australian lawmakers on threat of contempt proceedings to appear at a hearing today in Canberra. The companies previously declined to appear before the committee, Chairman Nick Champion said in an October speech.

Software and hardware products in Australia sell for a median 50 percent more than their U.S. equivalents, according to a 2012 survey of 186 songs, games, programs and computers by Choice, a not-for-profit consumer advocacy group. Companies could face restrictions on their ability to set prices in Australia under measures being considered by lawmakers.

"There's been price discrimination against Australian consumers," said Matthew Rimmer, a professor at Australian National University in Canberra, who specializes in copyright law. "If the distribution is digital, why are the prices so much higher?"

Rihanna's album costs A$22.99 ($23.98) in the Australian iTunes store, compared with the $15.99 that fans in the U.S. pay. Bruno Mars's "Unorthodox Jukebox," in the Top 10 of both nation's charts, costs 42 percent more.

Downloads of Microsoft's Office Professional 2013 software package cost A$599 in Australia, about 50 percent above the $399.99 charged in the company's U.S. Web store.

"We would love to see lower prices for content in the Australian store," Tony King, managing director of Apple's Australia unit, said at the committee hearing in the capital Canberra today. "We would urge the committee to talk to those folks who own the content."

The biggest difference in prices for music and films was due to the wholesale price set by music labels and film and television studios, he said.

Customers "will vote with their wallets" and buy alternative products if prices are too high, Pip Marlow, managing director of Microsoft's Australia division, told the committee.

Different packaging distinguished products sold in Australia from those sold elsewhere, Adobe's Australian managing director Paul Robson said.

"I'd consider a box that has different writing on it to be materially different," he said.

Sales taxes, different labor and rental costs, marketing spending and the decisions of third-party resellers can all cause Australian prices to be higher, Redmond, Washington-based Microsoft said in its filing to the committee. Even download sites incur costs for maintenance and support, the company said.

The strength of the Australian dollar has increased the contrast between local and international prices for software, music and entertainment.

Trade Secrets/Industrial Espionage

Telenor Target of Large-Scale Cyber Attack; Military Alerted

Telenor ASA (TEL), the Scandinavian region's largest phone operator, was the target of a large-scale industrial espionage attack, TechWorld reported.

The attacks were of sufficient severity that Norway's national emergency response team and Cyberforsvaret -- the nation's cyber-attack defense force -- were put on alert, according to TechWorld. The company, which hasn't revealed what has been stolen, said it became aware of the problem when it observed suspicious traffic from individual employees' computers to external destinations, TechWorld reported.

The attack was believed to have been initiated through links that installed what are known as "Trojans," that then stole filed and emails, according to TechWorld.

(BN) Chinese Hacking Is Made in the U.S.A.

(Bloomberg)  Ten years ago, while visiting International Business Machines Corp. (IBM)'s software-research lab in Beijing, I observed dozens of Chinese employees moving about seemingly free of any security-related limitations. I asked the lab's manager two questions: 

"Do you have any way of knowing whether any of your Chinese staff is also working for the Chinese government?

"Do you have any way of knowing whether any of your Chinese staff is a spy?"

The manager unhesitatingly answered "No" to both. He hastily added, "But you can be sure that we at IBM work very hard to protect our core intellectual property."

This episode could occur at any of the many U.S. corporate facilities in China. It highlights an underreported feature of recent cyberattacks: Much of China's hacking power was Made by the U.S.A.

For decades, U.S.-owned technology giants have set up state-of-the-art factories, laboratories and training programs in China. Their aim was to use a super-cheap, lightly regulated production base to supply Chinese and world markets, and to harness Chinese scientific talent. Greater profits were the top priority, but the companies also claimed that a more computer- and Internet-savvy China would become more peaceful and democratic.

Access Price

Chinese authorities demanded some technology as the price of access to their market. Yet most transfers were made voluntarily to Chinese partners. China's hacking prowess makes clear that, as critics warned, the government and military benefited from widespread sharing of know-how directly applicable to spying, sabotage and theft of business secrets.

Paradoxically, the first known victims of China's U.S.- enabled cybercapacities were Chinese citizens. These include dissidents who were tracked with technology sold by Cisco Systems Inc. (CSCO) and Yahoo! Inc. (YHOO) (YHOO), as well as ordinary people whose online content has been censored with products provided by Microsoft Corp (MSFT) (MSFT). and Google Inc (GOOG) (GOOG).

Those four companies, and many others, still supply official Chinese customers with capabilities easily used against U.S. government or business targets. (Google itself has repeatedly complained about attacks from China-based hackers.) These companies also continue to strengthen the technology base of a nation designated by the Defense Department as the greatest potential foreign threat to U.S. security.

Cisco, for example, says that its goals include maintaining "close relationships with government" and notes that the regime's "good will" is important for operations, "enforcement," sales and policy. IBM touts its capacity to "improve the way government" works, "solve problems and challenges in public administration," and aid China's "drive to build a harmonious society." Intel Corp. (INTC) says its mission includes "strategic technology collaborations" with the government. Microsoft considers itself "a partner in developing the local IT ecosystem with the Chinese government."

Like IBM, companies such as Cisco, Hewlett-Packard Co. (HPQ), Intel, Google, Microsoft, Oracle Corp. and Yahoo have established large research centers in China. Thousands of engineers are working to develop capabilities that could easily be drafted for cyberwarfare.

Innovation Center

IBM also runs a China-based Global Rail Innovation Center that "focuses on every aspect of modern rail systems, such as track surveillance and infrastructure." Undoubtedly, that knowledge could help disrupt U.S. transportation networks. IBM also has sold a wide range of advanced hardware and software to Huawei Technologies Co., whose reported extensive ties with the Chinese government and military led the House Intelligence Committee to brand it a national security threat.

Finally, U.S.-owned companies have nurtured Chinese talent. As of 2010, Cisco was on track to build 300 of its acclaimed Networking Academies to train 100,000 Chinese students, and planned to use its curriculum to build 35 Model Software Colleges with the Education Ministry. IBM has created partnerships with more than 60 Chinese universities, and Intel is working with Chinese schools to develop their "research program and talent pool." Texas Instruments Inc (TXN).'s worldwide Leadership University includes two leading Chinese technical institutions.

Google's China University Relations program has forged ties with at least 15 Chinese institutions. Microsoft has established research partnerships with more than 30 Chinese universities focused partly on "talent development" and programs that have trained, among others, more than 1,000 doctorate holders.

President Barack Obama's new cyberdefense program can help safeguard U.S. security and commercial secrets. But its effects will be limited if American companies continue to shower China with hacking-related know-how. Significant new restrictions must replace today's failed security controls.

Companies will complain about lost business opportunities. The U.S. should solicit the cooperation of other trade partners in limiting China's technology access. But even simply curbing the availability of America's world-leading capabilities would enhance U.S. security. And the White House should tell allies that efforts to take advantage of the limits on U.S. exports will be treated as unfriendly acts.

Before China's cyberoffensive, U.S. companies could legitimately argue that they, and America, would be enriched by technological engagement. The new security threats, however, now trump any plausible economic benefits. Doing business with China can continue. Business as usual can't.

(Alan Tonelson is a research fellow at the U.S. Business and Industry Council, which represents almost 2,000 domestic manufacturing companies. He is the author of "The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade Are Sinking American Living Standards." The opinions expressed are his own.)

South Korea's R&D push since 2000

 

Source: The American Association for the Advancement in Science.

South Korea spends the most in the world on R&D (as the percentage of GDP).
China almost tripled its R&D investment since 1995 and caught up with most European countries.  

Invention of the Day: Taxes.

tags: invention, video, economics, history

Growing new body parts.

The March 22 issue of the WSJ reports that biologists have found a working solution to the problem of creating "spare" body parts for transplantation. Before diving into the solution, let's consider the core problem first.

Traditionally, doctors took organs from healthy donors (live or recently dead) and used them to replace failed organs in their patients. The method had (and still has) two major problems: 1) high-quality body organs are rare and expensive; 2) other people's organs can be rejected by the patient's immune system.
Although creating biological organs from scratch from the patient's own cells can address both aspects of the problem, such method would be extremely difficult and take a long time. Besides, the vast majority of people don't require transplants during their lives. Therefore, growing organs that nobody needs would be a tremendous waste.

The new solution allows to create one's "own" organs on demand. It uses sanitized cadaver organs as a scaffold that supports the patient's own stem cells that grow around it. (The figure above shows steps involved in building a heart.) As the result, we have an abundant supply of cheap "prototype" organs that in combination with the patient's stem cells have a great chance to be compatible with the host body. The method would probably work for most functional body parts, except the brain.

tags: trade-off, dilemma, problem, solution, biology

(BN) Biogen, HTC, Boston, MIT, Mary Bono: Intellectual Property

(Bloomberg ) Biogen Idec Inc. (BIIB), the fourth- largest U.S. biotechnology company by market value, won a U.S. patent that may guard its experimental multiple sclerosis pill from generic competition for eight more years than anticipated.

The company's patent 8,399,514, which expires in 2028, was issued on an application filed in February 2012 by Weston, Massachusetts-based Biogen, according to the U.S. Patent and Trademark Office's website. The Food and Drug Administration is expected to decide whether to approve the medicine, Tecfidera, by the end of the month.

The drug had been protected by three patents that expire from October 2019 to May 2020, according to Eric Schmidt, a New York-based analyst with Cowen & Co. who estimates Tecfidera could generate $3.2 billion in annual sales in 2017. The drug was tested in doses given twice a day and three times a day, and the patent today covers administration twice daily.

"They have a novel discovery here in that they were first to observe that the lower dose of the drug, maybe somewhat surprisingly, was as active as the high dose," Schmidt said yesterday in a telephone interview. "The burden of proof will be on anyone else to show this patent isn't valid."

Biogen already sells the MS treatments Avonex, given by injection, and Tysabri, administered intravenously. Tecfidera, formerly known as BG-12, would be Biogen's first pill for MS, a disease that affects more than 2.1 million people globally, according to the National Multiple Sclerosis Society.

"The patent for this dosing regimen is recognition of the remarkable innovation Tecfidera represents for the MS community," Biogen Chief Executive Officer George Scangos said in a statement. "The tremendous research investment required to study and validate the patented dosing regimen is an example of innovation that leads to meaningful benefits to patients."

HTC Loses German Patent Suit Over Nokia Battery-Life Patent

HTC Corp. (2498) lost a German lawsuit after a court said it violated Nokia Oyj (NOK) patents for technology that helps save battery life on mobile phones.

The Mannheim court yesterday ruled that it infringed the German part of Nokia's European patent, HTC said in an e-mailed statement. Taoyuan, Taiwan-based HTC said the patent is invalid and it will appeal the decision.

Nokia last year sued HTC, BlackBerry and ViewSonic Corp. in the U.S., U.K. and Germany over 45 patents. The Espoo, Finland- based mobile-phone maker, struggling to reverse a sales slide, settled with BlackBerry in December. A month earlier, HTC reached a global patent settlement with Apple Inc.

"This decision cannot be described as a 'win' for Nokia because it only applies to handsets that are no longer imported into Germany, and newer HTC handsets do not use the accused technology," HTC said. "As Nokia clearly went to great lengths to assert its strongest patents first, we are confident that its non-essential patent portfolio poses little threat to HTC."

Nokia is "pleased with this decision, which confirms the quality of Nokia's patent portfolio," Mark Durrant, a spokesman for the company, said in an e-mailed statement. "HTC must now respect our intellectual property and compete using its own innovations."

HTC said the power-saving technology in the disputed patent is "trivial" and "contributes only a negligible reduction in power consumption."

The company said it will continue to pursue separate lawsuits to invalidate the Nokia patents pending in German and U.K. courts.

For more patent news, click here.

Trademark

Minnesota Lawmakers Considering Ban on 'Trademark Bullying'

The Minnesota legislature is considering a bill that would bar so-called "trademark bullying."

HF 1116 defines trademark bullying as "the practice of a trademark holder using litigation tactics in an attempt to enforce trademark rights beyond a reasonable interpretation of the scope of the rights granted to the trademark holder."

The measure provides for the awarding of attorney fees to the prevailing party in exceptional cases. These would be cases in which a party brings suit for "harassment, malicious, fraudulent or willfully purposes, including trademark bullying,"

If the bill passes and is signed into law, it will go into effect Aug. 1 and will apply to actions arising from incidents occurring on or after that date.

For more trademark news, click here.

Copyright

Rock Band Boston Song Publisher Sues Leader Over Copyrights

A publisher of hit songs by the 1970s rock band Boston, including "More Than a Feeling" and "Don't Look Back," sued the group's leader and songwriter, Tom Scholz, to prevent the termination of his copyrights.

Paul Ahern, the plaintiff, said that Scholz assigned copyrights to the songs he wrote in a 1975 agreement. He claimed that in January Scholz said he planned to terminate those rights, according to a filing yesterday in federal court in New York.

The threat to end the copyrights "casts a pall on the assets of the compositions, diminishes their value and complicates the ability of plaintiffs Next Decade and Ahern to commercially exploit them," his lawyers said in the complaint.

Scholz, a graduate of the Massachusetts Institute of Technology, said that the U.S. Copyright Act of 1976 grants him the authority to terminate Ahern's copyrights, according to the suit. Those rights would end in 2015.

"Tom Scholz filed to reclaim his copyrights, as many artists have done recently," Craig Pinkus, his lawyer, said in an e-mail. "The lawsuit from Mr. Ahern apparently seeks to resolve those rights in court. Mr. Scholz is confident in his legal position."

Ahern, a Florida resident whose publishing firm is Pure Songs, said he employed Scholz in 1975 to write the songs that were included on Boston's first two albums. He seeks a judicial declaration that Scholz has no interest in the copyrights to those songs and that the notice of termination is invalid.

Boston recorded its first albums for Epic Records, a unit of Sony Corp. (6758)'s Sony Music Entertainment. The self-titled debut album sold 17 million copies, according to the Recording Industry Association of America, and the single "More Than a Feeling" reached number five on the Billboard Hot 100. The second album, "Don't Look Back," sold 7 million copies, the RIAA reported, and the single peaked at number four.

The case is Ahern v. Scholz, 1:13-cv-01812, U.S. District Court, Southern District of New York (Manhattan).

MIT Will Release Edited Documents Related to Aaron Swartz Case

The Massachusetts Institute of Technology said it would release edited documents related to the school's role in the prosecution of Aaron Swartz, who killed himself while facing charges that he broke into the university's network to download millions of research articles.

In a letter to the MIT community, President L. Rafael Reif said the information wouldn't include names or information about MIT's computer vulnerabilities. MIT must protect people from "a pattern of harassment and personal threats," he said.

MIT, which prides itself on a commitment to openness, and the Justice Department have faced harsh attacks for their roles in pursuing Swartz, considered a hero by many in the movement to make information available for free.

"At MIT, we believe in openness, and we are not afraid to re-examine our own actions," Reif said. "Openness must be balanced with reasonable concern for privacy and safety."

MIT will release the documents when it issues a report by Professor Hal Abelson on the events leading to Swartz's suicide, Reif said. Swartz, facing as long as 35 years in prison and a $1 million fine, hanged himself in his Brooklyn, New York, apartment on Jan. 11. He was 26.

On March 15, lawyers for Swartz's estate filed a motion in federal court in Boston asking that documents related to the case against Swartz be released to the U.S. Congress and the public. They are asking that the names and titles of all law enforcement personnel and MIT employees in the documents also be released.

In November 2011, a magistrate judge issued a protective order barring disclosure of documents to anyone other than the defense team or potential defense witnesses.

"Public interest in access to these materials in an intelligible form outweighs the limited privacy interest in the names and official titles of the individuals named therein," Swartz's lawyers said in the March 15 motion.

The U.S. Attorney's office in Boston has agreed to the release of documents but seeks to keep private the names of law enforcement people investigating the case and MIT employees, according to the motion.

The case is U.S. v. Swartz, 11-cr-10260, U.S. District Court, District of Massachusetts (Boston).

EBay Wins as High Court Backs 'Gray Market' Discount Goods

The U.S. Supreme Court ruled that publishers and manufacturers can't block imports of copyrighted items made and sold abroad, bolstering the multibillion-dollar "gray market" in a victory for EBay Inc. and discount chains.

The justices, voting 6-3, yesterday threw out a $600,000 jury award assessed against a graduate student who imported John Wiley & Sons Inc.'s textbooks from his native Thailand and sold them in the U.S. for a profit.

The case was one of the top business and consumer cases pending at the court, with implications for sales by Costco Wholesale Corp. and Wal-Mart Stores Inc. as well as on EBay, operator of the world's largest online marketplace.

The gray market is the annual trade in tens of billions of dollars in genuine products outside of their official distribution channels to exploit lower overseas prices. Supporters of the gray market -- retailers, distributors and consumer advocates -- were battling publishers and manufacturers, which say their U.S. sales are being illegally undercut.

Writing for the court, Justice Stephen Breyer said a ruling in favor of Wiley would have subjected retailers to "the disruptive impact of the threat of infringement suits."

Imports of gray market products to the U.S. cost manufacturers as much as $63 billion in sales a year, according to a 2009 Deloitte LLP analysis conducted for Bloomberg. American sales of copyrighted works, including books, music and movies, amount to more than $220 billion a year, Breyer said yesterday, citing retail industry estimates.

"The Supreme Court's ruling is a victory for all American consumers and businesses," EBay said in an e-mailed statement. "The decision protects your right to buy and sell authentic goods, regardless of where they were made."

The Association of American Publishers said the decision undercuts a law designed to let U.S. copyright owners set different prices around the world. The ruling "will discourage the active export of U.S. copyrighted works," Tom Allen, the group's chief executive officer, said in a statement.

Wiley's chief executive officer, Stephen M. Smith, called the ruling "a loss for the U.S. economy, and students and authors in the U.S. and around the world."

The Obama administration backed the copyright owners in both cases.

Bloomberg Press is an imprint of Wiley.

The case is Kirtsaeng v. John Wiley & Sons, 11-697. For more copyright news, click here.

IP Moves

Copyright Term Extension Act Sponsor Joins Lobbying Firm

Mary Bono Mack, the former Republican member of the U.S. Congress who was one of the sponsors of the Copyright Term Extension Act of 1998, has joined FaegreBD Consulting, according to a statement from the Washington-based consulting and lobbying firm.

FaegreBD is a unit of Faegre Baker Daniels LLP, a Minneapolis-based law firm.

She will be a senior vice president, focusing her advocacy and consulting practice on matters related to the entertainment, media and information-technology sectors. She is the widow of the musician Sonny Bono, and is now married to former U.S. Representative Connie Mack IV, a Republican from Florida.

Initially elected to Congress in 1998 after her husband was killed in a skiing accident, she served until her defeat by Democrat Paul Ruiz in the 2012 election. Under federal rules she will be barred from lobbying for one year.

The copyright-extension bill she sponsored is sometimes known as the "Sonny Bono Act," extended the copyright term to the life of the creator plus 70 years. The bill is also nicknamed the "Mickey Mouse Act," because of the extensive support the Walt Disney Co. (DIS) gave the legislation, which ultimately prevented the early Mickey Mouse films from entering the public domain.

(BN) Zynga Ends Requirement for Facebook Login on Web-Based Games

(Bloomberg ) Zynga Inc. (ZNGA) will let users play its Web-based games without having to provide a Facebook Inc. (FB) login, bolstering efforts to reduce its reliance on the world's largest social-networking service.

An updated version of the Zynga.com gaming portal, available to some visitors starting today, will let new users create an account without entering their Facebook name and password, Chief Technology Officer Cadir Lee said today in an interview.

Zynga, the largest maker of games played on Facebook, has struggled as competition has increased and users have shifted toward apps on mobile devices, away from Web-based titles. The company began planning a revamp of Zynga.com last year after renegotiating the terms of its agreement with Facebook, easing requirements for log-ins, payment and advertising, Lee said.

"It's a reflection of the work that we jointly undertook after discussions with Facebook," Lee said. "We both felt like there were some things that just didn't quite work about having an all-Facebook site on a non-Facebook destination."

The new login process could make it easier for Zynga to work with competing social networks including Google Inc. and Twitter Inc., Lee said.

Zynga generates revenue by selling virtual goods within its games -- for example, a gun in "Mafia Wars" or a brick oven in "ChefVille."

The company reported fourth-quarter profit and sales last month that beat analysts' estimates as it cut costs faster than demand fell for virtual goods.

The shares were little changed at $3.35 at the close in New York. The stock has jumped 42 percent this year, compared with an 8.4 percent gain in the Standard & Poor's 500 index.

(BN) Wal-Mart Pushes Senate Against EBay-Led Tax Exemptions

(Bloomberg ) Brick-and-mortar retailers like Wal-Mart Stores Inc. (WMT) see an opportunity to claim victory in a lobbying duel against online companies that don't collect sales tax from their customers.

Retailers are urging U.S. senators to take a non-binding vote this week to demonstrate support for allowing states to impose sales taxes on out-of-state online sellers. Opponents including EBay Inc. (EBAY) have prevented House or Senate action so far in a decade-long dispute.

"If this gets 60 votes in the Senate, it's a pretty impressive sign," said Jason Brewer, vice president for communications and advocacy at the Retail Industry Leaders Association, a group based in Arlington, Virginia, that represents companies such as Target Corp. (TGT) and Dollar General Corp. (DG) "Just take a look at the political landscape. How many issues are attracting bipartisan support these days?"

The lobbying has been particularly intense among Republicans, who face competing pressures. Many of their home- state governments and local retailers support the bill, as does Amazon.com Inc. (AMZN), the world's largest online retailer, which is expanding its physical presence in many states. Anti-tax groups including Americans for Tax Reform oppose it, maintaining that the levy would constitute a new type of taxation and let states reach across their borders.

Procedural Obstacles

Gathering 60 votes for an Internet sales tax is important for proponents, because that's the number needed for future legislation to overcome procedural obstacles in the 100-member Senate.

Senator Jeff Sessions of Alabama, who hadn't previously backed the measure, said fellow Republicans had made a "strong case" to him to support it.

"I think the time may be here for that fix," Sessions said in a brief interview yesterday.

The bill would let states collect taxes from out-of-state sellers, which has been prohibited since a 1992 Supreme Court decision. The measure includes an exception for smaller online companies that have gross annual sales of less than $1 million.

Consumers are typically required to pay use taxes to their home states on purchases they make from out-of-state retailers. In the 45 states with sales taxes, relatively few taxpayers file those returns.

The National Retail Federation, which supports the bill, estimates that state and local governments forgo $24 billion a year in taxes from Internet purchases by residents of their states.

Budget Resolution

Any vote this week would occur as part of the Senate's debate on a budget resolution, a measure that isn't going anywhere this year and isn't used to make binding law. Senator Richard Durbin of Illinois, the leading Democrat on the issue, said a vote was "possible" this week.

Instead, a test vote would serve as a signal that the bill's backers have enough clout to overcome procedural hurdles in the Senate if they attempt to bring it up later.

Bryan Bieron, senior director of global public policy at EBay, said the text of the proposal up for a vote may be more generic than the legislation retailers are promoting.

"It's certainly different than voting on something that's actually got specific recommendations on it," he said.

A failed Senate vote, or even a decision not to make an attempt this week, could be a signal that retailers and their allies in Congress don't think they have the votes yet.

Big-Box Stores

"Whether it gets 60 votes or 30 votes, I'm convinced that the big-box stores and state tax collectors will find a way to get this onto the Senate and House agenda this year," said Steve DelBianco, executive director of NetChoice, a coalition opposing the bill whose members include Facebook Inc. (FB) and Oracle Corp. (ORCL)

Bieron said the vote would help clarify where individual senators stand and lead to a more concentrated effort by affected companies.

The Senate bill, written by Wyoming Republican Mike Enzi, has 26 co-sponsors as of today. Among the supporters are seven Republicans, including Wal-Mart's home-state senator, John Boozman, and both senators from Tennessee, which relies heavily on sales taxes because it doesn't tax individuals' wages.

Lindsey Graham of South Carolina and Susan Collins of Maine both became co-sponsors in the past week.

Republican Backing

With that Republican backing, if all Senate Democrats support it, that would be enough to gather the 60 votes needed.

Democrats hold eight of 10 U.S. Senate seats in the five states that don't levy sales taxes -- Alaska, Delaware, Montana, New Hampshire and Oregon. Delaware's Thomas Carper became the only one of those 10 senators to sign on as a co-sponsor of the bill on March 18.

Montana Democrat Max Baucus, chairman of the Senate Finance Committee, said yesterday that the proposal is "not ready."

Brewer said backers of the bill face an "uphill battle" with lawmakers from those non-sales-tax states.

Amazon.com supports the proposal. The company, which is expanding its physical presence into more states, would be required to collect taxes in those jurisdictions anyway, giving it an incentive to seek a national rule that would govern its competitors with smaller geographic footprints.

Differing Rules

DelBianco said the bill would allow state tax auditors to reach beyond their borders and require companies to purchase computer systems to make sure they're following the differing state and local sales tax rules.

Companies such as Wal-Mart and Best Buy Co. (BBY), he said, are "large enough to afford the systems to figure this complexity out."

The latest versions of the Senate bill include language that would require states to provide software to sellers if the state doesn't join the multi-state Streamlined Sales and Use Tax Agreement designed to harmonize tax collection.

The bill may be tougher to advance in the Republican- controlled House. A companion measure in the House has 47 co- sponsors, including Alabama Republican Spencer Bachus, chairman of the House Judiciary subcommittee with jurisdiction over the issue. The lead sponsor is Steve Womack, an Arkansas Republican whose district includes Wal-Mart's headquarters in Bentonville.

Brewer, of the retail group, said companies are using a free-market argument to appeal to Republicans.

"In a true free market," he said, "all retailers compete on price without the government's thumb on the scale."

The Senate bill is S. 336. The House bill is H.R. 684.

(BN) BASF, Samsung, St.Andrews, Airvana: Intellectual Property

(Bloomberg ) BASF SE (BAS), the world's biggest chemical company, lost a U.S. appeals court bid to force Makhteshim-Agan Industries Ltd. to stop selling a version of its popular termite killer, a day after filing a new patent suit against that competitor.

Makhteshim-Agan, the world's largest maker of generic agrochemicals, didn't infringe two BASF patents, the U.S. Court of Appeals for the Federal Circuit in Washington said yesterday in an opinion posted on its website.

The dispute is over a way of applying insecticides that use the chemical fipronil in and around a building. The patents cover Ludwigshafen, Germany-based BASF's Termidor, which has been sold for more than a decade and is the top-selling termite product in the U.S. BASF sued Makhteshim-Agan in 2010, after it began selling its own version of the insecticide under the name Taurus SC.

U.S. District Judge William Osteen in Greensboro, North Carolina, was correct in finding the BASF patents covered a specific way of applying fipronil, while Makhteshim-Agan used a different application method, the three-judge Federal Circuit panel ruled.

Anne Burt, a spokeswoman for BASF, said the company is reviewing yesterday's decision.

BASF filed a new patent-infringement suit March 19 against Makhteshim-Agan in federal court in Georgia. It claims Taurus SC is made using a manufacturing process covered by another patent.

"Intellectual property is the cornerstone of our innovation-based marketplace," Jan Buberl, director of specialty products for BASF North American Crop Protection, said in a statement. "Improper activity that undermines patent protection laws is unfair to those who act properly and lawfully."

Fipronil is an insecticide also used in flea and tick control products for pets. Makhteshim-Agan, based in Tel Aviv, was bought in 2011 by China National Chemical Corp. and taken private.

The case is BASF Agro BV Arnhem v. Makhteshim Agan of North America, 12-01206, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is BASF Agro B.V. Arnhem v. Makhteshim Agan of North America, 10-cv-00276, U.S. District Court, Middle District of North Carolina (Greensboro).

The new case is BASF Agro B.V. Arnhem v. Makhteshim Agan of North America, 13-cv-00867, U.S. District Court, Northern District of Georgia (Atlanta).

Samsung Countersues Ericsson After Failed Patent License Talks

Samsung Electronics Co. (005930) countersued Ericsson AB for patent infringement, claiming it unlawfully used the South Korean phone maker's technology and breached an agreement.

Asia's biggest technology company is asking that Ericsson's lawsuit against it for alleged patent violations be thrown out as the claims are invalid, according to papers filed March 18 in U.S. federal court in Texas. At issue are 13 different patents related to various aspects of mobile-telephone technology.

Ericsson, the world's largest maker of wireless networking equipment, sued Samsung in November after failing to extend a licensing deal after years of negotiations. The two companies have also filed complaints against each other with the International Trade Commission over alleged patent infringements.

"Over the course of two years of negotiations between the parties, Ericsson has engaged in a pervasive and pernicious pattern of refusing to grant licenses to Samsung on fair, reasonable and non-discriminatory terms," Samsung said in its filing.

Stockholm-based Ericsson had said in its lawsuit that it offered to extend its previous licensing agreement with Samsung on such terms and the Suwon, South Korea-based company refused.

The case is Ericsson Inc. v Samsung Electronics Co., 6:12- cv-00895, U.S. District Court, Eastern District of Texas (Tyler).

Apple Sued for Security-Patent Infringement by Intertrust

Intertrust Technologies Corp., a developer of digital rights management software jointly owned by Sony Corp. (6758) and Royal Philips Electronics NV, sued Apple Inc. for allegedly infringing 15 patents related to mobile-device security.

The company's iPhone, the iPod touch, iPad product lines, laptop computers, Apple TV and App Store are built on secure computing technologies developed and patented by Intertrust, Intertrust said in a complaint filed yesterday in Oakland, California, federal court. Intertrust has previously sued Microsoft Corp. (MSFT) over patents. The software maker settled and licensed the technology in 2004 for $440 million, according to the complaint.

"Apple's decision to free-ride off Intertrust's innovations has caused, and continues to cause, substantial harm to Intertrust," according to the complaint.

Intertrust is seeking a court order barring further infringement and sales of products that infringe the patents, lost profit damages, a reasonable royalty and a finding that the infringement was willful, which would triple damages.

Steve Dowling, a spokesman for Cupertino, California-based Apple, didn't immediately return an e-mail seeking comment on the lawsuit.

The case is Intertrust Technologies Corp. v. Apple Inc. (AAPL), 13-cv-01235, U.S. District Court, Northern District of California (Oakland).

Trademark

St. Andrews Trust Seeks Registration for 'St. Andrews' Mark

The St. Andrews Links Trust, which operates the famed St. Andrew's golf course in Scotland, has applied to register "St. Andrews" as a European trademark, the U.K.'s Courier newspaper reported.

The application, filed to cover a broad range of golf- related goods and services, was made in efforts to halt outsiders' attempts to profit through the use of the name, according to the Courier.

A spokesman for trust told the Courier that local businesses that identify themselves as being from St. Andrews won't be under any threat of trademark enforcement.

The trust, which bills the St. Andrews golf course as the oldest and most renowned in the world, said it was its duty to seek registration as means of nurturing what the name symbolizes around the world, according to the Courier.

Python Software Foundation, Veber Reach Trademark Agreement

The Python Software Foundation, a non-profit group that holds the IP rights behind the Python programming language, reached an accord with PO Box Hosting Ltd., the foundation said in a statement.

The foundation had objected a European trademark application filed by U.K.-based PO Box Hosting, which does business as Veber in Europe. Veber will rebrand its Python cloud server and backup services under an as-yet undetermined name, according to the statement.

Veber has agreed to withdraw its European application and support the foundation's use of the Phython name. According to the database of the U.S. Patent and Trademark Office, the foundation registered "Python" for use with computer programs and a computer programming language in March 2004.

Tim Poultney, managing director of PO Box Hosting and Veber, said in a statement the "use of the Python name for our cloud server and backup business has ceased with the services now available in Europe from Veber. This agreement will remove potential confusion between the Python software language and our cloud services business."

Wowo Appeals Trademark Revocation, Say Mark Isn't Like Thai Flag

The head of a 300-unit convenience-store chain based in Chengdu, China, filed suit in a Beijing court this month, seeking to overturn the ban on his trademark for its alleged too-strong resemblance to Thailand's flag, China Daily reported.

After a Thai official who saw the signs on the Wowo Inc. convenience stores complained that they used the same design and arrangement of colors as his country's flag, the Trademark Office of the State Administration for Industry and Commerce revoked the mark, according to the newspaper.

Tan Yaohua, chairman of the Wowo stores, said that he had no intention to infringe and that when he designed his stores' logo, he didn't even know what the Thai flag looked like, China Daily reported.

Xuan Zhiyu, secretary-general of the Shanghai Chamber of Commerce, told China Daily that he didn't think of the Thai flag when he looked at the Wowo logo and had never heard anyone else remark on the alleged similarity either.

Trade Secrets/Industrial Espionage

Airvana Granted Injunction in $330 Million Ericsson Suit

Airvana Network Solutions Inc. was granted a preliminary injunction in its intellectual-property lawsuit against Ericsson AB, the world's largest maker of wireless networks.

Airvana, a Chelmsford, Massachusetts-based provider of network-infrastructure software, sued Ericsson in February 2012 for more than $330 million, accusing the Stockholm-based company of developing software based on Airvana trade secrets and using it to operate wireless network equipment to avoid paying license fees.

New York State Supreme Court Justice Barbara Kapnick, in an order dated March 19, granted Airvana's request for an injunction blocking Ericsson from "using, operating, testing or deploying" certain hardware unless it's using software licensed from Airvana.

"Airvana has met its burden of showing that it will suffer irreparable harm absent the requested injunctive relief," Kapnick wrote.

Kathy Egan, a spokeswoman for Ericsson in the U.S., didn't immediately respond to a voice-mail message seeking comment on the ruling.

The case is Airvana Network Solutions Inc. v. Ericsson Inc., 650360-2012, New York State Supreme Court, New York County (Manhattan).

Quote of the Day: the Value of Books

George Boole, a self-taught logician, the inventor of Boolean logic, an essential element of today's math and computing:

In later years, reminiscing about this period in his life, he explained that having a very limited budget for buying books, he found that mathematics books provided the best value because it took longer to work through them than books on other subjects.

                             - Source: The Universal Computer, by Martin Davis. 2000.

In today's world where books are very inexpensive, the most valuable books are those that are easy to read, i.e., accessible to lots and lots of people.

tags: creativity, invention, science, logic, control

(BN) Apple, Samsung, Adidas, Dotcom: Intellectual Property

(Bloomberg ) Apple Inc. asked a U.S. appeals court to reinstate patent-infringement claims it filed against Google Inc. (GOOG)'s Motorola Mobility unit over touch-screen technology used in mobile phones.

"This is Apple's first touch-screen patent," Apple lawyer Joshua Rosenkranz of San Francisco's Orrick Herrington & Sutcliffe LLP told a three-judge panel of the U.S. Court of Appeals for the Federal Circuit in Washington yesterday. The patent was for "a key invention and it drove the iPhone phenomenon and later the iPad. It claims something that no one had ever done."

Apple is appealing a U.S. International Trade Commission decision over transparent screens that can sense multiple touches in different locations, enabling users to operate a mobile phone by touching or swiping its screen. Motorola Mobility persuaded the agency to rule that Apple's patent 7,663,607 was invalid and its patent 7,812,828 wasn't infringed.

Commission lawyer Megan Valentine defended the agency's decision, saying the Apple multitouch invention was very similar to earlier technology, including patent 7,372,455 which was issued to an Israeli company in 2008, and a Sony Corp. paper for a product called SmartSkin.

"The algorithms are nearly identical in the two patents," she told the panel. She also defended the commission's finding that the commercial success of the iPhone wasn't proof of the uniqueness of the patented invention.

Motorola Mobility lawyer David Nelson of Quinn Emanuel in Chicago said the two patents "describe that same sensing device." He also urged the court to uphold the finding of non- infringement, saying the judge's interpretation of that patent was correct.

In its filings with the court, Apple said figuring out how a device with a transparent screen could accurately detect multiple touches was a "head-scratcher." Apple said Motorola Mobility tried and failed to develop its own useful touchscreen.

"The moment Apple unveiled its invention, we all know what happened," Rosenkranz told the court. Cupertino, California- based Apple has claimed other handset makers copied the iPhone and has filed patent-infringement lawsuits around the world.

Motorola Mobility, in its filing, called Apple's description of its inventive process as "equal parts fiction, hyperbole, and litigation-inspired hindsight."

The ITC in Washington has the power to block imports of products that violate U.S. patents. Since most smartphones are made in Asia, the trade agency has become a central front as handset manufacturers use patent litigation as part of an overall effort to increase their own market share.

The case is Apple Inc. (AAPL) v. ITC, 12-1338, U.S. Court of Appeals for the Federal Circuit (Washington). The ITC case is In the Matter of Mobile Devices and Related Software, 337-750, U.S. International Trade Commission (Washington).

Apple Decision in Complaint by Samsung Delayed by Trade Agency

A final decision in Samsung Electronics Co.'s patent- infringement case against Apple Inc. was delayed by the U.S. International Trade Commission until next week.

The commission set a new target date of March 13 without explaining the reason for the delay in a notice posted on its website. The agency must decide whether Apple infringes four Samsung patents and, if so, whether the appropriate remedy would be to limit U.S. imports of the iPhone and iPad tablet computer.

Trademark

Adidas Wins South African Trademark Case Involving Shoe Stripes

Adidas AG (ADS), the German maker of athletic shoes, persuaded an appeals court in South Africa to order Castellina Investments Ltd.'s Pepkor Group to stop selling shoes that infringe the Adidas three-stripe trademark, South Africa's Business Day reported.

The court also ordered Pepkor either to remove the stripes from the shoes or to surrender them to Herzogenaurach, Germany- based Adidas, according to Business Day.

The ruling overturned a lower court determination of non- infringement, Business Day reported.

Pepkor, which operates Pep Stores and Ackermans in South Africa, had argued that the patterns of four stripes on its shoes were a mere embellishment, and that Adidas's trademark registration covered only a three-stripe pattern, according to Business Day.

Copyright

Dotcom's Prosecutors Urged by Court to Cooperate in N.Z. Lawsuit

Kim Dotcom's prosecutors in New Zealand must cooperate with the indicted Internet entrepreneur's lawyers to expedite his lawsuit over illegal wiretaps and a police raid on his home, an appeal court said.

A three-judge panel of the Court of Appeal of New Zealand in Auckland yesterday affirmed a lower court decision that Dotcom can sue the Government Communications Security Bureau, New Zealand's spy agency, for illegally intercepting his communications before last year's police raid on his mansion in an Auckland suburb and the seizure of his equipment.

The judges said prosecutors ignored proper procedures in filing the appeal before a decision was made on compensation, referred to as a Baigent claim, according to yesterday's ruling. Dotcom was indicted in what was dubbed a "Mega Conspiracy" by U.S. prosecutors, who accused his Megaupload.com website of generating more than $175 million in criminal proceeds from the exchange of pirated film, music, book and software files.

"We urge the parties to cooperate," the judges wrote in the ruling. Prosecutors "should have asked the chief judge to determine the position in relation to the police Baigent claim before this appeal," they said.

Dotcom, 39, faces as long as 20 years in prison for each of the racketeering and money-laundering charges in the indictment, with the U.S. seeking his extradition for a trial in Virginia. An extradition hearing in New Zealand is scheduled for August.

"We look forward to holding GCSB spy org accountable," Dotcom's lawyer Ira Rothken said on Twitter. "Doing so will not only protect @KimDotcom's rights but the rights of all NZ residents."

The case is Between Kim Dotcom and Attorney General. CIV2012-404-001928. High Court of New Zealand (Auckland).

ASMP Weighs In on 'Orphan Works,' Endorses PLUS Registry System

The American Society of Media Photographers, a Philadelphia-based trade group of photojournalists and other photographers, submitted comments to the U.S. Copyright Office with respect to what are known as "orphan works."

An "orphan work" is a work for which the owner of its copyright can't be located.

ASMP said in its comments that it joins with the National Press Photographers Association in endorsing a licensing system that uses standardized language and a machine-readable coding architecture. The system, known as the Picture Licensing Universal System, has been endorsed by a wide range of image creators and users.

Among the organizations that are members of the PLUS advisory council are the Association of American Publishers, the Japan Photographers Union, the Newspaper Association of America and the White House News Photographers Association.

ASMP said in its submission to the Copyright Office that two keys to minimizing or eliminating entirely the existence of orphan works are "persistent attribution and registries."

For the system to be of value in a digital environment, the attribution must remain attached to the images as they make their way "through the channels of usage and distribution," ASMP said.

Trade Secrets/Industrial Espionage

USDA Seeks Comments on Sharing of Information on GM Organisms

The U.S. Department of Agriculture's Animal and Plant Inspection Services is considering new regulations that would make it easier to share information about genetically engineered organisms with state and tribal authorities, even when it comes under the heading of "confidential business information" or trade secrets.

In a notice published in the Federal Register, the USDA said that entities that are introducing genetically engineered organisms have typically claimed a wide range of information be designated as confidential.

These include the genes, the gene donor, production details, the organism's observable characteristics, the location of the introduction of the organism, the purpose of the environmental release, proposed procedures and confinement methods, and mitigation measures to prevent dissemination.

State and tribal officials may need to know some of these details to coordinate responses in the event of local emergencies such as a hurricane or tornado, or accidental release of the organism because of damage to the confinement facility.

"In these events, state and tribal government officials in proximity to the area of concern may be better prepared to respond to this situation if they already have knowledge of the regulated article, the location of the site, and the identities of the personnel responsible for the site," the USDA said.

Because such information is often designated a trade secret, and the Animal and Plant Inspection Service is barred from sharing it, "participation of the state or tribes may be hampered," according to the USDA notice.

As a method for safeguarding this information, the USDA said that if it is to be retained by state and tribal authorities, only paper copies would be authorized. The agency said that although it's looking at a variety of electronic options, "providing a new and separate secure system was not likely to be economically viable" for the inspection service.

The FDA is seeking comments on the proposed regulations from all interested parties, including the public. They must be received by April 29, according to the notice.

(BN) Amazon Cloud Revenue Heads Higher as Google Plays Catch-Up: Tech

(Bloomberg ) Amazon.com Inc. (AMZN)'s Web Services division, whose server farms generate the processing power the retailer sells to heavy corporate data users on the cheap, has grown so large that the unit routinely finds itself with thousands of spare machines.

So the e-commerce giant created a supply-and-demand-driven market called Amazon EC2 Spot Instances that lets clients rent processors for as little as 10 percent of Amazon's standard cloud-services fees. To use Spot Instances, companies bid for the rights to a certain number of servers. Winning bidders are billed by the hour, as long as the market price hasn't risen above an upper bound they specify.

The marketplace gives Seattle-based Amazon and its 7-year- old cloud-computing division an added advantage over Microsoft Corp. and Google Inc. (GOOG), which are racing to catch up after a late start. Analysts at Macquarie Securities estimated in a Jan. 7 report that total Amazon Web Services revenue will almost double this year to $3.8 billion and will reach $8.8 billion by 2015. Web Services will kick in close to 5 percent of sales this year, up from 3.4 percent last year, and will rise to almost 8 percent by 2015, Macquarie projected.

Were AWS a standalone company, it would be worth $24 billion, according to a March 5 report by Carlos Kirjner, an analyst at Sanford C. Bernstein & Co. That's more valuable than two-thirds of the companies in Standard & Poor's 500 Index, and accounts for about a fifth of Amazon's stock market value.

Analyzing Terabytes

Amazon's lead in the public-cloud market, which Gartner Inc. estimates jumped 20 percent last year to $109 billion, poses a challenge for technology competitors. As an e-commerce company, Amazon's operating margins are already razor-thin - -1.11 percent in 2012 -- while Google and Microsoft generated margins last year of greater than 25 percent. That means Amazon can cut prices on cloud services without affecting its total profitability.

Investors aren't fazed by Amazon's low margins. The stock trades at 186 times estimated earnings for this year, compared with a ratio of 18 for Google and 10 for Microsoft.

Spot Instances was started in 2009, though the spot market has taken off only in the past year, Amazon EC2 Vice President Matt Garman said. Researchers in genomics and drug design as well as online advertising increasingly use Spot to analyze terabytes of data, while companies such as Cycle Computing LLC, Princeton Consultants Inc., and Numerate Inc. have built businesses that track market prices for heavy data users.

Spot Algorithms

"We're finally starting to see the real change in the slope of adoption," Garman said. While he declined to provide specifics on how profitable the product is or how many customers use it, the company says much of its increased spending on "technology and content" went to add capacity for Amazon Web Services.

Princeton Consultants, a strategy and software firm, is among the companies that developed algorithms to monitor Spot Instances' pricing and availability for clients in need of server time. Chief Executive Officer Steve Sashihara said his program, OptiSpotter, provides small hedge funds with the edge they need to compete with investment banks and global funds in the cutthroat world of high-frequency trading.

"It's completely game-changing" for clients to cut a project's processing costs from $100,000 to $10,000 and get supercomputer-like processing power, Sashihara said. "A couple guys with $50 million can be trading at high frequency and be taking on Goldman Sachs and Morgan Stanley."

On Deadline

One big catch limits the utility of Spot Instances: If rising demand sends prices skyward, a customer must outbid the higher price to keep its project running. Otherwise, Amazon shuts their servers off in midstream. That's a deal-breaker for clients using it to host websites or stream video.

"For people running with hard deadlines, it's not an appropriate solution," said Michael Crandell, CEO of RightScale Inc., which helps companies manage cloud services.

Still, Crandell says he expects Spot Instances to keep growing. As much as 15 percent of Amazon servers his customers rent is now from Spot Instances, he says, up from the low single digits in mid-2011.

Julie Black joined Web-advertising startup TellApart Inc. in 2011 as director of engineering after six years at Google. She uses Spot Instances regularly, because her former employer's recently introduced cloud platform, Google Compute Engine, doesn't offer a comparably cheap market. Burlingame, California- based TellApart analyzes online shoppers' habits for retailers such as Nordstrom Inc. (JWN), One Kings Lane Inc., and CafePress Inc. (PRSS)

Faster, Cheaper

To provide better results than its dozens of competitors, TellApart uses Spot Instances to collate more than 10,000 queries per second from hundreds of millions of people, with the bulk of the work occurring during off-peak hours when prices are lower. Black said the company, backed by almost $18 million from venture investors including Greylock Partners and Bain Capital Ventures, rents hundreds of machines at a time. Its monthly check to Amazon is about 75 percent less than it would be for cloud servers at the on-demand price.

"We process data faster and cheaper because we can use more machines," she said. "Everything we do relies upon this core piece of technology."

(BN) China Mobile Industry Too Dependent on Google Android

(Bloomberg ) China's smartphone makers are "heavily dependent" on Google Inc. (GOOG)'s Android mobile operating system, hampering the development of the domestic industry, according a white paper from a government research institute.

Android's core technology is strictly controlled by Google, and Chinese businesses face commercial discrimination, including delays in sharing code, according to a document dated in February from the China Academy of Telecommunication Research, under the Ministry of Industry and Information Technology.

New market entrants will encounter substantial obstacles, the institute said. China has more than 300 local Android- handset manufacturers, accounting for 97.7 percent of domestically produced smartphones, the report said.

Worldwide, Android dominates the smartphone market with about 70 percent of shipments, followed by Apple Inc.'s iOS, and BlackBerry's operating system.

(BN) VirnetX Says Cisco Should Pay $258 Million Over Patents

(Bloomberg ) Cisco Systems Inc. (CSCO) should pay $258 million for infringing patents over secure private communications technology, a lawyer for VirnetX Holding Corp. (VHC) told a federal jury today.

Cisco began using a VirnetX invention to improve security in 2005 and has made more than $1 billion of revenue related to the technology, VirnetX lawyer Doug Cawley, of McKool Smith, said during opening arguments at a trial in Tyler, Texas.

The dispute is over virtual private networks, through which a website owner can securely interact with a customer or an employee can work at home and have protected access to a company's electronic files. VirnetX won a $368.2 million verdict against Apple Inc. (AAPL) in November over the same technology before a different Tyler jury. Cisco denies infringing the four patents, contends they are invalid, and argues VirnetX isn't entitled to any damages.

"VirnetX did not invent secure communication over the Internet," said John Desmarais of Desmarais LLP in New York, representing Cisco. San Jose, California-based Cisco "uses industry standard parts" and doesn't violate VirnetX's patent rights, he said.

Two of the patents in the Cisco case also were asserted against Apple in the trial last year. VirnetX is asking the jury to award it a "reasonable royalty," while Cisco argued in court documents that any damages should be limited or excluded altogether because Zephyr Cove, Nevada-based VirnetX took too long to file suit.

Networking Functions

The case targets Cisco routers, software and phones that have virtual-private-networking functions including its Unified Communications Manager product, Telepresence or AnyConnect. Cisco, whose products handle traffic over the Internet, reported sales of $12.1 billion in the quarter ended Jan. 26.

VirnetX, which reported in its annual report that it has an accumulated deficit of $62.9 million, relies on patent licensing for its revenue. It is beta testing its Gabriel Connection Technology to create secure communications links, it said in the annual report. The company received $200 million from Microsoft Corp. from a settlement in 2010.

U.S. District Judge Leonard Davis, who is presiding over both the Apple and Cisco cases, on Feb. 26 upheld the jury verdict against Apple. Davis denied a VirnetX request for an order that would have limited Apple's ability to provide virtual private networks on its products.

In rejecting the request, Davis said that VirnetX's Gabriel software isn't commercially available, so Apple hadn't damaged the company's business. He also said that cash would be sufficient to compensate VirnetX for the infringement. In that ruling, the judge ordered the two sides to confer to try to work out a license for future royalties.

The case is VirnetX Inc. v. Cisco Systems Inc., 10cv417, U.S. District Court for the Eastern District of Texas (Tyler).

(BN) Wal-Mart Anxious to Combat Amazon’s Lead in Web Vendors

(Bloomberg ) Wal-Mart Stores Inc. (WMT) is "anxious" to take on Amazon.com Inc.'s Marketplace, where independent merchants sell millions of products.

According to minutes from a Feb. 1 officers meeting led by U.S. Chief Executive Officer Bill Simon, Wal-Mart considers Marketplace Amazon's "number one weapon."

"This is an area" Wal-Mart is "anxious to compete in," according to the minutes, which were obtained by Bloomberg News. Participants at the meeting also focused on the savings Amazon has captured by offloading shipping costs to its army of independent sellers.

Four years after starting its own version of Marketplace -- called Marketplace -- Wal-Mart has signed up six outside merchants, including one that sells sports memorabilia. Amazon has 2 million that sell everything from clothing to mobile phone cases. More and more Wal-Mart customers are shopping at Amazon, according to research and consulting firm Kantar Retail. Yet Wal-Mart continues to pour capital into its brick-and-mortar operations. This year the world's largest retailer plans to open about 130 supercenters, which Simon called Wal-Mart's "primary growth vehicle" in an earnings call last month.

"I can think of better investments for the long-term when this is 2013 and the biggest competitor is Amazon (AMZN)," said Leon Nicholas, Kantar's Boston-based senior vice president. "I don't think there's anyone who would argue that the supercenter is the store of the future."

Re-Invention Struggle

Retailers from Wal-Mart to Sears Holdings Corp. (SHLD) to Best Buy Co. are struggling to re-invent themselves as consumers increasingly shop on the Web. U.S. online sales grew more than 17 percent between 2011 and 2012, more than four times faster than overall retail sales, according to Kantar.

The minutes of the Feb. 1 meeting show how closely Bentonville, Arkansas-based Wal-Mart is monitoring its Seattle- based rival. In a section headed "Amazon Update," the minutes said the online retailer's competition was "getting better" and that EBay Inc. (EBAY) and Google Inc. (GOOG) were ramping up their efforts to take on Amazon.

David Tovar, a Wal-Mart spokesman, declined to comment on the contents of the minutes, while Ravi Jariwala, a Wal-Mart spokesman based in San Bruno, California, said the company was taking a "thoughtful approach" to its Marketplace strategy.

Pia Arthur, an Amazon spokeswoman, didn't return e-mails seeking comment.

In the fourth quarter of 2012, 53 percent of Wal-Mart customers said they also shopped on Amazon, compared with 47 percent a year earlier, according to data from Kantar. Six years ago, only about a quarter of Wal-Mart customers shopped at Amazon.

Amazon's Draw

In the past five years Wal-Mart shares have gained 45 percent, while Amazon has more than quadrupled.

More than 12 years after opening its Web store, Wal-Mart generates about $5.15 billion, or 2 percent, of its total annual sales online, according to Kantar, which is based in London. Amazon's North American sales last year: $34.8 billion.

In an interview, Jariwala defended Wal-Mart's emphasis on supercenters, saying that the locations double as distribution and pickup centers for merchandise bought on the Web. Half of orders placed online are picked up at the stores, which saves on shipping costs, he said.

Wal-Mart opened its own version of Marketplace in 2009 yet "most people don't even realize it exists," said Nicholas.

Jariwala acknowledged Wal-Mart's reticence to promote Marketplace and said: "We need to make enhancements and improvements to our e-commerce platform first."

'Very Selective'

While he said Marketplace is "a big part of our expansion," Jariwala declined to say how many merchants will be added or what they'll sell. Wal-Mart's third-party merchants include eBags, Shoebuy.com and ToolKing.com.

"We are very selective," he said. "We choose merchants with high-quality products and high-level customer service."

Matt Nemer, a senior analyst for Wells Fargo Securities, said the breadth of products is what drives shoppers to Amazon.

"Amazon will take anything as long as it's legal," said Nemer, who is based in San Francisco, while Wal-Mart has "sensitivities" about signing vendors that will compete directly with it.

In recent months, Wal-Mart has been adding thousands of so- called consumables to its website -- items such as cereal and pet food that shoppers buy routinely, said Anne Zybowski, who directs research on Amazon for Kantar. Wal-Mart may be gearing up to borrow another part of Amazon's strategy, a subscription service that allows consumers to have products automatically delivered on a regular basis, she said.

Direct Assault

Amazon debuted its Subscribe & Save service almost six years ago. The innovation is a direct assault on Wal-Mart supercenters, which have long carried consumables as a way of getting shoppers to visit once or more a week.

"Like Wal-Mart of the '80s or '90s, this is the new one- stop shop," Zybowski said. "People don't want to deal with items they know they have to replenish."

Part of Wal-Mart's challenge is that the more people shop its website, the less they'll visit supercenters, she said.

Still, "it's better to cannibalize themselves than have those shoppers go to Amazon."

(BN) Apple, Gildan, Waterford, Google: Intellectual Property

(Bloomberg ) Apple Inc. (AAPL)'s $1.05 billion victory against Samsung Electronics (005930) Co. in a patent infringement case was cut almost in half by a judge who ordered a new trial for some Samsung products.

U.S. District Judge Lucy Koh in San Jose, California, in a March 1 ruling, reduced the jury's damages award by $450.5 million and said Samsung deserved a new trial on infringement claims over its Galaxy Prevail and other smartphones. Koh rejected Apple's request to enhance the jury's award, saying the amount Samsung owed was heavily disputed and the jury wasn't bound to accept either side's damages estimate.

"It is not the proper role of the court to second-guess the jury's factual determination as to the proper amount of compensation," Koh said in her ruling.

Apple is entitled to additional damages for sales of infringing products that weren't considered by the jury, Koh ruled, saying she intends to calculate the amount beginning on Aug. 25, the day after the jury reached its verdict. As the case has been appealed, Koh said she would delay considering evidence of actual post-verdict sales and pre-judgment interest until the appeals are completed.

Koh encouraged both companies to seek appeals court review of her March 1 order before any new trial.

Samsung and Apple, the world's two biggest smartphone makers, have each scored victories in patent disputes fought over four continents since Apple accused Asia's biggest electronics maker of "slavishly copying" its devices. The companies, competing for dominance of a global mobile-device market estimated by researcher Yankee Group at $346 billion in 2012, are fighting over patents even as Apple remains one of Samsung's biggest customers.

Steve Dowling, a spokesman for Apple, said the company had no comment on the ruling. Samsung spokesman Adam Yates didn't immediately respond to e-mails seeking comment.

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

Trademark

Gildan to Pay Trademark Damages to Berkshire Hathaway Units

Gildan Activewear Inc., a Canadian sportswear manufacturer, was ordered to pay $1.05 million to two units of Berkshire Hathaway Inc. (BRK/B)

The order came in a trademark infringement suit Russell Brands and Union Underwear Co. filed in federal court in Kentucky in October 2012. Russell and Union Underwear, which does business as Fruit of the Loom, said Gildan had substituted its own label on the Jerzees clothing that had been made by Fruit of the Loom under license from Russell.

The label switch occurred after Dollar General Corp. (DG) switched suppliers for one of its product lines.

According to court papers, as part of the Dollar General supply arrangement with Gildan, the Montreal-based company was required to buy the remaining Jerzees inventory in the store's distribution centers and replace it with Gildan's own products.

In the complaint, the Berkshire Hathaway units claimed its labels were either partially ripped out or altered to reflect Gildan's trademarks.

The court ordered Gildan to pay $1 million in damages, and $50,000 in attorney fees. Additionally, the court said the Canadian company was barred from removing labels from or adding its own label to Jerzees clothing. All Jerzees apparel in Gildan's custody or control is to be destroyed within 30 days, the court said.

A Gildan spokesman told the Toronto Star that it offered the settlement to end the litigation and didn't admit to any wrongdoing.

Dollar General isn't a party to the case.

The case is Russell Brands LLC v. Gildan Activewear Inc. (GIL), 1:12-cv-00176-TBR-HBB, U.S. District Court, Western District of Kentucky (Bowling Green).

KPS Capital Partners' Waterford Targeted in Trademark Action

The U.K.'s largest trade union has filed a complaint with the European trademark registrar over KPS Capital Partners plans to start manufacturing its Waterford Crystal in Slovenia violates geographic name protections, the New Legal Review reported Friday.

The Ireland branch of the union Unite has said the move to Slovenia would cause the loss of an important skill base and shatter the link between glass production and the local area, according to New Legal Review.

Walter Cullen, the national coordinator for Unite said, and the New Legal Review reported, that other areas such as Champagne and Parma have managed to protect links between the place name and the product manufactured there.

The union is also concerned that more than 600 skilled jobs will be lost to Waterford if manufacturing moves to Slovenia, according to New Legal Review.

Fender Sues Maker of 'Authentic Vintage Replica' Guitars

Fender Musical Instruments Co. (FNDR), whose guitars have been played by the late Jimi Hendrix, Buddy Holly and John Lennon, sued a Tennessee guitar maker for trademark infringement.

Keldon Swade of Franklin, Tennessee, makes replica guitars that Fender claims infringe the company's marks. The guitar company said Swade also uses the company's trademarks on its website. Swade's website says he makes "authentic vintage replicas."

Scottsdale, Arizona-based Fender said that it sent Swade a cease-and-desist notice to no avail. The company claimed it's harmed by the guitar-maker's actions and that the public is confused by the unauthorized use of Fender trademarks.

It asked the court to order Swade to halt his infringement and for the seizure and destruction of all infringing products and promotional material. Additionally, Fender seeks awards of money damages of as much as $2 million for each trademark it said Swade has infringed, and attorney fees and litigation costs.

Swade didn't respond immediately to an e-mail sent to his website.

The case is Fender Musical Instruments Corp. v. Swade, 2:13-cv-00431-NVW, U.S. District Court, District of Arizona (Phoenix).

Copyright

Google Defeats Publishers Over Web Copyright in German Vote

Google Inc. (GOOG) and other news aggregators may continue to show short news items on their Internet sites without being required to pay, German lawmakers decided in a March 1 parliamentary vote in a blow to publishers including Axel Springer AG (SPR) and Bertelsmann SE.

A majority of lawmakers from Chancellor Angela Merkel's coalition allowed companies such as Google to display "single words or very small text excerpts" referring to publishers' websites at no cost. For content exceeding these limits, publishers retain the exclusive right of use, according to the bill.

Publishers, pressed by falling revenue from newspapers and magazines, argued search engines and aggregators like Google News should pay for displaying short excerpts from news stories. Google, which doesn't display ads on its news aggregator pages in Europe, argued its so-called "snippets" are actually helping publishers by driving traffic to their sites.

The bill by Germany's Justice Ministry gives publishers one year during which they have the sole rights to commercially use their journalistic content. Google's director of public policy in Europe, Simon Hampton, in November called this a "complete reversal of the legal situation today" and a reversal of current Web practices.

"As a result of today's vote, ancillary copyright in its most damaging form has been stopped," Google said in a statement. "However, the best outcome for Germany would be no new legislation because it threatens innovation, particularly for start-ups. It's also not necessary because publishers and Internet companies can innovate together, just as Google has done in many other countries."

Google Chairman Eric Schmidt and French President Francois Hollande earlier this year signed an agreement to settle disputes with French news sites. Under the accord, Mountain View, California-based Google will help publishers lift Web advertising sales and set up a 60 million-euro ($78 million) fund to boost their digital publishing efforts.

The search-engine operator in 2011 removed some Belgian newspaper content from its search engine after an appeals court upheld a 2007 ruling granted in favor of newspaper association Copiepresse, forcing Google to remove links and snippets of articles from Google.com and Google.be.

Google later agreed to restore French- and German-language newspapers in Belgium to search results without displaying the papers' full articles.

The bill was passed in the Bundestag with 293 votes in favor, 243 against and three abstentions.

U.S. Wins Bid to Limit Disclosure in Kim Dotcom Extradition

The U.S. won an appeal in its bid to limit the amount of information it must turn over to Megaupload.com founder Kim Dotcom in his fight against extradition from New Zealand.

The New Zealand Court of Appeal overturned a ruling that ordered the U.S. to provide extensive documents relating to Dotcom's indictment, saying the disclosure would slow proceedings.

"If suspects were entitled to extensive disclosure of documents on the basis that they wished to challenge the evidence at the extradition hearing, the procedure would lose much if not most of its efficacy," the Court of Appeal said in a summary of the ruling on its website March 1.

Dotcom, 39, was indicted in what U.S. prosecutors dubbed a "mega conspiracy," accusing his file-sharing website of generating more than $175 million in criminal proceeds from the exchange of pirated film, music, book and software files. He faces as long as 20 years in prison for each of the racketeering and money-laundering charges in the indictment, with the U.S. seeking his extradition for a trial in Virginia.

The amount of documentation ordered to be turned over to Dotcom was unprecedented in the country or anywhere else for extradition cases, the U.S. had argued.

Paul Davison, one of Dotcom's lawyers, said he plans to appeal to New Zealand's Supreme Court, the Associated Press reported.

Germany-born Dotcom was arrested at his home in an Auckland, New Zealand, suburb in January last year and spent four weeks in jail before being released to await the extradition hearing, which is scheduled for August.

The case is between U.S. and Kim Dotcom. Civ 2012-404-3026. High Court of New Zealand (Auckland).

Invention of the Day: Effective Placebo

A year ago The New Yorker ran an article about placebo research at Harvard:

The findings, while difficult to translate into medicine, have been compelling. In most cases, the larger the pill, the stronger the placebo effect. Two pills are better than one, and brand-name pills trump generics. Capsules are generally more effective than pills, and injections produce a more pronounced effect than either. There is even evidence to suggest that the color of medicine influences the way one responds to it: colored pills are more likely to relieve pain than white pills; blue pills help people sleep better than red pills; and green capsules are the best bet when it comes to anxiety medication.

In short, how people feel about the pills they receive makes a real difference in the way their bodies respond to pain and disease. In a classic experiment mentioned in the article, researchers found brains of those who responded positively to placebos produced endorphins,  substances chemically similar to opiates.

I wonder if the same effect works in creativity. Many experiments show that how people feel about their chances for success directly affects outcomes (e.g. math scores, athletic achievements). It would be interesting to give people "creativity pills" and see if they come up with better ideas. Based on the placebo research, we know that the pills should be large and colorful :)

tags: creativity, biology, science, technology