(BN) Facebook Said to Plan to Sell TV-Style Ads for $2.5M Each

(Bloomberg ) Facebook Inc. (FB), seeking to break the long-held dominance of television over advertising budgets, plans to sell TV-style commercials on its site for as much as $2.5 million a day, two people familiar with the matter said.

The world's largest social-networking site, which has 1.15 billion members, expects to start offering 15-second spots to advertisers later this year, according to the people, who asked not to be named because the plans aren't public.

The move would follow efforts by Facebook's online rivals to capture ad dollars that have traditionally gone to TV networks. Google Inc. (GOOG) began funding original content channels on its YouTube video-sharing site in recent years, giving it a more curated venue for commercials. A year ago, AOL Inc. (AOL) started HuffPost Live, a CNN-like video stream running five days a week.

With Facebook, the idea would be to capitalize on the millions of users who actively check the site on a daily basis, including during the prime-time hours coveted by television advertisers. As of last quarter, 61 percent of Facebook members were using the site daily -- a number that has risen despite management predictions that it would decline.

"Every night, 88 million to 100 million people are actively using Facebook during prime-time TV hours in the United States alone," Chief Operating Officer Sheryl Sandberg said last week on a conference call about second-quarter results.

Elisabeth Diana, a spokeswoman for Menlo Park, California-based Facebook, declined to comment on its advertising plan.

Instagram Length

While the social network already allows advertisers to upload videos to their Facebook page and then broadcast them to a user's news feed, the new service would let marketers buy their way directly into a person's feed with a 15-second pitch, according to the people. That's typically the minimum length of a television commercial.

At 15 seconds, the ads also would be the same length as Facebook's Instagram videos -- a feature that was added to the company's photo-sharing service last month. That means the commercials would come in a familiar format for users.

The commercials will initially be sold on a full-day basis and can only be targeted to users based on age and gender, according to the people. That would be a break from how ad units are currently sold on Facebook, which lets marketers target ads based on location and areas of interest -- data points that television networks generally don't offer. By relying on fewer categories, Facebook is mimicking the way television ads are purchased, an attempt to make the process more comfortable for executives accustomed to TV, the people said.

Three Showings

Facebook members won't see a commercial more than three times in a given day, the people said. Depending on how large an audience an advertiser plans to reach, the ads will range in price from $1 million to about $2.5 million a day, according to the people.

Chief Executive Officer Mark Zuckerberg, who has been working with global marketing head Carolyn Everson on the video ad service, pushed back the start date at least twice, wanting to make sure Facebook's user experience won't be tainted by the ads, according to the people. Zuckerberg wants high-definition video and easy-to-use playback features, the people said.

Zuckerberg said last week that he's sensitive to how users react to advertising in general. He plans to limit the amount of ads people see to about one for every 20 updates. That would comprise about 5 percent of a user's news feed.

No Decline

"One of the things I watch most closely is the quality of our ads and people's sentiment around them," Zuckerberg said. "We haven't measured a meaningful drop in satisfaction."

Facebook shares rose 6.2 percent to $37.63 yesterday, reaching the highest price since May 2012, the month of its rocky initial public offering. The stock climbed as high as $37.96 during the session, coming close to the $38 IPO price. Surging demand for Facebook ads, especially on mobile devices, has helped the company rebound from one of the worst technology IPOs in a decade.

Even so, television remains the undisputed king of the ad world. Advertisers plan to spend almost twice as much on television as on digital media this year, according to ZenithOptimedia, a research unit of Publicis Groupe SA. Internet ads are expected to reach $36.2 billion, or 22 percent of all media purchases, while TV advertising will garner $63.9 billion, or 38 percent.

Facebook's move also would step up competition with social-networking rival Twitter Inc., which has been courting TV advertisers in its bid to reach $1 billion in sales by 2014. Earlier this month, the microblogging site expanded a service that markets direct promotions to viewers who tweet about shows they're watching on television.

Twitter Partnerships

Twitter also has built partnerships with television networks such as Walt Disney Co.'s ESPN; Viacom Inc.'s MTV and Nickelodeon; and Time Warner Inc., owner of TNT, TBS and CNN. The agreements let the company stream videos on its site and split the resulting ad revenue with the networks, a person familiar with the matter said earlier this year.

Silicon Valley companies have had difficulty luring away ad dollars from television networks because of a lack of a single measurement system that compares TV audiences directly to Internet audiences. Figures from measurement companies such as ComScore Inc. are difficult to compare against ratings from Nielsen, the dominant firm for measuring TV ratings.

Nielsen started working with Facebook three years ago on an effort to count Internet viewership the same way it does with television. Nielsen relies on Facebook's user data to create ratings measurements for online content, whether it's an ad or a TV show streamed over the Internet.

Facebook sees the Nielsen partnership as a boon in its effort to sell more video advertising, an executive familiar with the plans said. Advertisers will be willing to spend more if they're able to present comparable Nielsen ratings figures, the person said.

In a separate report released today, Nielsen found that Facebook attracts more 18- to 24-year-old people during prime-time viewing hours than any of four major television networks.

(BN) Apple, Ben & Jerry’s, Georgia Code: Intellectual Property

(Bloomberg ) The U.S. Patent and Trademark Office issued a final rejection of a patent at issue in the dispute between Apple Inc. (AAPL) and Samsung Electronics Co., according to a July 28 court filing.

Patent 7,844,915, which covers Apple's pinch-to-expand technology, is one of more than 25 that the Cupertino, California-based company has claimed are infringed by mobile phones made by South Korea's Samsung. The infringement suit was filed in federal court in San Jose, California, in April 2011.

Counsel for Samsung informed the court in a July 28 filing, to which the patent office's 61-page rejection notice was appended.

The case is Apple Inc. v. Samsung Electronics Co., 5:11-cv-01846-LHK, U.S. District Court, Northern District of California (San Jose).

Trademark

Ben & Jerry's Ends Dispute With Adult Film Company Over Titles

A seller of adult films with titles and packaging based on Ben & Jerry's Homemade Inc. ice cream flavors will quit using those marks in its films, according to a July 29 court filing.

Ben & Jerry's, a unit of London-based Unilever NV, sued Rodax Distributors Inc., which does business as Caballero Video, in federal court in New York September 2012, claiming the DVDs and packaging violated its trademarks.

The packaging featured images of naked men and women against backgrounds that copied design elements of Ben & Jerry's ice cream containers such as grazing cows and fluffy white clouds, the company said in its complaint.

The ice cream company objected to Caballero's "Ben & Cherry's" series of 10 DVDs with titles including "Peanut Butter D-Cups" and "Boston Cream Thigh."

U.S. District Judge Lewis Kaplan issued a temporary restraining order against Caballero in September, shortly after the case was filed. The order required Caballero to recall the DVDs and to destroy all products, labels and marketing materials that infringe on Ben & Jerry's trademarks.

In the July 29 consent judgment, Caballero agreed to quit using the infringing titles for its products and not to challenge the ice cream company's ownership of its intellectual property. No financial terms are mentioned in the filing.

The case is Ben & Jerry's Homemade Inc. v. Rodax Distributors Inc., 12-cv-6734, U.S. District Court, Southern District of New York (Manhattan).

Copyright

New Zealand Parliament Apologizes to Reporter in Spy Leak Probe

New Zealand's Speaker of Parliament apologized to a journalist whose phone records were provided to an inquiry investigating how she obtained a leaked report on the nation's spy agency.

"This is completely unacceptable and I have personally apologized to the journalist concerned," Speaker David Carter said in a statement yesterday. "This private information should not have been released, and could be seen to attack the freedom of the press."

It's the latest twist in a saga sparked by revelations that the Government Security and Communications Bureau had illegally spied on Kim Dotcom, founder of the cloud-storage service Megaupload.com that the U.S. shut down on copyright infringement charges.

Peter Dunne resigned as revenue minister last month after failing to adequately respond to an inquiry into how an external review of the GSCB's spying activities was leaked to the Dominion Post newspaper.

Dunne was identified as having had frequent contact with the journalist who got the report, including 86 e-mail exchanges in the two weeks prior to the leak.

"I don't believe the release of information about a journalist or their records is appropriate," Prime Minister John Key said in parliament yesterday.

Key's government has introduced legislation that will allow the GCSB to carry out domestic spying on New Zealanders under certain circumstances, prompting protests from political opponents and peace groups.

Earlier yesterday, a group called Anonymous New Zealand hacked into 14 of the governing National Party's websites, including Key's, protesting what the group described as "despicable" legislation.

New Zealand's Defense Force yesterday denied spying on a journalist while he was working for U.S. news organization McClatchy Co. in Afghanistan, following allegations in the Sunday Star-Times newspaper.

Public.Resource.Org Confronts Georgia After Sheet Metal Accord

Public.Resource.Org ran afoul of the state of Georgia for publishing its statutes just weeks after settling a dispute over the posting of a sheet-metal group's industry standards online.

After the sheet-metal association sent a notice under the Digital Millennium Copyright Act demanding that the standards be taken down, Public.Resource.Org, aided by the Electronic Frontier Foundation, sued in federal court in San Francisco seeking a declaration that it hadn't infringed the association's copyrights.

In a July 8 filing, a settlement was spelled out. The Sheet Metal & Air Conditioning Contractors' National Association Inc. agreed not to sue over the standards' publication, and Sebastopol, California-based Public.Resource.Org said it wouldn't sue the association for two years.

On July 25, Public.Resource.Org got a letter from the chairman of the Code Revision Commission of the Georgia Legislature. The chairman said the group's publication of the Official Code of Georgia Annotated infringed copyright and demanding its removal from the website.

The state said that while it's not claiming copyright to the code's text or numbering, the annotations are protected. Georgia gave Public.Resource.Org 10 days to remove the text. If it doesn't comply, the state will add a claim of willful infringement, according to the letter.

Public.Resource.Org responded yesterday, declining to remove the code. The organization rejected the distinction between the text of the law and additional materials, "as both are integral part and parcel of the only Official Code of Georgia Annotated, such material constituting the official law as published by the state."

The group said that Oregon had asserted copyrights to its Revised Statutes, demanding a license for their publication, but after a public hearing the state "unanimously waived any assertion of copyright."

Public.Resource.Org said its publication of the Georgia laws "should be encouraged, not threatened."

The organization's founder, Carl Malamud, said he would be happy to come to Georgia to discuss the issue with lawmakers.

The sheet metal case is Public.Resource.org v. Sheet Metal and Air Conditioning Contractors' National Association Inc., 3:13-cv-00815-SC, U.S. District Court, Northern District of California (San Francisco).

Trade Secrets/Industrial Espionage

MIT Report Faults Neutrality Toward Swartz in Downloading Case

The Massachusetts Institute of Technology, while maintaining a "neutral" stance on the prosecution of Internet activist Aaron Swartz, failed to live up to its commitment to the free exchange of ideas, a report found.

MIT didn't take into account that Swartz was a "well-known contributor to Internet technology," according to yesterday's report, led by Professor Hal Abelson. Swartz killed himself in January while awaiting trial on charges he broke into the school's network to download millions of research articles.

The university, which prides itself on promoting openness, and the U.S. Justice Department have faced criticism for their roles in pursuing Swartz, considered a hero by many in the movement to make information available for free. The law used to prosecute him was "poorly drafted" when "applied to modern computing," according to the report.

"MIT's position may have been prudent, but it did not duly take into account the wider background of information policy against which the prosecution played out and in which MIT people have traditionally been passionate leaders," the report said.

While the report presents an opportunity to "learn and lead" on questions of open access, intellectual property and ethics, it also dispels myths about the case, L. Rafael Reif, MIT's president, said yesterday in a letter on the school's website.

Two days after Swartz's suicide, Reif asked Abelson, a computer-science professor and an advocate of maintaining free access to software, to lead the review.

In a blog posting, Lawrence Lessig, a Harvard Law School professor and Internet activist, faulted MIT's position of neutrality, saying it intervened in an earlier case, involving an MIT student, and it could have told prosecutors that Swartz was authorized to have access to the research under the school's open-access policies.

"We as a community failed to live up to the high standards that MIT has set for itself in the past," Abelson told reporters.

(BN) Facebook Mobile Push

(Bloomberg ) Mobile Push

Facebook is projected to take 13 percent of the global mobile-advertising market this year, up from 5.4 percent last year according to EMarketer Inc. Still, the company remains a distant No. 2 to Google Inc. (GOOG), which is expected to grab 56 percent of the market in 2013.

Facebook has stepped up efforts with its mobile services, including updates to its smartphone applications and a new video feature for photo-sharing service Instagram. Investors' concern that the company wasn't shifting its focus fast enough toward wireless devices weighed on the shares in the four months following its market debut.

The number of mobile users expanded 51 percent to 819 million during the quarter. The total number of Facebook members was 1.15 billion, compared with 1.11 billion in the earlier period.

Marketing Tools

Facebook is also making improvements to its advertising tools for marketers. The company said last month it intends to cut its 27 ad units by more than half, making the promotion-buying process more simple and efficient.

The social-networking provider has been wooing more large advertisers. In April, Facebook won back General Motors Co. as a customer almost a year after the automaker said it was pulling ads off the service.

(BN) Google, Novozymes, Disney Printng: Intellectual Property

(Bloomberg ) Google Inc. (GOOG) and Amazon.com Inc. (AMZN) won a U.S. appeals court ruling in a case of a former university researcher who claimed his patents covered some of the Internet's most basic interactive functions.

The two patents owned by Eolas Technologies Inc. of Tyler, Texas, and the University of California are invalid, the U.S. Court of Appeals for the Federal Circuit in Washington ruled yesterday. The decision, issued without a formal opinion, upholds a jury verdict won by Google, Amazon.com, JC Penney Co. and Yahoo! Inc. (YHOO) last year in Tyler.

Eolas founder Michael Doyle claimed functions including music clips, search features, maps and embedded applications used his inventions. Tim Berners-Lee, the British computer scientist credited with inventing the World Wide Web, was among those testifying against him in the trial.

Eolas, in court papers, claimed the patents covered inventions that "took the Web from a primitive and static world to today's seamlessly interactive environment."

In its own filing with the court, Mountain View, California-based Google and Plano, Texas-based JC Penney said Eolas's claim was a "fantastic assertion" rejected by the jury "after hearing from the scientists who are actually responsible for that achievement, including the father of the World Wide Web."

More than a dozen companies had been named in the original complaint, including Apple Inc., EBay Inc. (EBAY) and Citigroup Inc. Most settled before the trial. Cases against Facebook Inc., Wal-Mart Stores Inc. and Walt Disney Co. (DIS) were stayed pending appeal.

In 2003, Eolas won a $521 million verdict against Microsoft Corp. that was thrown out on appeal for a retrial on the validity of the patents. The two companies settled before a new trial could be held.

The case is Eolas Technologies v. Amazon.com Inc., 12-1632, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Eolas Technologies Inc. v. Adobe Systems Inc. (ADBE), 09-cv-00446, U.S. District Court, Eastern District of Texas (Tyler).

Novozymes Loses Appeals Court Bid to Revive Danisco Verdict

Novozymes A/S (NZYMB) lost its appeals court bid to revive an $18 million patent-infringement verdict against DuPont Co.'s Danisco unit over an enzyme used in biofuel production.

A Novozymes patent for an enzyme that remains active in high temperatures is invalid because it doesn't describe what the company claims to have invented, the Washington-based U.S. Court of Appeals for the Federal Circuit said in an opinion posted on its website.

In dispute was patent 7,713,723, which was issued in May 2010, the same month in which Novozymes filed the infringement suit in federal court in Madison, Wisconsin.

The appeals court affirmed a trial judge's decision to throw out the jury verdict.

The lower court case is Novozymes A/S v. Danisco A/S, 3:10-cv-00251-BBC, U.S. District Court, Western District of Wisconsin (Madison). The appeal is Novozymes A/S v. DuPont Nutrition Biosciences, 12-01433, U.S. Court of Appeals for the Federal Circuit (Washington).

Trademark

Castel Group Loses Chinese Trademark Fight Over 'Kasite' Mark

Castel Group, the French beverage maker, registered a new Chinese trademark after losing a trademark dispute with a Chinese wine distributor, Decanter reported.

The French company had used "Kasite" as a Chinese translation of its name on labels for wine it began bottling in China in 1999, according to Decanter.

In 1998 Panati Wine, the company owned by Chinese entrepreneur Li Daozhi, registered "Kasite" as a Chinese trademark and sued Castel for trademark infringement in 2009, according to Decanter.

The Zhejiang Provincial Higher people's Court barred Castel's use of "Kasite," levied a fine of 33.73 million Chinese renminbi ($5.5 million), and ordered the company to issue a public policy through a Chinese business publication, Decanter reported.

Taiwan District Will Use Folk Icon to Promote Regional Identity

A district in Taiwan's Kaohsiung region has registered the name of a Taoist folk icon as a trademark as a way to promote the area, which lacks the kind of specialty agricultural products often identified with a region, the Taipei Times reported.

The Saimin District registered "Third Happy Prince" as a trademark and then sponsored a public competition for the creation of a modern image of the character, according to the newspaper.

A cartoon figure was selected and his image includes the district's landscape as a background, the Times reported.

Taiwan's Ministry of Economic Affairs Intellectual Property Office approved the mark July 19, and the image will be used for school bags, clothing and related items, according to the newspaper.

Russian Patent Office Says Nyet to Boozy Trademark for Vodka

Russian officials rejected a trademark application for a new brand of vodka because it alludes to heavy drinking, the Moscow Times reported.

The "Vyp/Buhalo" mark sought by Rusinvest "contravenes public interest and moral principles," the Russian Patent Agency said in its rejection notice, according to the newspaper.

"'Vyp" sounds like a colloquial Russian expression meaning "bottoms up," and "Buhalo" resembles a Russian word for "booze," according to the Moscow Times.

The patent agency previously refused to register a phrase that colloquially means "delirium tremens." That brand -- "Belochka. Ya prishla" -- got so much media attention over the refusal that it was named the brand of the year in May, the newspaper reported.

Copyright

Artist Prints 3D Mickey Mouse, Challenges Disney IP Rights

An artist and researcher at the U.K.'s Goldsmith College is using 3D scanning and printing to challenge the intellectual property policies of the Walt Disney Co.

Matthew Plummer-Fernandez "uses scanning, digital fabrication and computational approaches to making artifacts, both physical and digital, that blur the distinction between the two, referencing the digitization of the everyday," according to the biography posted on his website.

He has created several small figures of Disney's iconic Mickey Mouse, using a powder composite and tinted binder. The figures are fabricated by scanning and remixing the data derived from the scan, according to his artist's statement.

Plummer-Fernandez said he deliberately chose Mickey Mouse as his subject in order to raise "issues of potential clashes with big copyright holders that could potentially choose to lobby for legislation against 3D scanning.'

Disney was a company of particular interest, he said, for "paradoxically pioneering remix culture by creating their own versions of public domain characters such as Snow White and Cinderella, and yet the company take a hostile approach against any attempts to copy their own creations."

One of his figures -- "sekuMoi Mecy" -- is a distorted figure covered in small geometric patterns in red and blue. The name of his Mickey Mouse pieces comes from a computer-generated anagram, he said.

The other figure is "sekuMoi Mecy 3; Smooth() Operator," generated using what he called a "mesh smoothing technique pushed to the extreme." That piece's contours are deliberately much less detailed than the first.

"Blurring images has become both a widely recognized cultural aesthetic," he said. It is "also used to obscure the identity of persons photographed or filmed," he said.

Trade Secrets/Industrial Espionage

Seagate Technology Wins Back $630 Million Trade-Secrets Award

Seagate Technology LLC won reinstatement of a $630.4 million arbitration judgment against Western Digital Corp. (WDC) over allegations of misappropriation of trade secrets.

An arbitrator awarded Dublin-based Seagate $525 million plus interest in 2011 against Irvine, California-based Western Digital and a Western employee, Sining Mao, who previously worked at Seagate. Some of the defendants' evidence was fabricated on three trade secrets, the arbitrator found, entering a judgment against Western and Mao as a sanction.

A state court judge set aside the award in October, finding that the arbitrator didn't consider any evidence by the defendants countering the allegations. Minnesota's Court of Appeals reinstated the arbitrator's judgment yesterday.

"The district court erred by determining that the arbitrator did not have authority to impose sanctions," the appellate court said. "The district court should not have reviewed the merits of the arbitrator's decision."

The appellate case is Seagate Technology LLC v. Western Digital Corp., A12-1944, Minnesota Court of Appeals (St. Paul). The lower-court case is Seagate Technology LLC v. Western Digital Corp., 27-cv-06-1900, District Court, Hennepin County, Minnesota (Minneapolis).

(BN) Google Challenges Apple TV With $35 Video-Streaming Device

(Bloomberg ) Google Inc. (GOOG), owner of the world's most popular search engine, introduced a device that sends YouTube and Netflix Inc. (NFLX) videos from phones, tablets and laptops to televisions, bolstering competition with Apple Inc. (AAPL)

Chromecast, a small $35 dongle that plugs into a TV's HDMI input, lets customers watch and control online videos without their remote control. The gadget, unveiled at an event today in San Francisco, works with Android devices as well as Apple's iPhone, and enables users to continue using their phone for other activities while streaming.

"Of course people would want to watch YouTube and Netflix on the device with the biggest screen, but the user experience on the TV has been so difficult," said Rishi Chandra, a director of product management at the Mountain View, California-based company, in an interview after the event. "If you have to stop using your phone just to watch something on TV, it's not a viable solution."

The announcement of Chromecast came after Google introduced an updated Nexus 7 tablet, which has a sharper screen and is being made in partnership with Taiwan's Asustek Computer Inc. (2357) In tablets, devices running Android software have been gaining share versus Apple's iPad. The move into televisions follows previous unsuccessful efforts for Google, including a media-streaming device called Q that never shipped based on poor initial feedback, and the Google TV set-top box that has lagged the competition.

Google Senior Vice President Sundar Pichai said in an interview that the company would continue pushing Google TV, which turns TV into an Android device capable of playing apps and other content, "in a big way."

Content Partners

Chromecast, which looks like a USB stick, wirelessly syncs video being watched on a customer's mobile devices and TV. Pichai said the device will also work with Pandora Media Inc. (P)'s music-streaming service and other content partners in the future. It goes on sale today through Amazon.com Inc. (AMZN), Best Buy Co.'s website and the Google Play store. Google said that through a partnership with Netflix, Chromecast customers will get three free months of the streaming service.

Apple TV in its current iteration is a $99 set-top box, though Chief Executive Officer Tim Cook has said the company is considering other television products. Apple also has AirPlay, which lets consumers stream pictures and videos from iPhones and iPads to Apple TV.

Tablet Shipments

The upgraded Nexus 7 is Google's latest effort to parlay its success in smartphones to larger devices. Tablet shipments, benefiting from consumer migration away from personal computers, are expected to grow 68 percent this year, outpacing a 4.3 percent increase for mobile phones, according to research firm Gartner Inc.

"Tablets are going to be part of the next era," said Carolina Milanesi, an analyst with Gartner. "It means eyeballs and it means accounts and it means knowing what the consumers are doing."

Google develops the Android operating system and offers it for free to makers of phones and tablets, as well as using the software in its own devices.

The Nexus 7 ranges in price from $229 for a Wi-Fi version to $349 for a device with more memory that also works over cellular networks. The new Nexus 7 is 50 grams lighter than its predecessor with the same screen size and a high resolution display, said Hugo Barra, vice president of Android product management.

"It's a much more comfortable grip and fits easily into your purse or jacket pocket," Barra said. For the screen, "having a crisp and bright display makes all the difference," he said.

Upbeat Reviews

The Nexus, which sports a 7-inch screen, received positive reviews last year for its sleek design and intuitive software. The gadget offers the best value among its rivals, CNET said in a review last year.

"With its excellent design, useful software features, and low starting price, the Nexus 7 is the cheapest way to experience the best that the Android" operating system has to offer, CNET said. "The Nexus 7 is still the overall best small tablet."

The Nexus 7 goes up against Apple's iPad Mini, which is 7.9 inches, and Amazon's Kindle Fire, which also has a 7-inch screen and uses a version of Android.

Google also announced today that it's making textbook purchases and rentals available on the new tablet. Books from all five major publishers will be in Google's store in time for the coming school year.

Sisyphus 2.0: predicting the future is easy.

Despite all the technological change, our daily lives are quite similar to that of Sisyphus, a character from an ancient Greek myth. As a punishment, the gods condemned him to" roll an immense boulder up a hill, only to watch it roll back down, and to repeat this action forever."

A research paper from Microsoft shows that а modern person's future is highly predictable:

It turns out that no matter how spontaneous we think we are, humans are actually quite predictable in our movements, even over extended periods of time. Not only did Far Out predict with high accuracy the correct location of a wide variety of individuals, but it did so even years into the future.

The researchers note that frequently visited locations can be further linked to people's actions. One could reasonably guess that people who happen to be at the same location do similar things. As a result, knowing what one person does on a regular basis helps predict what other people do on a regular basis. Quite likely, companies like Google, with access to lots of user data, will soon be able to predict (among other things) a country's economic activity better than the government statistics.


tags:  process, creativity, prediction, mobile, aboutness

(BN) High-End Smartphone Boom Ending as Price Drop Hits Apple

(Bloomberg ) The smartphone has crossed the line from shiny new technology to ubiquitous commodity.

App-laden, Web-surfing phones have surged in popularity over the past half-decade and generated $293.9 billion in sales last year alone. They are now used by more than 1 billion people around the world. With more than half of mobile users in the U.S. and developed countries owning a smartphone, and consumers in emerging markets including China and India gravitating toward cheaper models, demand is slowing for high-end devices.

The average price of a smartphone has plunged to $375 from $450 since the beginning of 2012, IDC estimates. That drop has already threatened revenue growth and profit margins at Apple Inc. (AAPL) and Samsung Electronics Co. (005930), and could further squeeze companies like Nokia Oyj (NOK1V) and BlackBerry that were counting on new products to revive sales. Beneficiaries include up-and-comers, such as Huawei Technologies Co. and Lenovo Group Ltd. (992), which specialize in low-priced gear.

"The days of great growth in the high end of the market are gone," said Michael Morgan, an analyst at ABI Research. "It's the Chinese companies who know how to survive on tiny margins that are ready for the fight that's about to ensue."

The decline in average smartphone prices is akin to what happened in the personal-computer industry in the late 1990s, according to former EMachines Inc. Chief Executive Officer Stephen Dukker. Back then, millions of people who wanted to get online for the first time snapped up cheap new PCs from EMachines and other low-cost providers, dragging down once-stable PC prices to $1,026 in 2002 from $1,898 in 1996, according to IDC.

Feeling Pinch

Apple, Samsung and other companies relying on sales of expensive phones are already feeling the pinch. In June, Samsung lost more than $25 billion in market capitalization, greater than the value of Sony Corp. (6758), as analysts trimmed projections for Samsung's high-end Galaxy S4 smartphone, which costs $200 when sold as part of a two-year wireless package, or about $630 without a carrier subsidy.

"The market is becoming less about speeds and feeds, and more about price," said Kevin Restivo, an analyst at IDC in Toronto. "More people don't need to be overwhelmed by a phone, so long as it's good enough."

HTC Corp. (2498), Taiwan's largest smartphone maker, missed analysts' sales and profit estimates for its second quarter amid disappointing sales of its HTC One handset, which costs $200 with a package, or $600 to $700 without one. On July 12, carriers cut the price of BlackBerry (BBRY)'s poor-selling Z10 to $50 from $200 -- just six months after it was introduced.

IPhone Estimates

Apple, based in Cupertino, California, is predicted to report on July 23 that fiscal third-quarter revenue was little changed from a year earlier, based on the average of analysts' estimates compiled by Bloomberg, mainly because of slowing iPhone sales. That would be the worst sales performance since 2003's second quarter, when revenue declined 1.3 percent.

T. Michael Walkley, an analyst at Canaccord Genuity Inc., last month lowered his estimate for iPhone sales for fiscal 2014 to 173 million from 181 million. Natalie Kerris, a spokeswoman for Apple, declined to comment on iPhone sales.

Falling prices and the popularity of products with lower margins such as the iPad mini are beginning to hit Apple's profitability. While the company makes a gross margin of more than 50 percent on the iPhone 5, sold for more than $600 to carriers, it has sold millions of older models in recent years at lower prices at a gross margin of 35 percent or less, according to Brian Marshall, an analyst at ISI Group. Apple's gross margin fell to 37.5 percent in the period that ended in March, from 47.4 percent a year earlier.

Consumers Content

Apple shares have dropped 39 percent from a record in September amid concerns of slowing iPhone growth and declining margins. They declined 1.6 percent to $424.95 on July 19.

While any innovations may slow the drop in prices -- for example, Apple, Samsung and others are working on wearable, wristwatch-like device, which could stoke sales -- most people are content with the size, shape and features of basic smartphones, ABI's Morgan said.

Morgan predicts Apple will introduce an iPhone 5S this September that could come in different colors and feature a fingerprint reader so owners wouldn't have to remember a security code. That won't be enough to revive iPhone sales growth for long, he said.

Chinese Suppliers

More of those profits will be won in emerging markets, where many consumers have yet to buy their first smartphone. IDC's Restivo predicts that 66 percent of the 384 million smartphones sold in China next year will cost less than $200, compared with 14 percent of the 153 million phones projected to be sold in the U.S.

China-based suppliers of less-expensive phones, such as Huawei, have been gaining market share, mostly by undercutting HTC, BlackBerry and Nokia on price. Even as its phones priced as low as $100 sell briskly, Huawei's two-year-old devices unit is profitable, Shao Yang, the company's vice president of marketing, wrote in an e-mail.

Lenovo has used the same low-price strategy that has made it the world's largest PC maker to become the fastest-growing smartphone maker in China, said J.D. Howard, vice president of operations and business development for Lenovo's smartphone, tablet and TV unit.

"It really works in the smartphone business, because some of our rivals have been charging a ridiculous premium," he said.

PC History

If the history of PCs is any guide, price wars can quickly lead to industrywide carnage. In the years after cheap models such as EMachines' $600 desktop became popular in 1998, average PC margins narrowed to less than 10 percent from more than 15 percent, not enough to cover the research and other costs at bigger companies, Dukker said.

As margins shrank and losses mounted, PC makers merged and divested the commodity business. Onetime leader Compaq Computer Corp. was acquired by Hewlett-Packard Co. (HPQ) in 2002, and International Business Machines Corp. (IBM) sold its PC business to Lenovo in 2005. Gateway Inc. purchased EMachines in 2004, only to be bought by Acer Inc. (2353) in 2007.

The two smartphone powerhouses, Apple and Samsung, are better-positioned than Compaq and IBM were in PCs. While most of its marketing in the U.S. focuses on high-end devices like the Galaxy 4S, Samsung sells hundreds of models at all price points. As one of the largest manufacturers of chips, displays and other smartphone parts, Samsung can reach lower price points more easily than rivals who must buy those components -- often from Samsung itself.

Strong Ecosystem

Apple's strong brand and ecosystem of music, services and more than 800,000 applications should help it maintain its large customer base, according to David Yoffie, a professor at Harvard Business School.

The company has also shown it can profitably appeal to thriftier shoppers with older iPhone models. About half of the iPhones sold by Verizon Wireless in recent quarters were iPhone 4 or iPhone 4S models, which Verizon and other carriers sell for $99, or give to customers who agree to a two-year contract. More recently, Apple has helped carriers run trade-in programs that give shoppers as much as $200 in credit toward an iPhone 5 if they hand in their existing iPhone.

Without these efforts, Apple would have lost even more market share to Samsung and other makers of smartphones running Google Inc. (GOOG)'s Android software, Yoffie said.

"As growth increasingly comes from emerging markets, Apple is not going hold share," Yoffie said. "An evolution in strategy is definitely necessary. They can't stay where they are.".

Entrepreneurship: Singapore vs Silicon Valley

Singapore startups are relatively good on talent and funding, but their output it disproportionately low (data from the Startup Genome Report, Part I. 2012).

Entrepreneurs are much better educated than their Silicon Valley counterparts and they work harder. But I would argue that these advantages fail them because of the wrong market choice: niche vs new.

Singapore entrepreneurs and VCs seem to be suffering from the "Better Mouse Trap" syndrome, i.e. they focus too much on improving existing products/services instead of creating new markets.

tags: mousetrap, startup, entrepreneurship, source, control

(BN) Microsoft, Green Mountain, Weather: Intellectual Property

(Bloomberg ) Even as they battle in court over smartphone and video technology, Microsoft Corp. (MSFT) and Google Inc. (GOOG) have discovered a common foe: patent owners who try to sue their customers or go after an entire industry.

Both companies are seeking to curb the litigation practices of firms that buy patents with the sole purpose of demanding royalties from as many end-users as they can, even if it means suing a pizza parlor or nonprofit. Anger has united a cross-section of retailers, finance companies, public-transit operators and hotels, and even caught the attention of President Barack Obama, who last month announced corrective measures.

Focusing on the issue could create pressure in Congress for legislation and action by U.S. courts -- as long as companies avoid the squabbling that marred the previous effort to change patent law. That took almost a decade and pitted industries, and even technology companies, against each other.

"Going after bad litigation behavior is an approach we can all agree on," said Tim Molino, director of government relations for Washington-based BSA - The Software Alliance, whose members include Microsoft and Oracle Corp.

Google spokesman Matt Kallman referred questions about patent legislation to the Coalition for Patent Fairness, a Washington-based lobbying group backed by Google, Cisco Systems Inc. and Intel Corp. Each month, the group has a meeting with an increasing number of organizations to discuss ways to get legislative change.

The increased political attention is due to patent owners who started going after product end-users, demanding cheap settlements from a large number of companies. A White House-commissioned report estimated that more than 100,000 companies were threatened last year, including members of politically connected Washington trade groups like the National Retail Federation and Financial Services Roundtable.

Members of Congress have proposed legislation to limit some patent owners from seeking product import bans at the U.S. International Trade Commission, expand reviews of business method patents and force certain patent owners who lose at trial to pay legal fees of those they accused of infringement.

The courts have also been trying to curb abuses. The ITC, a quasi-judicial agency in Washington, set up a program to resolve certain patent cases more quickly. The chief judge of the federal appeals court that specializes in patent law co-wrote a New York Times opinion piece advocating sanctions for litigation abuses.

Getting a consensus could mean avoiding more controversial issues such as curbing software patents, and ensuring that any changes don't have unintended consequences that hurt universities needing legal protection for their research and patent-reliant businesses.

Trademark

Green Mountain Unit Seeks Trademark for Home Soda Machine

Green Mountain Coffee Roasters Inc. (GMCR)'s Keurig unit filed an application to register a trademark to be used with soda machines, according to the database of the U.S. Patent and Trademark Office.

The application, filed July 3, is to register "Karbon" as a trademark for "machines for the production of cold water, soda, still, carbonated and sparkling beverages." A second application filed that day is to register "Bolt," to be used for carafes.

Keurig's soda machine would compete with those made by Israel's SodaStream International Ltd. (SODA)

"We are not going to comment on this specific trademark," Suzanne DuLong, a spokeswoman for Waterbury, Vermont-based Green Mountain, said in an e-mail. "As we continue to grow, we are likely to seek any number of trademarks."

Flipboard Sued by Company Seeking to Use 'Flowboard' Trademark

Flipboard Inc., a maker of software for use on mobile devices, was sued over a trademark by a Seattle-based software company.

According to the complaint filed July 11 in federal court in Seattle, Treemo Inc. is seeking a court declaration that its "Flowboard" mark doesn't infringe Flipboard's trademarks.

Treemo said it has been contacted by counsel for Flipboard threatening legal action over the trademark.

In court papers, Treemo said that during the process of applying to register Flowboard as a trademark, the U.S. Patent and Trademark Office "found no conflicting marks that would bar registration." The company is also arguing that the two marks are used for different purposes.

Flowboard is used for a software product "for the creation of side-scrolling presentations with images, text, video links and photo galleries," according to the complaint. Flipboard is used with social networking services, something Treemo says it doesn't offer under its Flowboard mark.

Additionally, Treemo argued that the patent office database contains almost 600 registrations or pending applications that contain some form of the word "board." The initial portions of the respective marks -- Flow and Flip --"connote substantially different images in the minds of ordinary consumers," Treemo said in its pleadings.

Flipboard, based in Palo Alto, California, sent a statement to the TechCrunch website saying that it had wanted to resolve the dispute with Treemo amicably and that it's concerned about the likelihood of confusion.

The case is Treemo Inc., v. Flipboard Inc., 13-cv-01218, U.S. District Court, Western District of Washington (Seattle).

Copyright

Goodreads Sued for Copyright Infringement Over Boy Band Photo

Goodreads Inc., whose website lets readers share book recommendations, was sued for copyright infringement by a company that owns and licenses celebrity photos.

The suit, filed July 5 in federal court in Los Angeles, is one of more than 20 brought since March 1 by BWP Media USA Inc. of Los Angeles. The company is represented in all these suits by Sanders Law Pllc of Garden City, New Jersey.

BWP said in its complaint that photos of a member of the boy band IM5 were posted on Goodreads without authorization and in willful violation of its copyrights.

Goodreads, based in Santa Monica, California, didn't respond immediately to an e-mailed request for comment on the suit.

BWP asked the court money damages, attorney fees and litigation costs.

The case is BWP Media USA Inc., v. Goodreads Inc., 2:13-cv-04851-E, U.S. District Court, Central District of California (Los Angeles).

For more copyright news, click here.

Trade Secrets Case Against Weather Channel to Proceed

Weather Channel LLC, the television network owned by Bain Capital LLC, Blackstone Group LP and NBC Universal International Ltd., failed to persuade a federal court to dismiss a trade-secrets case.

Events Media Network Inc. of Shamong, New Jersey, sued Weather Channel in Pennsylvania state court in March 2012, claiming it violated a confidentiality agreement with respect to its events database. The database had been licensed to Weather Channel through May 1, 2011.

Weather Channel used this confidential information both after the license expired and for purposes not covered by the agreement, Events Media said in its pleadings.

The case was moved to federal court in Pennsylvania in May 2012 before heading to a New Jersey federal court in November.

The Weather Channel asked that the case be dismissed, saying that the database didn't qualify for trade-secrets protection because it contained information that was publicly available and that Events Media didn't take enough care to protect its secrecy.

U.S. District Judge Robert B. Kugler in Camden, New Jersey, on July 12 rejected Weather Channel's arguments. He said the trade-secrets claims were made under Georgia law, which specifically covers compilations of what may be available to the public.

The judge also concluded that Events Media took care to protect the confidentiality of the database and found that the license agreement with Weather Channel specifically limited the ways the information could be disclosed. The agreement also required reporting any inadvertent or improper use of the data.

The case is Events Media Network Inc. v. Weather Channel Interactive Inc., 13-cv-00003, U.S. District Court, District of New Jersey (Camden).

Forming startup teams: an Israeli version of Silicon Valley

MIT Tech Review (7/11/2013).
Israel’s Military-Entrepreneurial Complex Owns Big Data.

MIT Tech Review: Each year, Israel’s military puts thousands of teenagers through technical courses, melds them into ready-made teams, and then graduates them into a country that attracts more venture capital investment per person than any in the world.

By contrast, in the US, tightly knit entrepreneurial teams form in college dorms, labs, and high-tech workplaces. Working at the edge of technology is another critical ingredient for success. As a result, the startup team has the following essential characteristcs:

1. - tech frontier proximity
2. - alertness to opportunity
3. - motivation (competitive drive)
4. - focus on getting things done
5. - high skills
6. - high challenge (facing difficult open-ended problems)
7. - connections necessary to recruit talent and obtain financing (network)
8. - low costs
9. - reputation for getting things done (see esp. p.4)

In the system model (see Scalable Innovation, Fig 2.2), the team is the Packaged Payload delivered by the Israeli Army (the Source) to innovation-making companies (Tool). The marketplace for high-tech products acts as a the Control; internal and external connections as the Distribution.

Scalable Innovation. Fig 2.2. System Diagram.

 Reputation (p. 9 on the list above) relates to the Aboutness (see chapters 4 and 5) that allows the marketplace to judge the teams efficiently.

(BN) Dow, Cadila, Lancome, Wendy’s, Sinovel: Intellectual Property

(Bloomberg ) Akzo Nobel NV (AKZA) accused Dow Chemical Co. (DOW), the largest U.S. chemical maker, of misusing confidential information to seek two patents for coatings technology.

Dow entered a development agreement with a U.S. unit of Amsterdam-based Akzo in 2010, ended the agreement the following year, and in 2012, without Akzo's permission, said it would file the patent applications, according to a lawsuit filed June 25 in Delaware Chancery Court in Wilmington.

By using confidential information, Midland, Michigan-based Dow is responsible for wrongly "usurping to itself and for its own benefit intellectual property entrusted to it by Akzo," according to the complaint.

Akzo is seeking a ruling that Dow violated the contract, an order forcing Dow to sign over rights to the inventions and an award of unspecified damages and legal fees.

"Dow is aware of the new complaint," Nancy Lamb, a company spokeswoman, said in an e-mailed statement. Dow "believes it has acted in compliance with terms of the referenced joint development agreement" and will fight the lawsuit, she said.

The case is Akzo v. Dow, CA8666, Delaware Chancery Court (Wilmington).

Cadila Sued by Alpex Over Patent for Obesity Drug Suprenza

Cadila Healthcare Ltd. (CDH) a generic-drug maker based in Ahmedabad, India, was sued by Alpex Pharma SA for infringing a U.S. patent for the obesity drug Suprenza.

Alpex, based in Mezzovico, Switzerland, contends Cadila, doing business as Zydus Cadila, wrongly applied to the U.S. Food & Drug Administration to sell low-cost copies of the medicine before patent 6,149,938 expires in 2018, according to a lawsuit filed June 26 in federal court in Wilmington, Delaware.

Unless blocked by a judge, premature sales of the generic drug in the U.S. will cause "substantial and irreparable harm" to Alpex, the company said in court papers.

Sujatha Rajesh, a Cadila spokeswoman, didn't immediately respond to an e-mailed request for comment on the lawsuit.

The case is Alpex v. Zydus, 13-cv-01143, U.S. District Court, District of Delaware (Wilmington).

Trademark

Lancome's 'La Vie Est Belle' Trademark Rejected by Taiwan Court

Lancome Parfums Et Beaute Et Cie. SNC, the Paris-based parfumerie, won't be permitted to register "La Vie Est Belle" as a trademark in Taiwan, the Focus Taiwan website reported.

The company had filed an appeal of the Nov. 2011, rejection of its trademark application by Taiwan's Ministry of Economic Affairs, according to Focus Taiwan.

Taiwan's Supreme Administrative Court rejected the appeal, saying the phrase, which translates to "Life Is Beautiful," isn't distinctive enough to qualify for trademark protection, Focus Taiwan reported.

Lancome had hired actress Julia Roberts to promote its La Vie Est Belle brand, and argued unsuccessfully that the mark was totally distinctive because it represented her own wonderful life and perfect marriage, according to the news website.

Wendy's Sued Ohio Dairy Over Claims 'Frosty' Mark Is Infringed

Wendy's Co. (WEN), the Dublin, Ohio-based fast-food chain, sued an Ohio-based dairy company for trademark infringement.

According to the complaint file June 21 in federal court in Columbus, Ohio, United Dairy Farmers Inc. of Cincinnati, Ohio, is accused of infringing Wendy's "Frosty" trademark and the trade dress used for that product.

Wendy's said it has used the "Frosty" mark since 1969 for a product by the same name that is a cross between a milkshake and soft-serve ice cream. The product, which contains a proprietary cocoa formula, hasn't changed significantly since it was first placed on the restaurant chain's menu.

The company objects to the Frosties product produced by the dairy company. According to court papers and Wendy's statements, the United Dairy Farmers' product uses a red and yellow packaging that is confusingly similar to the containers in which the Frosty is served.

Wendy's claims the infringement is deliberate and is aimed at causing consumers to assume falsely that an affiliation exists between the two companies' products.

United Dairy Farmers didn't respond immediately to an e-mailed request for comment.

Wendy's asked the court to order United Dairy Farmers to halt the infringing actions and to engage in corrective advertising to correct what Wendy's says is confusion in the marketplace. The company requests awards of the dairy company's profits related to the alleged infringement, together with money damages, litigation costs and attorney fees.

The case is Wendy's International Inc., v. United Dairy Farmers Inc., 2:13-cv-00596-ALM-NMK, U.S. District Court, Southern District of Ohio (Columbus).

Trade Secrets/Industrial Espionage

China's Sinovel Charged by U.S. With Stealing Trade Secrets

Sinovel Wind Group Co., a Chinese wind-turbine company, was charged with stealing trade secrets from its former U.S. partner, a case of industrial espionage that may heighten tensions in U.S.-China relations in the wake of the Edward Snowden affair.

U.S. prosecutors secured an indictment of the company and two of its executives in federal court yesterday in Madison, Wisconsin. Also charged was Dejan Karabasevic, who pleaded guilty in Klagenfurt, Austria, to stealing source code for the turbine controllers made by American Superconductor Corp. (AMSC), his former employer. The company lost more than $1 billion in market value after the theft.

The timing of the indictment is likely to give it prominence in U.S. dispute with China over economic espionage. That conflict has only been inflamed by Snowden's disclosures of U.S. computer-based spying and China's decision to allow the ex-National Security Agency contractor to fly to Russia from Hong Kong, where he had fled.

"My 5-year-old understands that this is wrong," AMSC Chief Executive Officer Daniel McGahn said by telephone.

The indictment is the latest development in a legal struggle between AMSC, a maker of small industrial computers that fit inside wind turbines, and the company that was formerly its largest customer. AMSC, based in Devens, Massachusetts, is seeking more than $1.2 billion in damages from Sinovel in Chinese courts, accusing Sinovel of putting the stolen source code in more than 1,000 turbines that it sold in China.

Prosecutors allege that Sinovel, which was charged with conspiracy, theft of trade secrets and fraud, cheated AMSC out of more than $800 million.

The case is U.S. v. Sinovel Wind Group Co. (601558) Ltd., 13-cr-00084, U.S. District Court, Western District of Wisconsin (Madison).

Lofgren Introduced Private Trade-Secret Section to EEA

Democratic Representative Zoe Lofgren of California introduced legislation to allow individuals to recover damages under the Economic Espionage Act.

HR2466 would give "any person who suffers injury" under a violation of this act to purse a civil case against the violator in order to be compensated. Under this legislation, a case must be brought within two years of the date of the action or the discovery of damage.

The legislation doesn't cover reverse engineering. In fact, it specifically states that those who obtain information without authorization who have worked backward "from a lawfully obtained known product or service to divine the process that aided its development or manufacture" may not be charged.

(BN) Microsoft Sues U.S. Customs for Failed Google Phone Ban

Microsoft Corp. (MSFT) accused U.S. Customs officials of refusing to follow a trade agency's order to block imports of phones made by Google Inc. (GOOG)'s Motorola Mobility unit in a lawsuit that seeks to alter how such cases are handled.

The U.S. International Trade Commission in Washington issued the import ban in May 2012 after deciding that Motorola Mobility devices infringed a Microsoft patent for a way mobile phones synchronize calendar events with other computers. Microsoft's lawsuit, filed yesterday in Washington, says that order isn't being enforced.

U.S. Customs and Border Protection, after having secret meetings with Google, continued to let the Motorola Mobility mobile phones enter the country even though Google has done nothing to remove the feature at the heart of the ITC case, Microsoft said in the complaint. The case illustrates what Lexmark International Inc. (LXK) and Lutron Electronics Co. in May called an "increasingly ineffective and unpredictable enforcement" of import bans imposed by the trade agency.

"Customs has a clear responsibility to carry out ITC decisions, which are reached after a full trial and rigorous legal review," Microsoft Deputy General Counsel David Howard said in a statement. "Here Customs repeatedly ignored its obligation and did so based on secret discussions."

Motorola Mobility convinced the agency that the order didn't apply to syncing through Google rather than Microsoft servers, and to give it a grace period to allow changes to take effect. Both of those requests had previously been rejected by the ITC, according to Redmond, Washington-based Microsoft.

Google Response

"U.S. Customs appropriately rejected Microsoft's effort to broaden its patent claims to block Americans from using a wide range of legitimate calendar functions, like scheduling meetings, on their mobile phones," Matt Kallman, a Google spokesman, said in an e-mailed statement. "We're confident that the court will agree."

Jenny Burke, a spokeswoman for Customs, said the agency doesn't comment on pending litigation.

The complaint filed yesterday in Washington also named Homeland Security Secretary Janet Napolitano, who oversees the Customs agency. She announced yesterday she was stepping down to head the University of California system.

The ITC order is in effect until Microsoft's patent expires in April 2018. An appeal in the case is scheduled to be heard Aug. 6 in Washington.

'Secret Presentations'

Meetings between Mountain View, California-based Google and Customs were held in secret in April, with Microsoft not privy to their existence until after the June 24 Customs decision allowing the continued importation of the phones, according to Microsoft's filings asking the court to halt the Motorola Mobility shipments.

"The only conclusion that can reasonably be drawn from CBP's pattern of conduct is that CBP will not enforce the commission's exclusion order absent a court order compelling it to do so," Microsoft said in the filing. "CBP has repeatedly allowed Motorola to evade that order based on secret presentations that CBP has refused to share with Microsoft."

The ITC's job is to protect U.S. markets from unfair competition, including infringement of patents or theft of trade secrets. It's become a key forum for disputes between smartphone manufacturers.

Once the import bans are ordered, it's common for both patent owners and importers to lobby Customs and neither side is told what the other is saying for fear of exposing trade secrets, lawyers involved in ITC cases said in March.

Apple, Samsung

A ban on some older models of Apple Inc. (AAPL)'s iPhone is scheduled to take effect Aug. 5 unless it's overturned by President Barack Obama or put on hold pending appeal. The models were found to infringe a Samsung Electronics Co. (005930) patent for a way data are transmitted. On Aug. 1, the agency is scheduled to announce whether it will order an import ban on some models of Samsung's phones based on patent allegations filed by Apple.

The trade agency is compiling information on how well its orders are being enforced, and Obama last month called for a review of ITC and Customs procedures. In their joint letter to the ITC, Lexmark and Lutron said the "current problems with enforcement of orders requires immediate attention."

Criticism of Customs comes in large part because an agency in charge of protecting the U.S. border from terrorists and unauthorized foreigners also has to analyze increasingly complex electronics and compare them to patents that are often written in jargon only specialists can understand.

'Red Flags'

"They want to focus their efforts on terrorism, and the issues related to intellectual property is not their concern," said patent lawyer Robert Stoll of Drinker Biddle & Reath LLP in Washington.

Past surveys had no "huge red flags" of the process in part because they often involved less complicated products, said former ITC Chairwoman Deanna Tanner Okun, who left the agency last year after 12 years and is now with Adduci Mastriani & Schaumberg in Washington. The commission has the authority now to take a greater role to address disputes about how the import bans are being enforced, she said.

"Both agencies are working with outdated policies and procedures that need to be changed to make the commission orders effective," she said in an interview.

It's not just patents that companies are complaining about with regard to Customs. The National Association of Manufacturers, in a July 2012 letter to the Senate Finance Committee, supported legislation that would boost customs enforcement of anti-dumping orders imposed by the ITC.

'Duty Evasion'

"Industries have continued to see increases in unlawful duty evasion," the manufacturers lobbying group wrote. "There are significant implications from continued duty evasion, including job losses."

Corning Inc. (GLW)'s Corning Gilbert, a manufacturer of coaxial cables for televisions, was shut out of the U.S. market for more than a year after Customs officials decided it was subject to a broadly worded order won by a competing company. Corning Gilbert had not been named in the complaint, and sued. A U.S. trade judge ruled last year that Customs had failed to conduct a proper analysis before blocking the Corning Gilbert imports.

Apple had to file an enforcement action after Customs allowed Taoyuan, Taiwan-based HTC Corp. (2498) to continue shipments of some of its mobile phones that had been found to infringe the iPhone manufacturer's patent for data-detection technology. The two companies settled their patent fights before that issue was heard.

Trade-off Q&A: better than optimal.

Tobias Enders (@TobEnders, one of my students in the Principles class at Stanford University CSP) emailed me a question about trade-offs in Scalable Innovation (Prologue, page xxii, figure 0.1).

In the book we argue that great innovations break trade-offs and do better than optimal. Tobias' question prompted me to explain briefly the figure. With his permission, I reproduce parts of our email exchange.

Question (Tobias):

You say that there is one optimum between in the middle between fuel efficiency and flexibility. From my understanding, the optimum can be anywhere on line that you have draw - depending on the preference of the customer. I.e. if you need more flexibility, you have to make a trade off on fuel efficiency and vice versa. I have used the same figure when I made a portfolio analysis for IBM some time ago (see fig below).

Answer (Eugene):

In your example, the customer locked into the optimized curve, either to the left or right, cannot get to a point where he has both high customization and high cost leadership. That is, the point on the left provides for high customization but low cost leadership; the point on the right does the opposite. A breakthrough would be a high-high combination, e.g. Google's large scale advertisement platform for search and other services (Company positioning).

The optimum on Fig 0.1 (Scalable Innovation, page xxii) applies when you want both fuel efficiency AND flexibility. In that case you end up with values somewhere in the middle of their respective ranges. Simply put, you can't have both high fuel efficiency AND high flexibility. 

Summary (Tobias): 

Got your point, Eugene.
If you want to have the best of 'both worlds' - i.e. fuel efficiency and flexibility - you end up [with neither, i.e.] in the middle of the line.

Google patent: If you don't skip ads you'll be watching them until we get tired showing them to you.

On July 2, 2013 USPTO issued to Google US Patent 8,474,713 "Targeted video advertising."

The patent covers a business model where a user can skip ads and the advertiser is charged only for the ads that actually get watched. In Claim 2 we read:

"...withholding display of a non-advertisement based video program to the user until the user has been shown a predetermined number of video advertisements without the user choosing to skip the displaying of one of the video advertisements."

Unlike in TV advertisement, video ads on the Internet will not stop if you just wait for them to stop. They will go on forever or until Google decides to stop them. As a result (since most services are personalized, claim 27) patient people will see tons of ads.

If you see an ad, skip it immediately!