Tag Archives: Bloomberg News

USTR warns of increasing attacks by China on US intellectual property, including cyber-attacks

A report released in late November the Office of the United States Trade Representative (USTR) states that China appears to be stepping up its attacks on U.S. intellectual property.

“China fundamentally has not altered its acts, policies, and practices related to technology transfer, intellectual property, and innovation, and indeed appears to have taken further unreasonable actions in recent months.”

Raymond Zhong in The New York Times reported that “something is unfolding right now that carries higher stakes than any other tech story on the planet.”

Zhong was referring to China having detained the third Canadian citizen in apparent retaliation for the arrest of Meng Wangzhou, a top executive at Huawei, the world’s leading maker of telecom networking equipment. Since, CFO Wangzho’s arrest, Canadian officials have reported that a total of 13 people have been arrested in China. Eight have been released.

It has been long speculated that Huawei’s products can be used for spying by the Chinese government.

The USTR report, released on November 20th, is called UPDATE CONCERNING CHINA’S ACTS, POLICIES AND PRACTICES RELATED TO TECHNOLOGY TRANSFER, INTELLECTUAL PROPERTY, AND INNOVATION.

“In the USTR report the U.S. accused China of continuing a state-backed campaign of cyber-attacks on American companies that were both intensifying and growing in sophistication,” Bloomberg News reported.

Chinese Claims

In response to questions about the report, a spokesman for China’s foreign ministry on Wednesday said U.S. officials should read a white paper published by the government in September that claims China ‘firmly protects’ intellectual property rights.

On August 18, 2017, the Office of the U.S. Trade Representative (USTR) initiated a Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. 3

On the date of initiation, USTR requested consultations with the Government of China concerning the issues under investigation.4 Instead of accepting the request, China’s Ministry of Commerce expressed “strong dissatisfaction” with the United States and decried the investigation as “irresponsible” and “not objective.”5

The primary four points of the report (IPCU’s boldface):

1. China uses foreign ownership restrictions, such as joint venture (JV) requirements and foreign equity limitations, and various administrative review and licensing processes, to require or pressure technology transfer from U.S. companies.

2. China’s regime of technology regulations forces U.S. companies seeking to license technologies to Chinese entities to do so on non-market based terms that favor Chinese recipients.

3. China directs and unfairly facilitates the systematic investment in, and acquisition of, U.S. companies and assets by Chinese companies to obtain cutting-edge technologies and intellectual property and generate the transfer of technology to Chinese companies.

4. China conducts and supports unauthorized intrusions into, and theft from, the computer networks of U.S. companies to access their sensitive commercial information and trade secrets.7

“Further Unreasonable Actions”

The USTR report concluded: “China fundamentally has not altered its acts, policies, and practices related to technology transfer, intellectual property, and innovation, and indeed appears to have taken further unreasonable actions in recent months.

“USTR intends to continue its efforts to monitor any new developments and actions in this area.”

The full report can be found here.

Since 2014 Chinese venture capital investment in the U.S. totals $31 billion. The report cites analyst that estimate “Chinese investors participated in 10-16% of all venture deals in the United States between 2015 and 2017.”

Image source: USTR Update

 

Musicians want fairer streaming fees; inventors want patent licenses

In a digital world, fair compensation for creative expression or new ideas, like music and inventions, requires more determination than ever.

Intellectual property piracy has become an insidious problem, affecting a wide range of  individuals and industries, including recording and technology.

The effect of low payment – as opposed to no payment – has been particularly harsh on recording artists. They have had the challenge of policing the frequently unauthorized use of their work, getting their music taken down (and kept down), and being paid fairly by valuable streaming services who claim that they are not profitable.

Spotify, Pandora, YouTube and others have made it difficult for artists to permanently take down songs and videos that they are not being fairly paid for or that should not have been posted in the first place. While fans may enjoy the mostly free access, it has made it extremely difficult for less well-known artists to survive in the industry. For most of the big names, the possible loss in recording revenue can be made up in performances and merchandising.

Musicians: Update the Law

Napster was a turning point.  Shut down by court order in 2001 after just two years of operation, the online service enabled MP3 files to be easily shared. The recording industry and artists had little choice but to respond by surrendering preventing the digital distribution of their work or accepting the poor terms – if they were even offered. Streaming services legitimized file-sharing. It’s been more than a decade since Napster was shut down, and artists and labels are finally fighting back about the meager pay rates for their material. They are demanding, among other things, that the Digital Millennium Copyright Act (DMCA) a 1998 law, be updated.

They want to change the law so that music and video streaming services will be required to remove permanently material that they are not authorized to provide. It will be interesting to see if Congress complies.

YouTube claims that it has paid out over $3b in royalties, although that amount was initially attributed to all of Google, YouTube’s parent company. Bank of America values YouTube at $80b, more than all but 66 of the S&P 500 companies. (An article from Bloomberg News is worth reading, here.)

Don’t get me wrong. YouTube is a convenient, well-organized service that offers consumers an affordable alternative to network and cable TV and iTunes.  It claims to have paid some 15 million content providers. But the-1x-1 question is what amounts and to whom?

Angry Headliners, Too

In an article in the The New York Times, “Music World Bands Together Against YouTube, Seeking Change to Law,” it was reported that while YouTube is a vital platform for promoting song and discovering new talent, “it has never been a substantial source of revenue and is a vexing outlet for leaks and unauthorized materials.”

Now, even highly successful artists like Pharrell Williams, Katy Perry and Billy Joel have signed letters asking for United States copyright laws to be changed.

It is no accident that recording and visual artists face similar obstacles as other IP holders – notably inventors and patent holders. Since passage of the America Invents Act, it has been anything but easy for patent holders to stop the unauthorized use of their invention rights, or to get fairly paid for them.

Consumers are Complicit

“New services and platforms are great for consumers,” says Johathan Taplin, a music and film producer who has worked with Bob Dylan and Martin Scorsese, “but our weak laws have allowed them to siphon revenue away for the underlying music, leaving song-writers, performers and the he whole industry choking on their dust.”

Taplin is Director of the Annenberg Innovation Lab at the University of Southern California Annenberg School for Communication and Journalism. See Do you love music? Silicon Valley doesn’t.”

It Ain’t Over Until It’s Over

In 2015, after years of battling pirates, Prince, an innovator in controlling the distribution of his work, said in an interview that the Internet “was over for anyone who wants to get paid.”

Let’s hope that blatant disregard of the source of creative expression and new ideas will not continue unchallenged. For less well-known musicians and visual artists who depend on revenue from streaming and copyrighted songs as a means of survival the future may be a little less bleak. Young tech companies, inventors and universities, who are finding difficulty securing patent licenses have yet to turn the corner.

 

Image source: nytimes.com; bloomberg.com; BofA/Merrill Lynch Global Research

Online Retailer Alibaba ‘Stocks Up’ on U.S. Patents Pre-IPO

In the days preceding what could be the largest U.S. IPO ever, Alibaba, the Chinese e-commerce giant, has been buying patents as well as filing them in an attempt to establish a stronger IP presence.

According to Bloomberg News, Alibaba’s pre-IPO patent buying is part of a larger move on the part of some e-commerce companies to “bulk up” with IP rights for defensive reasons just before or after they go public. (See video here.) However, the source and value of these patents indicate these moves may be more style than substance.

Bloomberg News may be right to suggest that these unproven companies need intangible assets like patents to justify their high valuation. However, it’s unclear if acquiring these untested patents really does provide a meaningful competitive advantage. Patents with an apparent pedigree are not necessarily quality patents, but for some they may provide sufficient freedom to operate. (Click on either image below to see Bloomberg News clip.)

 

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The news service reports that Alibaba has bought 102 patents, 20 from IBM, and has some 300 pending. Perhaps more important, Alibaba is 24% owned by Yahoo!, which has 1,500 patents, presumably those with relatively early prior art in e-commerce.

Twitter pre-IPO has just 9 patents and had been saying that it would not enforce them. Post IPO through and an acquisition with from IBM it has added 900. (Twitter reportedly paid $36 million for them of about $40K per patent, less than what Intellectual Ventures averages per purchase.)

Facebook had just 12 patents pre-IPO. Following it public offering, it used a relatively small amount of cash to buy 750 (from, guess what, IBM). Google, was somewhat of a laggard, but caught up quickly with two large portfolio purchases from IBM and the Motorola acquisition, which included 17,000 patents and 6,000 applications. Presumably, those rights were more focused on wireless inventions and chipsets.

An interesting pattern is emerging for e-commerce businesses: Raise a lot of money, go to the IBM or other well-known stock room and buy (not license) what they can for whatever price so they can at least appear to be IP competitive. Sometimes, the perceived value of a patent portfolio is as important as their actual value, especially if there is little likelihood they will be tested.

Is it possible that IBM, which is fast becoming the Home Depot IP rights, could have that many meaningful e-commerce patents? I hope not.

The Alibaba IPO is expected to exceed the $16 billion that Facebook had raised with its initial offering in 2012.

Image source: anyoption.com; bloomberg.com  

 

 


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