Monthly Archives: August 2021

[I]ts confounding to consider why the FTC would file an 80-page complaint arguing that Facebook squeezed out innovative competitors without mentioning the word patent a single time.

On August 19, the Federal Trade Commission (FTC) filed a first amended complaint for injunctive and other equitable relief in the U.S. District Court for the District of Columbia seeking a judgment that would split Instagram and WhatsApp away from Facebook as punishment for the social media giants alleged violations of antitrust law. The complaint, which traces many of the same arguments raised in a previous FTC suit that was dismissed by the District of Columbia this June, is yet another reminder that the current wave of antitrust enforcement against Big Tech has been an inevitable result of abysmal reforms of the U.S. patent system that have taken place since the mid-2000s, especially those reforms creating the Patent Trial and Appeal Board (PTAB) and turning Section 101 subject matter eligibility analysis into validity goulash.

According to news reports, the amended complaint recently filed by the FTC includes nearly 30 additional pages of allegations that were drafted mainly to address a ruling by U.S. District Judge James E. Boasberg of the District of Columbia, who dismissed the FTCs first complaint this June. These additions include both an identification of Snapchat as Facebooks next-largest competitor in the personal social network sector, as well as detailed numbers on Facebooks engagement with its user base that are redacted in the public version of the complaint. Like the December complaint, the FTC maintains that the relevant market for personal social network services, excluding similar networks like LinkedIn and NextDoor that connect users based on profession or residential neighborhood. It also heavily leans heavily upon allegations of anticompetitive activities surrounding Facebooks acquisition of previous rivals Instagram and WhatsApp.

And yet, anyone who has followed developments within the U.S. patent system has to be struck by the fact that Facebooks dominance in social media has at least as much to do with the inability of smaller competitors to protect their more innovative Internet-based services through patent rights as that dominance has to do with Facebooks merger & acquisition activities. Thats a reality that was acknowledged by IPWatchdog back in 2017, when this blog profiled the many innovative features developed by Snap that Facebook copied with absolute impunity. While other Big Tech entities like Google may have played a bigger part in patent reform, Facebook is a member of United for Patent Reform, a group that supports reduced discovery in patent cases, more stringent patentability standards and other patent reforms that make it harder to enforce patent rights against infringers.

A quick survey of some of the FTCs own language from its amended complaint shows that Facebooks anticompetitive activities involve far more than mere mergers:

Facebooks internal documents confirm that it is very difficult to win users with a social networking product built around a particular social mechanic (i.e., a particular way to connect and interact with others, such as photo-sharing) that is already being used by an incumbent with dominant scale. Oftentimes, even an entrant with a superior product cannot succeed against the overwhelming network effects enjoyed by an incumbent personal social network. (emphasis added)

Antitrust experts often come up against the subject of patent rights, especially in the context of standard-essential patents (SEPs). Although Facebooks social media business doesnt overlap with technical standards, its confounding to consider why the FTC would file an 80-page complaint arguing that Facebook squeezed out innovative competitors without mentioning the word patent a single time, despite consistent acknowledgements by the FTC that smaller innovators need help to compete with market incumbents.

Unable to maintain its monopoly by fairly competing, the companys executives addressed the existential threat by buying up new innovators that were succeeding where Facebook failed.

The complaint assumes that Facebooks major anticompetitive activity is an extensive buy-and-bury scheme without once considering the impact of Facebooks activities at the U.S. Patent and Trademark Office to knock out patent rights owned by innovative competitors. According to Unified Patents Top PTAB Parties list, Facebook, WhatsApp and Instagram have filed a total of 216 petitions at the PTAB. Although there is some overlap in those petitions, Lex Machina shows that Facebook, Instagram and WhatsApp have combined for a total of 138 PTAB petitions, 23% of which have led to findings of all challenged claims being unpatentable.

The FTCs complaint even mentions smaller competitors that have been targeted by Facebook at the PTAB without ever once alluding to such suits. The amended complaint notes that, in January 2013, Facebook cut off its application programming interfaces (API) from Voxer, a mobile voice messaging app, allegedly to prevent competition from that app. The FTC fails to mention, however, that Voxer was targeted in five petitions for inter partes review (IPR) filed by Facebook at the PTAB. Those IPRs have all been filed in the past year, well after Facebook allegedly cut off its APIs to Voxer in 2013, but according to AIPLAs 2019 Report of the Economic Survey, the average cost of defending a single IPR through an appeal to the Federal Circuit is $451,000. The IPRs filed against Voxer all failed at the institution phase, but the average cost of defending a single IPR through the petition filing is $114,000, an average cost that grows to $224,000 through the end of motion practice. It can be safely assumed that Facebook bleeding Voxer for more than half a million dollars by filing IPR petitions that had no meritorious claims was likely detrimental to Voxers business interests.

Facebook could merely wait for an app built for Platform to gain widespread adoption, then either build a competing app or reap the benefits of that popular apps user engagement, including valuable new social data for Facebook. (emphasis added)

Once again, the FTC gets tantalizingly close to realizing that much of the actual problem propping up Facebooks monopoly has been its efforts to copy competitors, a Big Tech business model known as efficient infringement. Time and again, the FTC notes that Facebooks social media platform failed to remain innovative during the nascent days of the mobile smartphone era, yet the federal agency evinces zero understanding that this would also mean that build[ing] a competing app would necessarily mean that Facebook was copying competitors, which is made clear by the companys efforts to copy Snap.

Given these mounting consecutive failures, Facebook justifiably feared that its personal social networking monopoly, and its enormous advertising profits, would be threatened by a mobile-first competitor emerging and gaining traction by connecting users in innovative ways and exploiting mobile phones photo or messaging capabilities. Such an entrant could substantially threaten Facebooks advertising profits. (emphasis added)

Again, not once does the FTCs 80-page complaint ever note Facebooks efforts to knock out its competitors IP, or even mention the word patent, despite every indication that the FTC realized that smaller competitors needed some form of protection to protect the innovative nature of their businesses and compete on a level playing field.

The blind eye that antitrust regulators have been turning toward Big Techs patent killing activities would be laughable if it wasnt so frustrating. The recent legislation introduced in Congress to reduce Apples anticompetitive app store practices? That probably would never have been needed if Smartflash, the inventor of data storage and access systems that Apples App Store was found to willfully infringe and whose patent rights were obliterated by Apple through questionable machinations at the PTAB, had its patent rights respected. Last December, 10 state attorneys general filed an antitrust suit against Google targeting its anticompetitive practices in online search advertising. Google didnt invent search advertising, but the Internet giant did leverage PTAB trials to knock out seminal online search advertising patent claims owned by B.E. Tech, preserving many billions in Googles corporate value while destroying the business interests of an innovative competitor. Earlier this month, B.E. Tech and inventor M. David Hoyle filed a Bivens action lawsuit naming several former USPTO officials, including Googles former Head of Patents and former USPTO Director Michelle K. Lee, for rigging proceedings at the PTAB on behalf of Google, one of the agencys largest stakeholders.

Antitrust suits may eventually be successful at splitting Big Tech giants into smaller firms, but none of these efforts does anything to actually ensure that the resulting markets will allow smaller competitors to protect their innovations against market incumbents that, while smaller, will still have market caps dwarfing small innovators and independent inventors. The sad truth of the matter is that Apple wouldnt dominate app stores, Google wouldnt dominate online search advertising, and Facebook wouldnt dominate social media if the entire U.S. federal government hadnt completely turned the patent system on its head over the past two decades.

Image Source: Deposit PhotosAuthor: nextnewmediaImage ID: 188830032

Steve Brachmann is a freelance journalist located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He writes about technology and innovation. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients and is available for research projects and freelance work.

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FTC's Antitrust Complaint Against Facebook Highlights Another Missed Opportunity to Address Big Tech's Anticompetitive Activities Through Patent...

Looks like that US revolution is going well

Bit Tech has become so powerful it has stopped innovating and is instead spending the cash buying corrupt politicians lobbying.

The flood of lobbying dollars spent by tech companies has increased with market concentration, according to a new study that cites similar patterns in the pharmaceutical and oil industries.

The anti-monopolist group American Economic Liberties Project has penned a report which says that as Big Tech faces less competition, it does not have to innovate any longer. So what it does is spend all that cash influencing the democratic process.

American Economic Liberties Project lawyer Reed Showalter who wrote the study, said policy makers and antitrust enforcers should look beyond the impact that mergers have on consumers and consider how market concentration affects the democratic process.

"We need to more closely scrutinize various elements of competition policy that have allowed industries to become more concentrated over the last 30 to 40 years", Showalter said.

"Allowing unchecked concentration is the cause for a lot of the democratic harms that we're also seeing people complain about as big money enters politics. There's no coincidence there."

Basically, Big Tech is following the same business pattern as other big US monopolies who see political power as a better way of controlling their profits. It seems that the US revolution really was about propping up criminals rather than any actual fear of real tyranny.

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Big Tech is cutting innovation to buy politicians - Fudzilla

US President Joe Biden has staged a cyber security summit at the White House, and it's produced quick results in the form of big tech making vague promises about stuff they think will improve the nation's security

The premise of the event was Biden's belief that America can't go on being hurt by ransomware, state-backed disinformation naughtiness, and other forms of infosec-driven attacks, but as government can't address security alone private enterprise must weigh in with its own efforts.

"The reality is, most of our critical infrastructure is owned and operated by the private sector," Biden said as the event convened. "So I've invited you all here today because you have the power, the capacity, and the responsibility, I believe, to raise the bar on cyber security."

The event saw more than 30 bigwigs from big tech, academia, finance, insurance, and the education sector talk about how to improve security. At one point attendees broke into three working groups one on critical infrastructure resilience, another on building enduring cyber security, and a third on the cyber security workforce.

Just what went on inside the room was not revealed, but after the event a statement listed pledges by attendees.

IBM's promises were detailed by CEO Arvind Krishna on LinkedIn in a missive titled "The Time To Prioritize Cybersecurity Is Now". One element of that plan is to release a product called "IBM Safeguarded Copy" that he said is "a new data storage solution that can shorten the time it takes for organizations to recover from days to hours."

A spot of web searching revealed it's actually a new capability of Big Blue's existing IBM Copy Services Manager products. It will only work on IBM's DS8000 storage systems, and involves the not-very-new technique of creating "many frequent copies of a production environment (for example, hourly copies maintained for a number of days)" so that in the event of an attack, restoration comes from a recently-retained copy of corporate data.

So basically defending American industry from ransomware with frequent snapshots. Which American industry can already do today with tech from other storage vendors, or cloud services.

Amazon Web Services' contribution was a little more substantial. The company pledged to share the anti-social-engineering courseware it uses on its own people with the world, and to hand out free multi-factor authentication tokens with an unspecified group of qualified" account holders.

Apple also promised to step up on authentication, with "a new program to drive continuous security improvements throughout the technology supply chain" that will see it "drive the mass adoption of multi-factor authentication, security training, vulnerability remediation, event logging, and incident response" among its suppliers.

Microsoft CEO Satya Nadella tweeted the following vague commitment and The Register cannot find anything to suggest the figures mentioned have increased by a cent over past commitments:

Google pledged to "invest $10 billion over the next five years to strengthen cyber security, including expanding zero-trust programs, helping secure the software supply chain, and enhancing open-source security". The digital advertising giant also promised to "train 100,000 Americans in fields like IT Support and Data Analytics, learning in-demand skills including data privacy and security". No details on how those people will be recruited were offered, nor was the level of education discussed.

Code.org also promised to train more people, insurer Resilience set the security bar higher for would-be buyers of its cyber policies, and Girls Who Code announced it will "establish a micro credentialing program for historically excluded groups in technology".

Dates for this stuff to happen were scarce, but the President came out of the event with evidence that private enterprise is doing stuff. That at least was a better look than at the start of the event, when one of the reporters who was there to witness Biden's opening remarks asked a question about one of the USA's other big recent drives to ensure national security the failed war in Afghanistan and the Commander-In-Chief declined to answer.

See more here:

Big tech proud as punch about cameos in Joe Biden's security theatre - The Register

Beijings ongoingtech crackdownsent U.S.-listed Chinese stocks into a tailspin and left investors and analysts wondering what is going on in China.

Does the ruling Chinese Communist Party feel threatened by the size and influence of these firms or the tycoons who run them? Was the action against Didi days after its U.S. IPO aimed at deterring other technology companies from listing in New York?One narrative getting a lot of media traction speculates that Beijing is cutting its internet companies down to size to redirect capital toward higher-priority technologies, such as semiconductors and biotech.

While there is an element of truth to each of these theories, the driving force behind the crackdownlike previous action taken in other sectorsis a regulatory enforcement campaign aimed at cleaning up the tech industry.

The Party has a longstanding distrust of the interneta mass communication tool it cannot fully control. On top of that, Beijing fears the massive size of the digital economy and its rampant shady business practices could result in civil unrest or even economic ruin if left unchecked.

>>>Biden Administration Needs To Take the Kid Gloves Off When Reacting to Chinas Cyberattacks

A recent studyby a Chinese government-affiliated think tank found the digital economy accounted for nearly 40% of the countrys GDP last year. By comparison,in the U.S., this figure was just 9% for 2019, the latest year for which data are available. Even more shocking, over 80% of payments in China are made via mobile apps, and this figure continues to grow. Almost all these transactions are completed through either Tencents super-app WeChat or Ant Groups Alipay. Indeed, the sector has become, as the clich goes, too big to fail.

In the U.S., too big to fail implies a promise of government protection, up to and including an eventual bailout, if needed. In China, however, the concept motivates the government to regulate companies heavily, even excessively, so it doesnt have to bail them out in the future. So, while political motivations are no doubt at play in the current crackdown, there is also an economic motive. The more reliant Chinas economy and society become on a given sector or company, the greater the governments urge to beef up regulation and oversight, even if it means jeopardizing the well-being of key companies.

Weve seen this before, in the 2017 takedowns of some of the countrys largest private-sector conglomerates, like Wanda Group and Anbang Insurance Group. These incidents, possible political motivations aside, were part of a broader crackdown on the irrational overseas investment binge among Chinese companies, which the government viewed as a huge financial risk.

Regulatory crackdowns typically target large, well-known firms, because their massive size and omnipresence make their infractions both easier to spot and potentially more harmful socially or economically. Action against a high-profile company also has a deterrent effect against non-compliant behavior by other businesses. This is important for the Chinese government, which relies on fear as a tool of self-regulation.

Nor did these crackdowns come out of the blue. Since Xi Jinping came to power in 2012, China has tightened regulatory enforcement across the board. The Party often designates priority industries or behaviors for the regulators to focus on, and two prominent themes driving these priorities have been controlling financial risks and cleaning up industries closely connected to quality-of-life issues. The tech companies targeted in the current sweep fit into both categories.

Indeed, the writing was on the wall months before the clampdown intensified in July. In March, Xi instructed Chinas key regulatory bodies to strengthen oversight and scrutiny of the platform economy, specifically prioritizing anti-monopoly and data security. Importantly, Xis stated objective was to promote the healthy and sustainable development of the platform economy, echoing a pledge made in each of Premier Li Keqiangs annual government work reports since 2018. Xi said that, in order to promote the sectors sustainable development, the irregular development and risks of some companies had to be reversed.

If previous well-publicized enforcement actions against platform operators like Tencent and Pinduoduo and last Novembers halting of Ant Financials IPO didnt provide sufficient warning of a looming crackdown, this statement and others like it should have.

>>>Biden Directive on Mitigating Threats From TikTok, Other Foreign-Owned Apps Is Insufficient

Seen from this perspective, it is little surprise that Didi was targeted after reportedly ignoring regulators request to halt its IPO pending a data security review. The company could not have been ignorant of the trend toward greater scrutiny on these grounds. Just prior to the IPO, China passed a new Data Security Law which, among other things, will require security assessments for data transfers overseas. Didi may have thought it could continue operating in a grey zone, given the law doesnt come into force until September, but the regulatory direction was clear. Didi simply failed to read the signs.

Chinas regulators were actively cleaning up tech companies long before Didis IPO debacle. Ant Financials dual Shanghai-Hong Kong IPO was cancelled last year. Whether or not one buys the official account that this action was due largely to concerns over financial risks rather than a power play against Ant Group founder Jack Ma, enforcement actions since then have carried all the markings of a standard regulatory campaign. On the anti-monopoly front alone, nearly every major Chinese platform company was either punished or admonished during the first half of this year. This doesnt even take into account the punishments dealt out for other issues, such as labor violations and cybersecurity infractions.

Chinas crackdown on big tech is neither surprising nor unprecedented. Regardless of what other motives played a role in this development, the sector has become too big to fail, and it will remain a target until Beijing is satisfied that its most serious risks have been resolved.

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China's Tech Sector Is Too Big To FailThat's Why Beijing Is Cracking Down on It - Heritage.org

When thinking about digitally transforming your finance operation, CFOs should start with whats big and broken and fix that before moving on to other things, former Oracle CFO Jeff Epstein said in a Tesorio webcast.

Epstein recommended that CFOs ask their team and the people outside the finance function who work with them which processes are working well, which are working poorly, which are large and which are small. A large process is one that involves a lot of people and consumes a lot of time and resources.

Armed with that information, CFOs can create a matrix listing big, poorly working processes in one quadrant, big, well-functioning processes in another, small, poorly working processes in another, and small, well-functioning processes in the last quadrant.

So, when you think about finance transformation, pick one of the large, broken processes, and fix that one first, Epstein said. Don't try to do 10 things at once. If you can just make some progress on [one] thing that people have been frustrated with for a long time, you can get a lot of credibility in the company and build your process improvement muscle from there.

For many CFOs, the process improvement team is a group brought together for the purpose. But if your organization is large enough, with sufficient resources, few things are better from a technology standpoint than having an in-house business systems team. This is a permanent team, with people hired for the purpose, to work with the CFO on selecting, and improving, finance function tech tools.

Greg Henry, CFO of Couchbase, has a three-person process improvement team, which he suggests pays for itself by improving the functionality and efficiency of the suite of tools accounts payable, accounts receivable, cash flow management and so on that surround the enterprise resource planning (ERP) system.

We have a small, three-person team out of 650 [employees] but get tremendous value out of having people inside the company to help us evolve and create efficiencies without having to get consultants or new tools, he said.

A Gartner poll found 93% of finance professionals feel theres alignment within their organization on what the finance function should look like by 2025 from a technology standpoint, but only 39% feel their digital transformation efforts are having the impact they want.

Some possible reasons for the disconnect: CFOs put in a tool to automate a function, like accounts payable, but it doesnt do it in a way that aligns with other organization processes doesnt show the impact on cash flow, for example or, more abstractly, works against company values.

If youre collecting from customers in a way thats repetitive and blunt, does that show your company believes in empathy? said Carlos Vega, Tesorio CEO.

For all intents and purposes, ERP systems, which serve as the backbone to finance and accounting organizations today, have become commodities, Henry said. Whatever system you have, the technology has evolved to the point where it can be expected to function well.

Where much of the value-add comes from today from a technology standpoint is in the specialized applications that surround the ERP, and thats where finding out where the pain points are, or bringing in a business systems team, can make a difference in how well the CFO tech stack is adding value to the broader organizations business goals.

However you go about assessing how well your applications are working, theres one rule of thumb you should follow no matter what, and thats to implement your solutions not for what you need today but what youll be needing in another year or two.

If you know that in a year or two youre going to open an entity in Canada or in the U.K., because youre going to expand your market, then choosing a tool for AR or AP that wouldnt work globally is going to create a situation in which youll have to choose a new tool in the future, said Sarah Spoja, CFO of Tipalti. You might not need all that functionality today and might not pay for it all today, but does it scale? Can you add that module for procurement when you want it, or to go global when you need it? Otherwise, digital transformations will feel like band-aids that you have to keep replacing.

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Transformation starts with fixing one big tech problem, former Oracle CFO says - CFO Dive