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Feb 05, `08 — Three global record companies, Universal Music Ltd, Sony BMG Music Entertainment (Hong Kong) Ltd and Warner Music Hong Kong Ltd, have launched legal proceedings against China’s top Internet search engine Baidu.com, accusing it of violating copyright by giving access to music files, International Federation of the Phonographic Industry said in a press release on Monday, Feb 04.

* New legal proceedings brought against Baidu
* Copyright infringement actions against Sohu and its associate company Sogou
* Yahoo China in breach of copyright violation judgment

After months of fruitless negotiations, legal proceedings have been filed on Feb 04, against the China’s biggest internet company, Baidu. Separate actions have also been brought against Sohu and its associate company Sogou. Meanwhile, Yahoo China faces fresh proceedings following its refusal to comply with a landmark ruling in December confirming it violated Chinese law by committing mass copyright infringement.

All of the Chinese companies involved operate similar services based on delivering music to their users via “deep links” to hundreds of thousands of infringing tracks on third party sites, with the aim of driving their own advertising revenue. Such services have been confirmed as in breach of copyright by the December judgment of the Beijing Higher People’s Court. Each of them is a driver of copyright abuse in China, where the huge potential for the online music sector is being stymied by copyright theft.

China has potentially the largest online music-buying public in the world with as many broadband connections as the United States. Currently, however, more than 99 per cent of all music files distributed in the country are pirate and China’s total legitimate music market, at US$76 million, accounts for less than one per cent of global recorded music sales.

Monday (Feb 04)’s actions follow in the wake of a decisive judgment against Yahoo China in December 2007 by the Beijing Higher People’s Court. The court’s finding that Yahoo China’s music delivery service is illegal under Chinese law sets a precedent for cases against similar operations in China.

Three record companies have now filed proceedings against Baidu. The new claims have been filed with the Beijing No. 1 Intermediate People’s Court by Universal Music Ltd, Sony BMG Music Entertainment (Hong Kong) Ltd and Warner Music Hong Kong Ltd. The three companies are asking the court to order Baidu to remove all links on its music delivery service to copyright infringing tracks that they own the rights to.

Action is also being taken today against Sohu and its associate company Sogou, which operates a similar service. Sogou makes profits through advertising that appears on the service and through sponsorship. Sogou also actively induces and encourages copyright infringement by means of recommendations and charts, while Sohu provides deep linking services through its associate company.

Sohu is the official sponsor of internet content service (ICS) for the Beijing 2008 Olympic Games.

The legal action is being brought by four record companies: Universal Music Limited, Gold Label Entertainment Limited, Sony BMG Music Entertainment (Hong Kong) Limited and Warner Music Hong Kong Limited. The cases were also filed at the Beijing No.1 Intermediate People’s Court. They follow four prior notices that were sent to both companies from July 2007 onward.

The claims against Baidu, Sohu and Sogou will be served on the respective companies by the court after the Chinese New Year.

Meanwhile, Yahoo China has still not complied with the December ruling made against it by the Chinese appeal court. As a consequence, the plaintiffs in that case have now filed execution proceedings against Yahoo China, asking the court to force Yahoo China to comply with the earlier judgment.

More at International Federation of the Phonographic Industry.

Feb 03, `08 — As Swedish prosecutors fixed their sights last week on The Pirate Bay, an Internet file-sharing service that is a scourge of the movie and music industries, the operators of the site responded by hoisting a defiant, digital Jolly Roger, reports the IHT.

The Pirate Bay, on its blog, called for a celebration saying, “This week we’ve hit some magic numbers. We’re tracking over 1 million torrents. We have had over 10 million simultaneous peers on the trackers. We’re at 2.5 million registered users (and they are active as well).”

The 100th post on the Pirate Bay blog further adds, “In case we lose the pending trial (yeah right) there will still not be any changes to the site. The Pirate Bay will keep operating just as always. We’ve been here for years and we will be here many more.”

The Wires writes, “Peter Sunde Kolmisoppi, one of the four Swedes charged in Sweden on Thursday, said in a telephone interview that the site has set up a clandestine, double-blind operation with its servers spread throughout the world — and out of reach of the Swedish authorities.

“The Pirate Bay is not in Sweden,” the 29-year-old Kolmisoppi said. Where are the servers?

“It’s a distributed system. We don’t know where the servers are. We gave them to people we trust and they don’t know it’s The Pirate Bay,” Kolmisoppi said. “They then rent locations and space for them somewhere else. It could be three countries. It could be six countries. We don’t want to know because then you’ll have a problem shutting them down.” More at IHT, theWired.

Feb 03, `08 –This Slashdot article reports on a new Italian copyright law, in which the Italian parliament may have mistakenly legalized sharing music over P2P networks.

The new copyright law, passed by both houses of parliament, would allow Italians to freely share music over the Internet as long as it is free of charge, at low resolution or “degraded,” for scientific or educational use, and only when such use is not for profit.

Excerpts of the Slashdot article:
According to Italian lawyer Andrea Monti, an expert on copyright and Internet law, the new Italian copyright law would authorize users to publish and freely share copyrighted music (p2p included). As Monti says in the interview, those who wrote it didn’t realize that the word “degraded” is technical, with a very precise meaning, which includes MP3s, which are compressed with an algorithm that ensures a quality loss. The La Repubblica.it article in Italian, and Google translation is here. More at Slashdot.

Feb 01, `08 — Four men who run one of the most popular file-sharing sites in the world have been charged with conspiracy to break copyright law in Sweden, the BBC reported on Thursday.

Pirate Bay does not store music and video files on its own servers, but instead helps users share them on the internet. The website acts as a directory of the files used by the BitTorrent file-transfer protocol.

“It’s not merely a search engine. It’s an active part of an action that aims at, and also leads to, making copyright protected material available,” public prosecutor Hakan Roswall told Reuters. “It’s a classic example of accessory — to act as intermediary between people who commit crimes, whether it’s in the physical or the virtual world.”

Pirate Bay told the news agency that the people running the site cannot be held responsible for how its directory services are used. The website is said to have between 10 and 15 million users around the world and is supported by online advertising.

Police seized computers in May 2006, temporarily shutting down the website.

Prosecutor Hakan Roswall said the website was commercially exploiting copyright-protected work because it was financed through advertising revenues. According to the Pirate Bay website, its users are currently downloading close to a million files.

On the site, a statement says: “In case we lose the pending trial (yeah right) there will still not be any changes to the site.

“The Pirate Bay will keep operating just as always. We’ve been here for years and we will be here many more.”

In an interview with the BBC’s technology programme Click last year Pirate Bay co-founder Peter Sunde said: “I think it’s okay to copy. They get their money from so many places that the sales is just one small part.”

The other three men facing charges are Carl Lundstrom, Frederik Neij and Gottfrid Svartholm Warg. If convicted, the four men could face a maximum of two years in prison.

The website had up until 2006 based its servers in Stockholm, but moved some to the Netherlands after a raid in May of that year by Swedish police, who seized equipment and held three people for questioning “on suspicion of breaking copyright law or abetting the breaking of copyright law,” authorities said. The site was taken down for a day, but was soon up and running again.

Moves against the site have been backed by entertainment industry groups, including the Motion Picture Association of America and the International Federation of the Phonographic Industry. More at BBC News.

Irvine, Calif — Dec 31, `07 /PRNewswire-FirstCall via COMTEX News Network/ — Broadcom announced that a federal judge today issued an injunction against Qualcomm’s continued infringement of three Broadcom patents.

As ordered by US District Court Judge James V. Selna, the injunction prohibits Qualcomm from making, using and selling certain chipsets and software that infringe the three Broadcom patents. Qualcomm is also barred from engaging in a range of marketing and customer support activities related to its WCDMA (Wideband Code Division Multiple Access) and EV-DO (EVolution-Data Only) chips, which are used to process data on high-speed wireless networks.

A Qualcomm spokeswoman said the company was reviewing the ruling and declined further comment. Qualcomm, based in San Diego, is the world’s second-largest chip supplier for mobile phones after Texas Instruments Inc. It earns much of its money from licensing fees on its patented technology.

Broadcom, based in Irvine, California, is a newcomer to the cell phone business but gained ground in 2007 in a wide-ranging court battle with Qualcomm.

In May 2007, a jury awarded Broadcom $19.6 million in damages for the same chip patents. In November, Selna indicated he would up the award to $39.3 million, but reversed himself when a a federal appellate court raised the bar for proving willful patent infringement.

The judge then took up the question of whether future sales of the chips should be stopped, resulting in Monday’s order.

“The ITC order did not go nearly as far in prohibiting other activities from Qualcomm,” said David Rosmann, vice president of intellectual property litigation with Broadcom. “The U.S. District Court order has in some respects much broader remedies. So the activities that are going to be barred by this injunction go a long way to stopping Qualcomm’s continued operations in support of these infringing chips.”

Broadcom is also suing Qualcomm on other patent infringement and antitrust claims, Rosmann said. The antitrust case is expected to go to trial in 2009. More at Broadcom.

HOLMDEL, NJ — Dec 31, `07 /PRNewswire-FirstCall/ — Vonage and Nortel today announced that they have agreed in principle to end the litigation pending between them.

The contemplated settlement involves a limited cross license to three Nortel and three Vonage patents and will not call for any monetary payments by any party.

Claims relating to past damages and the remaining patents will be dismissed without prejudice. The settlement is subject to final documentation. More at Vonage.

Dec 30, `07 — This Slashdot article highlights the latest strategy of the RIAA to sue consumers who have ripped their legally purchased CDs on to a PC.

“With this past week’s announcement by Warner to release its entire catalog to Amazon in MP3 format with no Digital Rights Management, you would think that the organization that represents them, The RIAA, would begin changing its tune.

Instead, they are pressing on in their campaign against consumers by suing individuals who merely rip CDs they’ve purchased legally. ‘The industry’s lawyer in the case, Ira Schwartz, argues in a brief filed earlier this month that the MP3 files Howell made on his computer from legally bought CDs are “unauthorized copies” of copyrighted recordings.”

The Washington Post article further writes, “”I couldn’t believe it when I read that,” says Ray Beckerman, a New York lawyer who represents six clients who have been sued by the RIAA. “The basic principle in the law is that you have to distribute actual physical copies to be guilty of violating copyright. But recently, the industry has been going around saying that even a personal copy on your computer is a violation.”

The RIAA’s legal crusade against its customers is a classic example of an old media company clinging to a business model that has collapsed. Four years of a failed strategy has only “created a whole market of people who specifically look to buy independent goods so as not to deal with the big record companies,” Beckerman says. “Every problem they’re trying to solve is worse now than when they started.”" More at WashingtonPost.

A federal appeals court handed Google a setback in a patent fight on Wednesday, Dec 26, tossing out part of a summary judgment in Google’s favor in a lawsuit filed by Hyperphrase Technologies.

The US Court of Appeals for the District of Columbia Circuit revived part of HyperPhrase Technologies’ lawsuit, throwing out a lower court ruling that Google’s AutoLink feature didn’t infringe the company’s patents.

As part of the Google toolbar, AutoLink gives users more information than standard links. It recognizes data such as addresses and book titles, then provides links to online maps or books at Amazon.com.

The appeals court ruled that Google’s immensely profitable AdSense did not infringe on Hyperphrase’s patents. It handed down a split decision on AutoLink, agreeing that Google did not infringe, as claimed, on one of the Hyperphrase patents. But it vacated a summary judgment in Google’s favor on two others and sent it back to the Wisconsin district court.

HyperPhrase claimed in an April 2006 suit that Google used its inventions without permission. It sought cash compensation and an order blocking Mountain View, Calif.-based Google from using the technology.

More at the US Court of Appeals for the District of Columbia Circuit ruling here (in pdf).

Dec 25, `07 — BBC News is reporting on British Airways being accused of colluding in setting prices of fuel surcharges and other levies in the provision of air freight services.

“BA confirmed it received a letter of complaint from European Union regulators, alleging that it was part of a suspected air freight cartel. The complaints were also sent to Germany’s Lufthansa, Air France-KLM and Scandinavia’s SAS. The airlines have the right to respond, but if found guilty, they face fines.

The European Commission that it had sent official letters, known as statements of objection, to a number of air freight firms, concerning “violation of EU rules on restrictive business practices”.

Officials did not name the specific airlines involved, but BA, Air France-KLM and SAS confirmed they had each received the European Commission letter.” More at BBCNews.

DENVER –BUSINESS WIRE– On Thursday, Dec 20, MPEG LA announced that it has commenced an action against Audiovox for breach of contractual obligations as a Licensee to MPEG LA’s MPEG-2 Patent Portfolio License and 1394 Patent Portfolio License.

According to the complaint filed in the Supreme Court of the State of New York, Audiovox has breached its contractual obligations by failing to report fully its manufacture or sale of products such as DVD players and digital TVs that use the MPEG-2 digital video compression standard or employ the high-speed transfer digital interface provided for in the IEEE 1394 standard, failing to make full payments for its manufacture or sale of such products, and refusing to allow an audit as permitted by the MPEG-2 Contract and 1394 Contract.

MPEG LA seeks, among other things, monetary damages, an order requiring Audiovox to allow the contractually required audit, an accounting of all products manufactured or sold by Audiovox subject to the Contracts, as well as injunctive relief prohibiting Audiovox from the manufacture or sale of MPEG-2 and 1394 products. More at MPEG LA (in pdf).

Brussels — Dec 21, `07 — The European Commission said on Friday it has contacted a number of companies regarding their alleged participation in an air freight cartel.

The European Commission can confirm that a Statement of Objections has been sent to a number of companies, concerning their alleged participation in a cartel in the provision of airfreight services, in violation of EU rules on restrictive business practices (Article 81 of the EC Treaty and Article 53 of the Agreement on the European Economic Area).

Procedural background

A Statement of Objections is a formal step in Commission antitrust investigations in which the Commission informs the parties concerned in writing of the objections raised against them. The addressee of a Statement of Objections can reply in writing to the Statement of Objections, setting out all facts known to it which are relevant to its defense against the objections raised by the Commission. The party may also request an oral hearing to present its comments on the case.

The Commission may then take a decision on whether conduct addressed in the Statement of Objections is compatible or not with the EC Treaty’s antitrust rules. Sending a Statement of Objections does not prejudge the final outcome of the procedure. More at European Commission.

It named no companies in the statement but Scandinavian airline SAS said earlier on Friday it had received a statement of objections accusing the airline’s cargo unit of breaking competition rules.

“SAS Group confirms that it has received a Statement of Objections from the European Commission within the framework of an industry-wide investigation of the air cargo sector, involving a large number of cargo companies and air carriers, including SAS Cargo.

In the Statement of Objections the EU Commission alleges that certain investigated practices in the air cargo sector constitute infringements of EC competition rules. SAS Group intends to review the Statement of Objections immediately and will also have to review the underlying documentation as soon as it has received access to the Commission’s comprehensive investigation file. Therefore SAS cannot comment on the alleged irregularities until this review has been completed.” More at SAS.

Seoul, S Korea — Dec 21, `07 — South Korean prosecutors probing corruption accusations against the giant Samsung Group said on Friday they had narrowed their focus down to around 400 accounts that might be linked to an alleged slush fund, Reuters reported.

A former top legal executive with the country’s biggest conglomerate last month accused Samsung of running a 200 billion won ($212.7 million) fund to bribe public officials to avoid investigation into its operations.

“The list of accounts has become a lot shorter,” a prosecution official said by telephone. “It’s roughly about 300 or 400.” Media reports have said the number of accounts searched by prosecutors was well in excess of 1,000.

The former Samsung employee, Kim Yong-cheol, said the firm hid the illicit funds in scores of deposit accounts in the names of current and former executives.

The company, whose group sales are equivalent to about a sixth of the entire economic output of the world’s 13th largest economy, has denied any wrongdoing. More at Reuters.

Beijing, China — Dec 20, `07 –The international recording industry today hailed a landmark Beijing court ruling confirming that Yahoo China’s music delivery service violates Chinese law by facilitating mass copyright infringement.

Yahoo China, part-owned by one of the world’s biggest internet companies, Yahoo, runs an operation enabling users to search for, play and download pirate music without ever leaving its website. Yahoo China’s appeal against a guilty verdict in April was today dismissed by the Beijing Court.

The decision is made under new Chinese copyright laws which entered into force in 2006. The Court separately ruled on a similar case against internet company, Baidu which had been brought under the previous Chinese copyright laws. The ruling confirmed that Baidu participated with and assisted third party sites in transmitting infringing music, but under the old laws Baidu was not liable for copyright infringement.

Music search services such as Yahoo China’s and Baidu’s, which “deep link” users to hundreds of thousands of pirate tracks, are a huge drain on efforts to develop a legitimate music market in China. Despite enormous market potential, music sales in China totalled US$76 million in 2006, less than one per cent of the global recorded music market.

Over 99 per cent of all music downloading in China infringes copyright, and services such as Yahoo China and Baidu account for the bulk of the problem. More at IFPI.

WASHINGTON — Dec 20, `07 — The Federal Trade Commission on Thursday approved Google’s $3.1 billion purchase of advertising rival DoubleClick, saying the deal would not substantially lessen competition.

The deal, which combines Google’s dominance in pay-per-click Internet advertising with DoubleClick’s market-leading position in flashier display ads, is also being scrutinized by European antitrust officials.

In a 4-1 vote, the FTC decided to end its eight-month investigation of the transaction.

Commissioner Pamela Jones Harbour dissented and issued a separate statement expressing reservations, arguing that the deal “may substantially lessen competition.”

She said the takeover “will affect the evolution of the entire online advertising market” as this evolves and have wide-ranging implications for consumers. “The transaction will combine not only the two firms’ products and services, but also their vast troves of data about consumer behavior on the Internet,” she said.

European antitrust authorities are expected to rule on the deal sometime next year. The European Commission last month launched a probe and said the merger “would raise competition concerns.” The European Commission declined to comment on the FTC’s decision, spokesman Jonathan Todd said.

Microsoft and other critics argue the deal would enable Google to dominate two aspects of the Internet advertising market — ad sales and ad-serving tools.

The FTC said in a report on its investigation that both the online ad sales and ad-serving markets have numerous competitors, several of which have been bolstered by recent acquisitions.

Those include Microsoft’s $6 billion purchase of DoubleClick rival aQuantive, the acquisition of online advertising provider Tacoda by Time Warner’s AOL, and Yahoo’s purchase of Internet advertising exchange Right Media for $680 million.

Other competitors include ValueClick and 24/7 Real Media, which was purchased by London-based advertising giant WPP Group PLC for $649 million in May, the FTC said.

Privacy advocates say the combined company will have access to a huge amount of data on individual Web-surfing habits. The FTC said it lacked the legal authority to block the deal on any grounds except on antitrust matters.

However, in an apparent nod to these concerns, the FTC on Thursday proposed a set of privacy guidelines for the online advertising industry, describing them as something that “clearly transcend” the Google-DoubleClick deal. It remains to be seen how such guidelines would be enforced.

Google has a dominant position in pay-per-click ads, which are based on a computer user’s searches. Its ads are usually in the form of text and are shown on the right-hand side of the screen.

DoubleClick is a market leader in the display ads preferred by many corporate advertisers. More at FTC.

San Jose, Calif — Dec 19, `07 - eBay today released the following statement regarding its District Court victory in the Netcraft vs eBay and PayPal patent infringement case.

On December 18, 2007, the U.S. District Court for the Western District of Wisconsin entered judgment, granting eBay’s and PayPal’s motion for summary judgment of non-infringement on both of the patents that Netcraft asserted against eBay and PayPal.

“We are pleased by the Court’s well-reasoned ruling in this case. We will continue to protect the interests of our global community of users and the businesses who rely on eBay’s platforms to make a living.”

In May 2007, Netcraft brought suit against eBay and PayPal and contended that PayPal’s payment services infringe two of Netcraft’s patents titled “Internet Billing Method.” The Court ruled that all of the patents in question require “providing customers with internet access” and because eBay and PayPal do not provide customers with internet access, the two companies do not infringe Netcraft’s patents.

St. Louis, MO — Dec 19, `07 — Microsoft, Yahoo! and Google have entered into settlements with the US to resolve claims that they promoted illegal gambling, United States Attorney Catherine L. Hanaway announced today. The total amount of the three settlements is $31.5 million in value to the United States.

Three companies also agreed to stop accepting ads for sports wagering and other online gambling, US Attorney Catherine Hanaway said.

The investigation conducted by Hanaway’s office, along with the IRS and the FBI, dates to 2000, she said. Negotiations have been going on for 12 to 18 months, she added.

All three companies said they stopped taking the ads years ago.

As part of the settlement, the companies will pay cash to the US government and provide millions of dollars worth of public service advertisements informing young adults and teenagers that Internet gambling is illegal.

The US Attorney’s office in St. Louis, MO has led in the effort to halt illegal Web-based gambling, a roughly $6 billion a year industry in the US that violates the Federal Wire Wager Act among other federal laws.

Earlier this year, the London-based Internet gambling firm BetOnSports pleaded guilty in St. Louis to federal racketeering charges. Cases are still pending against company executives. Hanaway’s office also settled a civil case against BetOnSports in November 2006. That settlement prohibits the company from accepting any bets from gamblers in the U.S.

Microsoft will pay $4.5 million to the US government, $7.5 million to the International Center for Missing and Exploited Children, and provide $9 million worth of public service advertising.

Yahoo’s settlement of $7.5 million includes forfeiting $3 million to the US govt and providing $4.5 million worth of online ads for a public service advertising campaign. Google will pay $3 million, the department said.

Google will pay $3 million, the department said. More at US Attorney’s Office, Eastern District of Missouri.

Waterloo, Belgium and Purchase, NY — Dec 19, `07 — MasterCard Europe said that it will appeal to the European Court of First Instance today’s decision by the European Commission regarding MasterCard Europe’s default cross-border interchange fees.

The Commission’s Order requires the company, among other things, to “repeal [its] Intra-EEA fallback interchange fees, as well as [its] SEPA/Intra-Eurozone interchange fees” within six months. The Order applies only to “interchange fees for MasterCard branded consumer credit and charge cards and for MasterCard or Maestro branded debit cards”.

MasterCard Europe believes that it has strong grounds for its appeal. While it will comply with the Commission’s Order, the company said that it is prepared to take action so that its payment products remain competitive and continue to benefit the millions of European cardholders who use and merchants that accept MasterCard and Maestro cards.

MasterCard Europe said its decision to appeal is based on its firm conviction that market forces, not regulation, should drive key decisions such as the setting of interchange fees and retailers’ choices over which forms of payment to accept. More at MasterCard.

Los Angeles — Dec 19, `07 — In a significant victory for the major Hollywood studios, a federal judge in Los Angeles has terminated an ongoing lawsuit against the operators of TorrentSpy.com in favor of all six of the Motion Picture Association of America’s (MPAA) member companies.

The court imposed the harshest sanction against the TorrentSpy defendants because of their brazen, continuous, and systematic destruction of evidence and subversion of the judicial process. The ruling means that TorrentSpy operators are liable for copyright infringement.

The District Judge Florence-Marie Cooper of the Central District of California found that the defendants, Justin Bunnell, Forrest Parker and Wes Parker, had lied to the court and had systematically destroyed evidence. She also found that TorrentSpy is responsible for copyright infringements. A further court session next year will determine what penalties will be imposed - the extent of damages and any other sanctions, such as closure of the TorrentSpy website.

In its decision, the court ruled that “although termination of a case is a harsh sanction appropriate only in extraordinary circumstance, the circumstances of this case are sufficiently extraordinary to merit such a sanction.” The court found that the evidence was “not deleted or modified negligently, but intentionally in direct response to the institution of this lawsuit.” Observing that defendants “already had been subjected to lesser sanctions in this case”, including a fine for $30,000 for violation of a court order, the court concluded that the “harsh sanction” of terminating the defendants’ case was the only appropriate remedy.

The evidence defendants destroyed included forum postings with references to copyright infringement and other incriminating statements; site directories referencing copyrighted works and subcategories clearly referring to pirated content; and user IP addresses.

MPAA members filed lawsuits against various P2P sites including TorrentSpy, early last year, because such websites enable users to download complete films from the internet. TorrentSpy defended itself and brought a motion to dismiss the action, on the basis that it does not host copyrighted works itself. In June of this year, TorrentSpy was forced to log visitor details. In response, the torrent search engine blocked access for US internet users. More at MPAA (in pdf).

Brussels — Dec 19, `07 –The European Commission has decided that MasterCard’s Multilateral Interchange Fees (MIF) for cross-border payment card transactions with MasterCard and Maestro branded debit and consumer credit cards in the European Economic Area (EEA) violate EC Treaty rules on restrictive business practices (Article 81).

The Commission concluded that MasterCard’s MIF, a charge levied on each payment at a retail outlet when the payment is processed, inflated the cost of card acceptance by retailers without leading to proven efficiencies.

MasterCard has six months to comply with the Commission’s order to withdraw the fees. If MasterCard fails to comply, the Commission may impose daily penalty payments of 3.5% of its daily global turnover in the preceding business year.

MIF are not illegal as such. However, a MIF in an open payment card scheme such as MasterCard’s is only compatible with EU competition rules if it contributes to technical and economic progress and benefits consumers. In the EU, over 23 billion payments, exceeding a value of €1350 billion, are made every year with payment cards.

Why does MasterCard’s MIF restrict competition under EC Treaty rules on restrictive business practices (Article 81 (1))?
MasterCard’s MIF is a mechanism that restricts price competition between acquiring banks by artificially inflating the basis on which these banks set their charges to merchants. A MIF effectively determines a floor under the merchant service charge and merchants are unable to negotiate a price below it. This can considerably inflate the costs of payment card usage at merchant outlets to the detriment of merchants and their customers. For instance, the Commission estimates that MasterCard’s MIF accounted for more than 70% of the merchant service charges for credit cards in Belgium (2002) and for approximately 60% of these charges in Italy (2003).

If MasterCard operated without a MIF, merchants would pay lower prices for accepting cards and, as a consequence, their customers should also incur lower costs for shopping at a merchant’s.

Competition Commissioner Neelie Kroes said: “Multilateral interchange fee agreements such as MasterCard’s inflate the cost of card acceptance by retailers. Consumers foot the bill, as they risk paying twice for payment cards: once through annual fees to their bank and a second time through inflated retail prices paid not only by card users but also by customers paying cash. The Commission will accept these fees only where they are clearly fostering innovation to the benefit of all users.”

More at the European Commission here and here.

SAN JOSE, Calif — Dec 18, `07 — Pressured by a lawsuit, social networking giant Facebook will adopt new measures to prevent its 58 million members from sending text messages to recycled cell phone numbers, the AP reports.

The lawsuit filed by Lindsey Abrams of Patriot, Ind., said she received text messages with explicit comments and other upsetting content — and had to pay 10 cents each time. Facebook received a share of the fee, according to the complaint.

According to the complaint, which Abrams’s lawyers had hoped would be certified as a class action, Abrams started getting the unsolicited messages shortly after she got a new mobile number from Verizon in November 2006.

Her suit alleged thousands of other unauthorized text messages had been sent nationwide to other recycled phone numbers, including some used by young children.

Without admitting any wrongdoing, Facebook agreed to make it easier for recipients of text messages to block future messages originating from the social network, and also will work more closely with mobile phone carriers to monitor the lists of recycled numbers and reduce the frequency of unwanted text messages. More at AP.

BRUSSELS, Belgium — Dec 18, `07 — Software maker Platform Solutions has filed a complaint with the European Commission alleging that IBM abused its market dominance by refusing to share information related to its high- performance mainframe computers.

The complaint, filed on Oct 19, according to a European Commission spokesman Jonathan Todd, is the latest in an ongoing intellectual property dispute between privately held Platform Solutions and IBM Corp.

Platform Solutions alleges that IBM abused EU antitrust rules “by refusing to supply interface information relating to mainframe computers and refusing to license third parties,” Todd said.

IBM and Platform Solutions have sued each other in the US over related intellectual-property and antitrust issues. The EU filing follows a European court ruling in September upholding a decision against Microsoft that it abused its dominant position by failing to help competitors connect to the Windows operating system.

In December 2006, IBM sued Platform Solutions charging that the company, which manufactures software that can run on IBM’s high-end systems, violated patents IBM holds on some of its operating systems.

In January Platform Solutions filed its own US suit accusing IBM of refusing to supply its operating systems to customers who buy Platform Solutions’s IBM- compatible mainframe computer. Platform Solutions also accused IBM of “unreasonably discontinuing” its licensing of intellectual-property rights.

NEW YORK — Dec 17, `07  –BUSINESS WIRE– Philips Electronics today filed suit in the United States District Court for the Southern District of New York to stop Procter & Gamble and its Braun division from continuing its false and misleading advertising campaign promoting its “Pulsonic” line of electric shavers.

The lawsuit asks United States District Court Judge William H. Pauley to order Braun to halt its false advertisements and award damages to Philips. Among other false claims the lawsuit identifies, Philips’ Complaint focuses on Procter & Gamble’s contention that the Pulsonic uses sonic power to generate microvibrations to expose and shave more hair with every stroke. A Connecticut federal court rejected as scientifically baseless similar claims by The Gillette Company, now a division of Procter & Gamble.

The Complaint also attacks Braun’s claim that “9 out of 10” men voted Pulsonic the “best electric shaver they have ever tried” in a 2007 Men’s Health survey. The Complaint notes that the “survey,” in fact, was a scientifically uncontrolled sweepstakes in which Braun gave each participant a free Pulsonic, for which it usually charges the price of $250. BusinessWire.

New Agreement Settles Dispute and Covers All Receivers in the XM Product Line with Recording Functionality.

NEW YORK, Dec 17, `07 /PRNewswire-FirstCall/ — Universal Music Group (UMG) and XM Satellite Radio today announced that they have resolved the lawsuit brought by UMG against XM over its Pioneer Inno, a portable satellite receiver with advanced recording functionality. The companies did not disclose terms of the deal.

As part of the agreement, UMG becomes the first music company to reach a multi-year deal covering all XM radios with advanced recording functionality, including both those currently available as well as future product releases. In addition, UMG will withdraw as a party to the complaint filed by the major record companies against XM in May, 2006. More at XMRadio.

Geneva — Dec 17, `07 — The European Commission, in a blow to European online gaming companies, on Monday struck a deal for compensation from the United States over a US decision to close its gambling markets to foreign operators.

The EU and US agreed on a compensation package to be offered by the US in response to its withdrawal in WTO of GATS commitments on gambling and betting services, including on-line gambling. A bilateral agreement was signed in Geneva, which provides EU service suppliers with new trade opportunities in the US postal and courier, research and development, storage and warehouse sectors. The US also made concessions in the testing and analysis services sector.

The bilateral agreement follows negotiations initiated by the US on 8 May 2007, when the US announced its intention to withdraw its WTO commitments on gambling and betting services under the General Agreement on Trade in Services (GATS). The GATS allows members to modify or withdraw commitments, provided that they negotiate offsetting compensation so that the overall level of its market access remains the same. The EU sought compensation to make up for the loss of trading opportunities in the US gambling sector, including the US internet gambling market.

Upon certification of the agreement by the WTO gambling services will no longer be covered by the US’ WTO commitments. The European Commission however will seek a non-discriminatory policy towards internet gambling in the US.

“While the US is free to decide how to best respond to legitimate public policy concerns relating to internet gambling, discrimination against EU or other foreign companies should be avoided” said Peter Power, EU Spokesman for Trade.

The postal and courier concessions will affect how Germany’s DHL, the express and logistics division of Deutsche Post World Net AG, competes with US-based companies FedEx and UPS, EU officials said. More at European Commission.

On Friday, Dec 14, Nortel Networks, the Canadian maker of telecom equipment, filed a lawsuit against Vonage - claiming that it violated nine patents related to Internet phone services and related features such as 911 and 411 calling and ‘Click to Call’.

Vonage was dragged into the legal battle after it acquired three patents from Digital Packet Licensing last year, according to Vonage spokesman Charles Sahner. DPL had filed a suit against Nortel in 2004 alleging violation of those three patents, so Vonage continued with the lawsuit.

“Litigation is ongoing, and both parties have filed - and will continue to file - papers supporting their case,” Sahner said. On the possibility of a settlement, he said: “We always prefer to settle disputes amicably whenever possible.”

In this particular case, Vonage is pursuing the legal action, rather than getting sued. Sahner said Nortel’s countersuit was a defensive move.

In October, Vonage settled the last of its lawsuits with the major U.S. telecom companies. Throughout the year, it had fended off legal actions by Verizon, AT&T, and Sprint Nextel.