A Significant Step

(Graphic from cato.org)

Republicans may finally help Barack Obama achieve passage of a major bill, one that is sure to have long-lasting effects [bold added]:

The Trans-Pacific Partnership (TPP) would link 11 economies of the Pacific rim—including Japan and Singapore—with America. These 12 countries together account for 40% of world GDP and one-third of trade. As well as dismantling tariff barriers, the TPP is meant to tackle tough issues such as intellectual property, labour and environmental standards. American trade negotiators predict that by 2025 the TPP will make the world $220 billion a year richer.

While the TPP is supported by majorities in both parties, it has encountered opposition from both the left and the right. Some Democrats say that more American jobs will be lost to cheap-labor countries that have lax worker and environmental protections, while some Republicans worry that controls over immigration will be greatly loosened:

The TPP....allows for the free migration of labor among the signatory nations...it would override national immigration restrictions in the name of facilitating the free flow of labor.

More troublesome is the secrecy that has surrounded the negotiations ("secrecy may now be so strict that it ends up irritating everyone"). Republicans still rankle at the lack of transparency in the passage of Obamacare (Speaker Pelosi: "we have to pass the health care bill so that you can find out what is in it"), the IRS' selective scrutiny* of Obama opponents, and other matters foreign and domestic. Republicans will need to take a leap of faith to believe Administration assurances about the TPP's provisions.

None of these concerns appear to be insurmountable, however, and it's likely that free trade will take a significant step forward this year.

[*Update - 4/26, Glenn Reynolds: "With so Many Red Flags, Why Isn’t the IRS Auditing the Clinton Foundation? Probably the same reason they’re giving Al Sharpton — and, apparently, the entire on-air staff of MSNBC — a pass."]

Peace, Just Not There

The Middle East once again threatens to boil over: Israel, Egypt, Syria, Libya, Iran, Iraq---there's no conflict-free zone. Elsewhere, however, there are nascent signs of peace.

Google and Apple are talking about resolving all litigation [bold added]:

The companies have been exchanging proposals on using binding arbitration to reach a licensing agreement over patents that are essential to comply with industry standards on how phones operate. Such an agreement could lead to a global settlement of all of their patent disputes, Apple said in a Nov. 15 filing.

Stocks rose on Friday after signals from both parties that the impasse over the "fiscal cliff" may be resolved:

the top lawmakers emerged from the White House meeting, which lasted more than an hour, with uncharacteristic optimism that they would reach a deal in coming weeks. [snip]

Leaders from both parties and aides to Mr. Obama said they agreed to make concessions to achieve a deal. For Democrats, that included a willingness to curb entitlement programs, such as Medicare. For Republicans that meant a willingness to raise tax revenue.

Of course, the devil is in the details, but at this point any deal is better than no deal. Let's hope that the emotion surrounding Thanksgiving next week is one of gratitude, not fear or disappointment. © 2012 Stephen Yuen

Nine Good Persons and True

The Apple-Samsung verdict is in after surprisingly quick 22-hour deliberations [bold added]:

Nine jurors delivered a sweeping victory to Apple Inc. in a high-stakes court battle against Samsung Electronics Co., awarding the Silicon Valley company $1.05 billion in damages and providing ammunition for more legal attacks on its mobile-device rivals.

Jurors Friday found that Samsung infringed all but one of the seven patents at issue in the case—a patent covering the physical design of the iPad. They found all seven of Apple's patents valid—despite Samsung's attempts to have them thrown out. They also decided Apple didn't violate any of the five patents Samsung asserted in the case.

It's easy to jump to the conclusion that the result was a "hometown" verdict. Apple is one of the largest employers in the Valley and is its most admired and successful company.

That assumption, however, wouldn't do justice to the efforts of the nine-person panel. The Journal profiles some of them:

Manuel Illagan, marketer, circuit board company
Velvin Hogan, video-compression expert
Peter Catherwood, AT&T product manager
David Dunn, cycling shop worker
Aarti Mathur, payroll administrator, IT startups

Just the organization of the task was impressive. How would you fare, dear reader, if you had been called? The WSJ graphic below (click to enlarge) lists the items that had to be decided:

Your humble observer is an Apple shareholder who will experience a pop to his investment because of the verdict. But it's not the monetary benefit--which is likely to be ephemeral--but the process that is cause for rejoicing. In an era of specialized knowledge, twelve good men nine good persons and true showed not only that they were relevant but why they are the backbone of the American system of justice. © 2012 Stephen Yuen

Not As Exciting As We Thought

OK, maybe the Apple-Samsung patent trial of the century isn't as exciting as we originally thought:

As the arguments wind down, Apple and Samsung will be handing the case over to jurors who may have difficulty understanding the intricacies of the issues, and who at times have had trouble staying awake during more technical discussions [bold added].

Hey, been there.

Patent Trial of the Century: A Must-Follow Event

After only a few days the Patent Trial of the Century between Apple and Samsung is turning out to be a must-follow event for tech watchers.

The iPad and iPhone were center stage (along with questions about whether Samsung stole ideas from them for their own phones and tablets). There were lines to get in. Security. Detail-hungry reporters from around the globe. Apple execs under the spotlight and a smattering of geekerati.

But there was one big difference: Imagine an Apple product launch at which Apple's promoters-in-chief were required to tell the truth, the whole truth and nothing but the truth.

Intellectual property is an arcane topic, and both Apple and Samsung will continue to be successful regardless of the outcome. However, anyone who is interested in how the smartphone came to be and how secretive Apple makes its decisions will have a lot to pick over.

Scott Forstall and Phil Schiller were on the stand.

In addition, there was one big reveal: despite Steve Jobs' publicly stated antipathy toward a smaller iPad, an e-mail from software Senior VP Eddie Cue showed that a 7" model has been considered at Apple's highest level at least 18 months ago:

Having used a Samsung Galaxy, I tend to agree with many of the comments below (except moving off the iPad). I believe there will be a 7" market and we should do one. I expressed this to Steve several times since Thanksgiving and he seemed very receptive the last time. I found email, books, facebook and video very compelling on a 7". Web browsing is definitely the weakest point, but still usable.

One perhaps-unintended cost of the trial is that Apple's disclosure of its inner workings may prove to be more damaging to Apple than Samsung's purported infringement. Another irony is that it is becoming clear that what separates Apple from everyone else is its unique combination of people, processes, and patents, and not any one thing that imitators can focus on and duplicate.

[Case in point: Ron Johnson, creator of the Apple Store which has been "hailed as the fastest retail success in history", is having a rough time transplanting his ideas to J.C. Penney.]

Intellectual Propriety

The mess that is the U.S. patent system has become a major impediment to both technological innovation and economic efficiency.

In an attempt to provide clarity and reduce litigation, Court of Appeals Judge Richard Posner, who "commands a respect and influence surpassed on the federal judiciary only by the nine justices of the U.S. Supreme Court", recently threw out a lawsuit between Apple and Google in which the tech giants accused the other of patent infringement. Judge Posner has deplored the "social waste" of phenomena such as defensive patenting and patent trolls:

Defensive patenting means getting a patent not because you need it to prevent copycats from making inroads into your market, but because you want to make sure that you're not accused of infringing when you bring your own product to market. The cost of patenting and the cost of resolving disputes that may arise when competitors have patents are a social waste.

Patent trolls are companies that acquire patents not to protect their market for a product they want to produce -- patent trolls are not producers -- but to lay traps for producers, for a patentee can sue for infringement even if it doesn't make the product that it holds a patent on.

The Apple-Google case that Judge Posner dismissed was just a warm-up to the Apple-Samsung "Patent Trial of the Century" that began this week in San Jose. The case's resolution could well alter the "trajectory" of future litigation. The issues are complex and important. One example--the rules for standards-essential patents:

When an industry decides that a technology shall become the standard, companies with those patents on the technology get an immediate financial windfall, because everyone has to pay for its use.

The trade-off for those companies: agreements and rules to prevent them from price gouging. Holders of standards-essential patents typically agree to license them on terms that are "fair, reasonable and nondiscriminatory."

But what constitutes a "fair" or "reasonable" price is a matter of much debate. What should happen if a company balks at a licensing offer and uses the patent anyway is also an unsettled matter.

The law surrounding them is "extremely murky," according to Brian J. Love, a patent expert and law professor at Santa Clara University. The Apple v. Samsung case could provide some clarity.

43-year-old Judge Lucy H. Koh will need the wisdom of Solomon to sort through all the claims and steer the jury toward a satisfactory resolution.

They Do Know Jack

While California tech companies duke out their intellectual-property battles in overburdened courtrooms, one venerable Tennessee company shows how these situations are resolved in a civilized manner.

When Jack Daniel's Properties thought that the design for a book cover (see below) too closely resembled the label of the famous whiskey, it asked that the author change the cover when the book is reprinted and offered to help pay for the redesign. Jack Daniel's didn't even require that current copies be removed from shelves.

I think I'll forego that daily dose (for medicinal purposes) of wine and polish off that bottle of Jack that's been sitting in the cupboard. Then I'll replenish the inventory with one of those new large bottles that I saw for $30 at Costco.

My gullet is only too pleased to reward examples of good corporate citizenship.

Image from Mashable

Patent Mess

The iPhone "slide to unlock"

Patent wars in mobile technology are being waged over nearly every feature of mobile phones:

In the past two years, legal disputes have erupted over digital-image storage methods, camera designs, Wi-Fi technologies and well-known software applications like email and calendars, as well as secondary features most consumers barely notice.

Non-insiders will be surprised to learn that major battles are being fought over slide-to-unlock technology. Patent-holder Apple is suing rivals Motorola and Samsung over their "stretch-to-unlock" and drag-outside-the-circle unlocking techniques. Meanwhile, Samsung has unearthed an older patent that has some features similar to Apple's. (Disclosure: I am long Apple.)

The larger issue is the mess that is U.S. patent law. Patents that should never have been approved are stifling innovation while disputes are being contested in overburdened courts. An entire industry of patent trolls has been built around the extraction of royalties from producers who, usually unknowingly, have infringed upon an idea that someone has patented but not exploited with an actual invention. In this litigious environment I am personally acquainted with very small companies who spend precious management and financial resources on obtaining patents for largely defensive reasons.

One of the principal issues in this election year concerns whether and how much taxes, regulation, and other government activities are stalling the American economic engine. Our patent and intellectual property laws--and their administration--clearly contribute to the problem. However, because of the powerful interests on various sides of the question, not to mention its complexity, it is highly unlikely we'll soon see a solution that improves the general welfare.