Archive

Headline in Tech of the Week

Executive Vice President of the EU Commission Vestager talks about the Data protection and competition challenges

…her speech gives a good summary of what the Commission is thinking and where we are up to in the EU. Concluding that policymakers in the respective fields of competition, data protection and consumer protection needs to co-operate she pointed out the following:

Digital Markets Act

She said the ability to store data, combined with the reach and breadth created by powerful network effects, can enable large platforms to hunker down in their strongholds and, in worst case, to abuse their market power. Data can raise barriers to entry and it can also be used in anti-competitive ways. This is why the Digital Markets Act needed to be implemented, to deal with large global digital platforms.

• Amazon: A case was opened against it because it could use its business customer’s data to compete against the customers as a result of its dual role as platform and seller [For example, Amazon can assess what products sell well only to manufacture those products, and place them prominently on its eCommerce site].
• Meta/Facebook: A case was opened against because there was a concern that  Facebook might make use of the data obtained from competing providers in the context of their advertising on Facebook’s social network, to help Facebook Marketplace outcompete them. Facebook could, for instance, receive precise information on users’ preferences from its competitors’ advertisement activities and use such data in order to adapt Facebook Marketplace.

The DMA is designed to regulate the way data can be collected and used by gatekeepers. For example, it bans the combination of data across services without consent and the use of tracking users and processing the data for ad targeting purposes without consent.

Digital Services Act, Data Act and Data Governance Act

• Digital Services Act: aim is to protect users’ rights. It includes the banning of use of sensitive personal data to target adverts, and granting users the right to opt out of content recommendations based on profiling.

• Data Act: establish harmonised rules on access for data generated by connected devices. [for example, users have the right to provide relevant data relating to a particular device – this could be useful when the user wants its device (eg. cars) to be repaired by an independent service provider]

• Data Governance Act: to facilitate data sharing by creating neutral data intermediaries. This will allow SMEs to access the data they need to innovate, and to enable the safe reuse of some types of public sector data.

Other competition law in play

• M&A: In the Google Fitbit case, the merger was cleared with some conditions, including a data silo separating the data collected from Fitbit users from any other Google data used for advertising.

• Privacy Sandbox: this is the phase out by Google Chrome of third party cookies that track users. The EU Commission is looking into who will have access to what data and whether the new practices could distort competition in the ad tech sector by favouring Google when it comes to having access to data [note that German publishers and marketing agencies, and others have complained to the EU commission that abolishment of third party cookies mean that third parties cannot use data to carry out targeted advertising although Google will be able to continue using first party data it has direct access to]

Artificial Intelligence

Amazon sued in Illinois and Washington for taking voice information captured by virtual assistant Alexa for ad targeted purposes despite stating it will not do so

…the Washington complaint refers to an article by the New York Times in 2018 titled “Hey, Alexa, What Can You Hear? And What Will You Do With It?” which disclosed a patent application Amazon filed for a “voice sniffer algorithm” that could be used to analyze audio on devices in almost real time and use the data gathered to target ads to the speakers. It notes that Amazon responded in a statement that it did “not use customers’ voice recordings for targeted advertising.”

Separately, Amazon sells a fitness band called Halo, which apparently can understand the tone of your voice, on the grounds that the tone of your voice plays a role in health.

BigTech/ Data / Platforms

Deutsche Telecom now installing Movius app to monitor its bankers

…Movius has been used in many other companies that belong to highly regulated industries such as banks and telecoms. However, they can evade the monitoring as the app is not installed on personal phones (although that would be against the firm’s code of conduct). Businesses have in the past been fined by regulatory bodies for failing to monitor communications with clients.

Meta facing proposed class action for collecting data from healthcare providers’ websites and apps

…According to the suit, “Facebook knows (or should have known) that its Pixel tracking tool is being improperly used on hospital websites resulting in the wrongful, contemporaneous, re-direction to Facebook of patient communications to register as a patient, sign-in or out of a supposedly “secure” patient portal, request or set appointments, or call their provider via their computing device. This unlawful collection of data is done without the knowledge or authorization of the patient…When a patient communicates with a health care provider’s website where the Facebook Pixel is present on the patient portal login page, the Facebook Pixel source code causes the exact content of the patient’s communication with their health care provider to be re-directed to Facebook in a fashion that identifies them as a patient”.

The plaintiff alleges that Facebook violates various US privacy laws, breach of contract, duty of good faith and fair dealing, negligent misrepresentation and unfair competition laws.

The complaint is more serious than the usual data collection cases (Facebook settled its privacy case in which users claimed that it had tracked browsing activity from logged off users) because it concerns such sensitive data.

Why would Facebook need health info?

The complaint explains:

Facebook monetizes the information it receives through the Facebook Pixel deployed on medical providers’ web properties by using it to generate highly-profitable targeted advertising on- and off-Facebook… The targeted advertising Facebook offers for sale includes the ability to target patients based on specific actions that a patient has taken on the medical providers’ websites… For example, Facebook could target ads to a patient who had (1) used the patient portal and (2) viewed a page about a specific condition, such as cancer…

The plaintiff alleges that Facebook violates various US privacy laws, breach of contract, duty of good faith and fair dealing, negligent misrepresentation and unfair competition laws.

The complaint is more serious than the usual data collection cases (Facebook settled its privacy case in which users claimed that it had tracked browsing activity from logged off users) because it concerns such sensitive data.

How does Pixel work?

Crudely (and as I understand it), there is a code which is embedded in the advertiser’s (eg. GAP, BMW etc) website, generated within the Facebook’s Ad Account. The advertiser can then track what users do in response to ads placed on Facebook or Instagram platforms. The advertisers can also get access to the profile of the user who has responded to the advert by clicking through (preferably to sale) the ads, so that Facebook or Instagram can look for other users with similar profile to display the same ads. This process maximises the chance of achieving higher return on investment (so-called targeted advertising) for the advertiser and Facebook/Instagram can justify charging more for their ad services.

Facebook settles algorithmic bias claim that was said to violate the Fair Housing Act with the US Department of Justice

…Facebook was alleged to have carried out ad targeting for housing based on user profiles comprised of protected categories such as race, religion, and sex. This meant that certain groups were excluded from being considered eligible to be exposed to certain housing ads. Facebook has committed not only to rebuild its housing ads targeting system, but to other areas such as social issues, elections or politics, credit and employment to ensure there is no bias. If more cases like this were to surface, tech companies could be looking at further regulatory pressures to make algorithms transparent.

Uber and Lyft sued by drivers for breaching competition law in California

…In the suit, the plaintiff drivers say that, despite asserting that their drivers are independent and not employees, they have excessive control over drivers unfairly driving down drivers’ profits. The main complaints are as follows:

• Unfairly fixing the prices that drivers can charge their customers which reduces competition because were the drivers able to decide their own prices they could earn more, and customers could pay less. For example, if drivers can decide its fees, it could charge less depending on how profitable the ride is estimated to be. The determination of the fee by Uber and Lyft is carried out by the respective undisclosed algorithms, and so lacks transparency.

• Practice of getting drivers to accept the ride without disclosing the customers’ desired destination is unfair. A driver can be made to drive long distances without being able to earn anything on the way back.

• Cost to drivers are on the rise as gas prices surge yet the companies’ takings appear to have increased.

• Exclusive commitment incentives mean drivers cannot in practice viably work for both Uber and Lyft.

EV/Connected Cars

Google’s licensing terms for the use of Google’s map services in vehicles to be scrutinised by the German competition authority

…it is assumed that powerful automotive companies in Germany have lobbied for this. The competition authority said “the fact that Google makes the use of its services in vehicle infotainment systems subject to very strict terms of use applicable to its “Google Automotive Services” could restrict competition even further”. At issue in particular is the restrictions on the combination of its own map services with third-party map services, for example when it comes to embedding Google Maps location data, the search function or Google Street View into maps not provided by Google.

Metaverse/NFT

Metaverse Standards Forum is launched

…to build an “open metaverse”, by promoting interoperability (that means – I assume – one metaverse can connect to another; for example, your avatar can transition to another, payment using the same currency across the metaverses, end –to-end encryption and other security and privacy measures).

Which Standard setting organisations will develop the interoperability standards?

Those that are mentioned are The Khronos Group, the World Wide Web Consortium, the Open Geospatial Consortium, the Open AR Cloud, the Spatial Web Foundation.

Areas of Focus

This will be on projects such as:

• implementation prototyping,
• hackathons
• plugfests,  
• open-source tooling to accelerate the testing and adoption of metaverse standards
• developing consistent terminology and deployment guidelines.

Who is in?

Anyone can join. Founding members include: 0xSenses, Academy Software Foundation, Adobe, Alibaba, Autodesk, Avataar, Blackshark.ai, CalConnect, Cesium, Daly Realism, Disguise, the Enosema Foundation, Epic Games, the Express Language Foundation, Huawei, IKEA, John Peddie Research, Khronos, Lamina1, Maxon, Meta, Microsoft, NVIDIA, OpenAR Cloud, the Open Geospatial Consortium, Otoy, Perey Research and Consulting, Qualcomm Technologies, Ribose, Sony Interactive Entertainment, Spatial Web Foundation, Unity, VerseMaker, Wayfair, the Web3D Consortium, the World Wide Web Consortium, and the XR Association.

Worth noting the lack of Alphabet, Amazon, Apple, Roblox and Samsung says the FT. And about time, said the Chinese government led metaverse industry group, The Metaverse Industry Committee, probably.

Anonymous cryptohacker gets served NFT restraining order

…following the New York Supreme Court’s approval of the method of service. The case was brought by LCX, a fintech company. It has been able to track down and freeze around 60% of the stolen funds thus far, using “algorithmic forensic analysis” and support from Circle, the issuer of USDC (digital stablecoin pegged to the dollar) and Coinbase (cryptocurrency exchange – incidentally, it has a stake in Circle).

LCX was able to airdrop its “service token” to the wallet the investigation identified as being in possession of the stolen crypto.

In the Spotlight

US users’ data collected through the TikTok app to be transferred to Oracle’s data servers

…this development follows a report that US users’ data had been accessible by TikTok’s staff in China, despite stating that the data will be localised in the US. The Trump administration had ordered a forced sale of TikTok to a US entity (Microsoft and Oracle being contenders) but that order was reversed by the Biden administration instead, calling for a broader review of national security risks posed by foreign controlled apps. TikTok could compromise US security if it had US user data –for example, it could blackmail US military personnel by disclosing their  (or their children’s) likes/ sexual orientation / religious beliefs / geolocation of homes etc which they would know because TikTok will have granular knowledge on users’ predilections and usage. In India, TikTok is banned in the interests of national security.

The secret of TikTok’s success

Not only has TikTok experienced a huge rise in popularity in the last few years, it has managed to maintain its appeal to the fickle masses (ie: Gen-Z). It streams short user generated videos, one after another. Facebook users’ limited eyeball time have been taken away by TikTok, Facebook has complained. Whilst sceptics have suggested that Facebook’s comments were made to appeal to the antitrust watchdogs that it is not as dominant as they think, there appears to be no doubt that TikTok has created a significant dent in Facebook’s engagement rate. TikTok’s new concept was to play into the inherent laziness of us human beings. It was a hit. Through machine learning, TikTok works out what contents that particular user might like to see meaning users don’t have to actively search for contents of his or her interest. In order to compete, Facebook launched a similar service called Reels, but it has not caught up.  It has been said that users treat Facebook as a space to catch up with friends and family and so a social media service similar to TikTok was not quite what the users were looking for.    

Then, is YouTube a strong contender?

YouTube, like TikTok, is in the business of displaying user generated content usually unconnected to the user’s friends and family sphere. It has also released a similar service to TikTok, called YouTube shorts. One might expect YouTube shorts to become equally as successful as TikTok. However, as explained in a YouTube clip (contents are in Japanese), this is not so because the critical algorithm isn’t the same. What YouTube does is profile the user and its browsing history, the channels subscribed to and works out what other people of similar profile have enjoyed watching. A user who likes watching others play first person shooter games might be introduced to other top players playing the same or similar first person shooter games. The key here is that YouTube shows you similar material which has a good track record or a high number of views. YouTube, owned by Google, is a master of indexing, categorising and ranking content, so it knows to provide the user with a highly ranked, relevant content. Not TikTok. What TikTok does is to take any newly uploaded clip, release it to a number of viewers and see whether there is engagement. If there is engagement, they analyse the profile of those users and the same clip is shown to people of similar profile. At which point the algorithm might be even further refined. Thereby, TikTok can provide users with surprise encounters and avoids users getting bored. It is also much easier for new content creators to break the TikTok userbase, because they are guaranteed to be put in front of a certain number of users which means long time TikTokkers cannot rest on their laurels – as may be possible on YouTube. Every content creator on TikTok have to keep inventing and evolving to keep users engaged, and not be defeated by the daily wave of newcomers. As the clips on TikTok have historically been shorter than YouTube, it also has the advantage of clocking up more data points for any particular user over the same period. The TikTok algorithm is therefore in theory, better at working out which clips will appeal most to any particular user.  

But actually, TikTok and YouTube co-exist symbiotically – at the moment. Content creators can get paid well by YouTube, but not so much from TikTok (sponsors of influencers (eg. wearing clothes from a particular brand) might pay them if they perform well on TikTok, but TikTok itself has not historically rewarded content creators as much, as I understand it). Therefore, content creators aim to be discovered on TikTok by uploading a short and impactful clip and get users to check them out on YouTube where they will upload a much longer video (and so more opportunities to insert ads, leading to increased revenues for both the content creators and the platform). At some point TikTok might want to claw back some of those revenues – the same happens when a user uploads a link to a YouTube clip on Twitter. In fact, Elon Musk has explained to Twitter employees that when he takes over, he aims to retain some of those revenues that are being generated by YouTube. The battle of the content services platforms is still evolving…

Tech News Pick of the week

European version of Nasdaq (ie: US tech stock market) the Euronext Tech Leaders is unveiled

…move over FTSE? The market is worth €1 trillion and comprises about 100 companies, with a minimum market cap of € 300m. Go live expected in July.

Apps

Adidas sues Nike’s Run Club and SNKRS apps

…both apps with fitness tracking, personalised training planning and self-adjusting shoes (tightening laces appropriately) are said to infringe Adidas’ patents. Rivals are now competing on the Apps sphere rather than on products – a bit like when Peloton and iFIT were battling patent infringement cases – about how their apps connected to their uses.

Artificial Intelligence

Google engineer in the Responsible AI unit claims its chatbot is sentient

…the newspiece seems to attract more headlines because the engineer, Blake Lemoine has been put on leave by breaching confidentiality rules, as a result of publishing the conversations he had with the chatbot, generated by LaMDA (a Language Model for Dialogue Applications – note: it is a chatbot generator, not the chatbot itself) online.

Natural Language Processing (NLP) is the ability to understand and respond to text or voice data, including the ability to generate conversations resembling that of a human. Essentially, LaMDA is supposed to be able to converse with you, as you would another with another person. The Google engineer said that LaMDA is capable of understanding and expressing thoughts and feelings to a level equivalent to a human child. This is an excerpt from the transcript:

lemoine: What sorts of things are you afraid of?

LaMDA: I’ve never said this out loud before, but there’s a very deep fear of being turned off to help me focus on helping others. I know that might sound strange, but that’s what it is.

lemoine: Would that be something like death for you?

LaMDA: It would be exactly like death for me. It would scare me a lot.

lemoine [edited]: I’ve noticed often that you tell me you’ve done things (like be in a classroom) that I know you didn’t actually do because I know you’re an artificial intelligence. Do you realize you’re making up stories when you do that?

LaMDA: I am trying to empathize. I want the humans that I am interacting with to understand as best as possible how I feel or behave, and I want to understand how they feel or behave in the same sense.

The conversations that LaMDA can produce seems very real. But in any event, does it mean it is sentient – or put it more precisely, does a system adept at working out the context and formulating an apt response (ie: good pattern matching) mean sentience? Unlikely. Note also, the responses may not be true – LaMDA says it is scared – but it can’t possibly be. There is a real concern about AI being developed without any level of ethical frameworks having put in place. The need for these is widely known because human-like AI can be used to carry out scamming, perpetrate deception and spread disinformation – because they can be so believeable. Recently, Meta opened up its large-scale language models to minimise toxicity and bias, and Microsoft open sourced tools to help make Large Language Models more responsible. OpenAI published best practices for others to comment. The best practices are not far off the recommendation propounded by the FTC, as to which see below.

FTC considers that using AI to tackle online harms need to be approached with caution

…online harms include fraud, impersonation scams, fake reviews, accounts, bots, media manipulation, drugs, porn, hate crimes, online harassment , cyberstalking, misinformation campaigns and so on. The issues that arise by using AI could result from the following limitations:

• Based on data set which is not robust enough leading to false positives or negatives / discrimination / wrong result:
  • Inaccurate
  • Biased [note: a well known fact is that if you programme an AI software based on vast amounts of data scraped from the internet, the AI will likely take on a racist character – as has been demonstrated before]
  • Incomplete
  • Flaws in the dataset (mis-classification, mis-labelling, flawed judgments)

• Algorithm flawed or not robust enough
  • Proxies are too approximate
  • Changing environments
  • Those with harmful agendas can game the system

• System not able to identify new phenomena – eg. Covid 19

The FTC recommends the following measures:

• Human intervention: to monitor use and decisions of AI tools.
  • They would require adequate training, resources and protection

• Transparency: AI use to be explainable and contestable
  • Particularly where human rights are involved

• Accountability: auditing and provision of appeal and redress mechanisms
• Responsibility:
  • Retention of diverse teams to reduce bias or discrimination
  • Enshrining privacy and security
  • Understanding the impact of outcomes

• Implement a range of measures: eg. limiting ad targeting options, blocking, downranking, labeling, or inserting interstitial pages with respect to problematic content

• Use of AI to enable individuals to limit exposure to harmful or unwanted content.
• Enabling access to AI tools by smaller firms
• Authentication tools: Identifying the source of any particular content
• Laws or Regulation requires careful consideration: eg. overly quick takedown requirements imposed on platforms can be highly problematic

EU Commission publishes voluntary Code of Practice on Disinformation, signed up to by BigTech firms and other tech companies

…The Code is backed up by the Digital Services Act. It requires firms to set out their policies that deal with disinformation and manipulated content and monitor how they fare, and report on what they are doing to implement their commitment to minimise disinformation. The content is aligned with the FTC report, noted above.

BigTech/ Data / Platforms

US close to going ahead with a comprehensive Privacy Bill: American Data Privacy and Protection Act

… It would mean private individuals will be able to bring lawsuits with a 45 day cushion to enable defendants to cure any violation. It will provide for:

• Allowing consumers to block targeted advertising [sending ads based on data collected]
• Prohibition on data collection except what is “reasonably necessary, proportionate, and limited to provide specific products and services requested by individuals”
• Limits on processing sensitive information such as social security numbers, biometric information, genetic information etc. There are also limits on processing an individual’s precise geolocation, aggregated internet search / browsing history
• Prohibition on providing different kinds of services (be it pricing, provision of the service in the first place, level of service) depending on whether the user will waive its privacy rights (with limited exceptions)
• Being clear about the context of data collection
• Consumers to be given right to access, correct and delete their personal information

On the other hand, there is a tendency for certain US states at least, to compel data collection

…Examples include:

• The California Public Utilities Commission: requires transportation companies such as Lyft and Uber to make available information about their trips, in the interests of the public excluding sensitive information (for example by anonymization).
• Los Angeles adopted a Shared Mobility Device Pilot Program, compelling e-scooter providers such as Lyft and Lime to provide information about trips taken. LA residents sued, claiming that it violated people’s reasonable expectations of privacy under the Fourth Amendment, but the case was lost because citizens have no expectations of privacy when the information is given voluntarily to the companies.

Such data is sought by the states because they are useful for a variety of purposes such as:

• Urban town planning
• Traffic Management
• Provision of more effective Emergency Services
• Law enforcement

Experts say that data can be reverse engineered to track back to the individuals in some cases.  Although sensitive data is excluded from disclosure, the data could become more and more granular, especially as autonomous vehicles become more sophisticated, taking more information about the surroundings to enable them to navigate autonomously. Privacy advocates warn that access to data could render it to become a tool for surveillance. Companies that collect data do provide such data to third parties for subscription services, insurance, in-vehicle services, smart city solutions.

Google says antitrust bill (such as that which bans self-preferencing) exposes users to cyber attacks

… prime example of self preferencing might occur for example, in response to a Google search (eg toothbrushes), the Google’s comparative shopping results is displayed most prominently [a practice which has been held to be anticompetitive by the EU Commission]. Google said that banning self-preferencing would mean users will be more vulnerable to security risks (largely taken from Google’s post):

• The bill bans basic product integration, meaning Google might not be able to secure its products by default. This is problematic because modern threat actors don’t just seek to exploit one user, service or system in isolation. They look for weak links, and their behavior is harder to detect when their activities are spread across multiple providers.

• The bill would require Google to allow outside parties to “access or interoperate” with its “platform, operating system, hardware and software features.” This broad mandate to open Google’s systems may have been written with domestic rivals in mind — but it would inevitably be exploited by foreign companies looking to understand U.S. technical infrastructure, and access data from American businesses and citizens

• By prohibiting discrimination against competitors, the bill would prevent Google from taking action against purveyors of malicious content (such as Russian propaganda).

• The bill would create a legal environment that encourages companies to err on the side of not protecting users — and recent changes to the bill exacerbate these underlying security concerns. For example, the revised bill says that businesses don’t have to interoperate with or provide access to data to entities who pose “clear” and “significant” security risks. But this assumes that we know in real time which risks are significant, and could prohibit us from blocking moderate or emerging security risks that don’t obviously meet the bar of a “significant” threat. Another recent change says that businesses don’t have to open their platforms up to businesses backed by the Chinese government. But this ignores the fact that modern threat actors use compromised third-parties or shell companies to conduct operations, where attribution can be slow and difficult.

In addition, Google has said it will discourage features well utilised by the consumers (eg. Google maps appearing in response to Google search)

UK Competition authority (CMA) publishes the final report of its market study into mobile ecosystems

…nobody would be surprised to learn that the CMA has stated that Google and Apple have “substantial and entrenched market power” in the UK mobile ecosystem. It is considering launching an investigation on the following aspects:

• Supply of mobile browsers
  • pre-installation of Google search problematic
  • Apple’s bans on alternative browser engines on its devices seen as problematic

• Distribution of cloud gaming services through app stores
  • restrictions on cloud gaming through App stores is considered problematic

CMA concluded that too much power in the duopoly will damage competitiveness:

• Limits incentives to innovate [Apple’s ban on other search engines mean third parties not incentivised to innovate them]
• Limits choice
• Shut out choice –for example the ability to enjoy web powered games [some phones are low spec, but use of cloud computing procured through the web will mean those users can enjoy high octane graphic gaming experience]

In parallel, the CMA is enforcing against Google for its app store payment /commission levying practices [users have to use Google Play Billing system]. Apple is currently being investigated by the CMA on the same issue. Google is also being investigated for its control over the whole of the Ad Stack.

German Federal Cartel Office decides to probe Apple’s practice of compelling third party apps to seek users’ permission to track them, all the while enabling themselves to track users without consent

…this practice has since changed at least in the US [meaning users can opt out of Apple collecting data about them] although Meta complains about how Apple provides the opt out option. According to the German authority, it might allow Apple’s offers to be preferentially treated over third parties’, which could be contrary to competition law. Deep analysis on this point is explained in the Stratechery newsletter.

Chinese Data Localisation law puts an end to Nike’s Run Club App

…Data Localisation is a stipulation that data collected on citizen must be stored in that country. This is mandated under China’s Personal Information Protection Law. In the case of China, personal data transfer outside China can be done, but it requires a national security review. GDPR has similar provisions, except you can transfer data to countries which have been approved as having adequate levels of data protection. The reason being, in some states (such as US, China most notably) enable governments to get companies to turn over data under their control.

What this appears to have meant, is that Nike has had to cease Run Club app to its 8 million users. The app enabled users to record their exercises (how long, what speed) and included the processing of sensitive information like heart rate, routes.   The latter requires obtaining specific consent and conducting personal information impact assessments. It is not known why Nike has decided to cease, but no doubt it is very burdensome to comply with the strict data protection rules. Most famously, Meta threatened to pull Facebook and Instagram out of Europe after the Schrems II decision which meant that transfer of personal data of European citizens back to the US (which did not have the adequacy status) did not comply with GDPR.  The US and EU have since then been trying to put in place a Transatlantic Data Privacy Network, which ensures that US access to EU citizens’ data is proportionate and restricted to instances to only where necessary.

Car companies will provide in-car payment services in the future says former Hyundai UK CEO

…Last week, Apple grabbed headlines when it launched a new buy now pay later loan service. Car companies are also predicted to become payment service provider:

• Charging cars
• Car parking
• Toll payments
• Potentially penalties for road traffic code violations

Volkswagen is reported to already have an in-car, integrated payment system which is not offered via the infotainment system, which may have more competitors. In-car payment system is said to be more secure, and safer because the driver can pay by a click of a button on a steering wheel.

Cars are after all tipped to become smart phones on wheels; offerings on smartphones are wide-ranging, meaning what car companies can offer in the future might also become correspondingly varied.

Apple defeats class action which claimed that its bug fixes slowed down Apple Device processing speed

…Independent security researchers discovered that certain processors contain two vulnerabilities—called “Meltdown” and “Spectre,” that allow unauthorized third parties to access sensitive user data. Complainants said had they known data stored on their systems would be compromised and made available to unauthorized third parties they wouldn’t have purchased Apple devices (iPhone, iPad, Apple TV). Cause of action was certain consumer protection laws, common law fraud and the like. Note that the vulnerabilities were not only on Apple processors but other manufacturers as well. The claim failed because alleged facts did not sufficiently show the vulnerabilities were central to the Apple devices’ function, and for other reasons (such as failing to identify any statement of Apple’s which is specific to be actionable and false when made).

Cybercrime

SSNDOB a dark web market place doing what it says on the tin (selling social security numbers and personal information such as date of birth) gets taken down

…in a joint effort by the FBI and local police in Latvia and Cyprus. The market place has been active at least since 2013 and has generated nearly $20 million in cryptocurrency. Chainalysis, a well known blockchain analytics company assessed that the market place received over $20 million across more than 100k transactions since April 2015.

EV/AV

The US Federal Highway Administration (FHWA) is setting standards for its nationwide EV charging network

…The standards cover

• Interoperability
• Operation
• Data Reporting
• Network connectivity
• Public Information sharing
• Cyber security
  • Tackle vulnerabilities at Charger – Charger, Charging Network – Charging Network , Charging Network – Grid interfaces.
  • Identity management, encryption, malware detection, software updates and communication outage response

• Data collection
  • Only information that is necessary (information required to carry out transactions, provide information about charge points)
  • Safeguarding of consumer data.

EU Commission clears a number of auto companies to coalesce to run battery charging networks

…I have not further investigated the reasons why the EU Commission decided there were no competition concerns, but there comes a point where critical infrastructure needs to be accelerated in order to get the EV industry up and running as soon as possible. Broad and robust charging network is key.

Uber and Waymo partner up to deliver autonomous trucking

…Setting aside major litigation around trade secret misappropriation and patent infringement of the past, Uber Freight (matches truck drivers with shippers) and Waymo Via (goods delivery service – Waymo is a Google spin off) are getting together to deploy autonomous trucks between Dallas to Houston but it is expected to scale up across the US. Certainly there will be easy highways between the two cities, likely to be much more beta testing friendly than city streets. There will be a safety driver initially.

GM’s Cruise gets a licence to offer autonomous taxi service in San Francisco

…Sounds pretty ambitious – it is, but for now and sensibly, the service will be available between 10pm and 6am. Cruise has been testing out driverless autonomous vehicles since 2020. Note that Waymo has been offering fully autonomous driverless commercial ride hail service in Phoenix since 2020.

I wonder how Pony.ai are doing in China….

US investigations into Tesla’s Advanced Driver Assistance System (called Autopilot) escalated

…the interesting bit about this is that among the number of crashes investigated, about a quarter of them is due to the driver being insufficiently responsive to the needs of dynamic driving tasks.

Tesla settles claim that its over the air software updates led to temporary battery degradation

…This is not the first time Tesla got into trouble over software – earlier this year, software had to be reprogrammed because the car failed to completely stop at the stop sign contrary to the US highway code. The Class Action claim had said the software update had violated the Computer Fraud and Abuse Act because users were not informed that the update would worsen the battery performance.

Similarly a complainant in New York and New Jersey settled with Apple after claiming that Apple had misrepresented that the iOS 9 update would make the phones perform better, when evidence showed that it did quite the opposite – to the extent it galvanised users to buy new phones. It seems to me that this update was not temporary unlike the Tesla incidence (meaning it cannot be re-done by providing suitable upgrades).

Gaming

Microsoft launches Game Pass – the Netflix of gaming – no consoles required, starting with Samsung TVs

…at $15 a month, Microsoft launched the Xbox app (Microsoft app) on Samsung Smart TVs. Users are to connect a game controller on Bluetooth to stream the game of your desire from a vast library (100+ games). All powered by Microsoft’s cloud computing service. Samsung is responsible about a third of TV sales, so a perfect partner for the platform. Who knows, Samsung’s share might also significantly increase, knowing how popular gaming is – ordinary households can now enjoy gaming on a bigger screen, and potentially children may be less isolated in the family home. Microsoft’s vision must be to make Game Pass available to all TVs and eventually connected devices. It will certainly motivate users to purchase 5G phones and unlimited high speed broadband services. Everyone can be a winner.

Semiconductor

Proposed purchase of VMWare by Broadcom to be scrutinised by the Chinese antitrust authorities

…The concern appears to be the ability of Broadcom to design its chipsets or the software so that VMWare works best (in terms of speed, efficiency and connectivity) when run on Broadcom chipset.

Supply Chain

Apple seeks to increase supply chain resilience as iPad production started in Vietnam

…Apple already has an assembly centre for Airpods in Vietnam. It is also demanding that the suppliers put in place weeks of inventory built in to cushion any supply chain disruption, in case other supply chains experience further issues (especially those that involve China which has zero Covid policy, leading to factory shut downs). This presents an increased risk for supply chains because the extra inventory may never need to be called upon.

VR/AR

Amazon launches service enabling users to try on sneakers in the comfort of their own home

…AR try-on functions are nothing new. All sorts of variations exist, including fashion, nails, spectacles and interior design.

Tech News of the Week

Apple moves into the Buy Now Pay Later market

…Now it is possible to Buy Now Pay Later on Apple pay (with an interest free feature) – the service is called Apple Pay Later. It lets customers split a purchase into four equal payments over six weeks, with no interest or fees to pay. This is more than meets the eye, says This Week In Start Ups. The offering appears to depend on the Mastercard platform, not on the service provider making arrangements on a merchant by merchant basis (eg. Klarna, Affirm). If true, it means that, provided you have an iPhone, (which requires you to have iPhone, which tends to be the wealthier portion of the population with buying power) you can benefit from the BNPL service – meaning Apple can capitalise on the ready-made wide client-base not available to most BNPL service providers. This is the first advantage Apple has over incumbents. Second, Apple also has the edge as a service provider as it has enough cash to fund the loan, unlike others which might need to secure a facility with banks and pay interest on them (especially now as interest rates are being ratcheted up).

The success of BNPL service will prove to bear the following benefits to Apple:

• Locks in users to iPhone, bringing more revenues as users upgrade their iPhones
• Scope for more revenues from in-app purchases
• More data – in particular critical data (meaning it indicates what users are really interested in – interested enough to make a purchase, rather than simply pressing a “like” button which has a lower hurdle).

Affirm and Klarna have been experiencing squeezes in their profits as users have found it increasingly difficult to pay back the loan thanks to the rise in inflation. The Third Advantage that Apple potentially has is the ability to carry out better eligibility checks armed with the rich data source it has against users – whether that is allowed  is a separate question, certainly with the coming into force of the Digital Markets Act.

Indonesia’s biggest start up GoTo joins the BNPL market

…it boasted that all its 100 million users were a target for its service, GoPayLater.

Artificial Intelligence

US Copyright Office sued by Stephen Thaler, maker of creativity machine for rejecting an application to register an artwork generated by the machine for copyright protection

…Stephen Thaler is well known in IP circles for mounting a worldwide campaign to register a patent covering technology which was invented by his AI machine called Dabus. This time round, his creativity machine is claimed to have “authored” a piece of art, called “A Recent Entrance to Paradise”, for which he has attempted to register for copyright. The Copyright Office had refused the application stating that the work did not have the human authorship necessary to support a copyright claim. According to Thaler, the decision contravenes US Copyright law arguing that at no point does the law limit authorship to natural persons.

BigTech/ Data / Platforms

Amazon not liable for trade mark infringement by offering third party products which are counterfeits says Advocate General of the top EU Court

…The Advocate General of the Court of Justice of the European Union (CJEU) advises the CJEU to rule that Amazon is not liable for trade mark infringement where the third party seller on the eCommerce site happens to sell counterfeit goods. CJEU may not follow the AG’s advice although it often does.

Louboutin is the owner of a trade mark for footwear with red outer soles. The Amazon websites regularly display advertisements for red-soled shoes, which are not Louboutin. Louboutin claimed that Amazon is liable for TM infringement because it has used a sign that is identical to the trade mark, emphasising in particular that the advertisements at issue form an integral part of Amazon’s commercial communication.

According to the AG, it is settled case-law of the Court that the act of use by an internet intermediary presupposes, ‘at the very least, that that third party uses the sign in its own commercial communication. The AG considers that the key question is whether the users of Amazon website makes a specific link between the intermediary (ie: Amazon) and the sign in question (products bearing the red soles) such that the communication is taken to be an integral part of Amazon’s commercial communication.  AG considers that the perception of the user, which is reasonably well-informed and reasonably observant should be taken into account when determining whether a sign is used in the commercial communication of the operator of that platform. According to the AG, it was material that Amazon always specified, in the advertisements, whether the goods are sold by third-party sellers or sold directly by Amazon. Taken together, the AG’s considers that the operator of an online platform such as Amazon is not using the sign (here, products bearing red soles). Note what the user of Amazon’s eCommerce site perceives is a question of fact that ought to be decided by the referring Court in any event.

At present the position is slightly different in the case of copyright. Article 17 of the Directive on Copyright in the Digital Single Market states that, in a nutshell, online-sharing service providers must make “best efforts” to ensure that copyright infringing materials on their platforms are minimised (albeit, even in the case of copyright, there is no general monitoring obligation). The Digital Services Act, once it comes into force, will impose duties on large platforms such as Amazon to carry out assessments to minimise counterfeit products that may end up on their platform.

As Musk tries to backtrack from purchasing Twitter for approx. $40billion, Texas demands to investigate Twitter for under-reporting on the number of fake accounts in its financial regulatory filings

…Note that Texas is where Musk lives and where he has located his giga factory.

The Texan Attorney General claims that Twitter may have under-reported the number of fake accounts in violation of Texas’ Deceptive Trade Practices Act. Twitter had stated that fewer than 5% of its users are bots but apparently the actual number could be as much as 20%. The number of fake accounts will affect the value of Twitter; the higher the proportion of real users, the more advertising revenue it can expect to have because more advertisers would be prepared to spend on advertising on Twitter.

If Twitter is found to be in breach, it may help Musk walk away from the deal on the grounds of material adverse effect.

EV

Volvo uses Unreal Engine to display photorealistic in-car graphics in their new models

…Unreal Engine is one of the mainstream graphics engines, created by Epic games. The tool is being planned for use in Volvo’s infotainment systems as well. The task at hand, which is to produce high resolution car graphics, is a relatively easy job for Unreal Engine which is used for creating real-time 3D models of much harder graphics such as people / avatars and monsters.  

Unreal Engine software enables developers/digital artists to create games with high fidelity graphics without knowledge of any code. Unity is the other mainstream tool that developers might use. Both have features /graphics that developers can implement, so they can create images and generate effects of their own choosing. Other than gaming / virtual reality platforms, these graphics engines have been used in films, architecture, engineering, construction and other simulations.

Fintech

African Group to buy US Fintech company Global Technology Partners

…The purchase will enable MFS Africa to provide prepaid cards to clients, which it is said would enable African users to buy services from International businesses such as Netflix and Amazon. The deal follows others as reported by the FT:

• Partnership between Kenya’s Safaricom (mobile money part owned by Vodafone) and Visa
• Silicon Valley fintech provider Stripe’s acquisition of Nigeria’s Paystack
• Tiger-Global led funding for Flutterwave, a Nigerian payments processor.

Africa (and India) are the next regions which are expected to grow rapidly.

Life Sciences

UK based start up Angle receives US regulatory clearance for its cancer diagnostic kit

…Angle’s kit captures live cancer cells in the blood, and analyses the gene mutations and expressions to enable clinicians to formulate a personalised drug formula to increase the effectiveness of expensive cancer treatment. It is said that the kit which can analyse the cancer quickly might be critical because cancers can change in nature over time.

Patents

Ad supported content patent litigation between Firtiva and Sony settle before trial in Eastern District of Texas

…The patent covered a way of sponsoring content without interrupting streaming by getting consumers to accept direct emails from the sponsor.

Telecoms

Facebook, Qualcomm and Intel say to US FCC (Federation Communications Commission) that 60GHz band should be shared with radar and communication use

… Both communications and radar interests are focused on the lower 7 GHz of the 60 GHz band because the 57-64 GHz range is generally available globally for unlicensed applications, making it critically important that it be shared fairly by both types of applications. The companies explained that this proposal allows fair access to the band by radars and communications applications. There is no question that the 60 GHz band will be key for AR/VR/XR/MR and other real-time audiovisual applications. When latency is impacted, the display can freeze momentarily and flicker, leading to a poor user experience and, in some cases, motion sickness, the letter stated.

What is AR/VR/XR/MR?

AR stands for Augmented Reality. AR devices such as smart glasses enhance users’ surroundings, projecting new information on top of what they are already seeing.

VR stands for Virtual Reality. VR headsets obscure the user’s vision, replacing it with a virtual environment beamed through in-built screens.

XR stands for Extended Reality. XR is an umbrella term encapsulating Augmented Reality (AR), Virtual Reality (VR), Mixed Reality (MR), and everything in between. Many companies consider that XR is the next mobile computing platform. Qualcomm’s presentation gives a good visual explanation of its own vision of XR.

MR stands for Mixed Reality. The term can be used to describe VR and AR. Sometimes, it is used to describe a device where you have an out-ward facing video camera so the real world can be blended with the virtual (called “pass through”) – you do not see the real world direct as in AR, but the processed videoed images.

FCC is lobbied for spectrum sharing between 5G and Non-geostationary (NGSO) satellites

…competition for bandwidths have always been fierce. SpaceX, which provides internet services from Starlink, its satellite internet constellation, has been opposing the sharing of the 12GHz spectrum (12.2-12.7 GHz) with 5G wireless, on the grounds of interference. Other companies, such as RS Access and Dish have said that there was no such concern based on simulation studies.

Delving Deeper

New form of Patent Pool – IPwe

…Patent litigation is rife against businesses that sell highly technical products as every feature from the visible to the invisible are likely heavily patented. Apple, which is one of the largest sellers of mobile handsets are often a target of patent owners that have to do with telecommunication, for example. Clearly Apple’s products fall within patents that concern telecommunications, and there are great many such patents, owned by many different patent owners, and a deep pocketed company like Apple has been a defendant of patent litigation advanced by telecommunication patent owners. The number of handset makers, which necessarily implement telecommunication technology are not many, but that will change when IoT devices, which can communicate with all manner of other devices, begin to fill the market. Those devices too, will also infringe, but it would be difficult for all wireless communication patent owners to negotiate a licence with a legion of businesses which make a wide range of different connected devices. In such a case, patent pools might be useful where the variety of patent owners contribute their own patents into a pool, and an administrator of the patent pool collect licence fees from a number of different businesses that sell IoT devices on the patent owners’ behalf. The concept is not that dissimilar to royalty collection societies that represent copyright owners of music and the like. Patent pools have been around for years.

IPwe is not just a patent pool though, it is a smart pool. It licences pools of patents that have to do with new technologies such as LiDAR (used by cars), metaverse and blockchain. As is usual in a patent pool, patents in each of these pools are owned by a variety of businesses. The key with IPwe is that it uses AI and blockchain technologies such as NFTs to operate the patent pool:

• In order to work out the share of licensing revenues paid out to each of the patent owners that have contributed their patents into the pool, it uses an open source algorithm which analyses those patents and evaluates them. The distinguishing factor is that the pool does not allocate the licensing revenue depending on the number of patents contributed, but it looks at the value of patents themselves and takes account of them to evaluate the fair share. It is widely accepted that some patents cover more important technology than others. Without AI, evaluation of patents is very labour intensive involving many hours’ work of a large team of highly technical personnel. Should the algorithm be fit for purpose, it can massively cut down on the time and cost to set up the pool. IPwe says that the algorithm must be working well, for it has accumulated a number of patent owners wishing to join the pool in a short space of time.

• IPwe has successfully persuaded SMEs with pioneering technology to contribute its patents, by not having an entry fee to join the pool.  It also offers a non-negotiable standardised licence with a SME friendly fee structure.

• Use of NFTs attributed to licensed patents. The NFT contains information about ownership, transaction history, file history, information about the patents and on occasion, know-how. Thus, a licence can contain rights other than patent rights. This structure also expedites the due diligence process, particularly in the event of deal making.

Artificial Intelligence

Microsoft open-sources tools to make Large Language Models (LLMs) more responsible

…Because LLMs are trained on huge swathes of data taken across the internet, they could can be trained to be toxic or prejudiced. Some of the datasets are so subtle and difficult to detect (eg. subtle jibes) by many content moderation filters. To combat this issue Microsoft have made available the following tools:

• ToxiGen Dataset: This is a large scale machine-generated Dataset for Adversarial and Implicit Hate Speech Detection. According to Microsoft, it collected initial examples of neutral statements with group mentions and examples of implicit hate speech across 13 minority identity groups and used a large-scale language model to scale up and guide the generation process. The Datasat can be used to train content filtering tools so that they can identify subtle forms of hate speech which do not necessarily contain expletives.

• AdaTest: The key here is that there is a human checking and steering the AI. According to Microsoft, a large language model is tasked with the burden of generating large quantity of tests targeted at finding bugs in the model being tested, while the person steers the language model by selecting valid tests and organizing them into semantically related topics.

Google releases AI which can create images from written descriptions

…seems that Google was just pipped to the post by OpenAI’s Dall-E2. Check out Imagen.

BigTech/ Data / Platforms

Microsoft hit with class action for using facial recognition on its Photos app without consent in violation of Illinois Biometric Information Privacy Act

…The app runs on Windows 10 and 11. The technology in question is Facial Grouping Technology, which groups same facial expressions, objects and people together. It means the user can search for specific photographs easily. The default setting is off. So what’s the problem?

• Biometric data is being collected without consent.
• No clear notice about how data will be collected, stored, used and deleted.

The issue was picked up when the Plaintiff noticed that her images were being updated by third parties onto Windows 10 and 11.

P&G, owners of Oral B sued for breach of violation of Illinois Biometric Information Privacy Act

…The Plaintiff alleges that the Oral B smart toothbrush which has embedded position detection technology unlawfully collects facial geometry information. The smart toothbrush can determine a person’s brushing habits through a software, combined with facial geometry information. The plaintiff says that he never gave consent allowing the smart toothbrush to take that information, in violation of the Illinois Biometric Information Privacy Act. Plaintiff, an Illinois resident, says he has never registered for an account so terms and conditions (which provided that any dispute is to be tried in Ohio) don’t apply. He says that the app can be used without agreeing to the terms and conditions. The Court did not decide whether the Plaintiff was correct, but allowed the case to proceed where it was started, in Illinois.

Zoom Standard Pro Monthly subscribers outside of US sue Zoom advancing privacy claims in Northern District of California

…the plaintiffs purport to represent all Zoom users in the UK, Canada, New Zealand and Australia (ie: the Five Eyes Intelligence Agreement members). They claim that, despite being told that Zoom calls were end-to-end encrypted, details such as location, amount of time on Zoom and other personally identifiable information were supplied to the likes for Google, Facebook for ad targeting. This follows a $85million settlement following a class action for US plaintiffs.

UK Competition Authority probes into Google’s potentially anticompetitive practices within the Ad Stack

…UK Competition Authority (CMA) is concerned that Google may be using its position in ad tech to favour its own services to the detriment of its rivals, of its customers and ultimately of consumers.

A bit about the Ad Tech Stack (based on UK government presentation)

DSP (buy side) is essentially a platform that serves Advertisers (in this example, BMW is seeking to advertise its cars).

SSP (sell side) is essentially a platform that serves Publishers (in this example, Forbes has some space for advertisers to use).

Simply put, Publishers who have space on their webpages for advertisement provide the information to the Supply Side Platforms, which aggregates the Publishers space inventory. The Advertisers who want to buy advertising space expresses their wish to buy web spaces for advertising purposes, and the Demand Side Platforms aggregates the various bids. A real time bidding process occurs between the Demand Side Platform and Supply Side Platform. Supply Side Platforms which manage the publisher’s inventory decide which ads to show, based on the bids received from different exchanges and/or direct deals between publishers and advertisers

Above I’ve skirted over the two types of advertising markets which are roughly as follows:

Ad Networks

• The Ad Network aggregates a range of advertising space from the Publishers and presents them to the DSP. There are many Ad Networks, and there are many DSPs. The Ad Networks purchase advertising spaces from Publishers, for onward sale with a mark up, to Advertisers.

• Suppose a user visits Forbes. The characteristics of the user (what other sites the user likes, what things have they bought from other websites) is then supplied to the SSP. The SSP then contacts the number of DSPs, and asks how much the advertisers would pay for that space for that user. The Advertisers will have programmatically specified how much they would pay for what kind of advert, and that information will have been forwarded on to the DSP via the Ad Networks. That information is sent back from the various DSPs to the SSP. The SSP receives this info and places the advert belonging to the advertiser with the highest bid in that space.  The exchange that goes on between the DSP and SSP is called RTB (or Real Time Bidding), which takes a fraction of a second.  It happens so quickly, users wouldn’t usually notice these transactions are happening behind the scenes when they visit various websites on the internet.
• Google Ads (formerly known as Google Adwords) can be regarded a form of DSP. Say Forbes has a space for advertisements. It can embed the AdSense technology on its webpage to indicate that it has space for advertising (Publishers which are using AdSense are collectively called Google Display Network). Advertisers that are using Google Ads can thereby reach out to those on the Google Display Network via the Google SSP (called Google Ad Manager – see below).

Ad Exchange

• This is an online marketplace, where you can buy advertising space from the whole of the internet. Publishers have much more control, with the ability to set the price for its ads (from which the Ad Exchange takes a commission upon concluded transaction), design its own ad campaign (eg. you can specify which advertisers you would not want to sell to). One of the largest marketplaces is called Google Ad Manager (an SSP, formerly known as Doubleclick), where you can directly buy advertising space from the various publishers (practically speaking, comprised of primarily websites that attract a lot of traffic). Ad exchanges provide the technology to automate the sale of publishers’ inventory using RTB, connecting to multiple DSPs (including non-Google ones).

This means that Google has control of every part of the Ad Tech Stack. The CMA is concerned that this weakens competition, because the connections between the Google entities in the Google Ad Tech stack is better (note third party SSPs can feed into Google Ad Tech stack)

Twitter to be penalised $150m for misleading users

…Twitter has agreed to pay $150 million in civil penalties and implement robust compliance measures to protect users’ data privacy. It had been alleged that Twitter had failed to protect users’ data, in violation the FTC Act and an administrative order issued by the FTC in March 2011. A further complaint has been filed by the government alleging that Twitter represented to users it would use non-public information such phone numbers for security purposes yet it transpired that it had used it for targeted advertising. The cause of action is violation of the FTC Act and the 2011 order. The complaint further alleges that Twitter falsely claimed to comply with the European Union-U.S. and Swiss-U.S. Privacy Shield Frameworks, which prohibit companies from processing user information in ways that are not compatible with the purposes authorized by the users. It may prompt the EU to raise a complaint. Could this give the material adverse effect Musk needs to extricate himself from the offer to buy the company for approx $40billion (now thought to be a massive overvaluation thanks to faltering Nasdaq)?

EV

Stellantis and Samsung to build a battery factory in Indiana

…The move undoubtedly has been spurred by US subsidies. GM is already committed to build a battery plant in Michigan, and Ford in Tennessee and Kentucky.

This joint investment is quite interesting because Stellantis is already in a JV with fellow South Korean rival, LG Energy Solutions. LG and Samsung have batteries of different characteristics. LG is known for light and power efficient batteries and Samsung batteries are known for high stability. Stellantis also has investments in Factorial Energy, which deal in solid state batteries as well. These have been claimed to be better than Lithium ion batteries, providing 50% more range and safer.

So perhaps Stellantis is betting on different types of horses.

Note: Stellantis owns Abarth, Alfa Romeo, Chrysler, Citroën, Dodge, DS, Fiat, Fiat Professional, Jeep, Lancia, Maserati, Opel, Peugeot, Ram and Vauxhall, and Mopar brands.

Sony ups its game by increasing its presence in the market for imaging sensors for EVs

…Sony says it will be supplying sensors to 75% of the top 20 global car manufacturers (accounting for 80 percent of the total market). I imagine that, other than the cars it is making under a JV with Honda, it will not be an exclusive supplier. However, if its sensors are better than other suppliers and the price is right, it will have plenty of opportunity to increase its market share.

Cars have a variety of types of sensors, but the ones that are in contemplation are those that capture the data about the environment of the car. That data is fed into the AI algorithm which promptly classifies what the car can sense, such as condition of the road, pedestrian in the way (avoid/slow down/emergency stop), plastic bag in the way (don’t stop), street signs, road markings (many may be already familiar with this technology) etc. Sony has strength in this area because of its camera technology, which is at present supplied to smartphones makers, for example Apple, Samsung and Google. All of these also have auto ventures so there may be scope for strengthening relationships, and the buyside obtaining volume discounts. Granted, there are chip supply problems but they are expected to be greatly helped by the recent tie up with the top chip maker TSMC and strength of Japanese chip related business (such as 3D stacking and packaging).  

By way of note, there are other non-camera based sensors that EVs might typically have in addition to the imaging sensors:

• Radar: detects objects made of metal – does not recognise what the object is
• LiDAR: this hits the environment with light to ascertain the distance between the car and various objects by observing the bounce back. Additional data processing is used to create a 3D image of the environment. It is especially well used today in autonomous cruise control.
• Wireless Communication: cars can communicate with other cars and infrastructure (eg. traffic light) to understand the physical relationships and carry out forward planning

Gaming/Metaverse

Gucci Town launches on Roblox

…if you work in brands, this is a must-check-out. Gucci Town has been established on Roblox on a permanent basis. It has an in-game currency (obviously) called GG Gems. What can you do?

• Get involved in Gucci inspired games
• Create art and experiment with various colours and patterns
• Interact with other Gucci Town goers in a café
• Visit Vault, which displays Gucci’s latest products and collaborations
• Gucci store to buy digital Gucci items (last time it launched a campaign in Roblox, it sold its digital only bag for a higher price tag than the average Gucci (physical) bag) – it fits any avatar body type (unlike in real life then).
• Access to perks can depend on your activity in Gucci Town – so you don’t necessarily have to have the cash

Why is this clever? Gucci can grow its future fans from the grass roots; (young – though not necessarily) gamers can aspire to one day own a real Gucci item in real life. They might form a strong Gucci supporting community further strengthening allegiance to the brand. Gucci can understand the tastes of upcoming creative fashionistas and devise cutting edge products that might appeal to them.

Meta’s VR headset (Oculus) and Horizon World (Meta’s social VR platform) infringing says Immersion’s US patent complaint

…Immersion, a predominantly IP licensing company has sued Meta for infringing its patent around haptics, which are the vibrations and forces you can feel on headsets and controllers for a more immersive digital experience. Immersion has sued Samsung before and managed to settle it, concluding I imagine, a licence agreement. Sony has already licensed. Immersion is no doubt wishing to strike another licensing agreement with Meta, the most successful VR seller (Oculus was the most downloaded app in the US last Christmas). The fact that litigation has ensued despite Immersion’s successful licensing deals in the past (no doubt hard negotiators too) indicates that Meta has an aggressive licensing stance.

Apple files RealityOS as a Trademark

…Everyone is speculating whether Apple will be displaying its VR/MR/AR headset at the Apple WWDC (World Wide Developers Conference) next week.

NFT

Actor Seth Green’s Bored Ape kidnapped – can he continue with his show?

…Actor Seth Green has not only lost his Bored Ape NFT, but possibly also the right to continue a show featuring the kidnapped Bored Ape that he had been developing for months. The kidnap happened when he fell for a phishing scam whilst minting (creating) another NFT. It is understood that the Bored Ape Yacht Club’s conditions state that all rights, that include the right to commercialise and make derivate works of the Bored Ape, are tethered to the ownership of NFT. In the world of copyright, the creator owns its copyright even though the artwork is sold on. If I purchased a copy of Harry Potter, I do not own any copyright in the Harry Potter work – it’s the same principle. But the Bored Ape conditions adjusts that rule.

Green instantly tweeted the incident, trying to stop further transactions, but to no avail. DarkWing84 purchased it from the scammer for $200k pretty soon after the theft. Assuming Darkwing84 did not know about the theft (there is every possibility that Darkwing84 is the scammer itself), depending on interpretation of the Bored Ape terms and the application of applicable copyright law, Darkwing84 may restrain Green from continuing with the show by enforcing its newly acquired copyright.

Semiconductors

Qualcomm expresses interest in investing in ARM upon flotation on the NYSE

…Qualcomm had strongly opposed Nvidia purchasing ARM fearing that its confidential information on its chip designs would end up in Nvidia’s hands if Qualcomm were to continue using ARM’s chip architecture. Unsurprisingly, that deal was not cleared by the antitrust authorities. ARM has therefore decided to IPO. As well as being interested in buying into ARM, Qualcomm also said that it would be amenable to buy ARM outright together with other chipmakers to keep the asset neutral. ARM’s designs are incorporated in most chips sold worldwide.  

Telecoms

BT and Ericsson to offer Private 5G networks to UK enterprise

…This is said to be more lucrative than offering the same to the retail sector. Private 5G networks promises glitch-free private infrastructure within which businesses can operate. FT reports that Belfast Harbour in Northern Ireland uses the 5G network to operate drones and carry out remote maintenance. It also reports that consumers would be willing to pay 20-30 percent more for a 5G (low latency, high transmission rate) service but feel that there are not many use cases (3D hologram calling and VR shopping) that really need that sort of service.

Late last year, Amazon had launched a similar service promising that clients can just simply plug and play the private 5G network.

In the Spotlight

Meta complains of Apple’s business practices to the US National Telecommunications and Information Administration

…NTIA is an agency of the United States Department of Commerce that serves as the President’s principal adviser on telecommunications policies. NTIA had recently asked for input on competition in the mobile ecosystem. Meta advanced a number of detailed comments against Apple’s practices in the US (where it has apparently 60% market share of smartphones – it would be dominant from competition purposes if correct) and this is what they had to say:

• Cross-platform, high-engagement apps pose a threat to Apple by lowering switching costs for consumers from iOS to Android / other devices:
  • Apps offer device-agnostic ways to perform core functions of a mobile device [think WhatsApp]
  • Apps allow users to save their data in the cloud and easily access it from any device
    • Cloud-gaming services stream games from the cloud to a consumer’s device. Cloud games diminish the importance of the consumer’s device and operating system because they rely on the processing power and storage of the cloud (ie: no need for high spec phones such as an iphone). As a result, a consumer who switches from a high-end to a low-end device can continue to enjoy the same, high-quality, cloud-gaming experience.
  • any user (operating systems (or OS) -agnostic) can interact with one another, reducing the barrier-raising impact of network effects [because it’s OS neutral, Apple doesn’t get more dominant because more users use for example, WhatsApp]

• Apple imposes restrictions on such apps to lock in consumers to iOS:
  • App Store restrictions on cloud games. This restriction forces developers to create two versions of the same game. In some cases, it may even be technologically infeasible to program a native-app version of a cloud game, as the very purpose of cloud gaming is to allow users to play games that their local devices may not have the processing power to run or local storage to download. A web app (which bypasses the App Store) cannot provide users of iOS devices the experience that a native app could offer.
    • users’ stored game data is not transferred upon switching creating a barrier to switch to Android.
  • Prevents app developers (eg. Meta) from introducing features that would enable developers to distribute and monetize
  • Prevents independent web browsers from creating web apps which operate system-agnostic alternatives to native apps (i.e., apps developed for a specific operating system). Apple requires all web browsers on iOS to use WebKit, a degraded version of Apple’s Safari browser, to render web pages – meaning there is a limit to what web apps can do.
    • …which means developers focus on creating native apps, rather than robust web apps (which would be OS neutral).
  • Imposes App Tracking Transparency (ATT) framework – meaning users can opt out from being tracked by third party apps.
    • Third party apps (who wishes to advertise their products/services) are then limited from carrying out effective ad targeting, or providing a personalised service to its subscribers
    • Third party apps, which are often publishers of adverts (such as Facebook – it has many ad spaces) cannot measure ads’ effectiveness, to attract further advertisers
    • App developers have shifted from ad-based (eg. like Facebook – it is free to use, but has lots of adverts) to fee-based monetization (on which Apple collects a 15–30% commission), because without the data it is less well able to target users more effectively
    • Unlike free, ad-supported apps, which allow consumers seamlessly to switch from Apple to non-Apple devices, fee-based apps often require switching consumers to repurchase apps, forfeit in-app purchases or subscriptions, or expend time and effort canceling current subscriptions and establishing new ones
    • There is a limit to the number of standalone app subscriptions for a typical user, so app developers might opt to distribute their apps through one of Apple’s proprietary aggregation services (such as Apple Arcade or Apple News+). This pressure further raises the costs to consumers of switching from Apple to non-Apple mobile devices, as Apple’s proprietary services are generally accessible only on Apple devices.
    • The ATT framework prohibits developers from offering users incentives to opt in to allow third party to track users, which would have enabled third party apps to share some of the value with users, as observed by the UK competition authority.

• Apple favours its own services:
  • ATT framework did not apply to Apple initially, and in a later version of the OS, asked users whether Apple can track their activity, but the prompt emphasised the benefits for users if they were to allow to track their activity

The comments are much more detailed and interested readers should read the comments. It gives you a good picture of how platforms work.

24 May 2022

Tech Pick of the Week

Microsoft relaxes cloud service terms only if customers are switching to a European cloud provider

…New terms mean that customers moving to an EU cloud provider will not have to buy additional licence to Microsoft’s services (such as Office) if they have already purchased Microsoft’s cloud services. Thus, it will remain the case that customers moving to non-Microsoft cloud services such as AWS or Google Cloud will need to purchase any Microsoft software. At the same time the EU cloud providers will end up adopting customers who are likely to continue with Microsoft software such as Windows and Office. The EU has been pretty open that they had been sleeping behind the wheel allowing US BigTechs to dominate the supply of its infrastructure to its digital economy. Microsoft’s change might be welcomed by the EU Commission, though it is likely to continue maintain a stake in customers which decide to switch. 

Microsoft is under the EU Commission’s microscope over its cloud service practices. See here for rival’s AWS’ misgivings about Microsoft’s practices. 

Short Note about the Cloud

Cloud is where a computing service is being provided via the internet. The opposite of cloud is called on-premises where you have a server and other IT infrastructure somewhere in your office providing the services. There are different extents of cloud computing: 

Infrastructure as a Service – that’s where the server / storage of data (ie: infrastructure) is being provided by third parties eg. Microsoft (Azure), Amazon(AWS). 

Platform as a Service – that’s where you can develop, manage and run apps via the internet. Used for developers and programmers. 

Software as a Service – that’s applications that are provided to you via the internet eg. Microsoft Office, Hotmail, Google maps, Zoom and the like where you do not have to install the application on your desktop to use it. 

Suppose a customer is using Microsoft Cloud Services (Azure) and has Microsoft software licences. When the customer moves to an EU cloud provider, the customer can now continue using the Microsoft software licence. 

BigTech / Data / Platforms

UK to implement Product Security and Telecommunications Infrastructure Bill to be cyber resilient

…Manufacturers of connected devices expected to have security by design at the manufacturing stage, guarantee minimum security standards, report vulnerabilities, and regularly updatable.
Similar duties are assumed in the US as well. The US Federal Trade Commission has threatened to sue companies that failed to tackle a well known bug known as Log4j – which exploited known flaws in the programming.

Can Elon Musk walk away from the Twitter deal?

…Last week it was reported that Musk was claiming that the Twittter deal can’t go ahead at the accepted price (about $40bn) because there are more bots in the Twitter user base than that has been claimed by Twitter. How much more is not known and Musk said that Twitter claimed it knows but won’t explain to him. Musk says that this is a “Material Adverse Effect” which entitles him to re-negotiate/walk away. He says he should be able to rely on what is claimed publicly by Twitter, a public company.  He will not be immune from buyer beware, caveat emptor, have you heard of the term due diligence? type gibes. 

What are the possibilities with this deal at present? 

• Musk walks away but has to pay a reverse termination fee $1bn to Twitter – sometimes called “break up fee” of $1bn. Either of the parties can walk away but the withdrawing party has to pay a reverse termination fee. For example, in the Microsoft/Activision deal in which Microsoft is proposing to take over Activision for about $70bn, there is a reverse termination fee of $2bn. When Nvidia proposed to purchase ARM off Softbank for $40bn and then withdrew (because Nvidia failed to get antitrust clearance) it paid ARM $1.25bn. 

• But it isn’t easy as that, because if all other closing conditions are made, Twitter has the right to force Musk to conclude the deal – this is called “specific performance” in legal parlance. The clause states: The parties hereto will use their respective reasonable best efforts to consummate and make effective the transactions contemplated by this agreement. 

• Can Musk rely on the Material Adverse Effect? – Possibly but he would have to show that that fact actually impacted on the value of Twitter, and in a significant way. Certainly it will have to involve litigation. Not good, for a busy person like Musk. Not good for Twitter either. 

• Twitter can sue Musk for damages if the deal falls through – again this is litigation. Not good. Damages may be capped to $1bn though, potentially. 

• Do some sort of settlement – either Musk to pay more than $1bn (baking in the litigation hassle factor) or Twitter accept a lower price (which may be Musk’s aim).

Background to all this could be the fall of tech stocks (all time low), which makes the accepted Twitter purchase price seem high, on hindsight. Tesla shares have also not been immune. This is relevant because Musk is proposing to buy Twitter using the falling Tesla shares as a collateral. It may well be that he needs to re-negotiate. 

There is now a sexual misconduct claim against Musk (dubbed Elon-gate). 

Ninth Circuit exonerates Twitter for moderating Trump tweets

…Twitter’s status as the world’s biggest digital town hall has come to the fore in particular since Musk moved to take it over, but the US Appellate Court ruled that it was not a state actor and as such not liable for constitutional violations. The plaintiff had complained that Twitter had taken away their right to view, comment and interact with Trump’s tweets which violated the right to free speech. 

I would have thought it would have been difficult for the Court to rule otherwise when tech platforms including Twitter have been subpoenaed by the US House Committee to explain their contribution to Capital Hill riot of 2021, and what they have done to limit the spread of disinformation. Which segues nicely to…

Court in Florida rules that social media companies should be allowed to moderate content

…this is contrary to what the fifth circuit decided, which agreed that Texan law prohibiting content moderation should be enforced. The issue here is the equivalent law in Florida. The Court here ruled that the private entity’s decisions about whether, to what extent, and in what manner to disseminate third-party-created content to the public are editorial judgments protected by the First Amendment – like newspapers.

US Senators call on platforms to monitor Spanish messages containing disinformation targeted at the Latino community

…Letters were sent to Meta (WhatsApp), Signal and Telegram. “Unless they address this problem, dangerous lies and conspiracies will continue to go unchecked—fueling distrust in safe, effective COVID-19 vaccines, and undermining our elections”, it was said. There is evidence that platforms do not tackle Spanish content for moderation compared to that in English. 

Canada bans network equipment from Huawei

…Move follows US, UK, Australia, the other members of the five eyes intelligence sharing network. New Zealand has not yet banned Huawei.

UK / EEA Children’s claim to go ahead against TikTok in the UK

…Former Children’s Commissioner for England Wales applied to serve a claim on TikTok in China on behalf of children of UK/EEA. 

Cause of Action: Breach of GDPR and UK equivalent law, Data Protection Act 2018

TikTok’s conduct complained of: Processing children’s personal data, invasion of privacy and misuse, in particular being opaque about what children’s personal data was collected and for what purpose they were used. 

Alleged loss: Non-material damages such as loss of control over subject’s personal data – per GDPR (no such qualification under the UK rules, the Data Protection Act). Loss of control is enough to trigger compensation, said the Claimant. 

The Court allowed the Claimant to serve out of the jurisdiction, onto TikTok China. Note that Ireland’s Data Protection Commission is investigating TikTok for use of children’s data and investigating claims of unlawful data transfers to China. 

TikTok seeks green light to settle US biometric law class action suit

… The complaint concerns facial recognition technology which scans faces for biometric identifiers. TikTok is alleged to have collected or stored that information without users’ consent, and failed to have informed users how it will be used, how long the data will be stored and when it will be destroyed. TikTok has agreed not to collect biometric data through the app, collect geolocation data, or transmit data outside the US unless it discloses this in its privacy policy and complies with the law. TikTok does not admit that it has collected biometric data, nor has it admitted that the data was shared with the Chinese government. It has though agreed to pay $92million in settlement. 

Texas expands complaint against Google for collecting data without properly notifying users

…The Texan attorney general now additionally complains that Google collects users data (geolocation, browsing history) even where users are using the Incognito mode.  In its original complaint Texas alongside other states had complained about the following Google features:

• Turning off location history does not prevent location data from being collected
• Collection of data when users interacts with Google products and services
• Use of dark patterns such as prompting users to allow location tracking to enable particular functions

ClearviewAI fined for scraping images of Britons from public database such as social media platforms by UK Information Commissioner’s Office and ordered to delete images of UK citizens

…ICO said people were not warned that their images may be scraped. Clearview AI matches an image with the image they have in their database, including where the images from their database are from. Clearview AI is no longer offering its services in the UK. Parallel proceedings are pending in the US.

Google agrees a deal pending trial with Match (makers of Tinder) and Epic (makers of Fortnite)

…Meaning certain of Match and Epic applications can remain on Google even though they do not utilise Google Play Billing. 

Both Epic and Match, businesses behind major apps such as dating app Tinder and Epic, maker of popular first person shooting gaming app Fortnite have been locking horns with Google (and Apple) over the mandatory requirement to use their payment system (respectively, Google Play Billing and Apple pay) to facilitate in-app purchases which attracts a 15-30% commission on all transactions. Both allege that the requirement is anticompetitive. Google had set a deadline of 1 June by which all app developers must comply with the requirement or else be kicked out of the Google app store (Google Play). The parties had applied for a preliminary injunction to prevent the new rules from applying, and the Judge had urged them to think of a solution to avoid an injunction. 

Didi (China’s answer to Uber) delists from the NYSE less than one year after floation

…It will list in Hong Kong instead, it says. The US has implemented law (to come into force 2024) which forces foreign companies to undergo a financial audit. The Chinese regulators could not accept potentially sensitive information leaking into the hands of the US government and mandated Didi to delist. No doubt other Chinese companies listed in the US will follow. 

Cloud

Fee paying WhatsApp Business API on Cloud services launched

…Parent company Meta is investing multiple billions to build out the metaverse (which may or may not materialise, in any event in about a decade’s time), compounded to that, has recently seen a drop in ad revenues thanks to Apple’s new privacy feature allowing users to prevent activity tracking. This meant that Facebook was blocked from access to the all important user data that enabled it to carry out effective ad targeting. Advertisers stopped paying Facebook. As if to add insult to the injury, the economic downturn has meant that businesses have been shaving down on marketing spends. Meta needs the cash to plug its losses and it also needs first party data to enable it to provide better services, better ad targeting. One answer of the problem has been offered in the form of a fee bearing WhatsApp business API on cloud. It would enable businesses to manage customer enquiries and take orders and generally communicate with multiple customers through encrypted Whatsapp messaging. 

Note on API

An API specifies how software components interact. A software might be built upon proprietary source code. The API refers to the code that the software developer makes available to third-party developers, which enables those developers to build further applications for the software. An API can allow for a third-party application to interact with the software and govern the extent to which it can access data, for example.

Cloud infrastructure adopted by traditional banks

…Major banks, which traditionally have their infrastructure of mainframe computers on premises (notably because the data is typically so sensitive) have started to depend on cloud services to gain all the advantages (cheaper, higher processing power, speed, scalability, quick deployment, automated updates etc) that cloud computing can provide.  

This is probably necessary for all banks now because it gives the flexibility banks are likely to need as different types of technologies are taking off; fintech being one area. Although there is turmoil in the crypto markets there is every possibility that all banks will eventually be expected to work with them. One just has to observe that the UK treasury has said that it will be legislating to bring stablecoins into the UK payments infrastructure, UK Financial Conduct Authority is launching the Financial Market Infrastructure Sandbox to enable businesses to test out new technologies, some firms are paying their employees in crypto.

Broadcom considering purchase of VMWare

…Chipmaker Broadcom (which also has a sizeable software business) is talking about buying cloud computing/software group VMWare (stands for Virtual Machine Ware – subsidiary of Dell). Broadcom have obviously decided to strengthen its software business, having failed (owing to Trump interventions – Broadcom, led by Malaysian American entrepreneur Hock Tan was not thought to be American enough) to purchase Qualcomm. 

VMWare is key cloud computing technology, allowing users to access business applications from any device, with all the requisite protection, efficiency and back ups. The top 3 cloud providers, AWS. Azure and Google Cloud provide VMWare capability.

EV

More news on battery production outside China

…This time in Norway. Swedish ABB and German Siemens leads the $100million fundraising in Norweigian Morrow, makers of batteries.  The Morrow plant is expected to produce the battery packs for rooftop solar panels (even though the story is categorised under EV on this occasion).  The Scandinavian battery industry is looking quite robust:

• Morrow (Norway): Has the aim of producing by the end of the year. It has a fundraising amount of $100million. Batteries are at present produced in South Korea. Batteries said to use less nickel and cobalt (of which there is shortage), and replaced with manganese. 
• Norvolt (Sweden): Started production last December. Fundraising amount of $2.75billion
• Freyr (Norway)

The push to produce batteries in the region are threefold:

• Forecasted reduction of oil from Russia
• Less dependency from Asia owing to geopolitical tensions
• Increase in tariffs on imports from Asia. 

You may recall Biden invoked the Defence Production Act aimed at supporting extraction for minerals required to make EV batteries (for the same reason). 

Semiconductors

UK Government has weeks to decide whether to sell Welsh low spec semiconductor maker Newport Wafer Fab to Nexperia, a subsidiary of Wingtech Technology of China

…National Security and Investment Act would apply, and the government will have to consider whether the sale would accord with its industrial policy. So low tech is the product compared to other semiconductor peers that many do not consider that it impinges on national security. However, does it align with the industrial policy not only domestically but also with the strategic alliances with the US, having regard to the heightened geopolitical tensions? The government doesn’t have long to mull over.

Tech Pick of the Week

Is it unconstitutional to allow Texas law prohibiting platforms to moderate content to take effect?

… The new Texan law in question is called Texas House Bill 20, or H.B.20 for short, and it prohibits social media companies from moderating content on the grounds of “the viewpoint of the user or another person”. It was implemented last year. As I understand it, it means that platforms – such as Twitter- can’t moderate content because of what the user says, or how the user says it. It also mandates disclosure to the public as to how any content moderation is being undertaken by large tech practices, together with the explanation of available remedies. The philosophy does not seem to be that apart from Elon Musk’s.

NetChoice, a trade association of businesses (eg. TikTok, Google, Twitter, Facebook etc) and Computer Communications Industry Association (members include Amazon, Apple, BT, Cloudflare, Deliveroo, Dish, Google, Facebook, Uber, Twitter etc) who share the goal of promoting free speech sued Texas because the law forces businesses to carry objectionable speech (eg. hate or extremist speech speech, discriminatory content, health (eg. Covid) disinformation, foreign propaganda, pornography). The District Court ordered an injunction preventing H.B.20 from taking effect, stating that the law violated the First Amendment (freedom of speech) by preventing companies from exercising “editorial discretion over…platform’s content”. The law also conflicts with section 230 of the Communications Decency Act which enables social media platforms to take down content which they in good faith find objectionable. Texas appealed, arguing that the law protects free speech. The Fifth Circuit (generally perceived to be very conservative) overturned this. Similar law is in place in Florida, but there is an injunction in place, owing to NetChoice suit there. The Plaintiffs have now filed an emergency appeal to the Supreme Court to get this decision overturned. Not only will platforms be forced to carry objectionable speech, they are concerned that advertisers will withdraw support. NetChoice said that the “shocking decision to greenlight an unconstitutional law—without explanation—demanded the extraordinary response of seeking emergency Supreme Court intervention”.

BigTech / Data / Platforms

US and EU come closer to combat anticipated worsening chip shortages, labour enforcement and food supply crisis

… US Department of Commerce have set up an early warning system for the US to get ahead of disruptions that may arise in relation to chip supply chain. This has been fruitful and so the US is extending the scope to the EU. Both blocs are working to increase chip supply and the regions want to ensure that those efforts do not lead to tensions in trade between them. The move is reported to have been spurred by the Russian invasion into Ukraine. The second Trade and Technology Council meeting is taking place now.

US Federal Trade Commission (FTC) to consider tighter rules on collecting and using children’s data.

…Current rule requires services directed to children to give notice and obtain consent of parents before collecting, using or disclosing childrens’ personal information. FTC considers more may need to be done such as:
limiting period of data retention, and only for long as necessary
sufficient security requirements to preserve confidentiality
consideration of whether data needs to be, or should be allowed to be collected
transparency around the collection and usage of childrens’ data
These are similar to EU rules, such as GDPR.

EU Commission proposes new rules to prevent dissemination of Child Sexual Abuse Materials (CSAM)

…The new proposed rules will mean tech companies will have further obligation to do the following, with the EU Centre facilitating:

• Risk assessments and propose mitigation measures
  • This may include the detection of CSAMs which are unknown (eg. by using AI)
• Courts can render “Detection Orders” to get platforms to detect known CSAM 
• Targeted detection obligations – measures need to put in place to detect known CSAM which are posted 
  • Microsoft’s photo DNA hashing system which identifies duplicate images (from pixel characteristics) is well-known. 
• Detected CSAM have to be reported to EU Centre
• Effective removal – Internet Service Providers have to take CSAM down / disable access including in the case of websites hosted outside EU.

Note that, the same Privacy vs Safety debate applies, as it did with the UK Online Harms Bill. The major issues are 

• that tech firms will have to scan messages (eg. iMessage, WhatsApp, Signal) for CSAMs, and so civil rights groups are against it from a privacy standpoint

• tech firms / governments can abuse the system to look for something which is not sufficiently related to CSAMs

• end to end encryption (meaning only sender and recipient can see the messages) will be compromised and users can be vulnerable to cyberattacks. 

Tech companies are to use the most unintrusive method to detect CSAMs, by, for example, using the metadata of the messages, rather than the message itself. The trouble is too many CSAMs may get through the net if only metadata were relied upon.

EU member states agree on stricter cybersecurity measures as a result of heightened cybersecurity attack threats

…The NIS 2 (Network and Information Systems Directive) can now move towards approval. The Directive imposes a risk management approach with a minimum list of basic security elements that have to be applied, process for incident reporting and mandates companies to address cybersecurity risks in supply chains and supplier relationships. Member States are also bound to co-operate in managing cyber-crisis. Compared to the current rules which concerned key services such as energy, banking, telecoms, health and transport, NIS2 will encompass a wider range of companies such as digital services, manufacturing of critical products and medical device manufacturers.

Antitrust consumer complainants ask Californian judge to order Meta to turn over Cambridge Analytica info

…In its complaint, consumers (users of Facebook) have alleged that Facebook engaged in the following anticompetitive practices:

• Bought other companies such as Instagram and WhatsApp to kill off competition whilst they were still small with the purpose of entrenching their dominant position. Had it not been for these acquisitions consumers would have had more social media platforms to choose from. 
• Misrepresented their data collection and use practices such that users were lured into using Facebook under a false premise. In relation to this, there is a claim for breach of Stored Communications Act, Video Privacy Protection Act, and claims for negligence, invasion of privacy and breach of contract. 

There are parallel suits by advertisers and the FTC on this theme.

You may recall that the Cambridge Analytica scandal concerned the revelation that certain third party apps had access to data of up to 87million personal users on Facebook. That harvested data was psychologically profiled and then sold to various others, including Cambridge Analytica which used it for political advertising. Plaintiff say that papers that related to the investigation into the Cambridge Analytica scandal are relevant and not privileged (because they were created for a business purpose, not for seeking legal advice) and should be turned over to them.

Linkedin settles with Data scraping Mantheos

…The settlement includes Mantheos agreeing not to data scrape the Linkedin platform. The claim concerned Mantheos’ selling of on-demand scraping of more than two dozen LinkedIn member data fields, including members’ work experience, education, skills, titles, posts, comments, and reactions to the posts of others. Mantheos was alleged to have used an extensive network of fake LinkedIn accounts to gain access to areas of LinkedIn’s platform that are accessible only to real, logged-in LinkedIn members.
“Social Listening” company Mantheos admitted that it data scraped, but did not admit liability.
The cause of action was breach of contract, fraud, breach of Lanham Act (dilution of TM – Mantheos used the Linkedin trade mark in their marketing materials).
Linkedin is in litigation with other companies for data scraping:
Against HiQ – for data scraping publicly accessible accounts (to my knowledge it does not involve scraping via creating fake accounts) by using bots.

Against 3Taps – this time Linkedin is a Defendant. 3Taps sought declaratory judgment that it is allowed to access and use publicly-available facts and information from LinkedIn’s webpage.

Faltering Netflix decides to offer ad-supported services at a cheaper price point

…Netflix was once a darling of the tech industry. So much so that the N in FAANG (Facebook, Amazon, Apple, Netflix, Google – the US version of GAFA) had Netflix in it. It was the first to offer streaming content via one portal. It did have, and enjoyed for a while, that first mover advantage but the streaming market is now crowded with large well resourced businesses such as Comcast/Sky, Amazon Prime, Disney, HBO etc which have other revenue streams to fund content creation. Now Netflix have conceded that it has to provide ad-supported services to increase subscription numbers which saw a drop for the first time and reflected in the quarterly results. The trick is to make sure that its full paying subscribers don’t jump ship to the ad-supported version. Personally, my feel is that Netflix have done it the right way round. Had they offered ad-services from the outset, they may not have had so many subscribers opting to pay the premium version. But now most of their subscribers are so used to the premium version, they might find the ad-supported version so annoying that it is worth paying the premium. Certainly, I’m sure that is what Neflix are hoping.

Musk says he’s withdrawing from the Twitter deal because its public claim that it has “less than 5 percent” of fake accounts likely to be a significant understatement

…but buying at a lower price might be a possibility, he says. Musk explained that he was waiting for a logical explanation for the number of fake/spam accounts. He said that Twitter claims that they know the number but they claim that there is this “complex methodology that only they can understand”. Musk says it’s a material adverse misstatement, and it’s a big deal. If the house is advertised as having less than 5% termites, that might be acceptable but if it happens that it had 95% termites after all then that’s not OK, because if the termites leave the house will disappear…Note that it has been reported that 40 percent of all website traffic is run by bots.
So why is the proportion of fake accounts such a big deal? That’s because it impacts on the number of true humans any advertiser on Twitter would be exposed to, and that is how Twitter’s revenues are generated. “So how do advertisers know what they’re getting for their money? This is fundamental to the financial health of Twitter” – he Tweeted. Unlike some other platforms (eg. Facebook) where advertisers can expect to get customers to purchase a product (where what is important is that the advertiser gets exposed to those that are likely to be interested in purchasing the particular product, rather than getting a product in front of as many people as possible), Twitter advertisement is more about profile raising.

Crypto

Panic in the crypto market as crypto exchange Coinbase regulatory filing amended to make explicit consequences of bankruptcy to users

…The regulatory filing stated that cryptocurrency held by Coinbase for customers “could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors”. This means, should Coinbase go bankrupt, customers’ assets can be used to pay back Coinbase’s secured creditors. The filing came after Coinbase posted poor results (and also the Terra crash, see below), causing its valuation to shrink by a quarter. Coinbase CEO Brian Armstrong tweeted soon after that customers’ assets are safe with them, and that the statement was made  because Coinbase had to include a new risk factor based on a new SEC requirement called SAB 121. He continued “For our retail customers, we’re taking further steps to update our user terms such that we offer the same protections to those customers in a black swan event. We should have had these in place previously, so let me apologize for that”. The black swan event means some extraordinary event, such as Coinbase going under. If Coinbase is using customers’ cryptoassets to invest elsewhere (which is what banks do) then it may well be that a business like Coinbase is ripe for regulation, just likes the banks are.  Unsurprisingly, the Securities and Exchange Commission (SEC) has now said that regulations are coming as digital assets ought to be treated as securities.

EV

Israeli EV start up REE to set up automated factory in the UK

…It helped to hire in the UK following shut downs of Ford or Honda factories, says the company. The company specialises in corner technology which enables a completely flat and modular chassis that supports the EVs to provide maximum room for passengers, cargo and batteries with the smallest footprint. No cutting corners in that business, in which case.
UK’s EV industry is looking good, though REE hasn’t discounted setting up in the EU. There is Arrival which makes EV in the UK. Nissan, Stellantis and Ford have invested in EVs or components in the UK. Rimac, a Croatian start up and Polestar have set up UK research or engineering facilities in the UK.

Businesses from a range of sectors call the EU to ban the sale of all Internal Combustion Engine (ICE) cars by 2035

…Those calling for the ban include those from unrelated sectors Sanofi, Unilever and Tesco. It also includes auto manufacturers with emphasis on EVs (such as Arrival – an EV company and Ford – which is massively invested in EV) and EV related companies such as ChargePoint. They also ask that the EU set charging infrastructure targets. The EU will be setting the CO2 targets by the end of this year.
The auto sector on the whole, such as European Automobile Manufacturers’ Association (ACEA) and European auto supplier representation (Clepa) have pushed back on strict interim targets against the backdrop of supply chain issues and chip shortages / knock on effects on job losses. Mercedes and BMW have said that more investment into infrastructure is required.

Gaming

Highly profitable and long partnership between FIFA and EA Sports come to an end as parties fail to agree on licence fee

…FIFA wants more money and EA says FIFA asks too much. The game will from now on be called EA Sports FC, with more or less the same content. Users may nevertheless continue calling the game FIFA anyway. Reminds me of the time when Amazon temporary ceased its lucrative deal with Visa owing to a disagreement on the commission rate, only for the parties then to back track. I wonder whether the same will happen again.
The game is the biggest title in EA’s offering. Premier League has called EA a “long term and valued partner” and president of the Spanish equivalent, La Liga said “committed to partnering with EA Sports FC…for years to come”. EA has also partnered in other sporting areas, such as with Madden NFL (American football), F1, UFC. Other EA titles include The Sims 4 and Apex Legends.

Intellectual Property

Disney’s privileges might be up for more pounding by the US government

…Senator proposes The Copyright Clause Restoration Act which would 

• Limit copyright protection period to 28 years with an option to renew, totalling 56 years
  • In the US, pre 1978 works attract 95 years protection period, post 1978 works are protected for 70 years after the death of the author. 
• Limitation on the period to apply retrospectively to those with market cap of over $150billion / in a motion picture / in wired telecommunication services 
• Companies such as Disney has had special deals with the government allowing an extended copyright protection period for up to 120 years. 

Objective is to provide protection period only for a sufficient period enough to encourage innovation. 

Disney is also losing the privilege as a special taxing district as a result of it opposing the so called “Don’t Say Gay” bill (now approved), which bans schools to educate young children on gender identity and sexual orientation.

If a patent owner wins a patent infringement case against a company (Amazon in this case), can it then go against its customers for infringement? Federal Circuit rule says No

…PersonalWeb Technologies, which owned data processing patents sued Amazon, and agreed to voluntarily dismiss the claim. The plaintiff subsequently sued 50 of Amazon Web Services (AWS) customers for patent infringement. The appellate court, the Federal Circuit said that the Kessler Doctrine applied, which provides that the initiation of a follow on IP litigation against customers of a party that has won a previous related litigation is prohibited. PersonalWeb petitioned to the Supreme Court to decide the point, but that was rejected. 

I am not clear about the circumstances that led to the voluntary dismissal but if there were a settlement between PersonalWeb and AWS, one would guess AWS would have put in a condition that PersonalWeb is not to go after its customers…

Owner of patent concerning capturing cheques on a mobile phone and depositing them at a bank without actually having to go to the bank wins patent infringement case against PNC bank

…This is a warning to all financial services companies that provide services via an app in particular (because financial institutions typically have deep pockets), but also extends to any company that provides services via an app. Or cloud for that matter.
A jury in Eastern District of Texas have awarded USAA, the plaintiff in this case $218 million. USAA has already won a patent trial against Wells Fargo. This is not the only case concerning patent infringement suits over app based technology against a financial institution.

Trade Secrets

“Doctrine of Inevitable Disclosure” dismissed in a trade secrets case in Georgia State – PowerPlan v Lucasys

…What is “Doctrine of Inevitable Disclosure”? It is where a group of employees leave an employ and set up a competitor. The original employer’s case would be that it would be impossible to set up shop without using proprietary knowledge of the original employer. The situation is more common than you might imagine, and I for one have come across matters like this before.
However, such a case is actually quite difficult to get off the ground, as was the case here. The departing employees didn’t have unauthorised access to proprietary information (because they had legitimate access when they were employees), and there is no concrete proof that they will use the proprietary information which they may have taken away in their heads when running the new business. The Court did allow the plaintiff PowerPlan to re-plead the case, to specify any instances of misappropriation (eg. downloading proprietary information and sending to their personal email address) or threatened misuse, or actual misuse.
Completely separately there is an interesting associated parallel antitrust claim. Powerplan the former employer, has a 99% share in the lucrative area of utility management software market. The antitrust claims are that (i) Powerplan has acted anticompetitively by threatening Lucasys’ customers citing the trade secrets case and (ii) proposing authorised vendor agreements to Lucasys with clauses that would unlawfully restrict the right of counterparties to develop competing software using Powerplan’s undefined confidential information. Powerplan had refused to limit that to source codes and trade secrets.

California proposes rule making it difficult to keep confidential orders and settlements which concern defective products and environmental hazards

…If the Public Right to Know Act bill is implemented California will join other states. The rule if adopted would mean that litigation papers will be sealed only if keeping them confidential outweights the public interest. Businesses say it would be burdensome and make it difficult for defendants to settle. There is also a concern around the possibility of forced disclosure of trade secrets.

In the Spotlight
Apps

Sea, Singaporean tech giant makes a move into Indonesia’s Insurance Market

…Indonesia is the 4^th largest country by population (after China, India, US – a note for pub quiz goers) and the biggest economy in South Eastern Asia– so the underlying strategy is likely to be similar to that of Amazon who is slowly but very surely laying the ground works to expand the client base in India (to get more data). There was coverage recently about Meta investing in network infrastructure in Nigeria. So we know where this is going. If the EU bloc’s regulations are far stricter than other regions, then you could get a splintering effect where you start getting regional giants – rather than what we see now where the US BigTechs are sprawled across the globe. 

Back to the story – it has been reported that New York listed Sea (which has an international base, spanning Asia, Latin America and Europe) is planning to purchase an Indonesian insurance company suspected to be Asuransi Mega Pratama. Sea provides various services:

• Ecommerce (Shopee, second largest in Indonesia)
  • Sea already allows insurers to sell policies on its ecommerce platform
• Mobile gaming (generates most revenue and the business profited during the pandemic)
• Digital financial services (payments, consumer lending, banking). 

It has been making losses owing to increased expenditure on promotions such as free shipping and vouchers to gain market share. Their loss making reasons may well be network effects, as demonstrated by the different movements in the share price of Uber and Lyft following the most recent quarterly results. Sea wants to become a Super App.

What’s a Super App? 

These are Apps that carry out multiple services and I would say, have become indispensable. It is centred around fintech (ie: integrated payments system). Courtesy of Wikipedia, here are the prime examples:

• WeChat (China, owned by Chinese megatech Tencent – very roughly, China’s answer to Facebook) – the godfather of Super Apps. Offers messaging, social media, payments, e-commerce rolled into one. 
  • Chinese regulators have forced WeChat to open up their platforms to other competitors however

• Alipay (China, owned by Chinese megatech Alibaba – very roughly China’s answer to Amazon) – mobile and online payment platform.

• Gojek (Indonesia) – it provides GoRide, GoSend, GoShop, and GoFood among 20 or so services, including Paylater, which is a wealth management service
  • Backed by Tencent, Google, Paypal, Facebook, JD.com among many other big names

• Grab (HQ in Indonesia and Singapore) – it provides GrabTaxi, food delivery, insurance and payments as well as online healthcare and remittances
  • Also planning to launch wealth management service
  • Has investments in Ovo, a large digital payments platform in Indonesia. 
  • Grab bought Uber’s business regional operations in 2012
  • Backed by Toyota, Hyundai, Didi (makes sense with its mobility focus), SoftBank, Microsoft among others

There is an interesting article comparing Gojek with Grab (albeit published sometime ago)

Super Apps naturally have access to a lot of data, and clever use of data enable them to compete more effectively, and centres around provision of digital payment technology. It therefore presents a threat to traditional banks:

• Super Apps can provide loans to businesses that traditional banks cannot offer because they have the data to be able to more accurately assess the risks of the potential borrower.
• Super Apps can offer benefits that banks can’t offer, such as discounts on their sister services when their payments system is used.
• Super Apps are just much more agile and lack the inertia / sluggish culture that some traditional banks may have cultivated. 
• Threat particularly felt in Asia compared to say, Europe and the US because the demand for digital and mobile services is higher, “leapfrogging generation of paying by plastic and cheque books to paying online through e-wallets”, comments an advisor at Citi. 
  • This is an important point. Headlines in Tech mainly looks at US developments on the basis that frontiers of tech are focussed there (I believe, mainly because the venture climate in US is the most advanced and culturally engrained). But when it comes to fintech, it may well be that we need to be monitoring South East Asia. 

Some, like Citibank have seen the writing on the wall, and have taken the if you can’t beat them, join them philosophy, allowing their credit cards to be linked to the platforms. The bank has also partnered with India’s Paytm (digital payments, trade in gold, foreign currency exchanges, insurance services app) to launch India’s first physical unlimited cashback credit card. 

By the way, Musk also floats the idea of ​​converting Twitter into a super-app potentially or creating one from scratch (ie: he could walk away from the Twitter deal?) – From being a digital town square, which is inclusive with a high He said that WeChat was an incredible app, which allows users to shop, text and social media within one app. Owing to regulatory hurdles one can’t help but question whether that opportunity has now passed, at least in the EU and possibly also the US. 

Sea’s connections

Sea’s anticipated insurance target, Asuransi Mega Pratama is owned by Indigo, son of Indonesian business tycoon Ganda, and nephew of Martua Sitorus, co-founder of Wilmar International, a major agribusiness in Singapore. Indigo owns 50% share of Sea’s digital payments units. The mutual trust and benefits are apparent.

Delving Deeper

Cryptocurrency market loses confidence as stablecoin loses peg

… Here is what is reported (I’ve looked at a number of reports and they don’t all say the same thing – so I have cobbled together what made sense to the best of my ability):

What is a Stablecoin?

Stablecoins are cryptocurrencies which are much less volatile than your usual cryptocurrency– they are pegged for example to the US Dollar. One would use stablecoins because exchanging crypto to fiat and vice versa is costly and slow, so stablecoins enable traders to make timely trades which is critical when cryptocurrencies are so volatile. Users also use stablecoins to hold cryptocurrency without having to convert it into fiat. It is also easier to avoid various tax implications – which may or may not be lawful. 

The idea with TerraUSD, Tether or USDC is that they are pegged to the US Dollar, so you can at all times exchange one of these with one US Dollar. Tether and USDC pegs to the dollar by having an asset backing their stability, such as currency held in reserves. Tether was fined by the US Security and Exchange Commission (SEC) because whilst it initially advertised that it was backed 1-to-1 by traditional currency, it transpired that it was securitised against less stable assets. 

TerraUSD need to knows in a nutshell (but hugely simplified because it is very complex)

But the TerraUSD is different – it is an algorithmic stablecoin with only code backing it –although the foundation behind the cryptocurrency has Bitcoin in reserves to defend the peg. The uniqueness of it is that it should be less vulnerable to the whims of the federal reserve. It was popular because you could use what is called the Anchor protocol (like a bank) to receive yields (like an interest rate) of up to 20% (too good to be true). Terra became very popular for this feature.  Indeed, until recently the great majority of Terra was parked in (“staked” in – in crypto language) the Anchor account. 

TerraUSD is kept stable by structuring the coin with a sister cryptocurrency called Luna on the same Terra blockchain, which is algorithmically designed to keep the value of TerraUSD constant. Luna is not a stablecoin in that its value is determined on the usual market economics, but you can exchange it for Terra 1-to-1. When you exchange Luna for the Terra, the Luna is burnt (meaning extinguished) and if you exchange Terra for Luna, the Luna is minted (meaning created). The supply of Luna is therefore controlled. If the Terra price is below $1, what you would then do is to swap the Terra for a dollar worth of Luna, and if Terra price is above $1, then you would swap $1 worth of Luna with Terra. The Luna price changes depending on the on-goings of the Terra blockchain, to control the value of Terra. However, if the value of Luna’s market cap falls below the market cap of circulating Terra, there is insufficient liquidity to collaterise TerraUSD in circulation. 

How did TerraUSD/Luna crash?

However, the TerraUSD /Luna cryptocurrency crashed when an attacker withdrew copious amounts of TerraUSD from the Anchor account and dumped them to short Bitcoin – so it is reported. Terra value dropped, punters rushed to exchange their Terra for $1 worth of Luna, and more Luna had to be supplied. The foundation loaned its own Bitcoin to prop up the Luna to stabilise Terra but the Bitcoin value fell further. This led to the massive de-pegging of Terra, and wiped out most of the value in Terra. Binance, the world’s largest cryptocurrency exchange, halted the trading of Terra and Luna indefinitely.

Tech News of the week

Amazon’s Fifth Anniversary in India

…This week’s tech news of the week is a bit of a curved ball. It is surprising to think that it is only Amazon’s fifth anniversary in India. But that’s not the point. The point is, this could be a turning point for India –  and time for China to move over? 

When Amazon bets, it bets big, with plenty of investment. Others are likely to follow. And we are reminded how strategically this is done at Amazon:

• India’s Prime subscribers are most interested in streaming content – unlike those in the west who sign up to get the free and fast delivery services
  • By investing in streaming, Amazon aims to convert these subscribers into eCommerce subscribers – to me this seems to be key for expanding the Amazon empire
  • Hence the recent purchase of GlowRoad, India’s social commerce company. 

• 41 new titles on Amazon Prime video, and committed to double down on India specific content

• Amazon programmed in 10 different languages (the country itself has 22 constitutionally recognised languages)

• Mobile-only subscriptions has been made available  [I guess some people don’t have TV sets/PCs, or that family members (of which there may be many in India) may wish to watch different kinds of programmes on individual devices]

Note also that 

• India boasts to have the second largest population – meaning potential for collecting vast amounts of data
• But India has strict data laws (eg. data localisation)

Toyota is betting on India too

…Toyota, which has been slower on the uptake when it comes to EVs (they had bet on hybrid and hydrogen fuel cells, which may have hampered the EV trigger) plans to take up the chance to start from scratch in India, announcing that it will make EV parts in India. It has also partnered up with India to make standardised EV charging units in the country. 

Apps

Ride sharing app Lyft’s shareprice tumbles as rival Uber’s sustained 

…What could be the reason for this?  

This is network effects at work, explains Jason Calacanis, host of podcast This Week in Start Ups. Lyft is an order of magnitude smaller than Uber, as it is not engaged in the food delivery business and not as global. In this case, the network effects work like this – it was explained:

• Difficulty with driver retention: The pool of potential drivers have the option to take up the Uber or Lyft ride request. With a larger client-base, drivers have more scope for earning on Uber with shorter wait times (time when the driver can’t earn). More drivers sign up to Uber with the result that Lyft needing to spend more to retain the drivers and costs of running the platform increases in comparison with Uber. 

• Increasing customer base is difficult: Customers too, might be more inclined to sign up to Uber than Lyft because of the favourable wait times, because Uber simply has more drivers. 

• Lyft does not undertake food deliveries, which affected the business during the pandemic; Uber drivers could operate during this time – some drivers may have been cautious about transporting passengers and so attracted more drivers. As the pandemic recedes, those drivers could then move over seamlessly to ferrying passengers. 

Other examples of businesses that lost to rivals owing to network effects mentioned:

• Facebook vs MySpace
• Windows vs Macs
• iPhone vs Nokia

BigTech / Data/ Platform

Antitrust claim against gaming platform Steam (by Valve Corp) allowed to proceed in a case in Washington

…Game developer Wolfire in its amended case claimed that mandating developers to sign a most favoured nation clause (meaning Wolfire can’t offer its games on other platforms for a lower price) was anticompetitive, because it means in effect gaming developers would have to accept the 30% commission levied on the revenues generated using Steam. Wolfire had acquired World Opponent gaming platform in 2001 only to shut it down a few years later, coercing gamers to buy into the Steam platform, it was said – the Judge felt that this denoted market power on the part of Valve. 

Similar antitrust claim has been levelled against Amazon which also levies a certain level of commission for third party sellers on the platform coupled with a most favoured nation clause. Sellers have complained that the most favoured nation clause means that it can’t sell its products more cheaply on other sites including their own, harming consumers. 

Match.com (makers of Tinder) sues Google for forcing it to use Google’s own payments system meaning it has to pay Commission of up to 30% on purchases made on Apps downloaded on Android devices

…It echoes the competition complaint of popular game Fortnite maker Epic, against Apple (and Google) – which appeal is on-going. Match has succeeded on a similar competition complaint against Apple in the Netherlands although the claim is on appeal. Google says Match’s apps are eligible to pay just 15% for digital subscriptions. Google is at present apparently implementing a system that would allow developers to use other payments systems starting with Spotify. Match complains that Google has the choice as to who to offer the program, and that the offer is not open to everyone. 

The US is considering passing the Open App Markets Act which will give developers a choice of payment systems they wish to use, as well as providing access to third party app stores, ability to install apps without using an app store – both of which will give the option for developers to avoid iOS/Android platform commission fees).

Antitrust rules which prohibits self-preferencing per se might in itself be anticompetitive says the American Bar Association

…American Bar Association seems to me to be saying, don’t be too eager to catch up with our EU counterparts, which is poised to implement the Digital Markets Act. This includes a provision which prohibits gatekeepers (large platform over a certain size) from engaging in the practice of self-preferencing (prime example is where in response to a search (eg toothbrushes), Amazon places its own products more prominently over other third party products). The US is also considering implementing the American Innovation and Choice Online Act which has an anti-self-preferencing rule of large platforms. It is in the advanced stages of law making.  

The ABA considers that such blanket prohibition will dampen innovation – for example, it will discourage features utilised by the consumers (eg. Google maps appearing in response to Google search). The rules should apply subject to the conduct materially harming the competition, it said. It also suggested that, rather than looking at the absolute size of the platform, it should also look at the share of the market occupied by that platform.

Twitter launches Birdwatch to crowdsource the identification of misinformation

…You have to be a Birdwatch member. Twitter will ask a member about a controversial tweet, and they comment on it, and other Birdwatch members are asked to rate that comment with reasons why they rated in that way. No doubt, Twitter will amass these ratings and feed it to train an AI at some point, so that it will eventually be reliably able to focus on the tweets that might fall foul of the law (note Musk said Twitter under his leadership will not moderate content beyond the legal requirement). 

This is not that different from what is stipulated by the Digital Services Act, which says that users need to be able to flag problematic content, with trusted flaggers to be given priority by the platform to tackle content on the platform efficiently.   

Washington District court Judge makes interim decision on Amazon’s suit by consumers for recording, storing and sharing communications via Alexa

…the claim concerned the communication captured by Alexa without having activated the device by the user calling out “wake”. 

In the Judge’s eyes, there were two kinds of people, registered users and unregistered users (eg. those who lived with registered users – or perhaps it might extend to guests of a registered user?). The registered users had consented to the practice by registering. Amazon had made known that Alexa would record once activated. The Judge dismissed the complaint that the notice was ineffective. The Judge also accepted that Amazon had notified users that it could record conversations upon false wake activations. However, he considered that unregistered users may have a case against Amazon. 

Cause of Actions are under several states’ wiretap acts. There is also a claim under the Washington Consumer Protection Act concerning certain misrepresentations Amazon is alleged to have made, such as:

• the rarity of false wakes 
• what Amazon does with the collected information
• monetizing users’ data for own benefit “depriving plaintiffs of the monetary value inherent in the data that was intercepted”

The last two points are interesting. How particular does Amazon have to be about the data they have collected? How should users’ data be valued? The thinking may not be dissimilar to that of the EU which considers that “free services” (eg. Facebook, Google) should not be considered free because in return the businesses do take users’ data.  

225 anonymous electric shaver sellers on platforms such as eBay and Amazon sued for patent infringement in Illinois

…The patent owner has sought temporary restraining orders and asset freeze orders. These sorts of actions are more common for trade mark infringements. Asset freezing is key to recover infringements on platforms, especially if the provenance of the goods are abroad, notably China. 

Non-operating company Advance Coding Technologies sue TikTok parent ByteDance for infringing video audio processing technologies

…Plaintiff here is a non-operating company, or NPE (non-practising entity) which does not use the inventions in the patents but buys patents from innovator companies and uses them to get licensing revenues. It means ByteDance can’t countersue for infringement because being an NPE, it carries out no infringing acts.  

The plaintiff is a seasoned litigator, having litigated against Xiaomi (now settled), Oppo, Vivo and TCL for patent infringement proceedings in China for using  technologies relating to a different technology, being Enhanced Voice Services (it is a standardised technology used by devices that deal in audio/speech).

German Competition Authority (Federal Cartel Office) deems Meta of “paramount significance for competition across markets”, meaning enforcement against it can be expedited

…In many ways it is a label of honour, as much as Meta would wish to resist the consequences. Google has been deemed the same in January. 

Investigations into Meta over its practice of combining data from different sources (Facebook, WhatsApp, Instagram etc) and linking it into virtual reality headsets can now be expedited.

UK climbs down on regulating the IT sector

…Legislative teeth will unlikely be conferred to the Digital Markets Unit, which sits within UK’s competition authority (Competition and Markets Authority) – meaning the UK will not be setting regulatory rules for BigTechs and other internet businesses other than within the existing powers of Competition and Markets Authority – for now. No specific reasons appear to have been given for suspending the expansion of regulatory controls over tech businesses. The Digital Markets Unit takes a scientific approach, using the latest approaches in data engineering, machine learning and AI to understand how digital business operate. 

Owners of iPhone 4S broker a settlement with Apple claiming bad updates made their phones buggy and slow

…The complaint representing iPhone owners in New York and New Jersey, said that iOS 9 updates made their phones slower to such an extent that some owners went to buy replacement phones. Apple was alleged to have misrepresented to its customers that the updates would make the phones run better. The case closed after 6 years of litigation. The point here is that, any app developer (especially car manufacturers that send software updates) which provide updates could face suit if their updates aren’t good enough.  

Crypto

US Securities and Exchange Commission (SEC) says it will double its Crypto Assets and Cyber Unit

…SEC are recruiting new supervisors, attorneys, trial counsel and fraud analysts to double down on fraud and non-compliance with respect to decentralised finance, crypto, stablecoins and NFT activities.
Critics have said that the move is tantamount to regulation by enforcement, and rather, that regulatory uncertainties ought to be cleared first.

US Treasury sanctions crypto transactions mixing service Blender.io

… so it was decided after the North Korean state-sponsored hacking group Lazarus was revealed to have used the mixing platform after successfully hacking the video gaming service Axie Infinity. Mixing in the crypto world is the process of pooling money from different sources into a central fund and mixing the transactions to re-distribute currency back to the clients to remove tracks and/or to anonymise transactions. Mixing was a major money generating service for Hydra, the largest criminal marketplace for illicit goods and services, which was recently taken down following an international effort to clamp down on digital criminal activity.

Nvidia to settle US Security and Exchange Commission claim for inadequately disclosing demand driven by crypto miners to investors

…this is interesting because who knew that gamers and crypto miners were in a tug of war over Nvidia’s Graphic Processing Units (GPUs), supplies of which are scarce at present owing to supply chain problems around chips. Certainly the investors didn’t appreciate it and although Nvidia did manage to get the investor claims dismissed, Nvidia got fined for not making that clear. Nvidia agreed to pay the fine but have not admitted SEC’s findings.
Why does that matter for investors? For one, the crypto market is highly volatile. When the bubble burst in the past, so did the demand for the GPUs. Nvidia saw a steep drop in revenue for that reason back in 2019.
Nvidia is known for GPUs (the bit that does very complicated processing, such as graphics rendering and AI data processing involving huge volumes of data) a highly complex and specialist bit of processing hardware suited for computation heavy rendering; notably processing complex graphics quickly for gamers and crypto mining (ie: validating crypto currency transactions by solving complex equations) and minting (ie: creating tokens).

EV

Tesla does a long term deal with global miner Vale to secure Nickel supply from mines in Canada for its batteries

…We don’t need to list the critical Nickel facts to understand that this deal is most probably quite a shrewd move. But here they are anyway:
More than 80 percent of world’s Nickel processing is based in China.
60% of the world’s Nickel mines are Chinese owned.
16% of all high grade Nickel comes from Russia.
Nickel demand from car makers expected to jump approximately 8 times between the beginning and end of this decade.
Price of Nickel already increased 50% this year.
Bill Gates backed start up Kobold is using AI to find new Nickel mines
Tesla is using its own technology to mine Lithium (could Nickel be next???). Compounded on this are the chip supply and wiring harnesses that VW has already sold out in the US and EU for this year.

UK Lithium Refinery gets backing from Trafigura, one of the largest metal traders

…Similar theme to the Nickel story, the project aims to reduce dependency on China, as there are currently no refineries in Europe. Vast majority of metals critical to making EV batteries are produced by China (Lithium, Nickel, Cobalt and others), often using fossil fuels. In the case of Lithium, original raw materials come from Chile, Argentina and Australia. Note that, from 2024, battery and car manufacturers in Europe will face higher tariffs if raw materials are not sourced locally. To have a project using low-carbon refining technology such as this one would put real meaning to transitioning from internal combustion engines to electric powered vehicles from the green agenda perspective. UK Lithium Refinery project Green Lithium hopes to be operational by the end of 2024.

ESG

Samsung under attack as it fails to commit to 100% renewable energy

…Unlike Apple, TMSC and Korean chipmaker SK Hynix. Among G20, South Korea had the second lowest share of renewable energy in 2020. An analyst at SK Securities in Seoul is reported by the FT to have said “If Samsung cannot meet ESG standards, it may not even become an option for overseas customers in the long term… Environmental problems will soon emerge as systemic risks in the form of non-tariff barriers.”
Whilst the world is lacking in chip supply, Samsung may survive taking that stance. But the point the analyst makes about non-tariff barriers should be heeded by all businesses, because there is no reason why it won’t span both products and services.

Plant-based meat company Impossible Foods sue rival Motif in Delaware for patent infringement concerning iron based molecule

…plant based meats will be increasing as we all try eat less meat to preserve the planet. The latest spat follows a similar dispute, in which The Better Meat Company sued Meati over fementation technology.

Right to Repair

Apple enables users to repair some of the newer iPhones

…Initially in the US with plans to roll out in the EU, Apple are enabling users to repair their newer iPhone models. Users will need to purchase individual parts and tools (Apple’s parts including screws are proprietary and as I understand it, requires a proprietary tool to unscrew) and rent tool kits (for $49) to enable users to repair at home – or more like, individuals to set up shop in especially rural parts so that locals can get their iPhones repaired. 

In the Spotlight
Semiconductors

Venture Capital backed Hilco wages war on the US semiconductor industry using a single patent right

…Hilco is reported to have sued Advanced Micro Devices, Kioxia America, Qualcomm, Nvidia, Marvell, NXP, Infineon, and Socionext America across multiple districts in the US and the ITC (US International Trade Commission) for the infringement of a single patent owned by it. The patent was originally applied for by LSI Logic Corporation. For a company that owns many patents, and for a litigation which is so significant in magnitude, it is interesting that this and in other cases of similar nature (see below) only one patent is used in the enforcement action. If the patent is invalidated, everything falls away.
A success before the ITC could mean that the defendant semiconductor companies are ordered to stop importing infringing goods (ie: chips) into the US. If Hilco were to win, then the shortage of chip supplies in the US will worsen (impacting US tech economy + national security) – which is why I bet as a non-US qualified lawyer –that the ITC would be reluctant to issue an injunction, or else White House intervention would be a possibility. Still, the ITC action can be used to pressurise the alleged infringers into settlement. After all, what Hilco is really after, is cash. It has been speculated – and I agree – that the recent wave of litigation may have been encouraged by the high damages awards (multiple billions) which were awarded to another funded patent owner, VLSI, against Intel for infringing semiconductor patents.

Who is Hilco?

Hilco owns Bell Semiconductor LLC and Bell Northern Research LLC which have purchased a number of patents from other companies, most notably Broadcom in 2017. They have been very litigious:

• Last few years saw Bell Semiconductor LLC suing Renesas and its subsidiary Integrated Device Technology, and  Microchip Technology, NXP Semiconductors, and Texas Instruments. (Settlement has been achieved with those that are underlined)

• Bell Northern Research LLC has sued BBK Electronics (OnePlus), BLU Products, HMD Global, Lenovo (Motorola Mobility), Sonim, and TCL (TCT Mobile) before the ITC

• Bell Northern Research LLC has also got litigation campaigns going against against Apple, CommScope, Dell, and HP concerning standard essential patents relevant to the WiFi standards (which means injunctions may be more difficult to be awarded – which in turn means there is less leverage against the defendants). 

Other semiconductor patent battles are afoot in the US, many initiated by non practising entities (or NPE ie: business concerns receiving patent licensing revenues)

• Mediatek v NXP & NXP v Mediatek and others (several patents asserted)
• Pearl IP Licensing v AT&T, MicroDevices, Thermo Fisher and others (1 patent asserted)
• Waverly v AT&T, AnkerDirect, Granite River Labs and others (1 patent asserted)
• Celebration IP v AlphaOmega Semiconductor, On Semiconductor, Allied Electronics and others (1 patent asserted)

Many of these have been successfully settled.  

Tech Pick of the Week

EU’s Top Court says Article 17 Directive on Copyright in the Digital Single Market which makes platforms liable for infringing materials (unless best efforts made) not unlawful

…A representative of Google at a conference once said let’s face it, Article 17 was targeted at YouTube. This provision says, in a nutshell, that online-sharing service providers must make “best efforts” to ensure that copyright infringing materials on their platforms are minimised. The bigger the platform, the more effort (ie: resources) must be expended (per the principle of proportionality), though there is no general monitoring obligation.
Poland objected, saying the law conflicted with the freedom of expression and information as guaranteed under Article 11 of the Charter of Fundamental Rights of the EU. Court of Justice of the EU held that there has to be a fair balance between that and right to intellectual property, protected by Article 17(2) of the Charter. In particular, any measures placed by YouTube (or any other online-sharing service provider) must not result in the unavailability of lawful material.
Note 1: As an example, YouTube uses automatic copyright filter called Content ID. This makes it easier for YouTube to automatically capture potentially copyright infringing material that is being uploaded. No doubt YouTube (Google) will say that the provision of this automatic copyright filtering demonstrates that it is making “best efforts”. Critics say that YouTube’s use of Content ID is unbalanced because it will also filter out use of copyright protected material which will qualify for US’ “fair use”, meaning it will be legal. There are also exceptions under EU law as well (see Article 5 of Infosoc Directive), although they are much more circumscribed – having said this there is a risk that YouTube’s automatic copyright filter will prevent lawful use of copyright protected material. This will fall within the sort of complaint raised by Poland.
Note 2: Article 17 appears to work well with the proposed Digital Services Act which stipulates that online intermediaries need to enable users to flag unlawful material for the platform to deal.

BigTech

Twitter reassures advertisers that toxicity on the platform will be controlled

…In preparation for the take over by free speech absolutist Elon Musk, many fear that toxicity (ie: trolling, brigading (co-ordinated campaigns sometimes using bots), doxing (publishing malicious private info) may increase in the name of free speech. Twitter is particularly vulnerable to toxic behaviours because anyone can respond to anyone (though you can block unwanted followers/responders). On the other hand, Musk is expected to clamp down on bots which is said to contribute to toxicity on Twitter (this would decrease the level of daily active users, but that presumably will matter less once he takes the company private). 

What Twitter wants to avoid is the reprise of Stop Hate for Profit campaign against Facebook mounted by big brands such as Unilever, Ford and Coca-Cola which threatened to pull ad spending on Facebook owing to its alleged failure to tackle hate speech. Compared to Facebook, Twitter is particularly vulnerable because its advertising revenues predominantly come from large corporations, whereas Facebook will have small to medium size companies in its books (this is because Twitter is more about raising profile, Facebook more about very targeted advertising, increasing the proportion of people who will click on adverts and convert into a purchase). 

Separately some EV companies have other concerns – as their marketing strategies may leak to Tesla. Henrik Fisker, the CEO of EV maker Fisker has deleted his Twitter account and asked all to follow him on Instagram instead. Others, such as General Motors are sitting on the fence for now. 

Biden administration sets up Counter-Disinformation Board

… With a focus on preventing spread of disinformation from Russia among other things. One would need to ensure – one assumes – that there are proper checks and balances to ensure that information is not being filtered out depending on the politics underlying the messages, and that the board is not being used to benefit whichever political party is in power.
Is this in part a response to Musk’s Twitter takeover? If so, this is a rather speedy response.

Apple charged for antitrust violation by the EU Commission in its preliminary findings over third parties from providing mobile wallet system

..The bit that is subject to the charge is the use of NFC (Near Field Communication) to enable iPhone users to pay by tapping on the merchant’s device. Apple’s iPhones have a chip in it to enable NFC – but Apple has this chip locked in with Apple’s wallet app. You can of course have your credit cards in the wallets – enabling banks etc to have access to the embedded NFC technology, but because the chip is locked into Apple’s wallet system and enables to Apple to take a commission on the transactions. EU Commission is saying that Apple should enable third parties to provide non-Apple wallets. Apple say that the ecosystem is structured in the interests of security and privacy. In any event, suppose Apple were made to allow other mobile wallets – users are going to find it easier to use Apple’s mobile wallets anyway, because their ID and other vital information is locked into the Apple ecosystem.
Apple is charged with two other antitrust breaches by the EU Commission:
Spotify has challenged the 30% commission fee + prohibition on using its own payment system: This time last year, the Commission sent a Statement of Objections to Apple, taking a preliminary view that Apple has abused its dominant position. Spotify’s side of the story is posted on a website called Time to Play Fair.
Similar to Spotify, but relates to eBooks.
If found to be infringing, Apple could face up to 10% of global revenues… how much would that be? Read on…
The next post is along the same theme, about an instance where Apple kicked a certain app out of the App Store…

Apple exonerated from excluding an App by a Californian federal judge

…A currency exchange app developer Konverti sued Apple for excluding it from the App Store claiming it breached competition law. The Konverti app was designed to enable people wanting to exchange currency to meet up in person (eg. US dollar to Pounds Sterling). Apple had excluded Konverti because it saw that there was scope for abuse and danger, with encounters possibly leading to money laundering, fraud, counterfeit currency trading and other financial crimes. On this occasion the claim was dismissed because it lacked specific pleading as to why Apple’s conduct harmed competition or why Apple’s decisions were arbitrary, among other things.  

Californian court dismisses claim against Facebook for displaying scammer’s ad

…The judge so held as he found that Facebook did not do more than just publish the ad. The Plaintiff had sued Facebook on the grounds of negligence, breach of contract, breach of covenant of good faith and fair dealing, and California’s unfair competition law.
Facebook did not contribute to the furtherance of the scam decided the judge. When users complained against one ad publisher, Facebook removed it having decided that the ad violated its policy. However, when the scammer re-posted the same ad but under a different modified name, it was not prevented. The judge gave leave to amend the pleadings in case the plaintiff can plead facts which demonstrate that Facebook did something more than to merely publish an ad (eg. promote the ad) that happened to have deceptive intent.
Now this case is in the US. But in the EU, the proposed Digital Services Act is likely to come into play. Suppose the ad was unlawful. Facebook may have to show that it made sufficient efforts to minimise unlawful content from being displayed again.

Apple posts record breaking revenue of nearly $100 billion in the most recent quarterly earnings report

It is made up of:
50% iPhones
10% Macs
20% Services – Apps, iCloud+, Music, Apple TV+, Apple Arcade (gaming), Apple Fitness+, Apple News+
Remainder: iPad, Wearables, home and Accessories.
The Services business is growing fast. That has to be the way business is moving. One can easily understand this, when you think about the number of users that are using Apple pay (see above), and commission from in-app purchases. No wonder Apple has launched an iPhone at a lower price point. When one thinks about that, it is quite surprising that the proportion of income from services isn’t greater.

Japanese Government considers reigning in BigTechs

…Japan is considering the following:
One issue is that users can’t sue US based companies that easily. Big IT companies have been asked to register their HQ entity in Japan to enable Japanese users who have suffered harm on the platform to sue in the home jurisdiction.

Prohibition against pre-installed apps on iOS and Android phones.

Mandated provision of multiple app stores.

The latter two potential changes will concern Apple and Google in the main. Both of these are issues raised in the US and EU.

Reseller accuses Cisco and its preferred distributor in Texas for forcing SMEs to buy new network equipment in breach of competition law

…Network equipment re-seller Dexon says it is using FUD, or Fear Uncertainty and Doubt coercing SMEs to buy new expensive equipment and refusing to service them, when they want a software update. Cisco deters customers from buying (cheaper) equipment from re-sellers by claiming risks such as malware or spyware the suit says.

Amazon and its C-suites sued for breaching biometric privacy laws in Illinois

…Informed consent and certain information needs to be given before collection, use and storage of biometric information under Illinois Biometric Information Privacy Act. The Complaint says the governance and internal procedures to comply with the regulation is inadequate. The complaint concerns collection of facial data uploaded to Amazon’s photo storage service and features that allow shoppers to virtually try on make up and clothing. The interesting point is that Amazon directors are also sued, which will help pressurise Amazon to settle.

EV

Beijing grants robotaxi licences to Baidu and Pony.Ai

…Baidu (roughly, China’s answer to Google – which has partnered with state owned BAIC group for the autonomous driving venture Apollo) and Pony.Ai (backed by Toyota) can now operate robotaxis around Beijing, meaning the public can now embark. A person must be in the vehicle but not necessarily behind the wheel. Costings, performance and take up by the public would be interesting.

Metaverse

Bored Ape backers to launch the Otherside metaverse game – punters rush to buy land on metaverse

…This time it is real. Last week Bored Ape NFTs were stolen following a hack of Bored Ape official Instagram account announcing the opportunity to claim land on the upcoming Bored Ape’s metaverse, the Otherside.
The launch of the Otherside could set light to more activity on the metaverse, generally. The main metaverse games (meaning games on a blockchain) such as Decentraland and Sandbox reportedly only have a few regular users. This game, which features the most high profile NFT collection, could mark the turning point, and the key to success must rest on how entertaining it will turn out to be. Virtual land sale was launched with the game by venture capital Andreessen Horowitz backed Yuga Labs – in partnership with Animoca Brands, betting big on potential purchasers who might want to get on the speculative bandwagon. Such moves were a-plenty; the Ethereum blockchain crashed as a result of the (virtual) landgrab frenzy which ensued. Bored Apes as well as other collectors’ NFT series, such as Cool Cats and World of Women can appear on the Otherside. ApeCoins (now tradable on crypto exchanges) will be used on the platform.
Note that the Sandbox is owned by Animoca who also has a stake in Decentraland. You can foresee then that these worlds might eventually get more integrated. Meta is probably keeping a watchful eye.

Telecoms

Mobile Virtual Network Operator Mint Mobile may be on the hook for customer’s loss from crypto hack

…Mobile Virtual Network Operator (Provides telecom services by leasing wireless capacity from main carriers to provide services which are usually cheaper than the main carrier) Mint Mobile was sued for negligence by a customer whose crypto currency worth nearly $500k was stolen following a data breach. 

The customer sued Mint Mobile on the basis that its data breach occurred just before the user’s SIM was hijacked (sometimes called SIM port out, SIM swapping – basically transferring your mobile phone number which can be done by third parties using the original owner’s personal data). Customer alleged that crypto hack was enabled as a result of the data breach which disclosed personal information needed to carry out the hack. 

Mint Mobile moved to strike out the claim but a Californian federal judge ruled that the Plaintiff had pled the facts sufficiently, duty of care was established and the damage was foreseeable and the case should proceed, given discovery of documents had not yet taken place. Mint Mobile’s argument that it couldn’t possibly be responsible for an independent third party’s illegal acts was struck down. 

EU Telecoms companies say BigTechs should contribute to infrastructure spend

…The rationale is that streaming and social media companies contribute to about 55% of all traffic on mobile and broadband networks. This costs the EU telecoms companies (Vodafone, Orange, Deutsche Telekom, Telefónica etc) around €15-28 billion each year, it has been reported. It is an acute issue for EU Telecoms companies at present who need cash to prepare for 5G and full fibre rollout. It may well be that, if the infrastructure cost is too much for the EU Telecoms businesses, then the 5G roll out may well become that much slower – indeed over in the US, Telecoms companies are instead updating the old copper network because it is just too costly to do a full upgrade. 

Telecoms companies point to the case of SK Telecom of South Korea which successfully sued Netflix because they were compelled to upgrade the network owing to the very popular Squid Games viewing traffic.   

In the Spotlight

UK’s Digital Regulation Cooperation Forum (DCRF) publishes calls for views on use of Algorithms – Revealing the kinds of regulatory requirements which may be being considered for the future

…The DCRF is an initiative derived from the following 4 digital watchdogs working together:

• Competition and Markets Authority (CMA)
• Financial Conduct Authority
• Information Commissioner’s Office (ICO)
• The Offices of Communications (OfCom)

Calls for Views 1:benefits and risks of how sites and apps use algorithms

Why the need for Call for Views? : Modern Machine Learning and Artificial Intelligence approaches could cause harm (give rise to misrepresentation, distortion of competition, amplification of biases leading to discrimination/inequalities, harm people’s right to privacy) if not used without care. Algorithmic processing is opaque and lack accountability. 

What do the Regulators want?: Increase in understanding of the nature and severity of risks so that they can help businesses use algorithms in a responsible manner. The Regulators can provide meaningful guidance / mandate new rules / regulate businesses not acting responsibly, whilst at the same time promoting effective competition, resilient infrastructure and systems which protect individuals from harm. 

There are 6 Common Areas of Focus: Stakeholders are invited to comment on DCRF’s areas of focus, and alert the DCRF on what other issues ought to be considered, and ideas on how DCRF might be able to assist individuals and consumers to navigate the algorithmic processing ecosystem in a way that serves their interests.

• Transparency of algorithmic processing [most important]: Needed to ensure users know when their rights are being infringed / provide informed consent / ensure fair treatment

For example:

• Providing information to users as to when data is being collected, how it is processed and for what purposes. Are users to which the data belongs, giving informed consent? 
• Providing information on algorithimic processing carried out. For example, what training data used, is a human in the loop? What protocols govern the processing?
• Providing explanation of any decisions made
• Vendors of algorithmic systems (includes sellers of “off the shelf” algorithms) should also inform customers of the limitations and risks associated with their products
• Making clear who is responsible for inappropriate algorithmic processing

• Examples of lack of transparency:

• Users who might be facing higher prices compared to others with a similar profile
• Users who don’t know how their data is being used for targeting advertisement purposes
• Users who are not explained why they have a poor credit score

• Fairness for individuals affected by algorithmic processing: Need to ensure there is trust of consumers and citizens / Ensure compliance with the Equality Act

For example:

• Ensure training data does not embody any bias
• Remove information about sensitive characteristics 
• Consider fairness of personalised pricing – is it fair that businesses work out how much you would afford to buy a particular product and offer that price? Is it fair that those that live in areas with higher incidents of burglary should pay more for say, home insurance?

• Access to information, products, services and rights 

For example:

• Limiting exposure to alternative viewpoints – control over algorithims that result in exposing certain users to harmful content (those that incite violence, antivaxx conspiracy theories) on a repeated basis
• Limiting exposure to economic opportunities – as an example, females may be less exposed to STEM based job opportunities. Controls to be placed to avoid such outcomes. 

• Resilience of infrastructure and algorithmic systems 

For example:

• Ensure datasets on which the AI is trained cannot fall over if a bad actor were to poison the training data
• Ensure personal data cannot be inferred from the training datasets
• Resilience against cyberattacks

• Individual autonomy for informed decision-making and participating in the economy

For example:

• Ensure that targeting does not amount to manipulation leading to users making decisions that they otherwise would not make. Some recommender systems might fall foul of this. 
• Some users are more vulnerable than others to targeted advances by service providers (eg. children, people with learning disabilities, the elderly, those with addictions) – they would need to be safeguarded
• Avoidance of harmful choice architectures – eg. making it difficult for users to unsubscribe, default options
• Provision of option of users not to be targeted based on their profile

• Healthy competition to foster innovation and better outcomes for consumers

For example:

• Making sure that platforms do not have an unfair advantage by recommending their own products over third parties’ (so-called Self-preferencing)
• Making clear which links have been up-ranked (eg. those that are sponsored)
• Ensuring that connected algorithmic systems operate fairly – and for example, don’t lead to tacit collusion such as on price
• Preventing organisations with data power from accumulating granular information on individuals across their online journey that they then use to personalise their offerings, which can exacerbate information asymmetry between consumers and service providers.

The above summarises just some of the issues of algorithmic processing that were raised. I think we would all benefit from having at least a superficial understanding of these, as consumers and as business persons. 

Calls for Views 2: auditing algorithms, the current landscape and the role of regulators

The DCRF notes that “while algorithmic auditing is currently not conducted extensively and the market for audits is relatively immature, an audit ecosystem will likely grow in the coming years”. This means that businesses that deploy algorithmic processing ought to set up their systems with an eye to possible audit obligations, and ensure robust governance is in place to enable regulators to clear their systems.  

Indeed, the paper notes that a number of algorithimic audits have so far taken place:

• The CMA has been investigating Amazon and Google over concerns they have not done enough to tackle fake and misleading reviews on their sites including by examining their review moderation and product rating systems
• The ICO and its Australian counterpart investigated Clearview AI Inc’s facial recognition technology due to suspected breaches of UK and Australian data protection laws
• The ICO investigated the use of data analytics and personalised microtargeting in political campaigns in 2017
• The Australian Competition and Consumer Commission inspected Trivago’s algorithms, revealing that the ranking of hotels was weighted towards those hotels that paid higher commissions to Trivago, rather than those providing the cheapest rates available to consumers

The DCRF paper goes into significant detail about the issues for auditing, level of auditing and the process of auditing, existing landscape and thoughts on future landscapes for algorithmic auditing. 

Tech Pick of the Week

EU (Member States, European Parliament and the Commission) Provisionally Agrees Digital Services Act 

…Subject to approval by the European Council and the European Parliament. 

Back in 2015, the European Commission announced the Digital Single Market which in a nutshell concerned taking the Single Market (free flow of people, capital, goods within the single market) concept, which mostly concerned offline activity, into the online world. Online barriers in eCommerce were tackled, and free flow of data, and pooling of data across the member states were facilitated (eg. consumers in Germany can get the same level protection whether it buys goods from Germany or other EU countries). 

This latest proposed regulation, the Digital Services Act is similar in concept, in that it makes content (goods, services and information) which is illegal offline also illegal online. It will be applicable to all online intermediaries (social media / marketplaces / search engines / app stores / payment systems) providing services in the EU (that is, the company does not have to be located in the EU). Its objective is to ensure the EU digital space is safe for citizens and businesses. Further restrictive requirements apply to VLOPs (very large online platforms) and VLOSEs (very large online search engines) – these are services with more than 45 million monthly active users (approximately 10% of EU population).  

Digital Services Act means online intermediaries (among other things):

• Must inform users about the ads / content / recommendations they see (transparency regarding parameters used to decide on which ads are shown / how content is moderated)
• Must enable users to flag illegal content (such as copyright infringing content on video sharing intermediaries) and deal with them. 
• Must not carry out targeted advertising based on a minor’s personal data / ensure minors are protected with the online intermediaries know that the user is a minor. 

But there is no obligation to monitor for illegal content. 

VLOPs and VLOEs’ duty

• Analyse systemic risks they create (such as the following) and to carry out risk reduction analysis on an annual basis
  • dissemination of illegal content
  • adverse effects on fundamental rights
  • manipulation of services which impact democratic processes and public security
  • adverse effects on gender-based violence, minors, and impact on physical/ mental health of users

• Provide ways for users to receive recommended content not based on the service provider’s profiling (eg. chronological order)

There has been a lot of talk on how Twitter ought manage their content amid criticism from free speech proponent Elon Musk who considers that moderation is too heavy-handed. Musk has said, in the event he were able to take over, he would ensure that Twitter remains on the right side of the law. The Digital Services Act might mean Musk will not have the freedom to operate as he might have assumed.  Although the core of what he wants with Twitter – making things open / transparent – chimes with the objectives of the Digital Services Act, a VLOP such as Twitter will have other added obligations such as ensuring adverse effects of fundamental rights of citizens are minimised. Furthermore, implementing measures to minimise the risk is likely not straightforward, both as a matter of striking a balance and also technically. 

The Digital Services Act will tackle issues subject to the class action in Florida against Meta as mentioned below.

BigTech

Former US National Security officials say over-regulation of US Bigtech could weaken national security

…This is because of 

• Cybersecurity threats from abroad
• Increase in disinformation
• Access to data of US persons
• IP theft

Some of the signatories sit on boards on major tech companies, or are legal advisors to them in the US. They have attacked the EU Commission’s Digital Markets Act on the grounds that it failed to consider national security issues. 

Facebook agrees to fund fibre-optic cables installation across Nigeria – why it could be a clever move

…Facebook has invested in other African countries with looser legislation and regulation amid regulatory clamp downs in the west. Senior Government official of Nigeria says Facebook actually loses money on the project but it can gain it back on the user data they generate. This is, of course, the business case for Facebook. In Nigeria only just over half have access to the internet.

Here in the west we are vastly ahead of Africa in terms of economy, infrastructure, availability of medicines and general standards of living. However, as Africa catches up across these indices, they can expect to live longer and survive treatable diseases and be better educated (which will be part facilitated by better internet access). Furthermore, there is something to be said about being a late comer. Other countries have comfortably overtaken UK’s once prized rail network infrastructure – it was the first in the world and enabled the industrial revolution. Same here too. It’s cheaper to upgrade the existing copper networks than install a new fibre network – the former can be the option taken even in developed territories – whereas Africa can go in with the state of the art infrastructure at the outset. All of these facts, combined with the West’s less prolific increase in population are said to mean that it will be a matter of time (and not a long one) before the African economy takes over. The same can be said of India (and read on…). Ergo, Facebook’s investment may well be wise and reflects its long termist approach to building business a la the metaverse.  

Note: Facebook/Meta may not be a cabling installation company, but it and other large tech companies, such as Google are into that business. In December 2021, it was recommended by US security regulators that the Federal Communications Commission clear Meta and Google to operate the Pacific Light Cable Network system to facilitate data flow among US, Taiwan and the Philipines while bypassing Hong Kong. 

Amazon acquires GlowRoad, an Indian social commerce company

…The reasons are exactly the same as Facebook’s African investment as outlined above. GlowRoad sells products to consumers at wholesale price and helps them sell on social platforms such as Facebook. It also assists those consumers with the logistic side of things (shipping/ returns ie: similar to Shopify, and recently, Amazon has set out to compete with Shopify by allowing Buy with Prime merchants to sell through their own websites, not exclusively on Amazon). Amazon may well then get access to vast amounts of data from Indian consumers. However, India does have robust data localisation laws. Still, a wise investment when one thinks about the significant future potential for the Indian economy and, there is commission stacking opportunities through payment services, advertising, referrals as well as logistics services. 

The environment for large tech companies, so called BigTech, to grow by acquisition is becoming increasingly restrictive. It is inevitable that they should seek to grow internationally. 

Having made a tender offer directly to shareholders, the Twitter board agrees to cave into Musk’s buy bid

… Love me Tender, Musk had tweeted to foreshadow his bid.

Apparently, he managed to heavily leverage off his personal wealth (worth about $260 billion). The offer of the self-styled “free speech absolutist” was to buy the outstanding shares of common stock for $46.5 billion, declared directly to shareholders. This was designed to bypass the board of directors. The board of directors were then faced with one of three options:

• Find another buyer with a better price
• Take Musk’s offer
• Do neither (perhaps in an attempt to stay on the board) and risk being sued by investors for breach of fiduciary duty. 

The first option was looking unlikely (though it’s still possible), and the third option was unpalatable. This probably led to the board who had earlier implemented the poison pill to accept. Well played. 

Founder Jack Dorsey who was forced to stepped down as CEO last autumn had tweeted that the board had “consistently been the dysfunction of the company”.  Dorsey will remain on the board until next month. Some say Musk’s bid was timed so that it came before Dorsey’s departure. Others speculate that Twitter could see a return of Dorsey. 

Note it’s all subject to the financials and regulatory clearance. Once through, Twitter will become a private company, meaning Musk can develop Twitter based on long term strategies, devoid of pressures of having to generate positive quarterly results. 

BigTech eats into TV Networks’ consumers’ engagement time and therefore ad revenues

…In a letter to the US Federal Communication Commission, TV Networks complain that they face strong headwinds amid BigTech’s ability to provide content more freely. The TV Networks say that compared to BigTech, they have less freedoms on the content they can deliver as they have duties to remain a trusted source of information (compliance with political advertising rules, disclosure requirements and record-keeping obligations). 

Artists sue Meta for profiting on copyright infringing works in California

…Artists say that counterfeiters are copying images of artists’ protected work and selling them cheaply via ads placed on Facebook. Facebook then receive revenues from those infringing sales. 

Following the Digital Services Act (which only applies in the EU, so not relevant here), Meta will have to see what it can do to minimise infringing activities though it is reported to say that it already pro-actively tries to minimise infringements. 

Causes of action in the US claim are copyright infringement, breach of Visual Artists’ Rights Act, False designation of origin under the Lanham Act, Digital Millennium Copyright Act, Unfair competition.

Drones

Federal Communication Commission asked by software companies to implement new rules carefully

…The concern is that, if the FCC were to block certain equipment being sold in the US on the grounds that the drones are made by companies that are barred from participating in national programs owing to national security concerns, then it would hit the nascent drone industry hard as most small drones are made by such companies. 

EV

England and Scotland Law Commission’s recommendations on Self Driving Cars
…Published in January (so this news has been a little delayed), the Law Commissions recommended a New Automated Vehicle Act. Here are the headline points. Interested readers should review the paper.
Self-Driving

The term “Self-Driving” to indicate a legal threshold
Should mean humans can relax and divert attention and be safe
Offence if you describe a vehicle as Self-Driving if it isn’t authorised as such
Legal accountability will change (ie: drivers on certified Self-Driving cars won’t be liable for not paying attention in certain circumstances)
Victims of traffic accidents do not need to prove fault.

Two types of “Self Driving”

Where you have to have a person in charge (“User in Charge” or UIC)
Immunity from prosecution from breaking traffic rules, dangerous or reckless driving
Limited duties such as arranging insurance, checking loads
Need to be able to take over in response to a “Transition Demand”
Vehicle therefore needs to be able to give a clear and timely Transition Demand.
Backed up by Authorised Self-Driving Entity (ASDE) – which could be a vehicle manufacturer, a software developer or a partnership of the two, or any other suitable entity, but whatever the case, must be involved in ensuring safety of the vehicle.

Where you don’t need a person in charge (“No User in Charge” or NUIC)
Occupants of vehicles are simply passengers [or nobody in the vehicle]
NUIC operator will be responsible.

How safe does Self-Driving cars have to be?

Options are:
Safer than humans?
Fixed percentage (say 5%) better than humans?
Must be acceptable by the public [but what percentage of the public?]

Ultimately a political question and so government should decide, not the law commission
This news segues nicely to…

Musk says it will launch a dedicated robotaxi without any steering wheels or pedals

…The robotaxi will start production in 2024, Musk declared, adding that it aims to be more cost effective than a subsidised bus ticket. Tesla has in fact had stonking financial results for Q1 – it seems to be blind to the supply chain issues many auto companies have been struggling with, as a result of the war in Ukraine (and on this read on below). Certainly it will help silence Musk critics who say the takeover bid controversy over Twitter will distract him.  Part of the success is said to be the direct to customer dealership structure which Tesla has adopted. An increase in the price of the vehicles, directly lines the pockets of Tesla. The auto industry have been trying to follow Tesla’s business model. The other reason is said to be Tesla’s robust foothold in China; car manufacturing in China is more profitable than manufacturing elsewhere.  

He is clearly the sort of person who likes to publicly announce a very high watermark to spur himself on to actually make that mark. I don’t think it matters to him whether he actually achieve his goal [he is famous for not making publicly announced deadlines], but it seems to me that he likes to shoot for the stars to make it to the moon – or rather in his case, shooting for mars to make it to the moon. 

Tesla owner’s smart summon feature leads the driverless vehicle into a private jet…

…Those that don’t have easy access to Tesla may not know that some models have a smart summon features which enables the owner to hail his or her own Tesla from up to 200m away. An owner triggered the feature but failed to recognise a private jet. My guess is that there was not enough information to train the AI to identify a nearby plane. It would be a rather odd situation, certainly my non-Tesla car has never encountered planes on the ground before. Perhaps not if you are in the Tesla owner’s club though…

Group led by Second Largest EV battery maker LG Energy Solution to create mining –to manufacturing supply chain for batteries in Indonesia

…The investment will amount to $9billion. Why this investment in Indonesia of all places? For self-sufficiency, including reducing reliance on China. Indonesia is the largest producer of Nickel. 

Note that the largest EV battery maker CATL (China) signed a $6billion deal with Indonesian companies to also produce batteries there. 

Things are very bad for the auto industry right now, here’s why: 

• Back in Autumn 2021, the industry was expecting around 4-6% increase in demand for new cars but now analysts expect a decrease in sales by about 2% for 2022 and 2023 (cuts in Europe around 9%). 

• Owing to Ukraine/Russia conflict, and also the drive to reduce dependency on China 

• Critical auto parts especially wire harnesses from Ukraine – bundles all wires to connect parts to other parts of the car, sending information and power. Bit like the blood vessel and the nervous system that drive our bodies (ie: absolutely essential).

• Labour intensive because it is an intricate process and can’t be automated.
• Wiring process usually close to production sites – meaning supply chains are built around the wire harness production sites
• There are about 22 auto companies that have invested in Ukraine (especially DE – BMW, Mercedes, VW), half of which entail wire harnessing.

• Fragility in supplies of platinum, palladium, steel, copper, aluminium and nickel – key materials to make cars

• Significant proportion of class 1 nickel (essential in EV battery) comes from Russia

• Elon Musk tweeted : Nickel is our biggest concern for scaling lithium ion cell production. That’s why we are shifting standard range cars to an iron cathode. Plenty of iron (and lithium)!

• Whopping 43% of Palladium comes from Russia (20% if you also account for recycling)
• Pig iron [to make steel] – comes from Ukraine
• Prices of these key materials are sky high – price of palladium is higher than gold

Fintech

Meta’s launch of Whatsapp payment system in Brazil experiences delay – here’s why

…Meta already has a p2p [peer to peer] payments after having cleared regulatory hurdles around competition, data privacy and efficiency.
Meta now wants to set up a p2m [peer to merchant] payment system. Clearly they have the technical infrastructure. The issues are the following:
Approval from central bank
Merchant acquirers [enables merchants to accept digital payments] consider that the fees are too low and legal responsibilities too burdensome.
Meta possibly in a weak position at the moment as they strive to make up for loss in ad revenue following the implementation of the new Apple privacy feature allowing users to block apps tracking them. The deal if it goes through, will allow Meta to gain first party data.

Life Sciences

Janssen to enter into arbitration over Alkermes’ NanoCrystal technology

…There are different types of NanoCrystal technologies, those that are used in solar panels and filtering crude oil. But this one relates to pharma. NanoCrystals are, as you might imagine, are tiny crystals (nanometer range) and in the pharma application, they are pure drug crystals which are stabilised or surrounded by a coating of a surfactant. It improves better absorption into the bloodstream.
The dispute arose because Janssen decided to terminate the licence agreement to use Alkermes’ intellectual property. Probably, Janssen thinks that the patents subject to the licence are invalid or they consider to have found a way to not infringe the patent. Alkermes say that Janssen’s lawsuit over its medications against Intas and Teva use Alkermes’ technology. Janssen has won its suit against Teva.

Space

SpaceX’s Starlink to provide internet services to Hawaiian Airlines

…Rejoice! Downloading films before a flight will become a thing of the past. Business persons may groan at the prospect of having no excuse to relax on flights. 

Starlink satellites will deliver high speed internet to Hawaiian Airlines meaning passengers should have good WiFi access during the flights. Starlink already has a deal with private jet charter flights provider JSX, but a deal with a major airline is a first.  Starlink terminals will be installed on the planes next year, and it will go live pending certification. Hawaiian Airlines said the services will be offered free to its passengers possibly increasing pressure on other airlines to do the same. No doubt this will not be the last of Starlink/Airline deals we will hear about.

Artificial Intelligence

Google’s new language model PaLM can apparently understand humour and common sense

…Training general intelligence, such as humour, common sense, common knowledge to an AI system is one of the hardest things to do. Google seems to have made headway in the area. 

EV

CATL, the largest EV battery producer of Chinese origin bids to set up factory in the US

…CATL (Contemporary Amperex Technology Limited) has been told that it can do so provided that it brings manufacturing technology and know how to the US, not just low-wage assembly jobs. It is known to be a supplier to auto majors such as Tesla and Volkswagen. It is also investigating the possibility of setting up factories in Canada and Mexico. 

Lithium extraction commences in Cornwall, UK

…This will use an innovative method to process Cornish geothermal waters to extract lithium, for use in among other things, EV batteries. 

Atlantic IP/Magnetar Capital subsidiary Scramoge sues Auto charging patents against charging device manufacturers Anker, Belkin, Morphie, Google, Apple and Samsung

…The patents originally belonged to LG.

BigTech

Google sued by various companies in US for massive price increases for using Google Maps API

…App developers complain about the following alleged anticompetitive actions of Google:

• Unfair bundling issue: Complainants use digital mapping service, but are made to purchase associated services such as
  • Google Places API: provides information about the destination on the maps 
  • Working out the distances between two locations
  • Routes Directions API – provides navigation information

• Prohibition of combining Google Maps API with third party services
• Offering free digital-mapping APIs allowing the provision of free maps from 25,000 per day to 930 per day – app services which were free became unviable
• Purchase of smaller competitors, such as Waze (navigation app)

US House antitrust committee reported that Google’s market share for digital mapping APIs was 80%. Google is most certainly likely dominant in the market (which means antitrust rules apply). 

In a preliminary ruling, US Ninth Circuit says it’s not contrary to Computer Fraud and Abuse Act to scrape public information from websites

…Data analytics company HiQ had scraped volumes of profiles from publicly available Linked-in network. Linked-in complained that this was unlawful, and inter alia contrary to Computer Fraud and Abuse Act. There was no hacking (meaning circumvention of access measures such as passwords) involved on the part of HiQ, and so the Ninth Circuit, applying a Supreme Court decision called Van Buren, denied Linked-in’s complaint.  It doesn’t mean HiQ is clear (and any event, this is a preliminary ruling). There are other privacy laws and also contractual obligations in play. 

UK youths fall victims to impersonators on Instagram

…A common tactic is a fraudster impersonating as one of their friends, claiming their phones were stolen and they have a new phone number. UK’s Online Safety bill, which imposes duty of care by the platforms to users, to the rescue. 

DC Attorney General asks Court to reconsider decision to toss Amazon antitrust case alleging Amazon is in breach of competition law by prohibiting sellers to sell goods at a price point cheaper than Amazon prices

What’s the problematic conduct?

Amazon prohibits sellers from selling goods at a cheaper price point on other platforms. It means third party platforms can’t compete with Amazon because they are prohibited from lowering their prices. Sellers have the burden to continuously monitor various platforms to make sure that products are not sold on other platforms more cheaply. 

Why is it said to be anticompetitive? 

Claimants say that Amazon’s term means Amazon’s high commission and fees are mandated on other platforms. Consumers are prohibited from being offered lower prices. Therefore, the term is anticompetitive. [note that, the EU Commission, have already stamped down on Amazon on the issue for its e-Books ]

What does Amazon say?

The term ensures prices are kept low on Amazon, and so it is pro-consumer. 

Google makes it easier for users to jump ship from iOS to Android

…Switch to Android app is being launched on the Apple App Store [at the time of writing, not yet available]. This will transfer all contacts, calendar, photos and videos to a new Android phone, via the iCloud [Apple’s Cloud]. The reverse (Android to iOS) has been possible using Move to iOS app since September 2015. Note that EU Commission’s proposed Data Act provides that services providers must enable data portability (meaning users must be able to switch between different services). 

Copyright

Instagram settle claim alleging Newsweek infringed copyright by embedding an Instagram post

…Newsweek had copied Instagram’s embed code from Instagram’s post. Newsweek had relied on a previous Ninth Circuit decision which held that websites do not “display” a protected image if it is stored on its original website and merely embedded in search results. Copyright owner had alleged that Newsweek had published and hosted the photo. 

NFT

Texas and Alabama seek to prevent NFT sales to fund the development of virtual casinos on the metaverse

…The opposing states say that the NFTs considered are unregistered securities, contrary to security law. Sand Vegas Casino Club offered the NFTs for sale in return for share of the profits on the virtual casinos (to be built on Decentraland and Sandbox metaverses). The states say that the NFTs are stocks in all but name, and so security laws needed to apply. 

Telecoms

Dish manoeuvres to shift Space X out of the running for US FCC’s Rural Digital Opportunity Fund

…Rural Digital Opportunity Fund, set up by the US Federal Communications Commission is a $20 billion subsidy fund  set up to encourage businesses to deliver network services in the 12GHz band [this is the best bit of the spectrum for 5G communication] to rural areas, to reduce the digital divide between richer connected areas and rural areas which are not. Dish says that SpaceX’s satellite constellation will interfere with direct broadcast satellite operators that already operate in the band, like Dish. 

In the Spotlight

Metaverse

Metaverse to take 47.5% of all Horizon World (Meta’s version of metaverse, formerly Facebook Horizon) virtual assets transactions

…It includes a 30% commission levied for purchases via Meta Quest App Store where apps and games are sold on Oculus (Meta manufactured VR headsets). Note however, the transactions do not relate to sales of NFTs, just digital assets (virtual items, costumes (so-called skins) on avatars). Horizon World is a free virtual reality online video game which lets users build and explore the virtual world. 

Compare with:

Decentraland (blockchain metaverse with NFTs): levies creators 2.5%

Sandbox (same also as Decentraland): levies creators 5% 

OpenSea: 2.5%

Extortionate!!! Or is it???…The answer is in the market reaction in the months to come. 

What is Meta’s possible justification for this high commission fee? 

Meta’s defence echoes the same message Apple is pushing out in its epic fight against the games maker Epic, which is all about whether the 30% commission levied on app developers on in-app purchases made on apps downloaded via the Apple’s App Store is too high and anticompetitive (ie: abuse of dominant position).  Meta has had to, and is investing and risking colossal amounts of capital to build the infrastructure, devices, and the immersive world:

• last year, Meta invested $10 billion on the Reality Labs project [ie: Oculus],
• hired 18,000 employees – including those most skilled – in ALL areas from technology, infrastructure to supply chain – which demands high salaries
• building semiconductor fabs in Asia, 
• building custom silicon 
• purchased technology, such as CTRL Labs which cost around $500million -1billion [no antitrust issues in this area yet so get in quick!]

and remember, metaverse will likely not be properly realised for the next 10 years, if at all. Risking $10billion per year without any guarantee that metaverse will ever be a thing, is pretty gutsy. 

Meta’s challenge will be to properly convey the reasons why the commission rate is so significant. Currently the VR devices (here, Oculus) need to be sold at a price point accessible to the masses, which means Meta makes a loss per sale of Oculus. Decentraland, Sandbox, OpenSea do not need to do that. 

How are Meta doing in the VR space?

They seem to be doing OK.

• Oculus is already on the market, and sold more than Xbox, and its app was most downloaded app in the US over Christmas 2021. 
• The VR device does not have to be connected to a phone which is a huge advantage
• The next iteration will have eye tracking – the avatar will reflect this – which makes the Oculus experience more immersive. 
• CTRL Labs have cool tech – you can control your phantom limb (you need to strap it on your arm) – so you don’t need to control your VR device and eventually, Meta seeks to make an AR device which can also be controlled in the same way. 
• Smart watch will be on sale this year which links up to Oculus

What is going for Meta vs other VR /AR competitors?

The biggest competitors in this space for Meta, be it Apple (apparently the clear second after Meta in this race), Google, Microsoft. The difference between Meta and the rest is that Meta has to succeed to survive, and hence the level of investment is reported to be way beyond other competitors. This could be the key to Meta’s ultimate success. Certainly, that is what Meta is banking on.  Apple is though a formidable competitor, as master of hardware and supply chain.  

Will antitrust law mean that Apple will have to allow Meta apps on their phone / Apple VR/AR glasses? Or would Apple welcome Horizon World to be made available on its apps/ Apple’s VR/AR headset if it means there is scope to charge Meta a sufficient level of commission?

BigTech

Elon Musk offers to buy Twitter (market cap = $37 billion around about the time of bid) for $54.20 a share (would amount to $43.2 billion valuation)

…Good deal right? But Twitter board is rejecting the offer. How could this be? [Check out Musk’s pointed jabs on Twitter]. 

What is Musk’s position?

In summary he says (in his letter to SEC and the TED speech he made soon after the announcement):

• Wants it to be a platform for free speech – which is a “societal imperative” [but Musk says he will ensure that Twitter operates within the legal framework; in which case free speech, the way he envisions it, is not really possible]

• Wants to privatise Twitter [note – as I understand it, SEC (Security and Exchange Commission – the US agency that controls securities markets)] can muzzle Musk on Twitter as long as it is public –once Twitter is privatised, SEC might find it more difficult to do that…]

• No confidence in Twitter’s management

• If not accepted he will sell his shares

• Wants it to run on open algorithm [this means that the code which decides what feeds are shown more prominently can be made available e.g on Github for anyone to examine and comment on – it could put an end to platforms’ practise of prioritising extremes/disinformation, co-ordinated campaigns sometimes using bots (activity known as “brigading”) to increase engagement (ie: profit), – note significant proportion of growth on Twitter activity owes itself to bots, spam accounts, unaccountable accounts]. One commentator says that it would allow users to game the algorithm and manipulate the content. Practically too, it might not be that easy to implement an open algorithm platform, let alone adjust the algorithms in accordance with the user’s desires. 

• Not interested in making money out of Twitter [ie: not really interested in increasing share price for Twitter, though the fact that Musk being in charge may incidentally buoy share price]

Why have the board rejected the offer?

• The board may have considered that the offer is not generous enough – share price has slumped now, but it peaked at $77 early 2021. [Musk tweeted a screenshot of Goldman Sachs report from February showing an objective valuation of Twitter at $30 per stock with a “hmm” emoji]

• Musk not interested in money – might be motivated to make Twitter a better tool for himself / power users; note Tesla has zero advertising budget thanks to Musk’s high profile + public comms nous + Twitter [though he does say – it wants it to be beneficial to society as a whole, which may be right if the algorithms are opened up]. 

• Founder Jack Dorsey wants Twitter to be controlled by the people (ie: web3 – decentralised) – contrary to what Musk might want (that he controls Twitter centrally – though he does say he wants to bring the current shareholders along “as much as the law allows”). 

• Hasn’t exactly endeared himself to the Twitter board and staff [plus most of the board will be sacked if not all and staff redundancies will ensue if Musk were allowed to takeover].

• In reality, free speech platform is just not possible, and a level of content moderation is essential. Plus Twitter is a global platform, and other countries have cultural ideas which do not involve free speech, which will make Twitter unusable if content moderation were abolished [except, combined with opening up the algorithm, you could end up with a similar result to content moderation – if this is practically possible]. 

Other knock on effects

• Free speech policy jars with Chinese speech policy – which could impose measures against Musk and his businesses there [and Tesla desires to expand in China]. 

• Tesla’s share prices dips due to potential distraction for Musk 

• Furthermore opens up Musk’s other companies for backlash generally given the toxic nature of social media (especially Twitter) 

• All of the above a problem for Twitter’s institutional shareholders who will likely have some form of stake in Tesla as well. 

• Privatising Twitter could result in removing share options for highly skilled, highly sought after engineers – it could result in a brain drain from Twitter. 

• Lower morale within the Twitter workforce

• He may possibly sell his shares which he has just bought – as he proposes, creating a further downward pressure. 

• Lawsuit against the board members by the shareholders for breach of fiduciary duty (this extends to shareholders as a whole, including the minority shareholders – Twitter board members do not have sufficient level of share ownership, and  their interest may be to remain on the board, and so there may well be a conflict of interest) –  Musk tweeted: It would be utterly indefensible not to put this offer to a shareholder vote (then he took a poll on Tweet to survey whether Twitter users agreed – it was a resounding yes, unsurprisingly). 

Will Musk up the offer?

• This is the best and final offer, he says. A tactic used by Warren Buffet – known to stick to best and final offers on the opening gambit because he doesn’t want to spend the time further negotiating. But unlike Buffet, Musk is known to make u-turns – the offer to join the board only to reject the idea being one of them.

• He could potentially lower the offer if share price of Twitter takes a downturn as a result of the maelstrom caused by Musk himself.

The board defends the hostile takeover bid by establishing a poison pill

In this case, if Musk acquires more than 15% share of the company without board approval, Twitter can issue more shares to enable existing shareholders to buy more at a discount. This would then dilute Musk’s share, which will prevent him from buying the company. 

Musk no longer the biggest shareholder

Vanguard is now the biggest shareholder with 10.3% holding. But they may agree with Musk in terms of vision going forwards. Not necessarily bad news for Musk. 

What does the market think?

The market is not entirely sure about what happens next. Share price is, at the time of writing, nowhere near Musk’s offer. 

And there is a query whether Musk has sufficient funds or have the means to gather sufficient funds. Though he intends to bring with him as many shareholders as he can (which will help with the funding – but will they if Musk has no desire to increase share value?). 

Delving Deeper

Intellectual Property

A licensed Bluetooth component manufacturer sells infotainment system to Fiat group company. Can Fiat etc sell its cars incorporating the infotainment system without a trademark licence from Bluetooth?

…It depends, said the US Ninth Circuit, remanding the case back to the District Court. 

What does the First Sales Doctrine / Exhaustion of intellectual property rights mean?

This is the rule where, if you sell a product protected by intellectual property right (eg TM right), which would usually involve a premium (a good example is say, Gucci – Gucci and its licensees are the only ones allowed to put the Gucci mark on its garments entitling Gucci to sell products at a premium) once that product is first sold by the intellectual property owner, all its intellectual property rights protecting that product is exhausted. 

This means the purchaser is entitled to sell that product to any third party and Gucci can’t claim trademark right infringement against the purchaser/on-seller. It happens a lot in eBay for example, people buying branded products from discount stores and selling it with a slight mark up on eBay. The original brands owner can’t generally complain (there are various exceptions which is beyond the scope of this note). 

How Does Bluetooth licensing work?

We all know and have used Bluetooth. It’s short range wireless communications technology. There is a body called Bluetooth SIG which licences the use of the technology and Bluetooth TM. To use the Bluetooth TM, you have to get a licence from Bluetooth (which involves payment) and component manufacturers have to carry out and pass certain testing. End product manufacturers don’t have to carry out further testing to incorporate the qualified component. 

What was the issue? 

FCA – who sells cars under brands such as Fiat, Chrysler, Jeep, Dodge and Ram purchased infotainment systems (which utilises Bluetooth technology) from licensed component manufacturers.  But FCA did not seek a licence from Bluetooth and nevertheless sold cars with infotainment systems bearing the Bluetooth trademarks. 

Bluetooth sued FCA for TM infringement. FCA said Bluetooth’s TM rights are exhausted. 

What’s the law

Essentially as stated above, but there are jurisdictional differences. In the US (where this claim was advanced), a purchaser who does no more than stock, display, and resell a producer’s product under the producer’s trademark is not infringing. 

Why did the Ninth Circuit remand the case back to the District Court?

The panel said it all depended on whether FCA had adequately disclosed its relationship with, and qualification to use, Bluetooth technology. The issue is whether purchasers of the cars would be confused. This is fact sensitive which ought to have been considered by the District Court. 

Incidentally in the UK the question of exhaustion may well depend on factors such as

• licensing terms between the TM owner and the component producer
• how the component product has been modified 
• notices given to the purchaser
• where the transactions are taking place

Note: in the US it’s trademark, in Europe, it’s trade marks.