Jury Convicts Former Google Engineer of Economic Espionage concerning AI

The U.S. Department of Justice has announced in a press release the conviction of a former Google software engineer of economic espionage concerning the theft of trade secrets about artificial intelligence.  The Press Release states:

Yesterday, a federal jury in San Francisco convicted former Google software engineer Linwei Ding, also known as Leon Ding, 38, on seven counts of economic espionage and seven counts of theft of trade secrets for stealing thousands of pages of confidential information containing Google’s trade secrets related to artificial intelligence technology for the benefit of the People’s Republic of China (PRC). The jury’s verdict follows an 11-day trial before U.S. District Judge Vince Chhabria for the Northern District of California.

“This conviction exposes a calculated breach of trust involving some of the most advanced AI technology in the world at a critical moment in AI development,” said Assistant Attorney General for National Security John A. Eisenberg. “Ding abused his privileged access to steal AI trade secrets while pursuing PRC government-aligned ventures. His duplicity put U.S. technological leadership and competitiveness at risk. I commend the trial team and investigators whose exceptional work resulted in this conviction.”

“In today’s high-stakes race to dominate the field of artificial intelligence, Linwei Ding betrayed both the U.S. and his employer by stealing trade secrets about Google’s AI technology on behalf of China’s government,” said Assistant Director Roman Rozhavsky of the FBI's Counterintelligence and Espionage Division. “Not only does this case mark the first-ever conviction on AI-related economic espionage charges, but it also demonstrates the FBI’s unwavering dedication to protecting American businesses from the increasingly severe threat China poses to our economic and national security. We remain committed to working closely with our partners across the private sector to protect our nation’s innovation, safeguard our trade secrets, and hold our foreign adversaries accountable.”

“Silicon Valley is at the forefront of artificial intelligence innovation, pioneering transformative work that drives economic growth and strengthens our national security.  The jury delivered a clear message today that the theft of this valuable technology will not go unpunished. We will vigorously protect American intellectual capital from foreign interests that seek to gain an unfair competitive advantage while putting our national security at risk,” said U.S. Attorney Craig H. Missakian for the Northern District of California.

“This conviction reinforces the FBI’s steadfast commitment to protecting American innovation and national security. The theft and misuse of advanced artificial intelligence technology for the benefit of the People’s Republic of China threatens our technological edge and economic competitiveness,” said FBI Special Agent in Charge Sanjay Virmani for the San Francisco Field Office. “The FBI San Francisco division serves Silicon Valley and the companies who lead the world in innovation, and we are committed to safeguarding their work. This case demonstrates the strength of collaboration between the FBI and the private sector, including leading companies like Google, whose partnership is critical to protecting sensitive U.S. technology. Today’s verdict affirms that federal law will be enforced to protect our nation’s most valuable technologies and hold those who steal them accountable.”

Ding was originally indicted in March 2024. A superseding indictment returned in February 2025 described seven categories of trade secrets stolen by Ding and charged Ding with seven counts of economic espionage and seven counts of theft of trade secrets.

According to the evidence presented at trial, between approximately May 2022 and April 2023, while a Google employee, Ding stole more than two thousand pages of confidential information containing Google’s AI trade secrets from Google’s network and uploaded them to his personal Google Cloud account. Ding also secretly affiliated himself with two PRC-based technology companies while he was employed by Google: around June 2022, Ding was in discussions to be the Chief Technology Officer for an early-stage technology company based in the PRC; by early 2023, Ding was in the process of founding his own technology company in the PRC focused on AI and machine learning and was acting as the company’s CEO. In multiple statements to potential investors, Ding claimed that he could build an AI supercomputer by copying and modifying Google’s technology. In December 2023, less than two weeks before he resigned from Google, Ding downloaded the stolen Google trade secrets to his own personal computer.

The jury found that Ding stole trade secrets relating to the hardware infrastructure and software platforms that allow Google’s supercomputing data center to train and serve large AI models. The trade secrets contained detailed information about the architecture and functionality of Google’s custom Tensor Processing Unit chips and systems and Google’s Graphics Processing Unit systems, the software that allows the chips to communicate and execute tasks, and the software that orchestrates thousands of chips into a supercomputer capable of training and executing cutting-edge AI workloads. The trade secrets also pertained to Google’s custom-designed SmartNIC, a type of network interface card used to facilitate high speed communication within Google’s AI supercomputers and cloud networking products.  

In presentations to investors, Ding called out the PRC’s national policies prioritizing AI development and innovation in the PRC, and in late 2023 Ding applied for a government sponsored “talent plan” in Shanghai, PRC. The jury heard evidence pertaining to the PRC government’s establishment of talent plans to encourage individuals to come to China to contribute to the PRC’s economic and technological growth. Ding’s application for this talent plan stated that he planned to “help China to have computing power infrastructure capabilities that are on par with the international level.” The evidence at trial also showed that Ding intended to benefit two entities controlled by the government of China by assisting with the development of an AI supercomputer and collaborating on the research and development of custom machine learning chips.

Ding is next scheduled to appear at a status conference on Feb. 3, 2026. Ding faces a maximum sentence of 10 years in prison for each count of theft of trade secrets in violation of 18 U.S.C. § 1832 and 15 years in prison for each count of economic espionage in violation of 18 U.S.C § 1831. Any sentence following conviction would be imposed by the Court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.  

Assistant U.S. Attorneys for the Northern District of California Casey Boome, Molly K. Priedeman, and Roland Chang are prosecuting this case, with assistance from Veronica Hernandez and Trial Attorney Yifei Zheng from the Counterintelligence and Export Control Section, National Security Division.  The prosecution is the result of an investigation by the FBI.

US DOJ Announces Indictment of Former Google Employee and PRC National for AI Trade Secret Theft

US Department of Justice announced the indictment of former Google employee for stealing AI related trade secrets.  The press release states:

A federal grand jury indicted Linwei Ding, aka Leon Ding, charging him with four counts of theft of trade secrets in connection with an alleged plan to steal from Google LLC (Google) proprietary information related to artificial intelligence (AI) technology. . . .

According to the indictment, returned on March 5 and unsealed earlier today, Ding, 38, a national of the People’s Republic of China and resident of Newark, California, transferred sensitive Google trade secrets and other confidential information from Google’s network to his personal account while secretly affiliating himself with PRC-based companies in the AI industry. Ding was arrested earlier this morning in Newark.

“The Justice Department will not tolerate the theft of artificial intelligence and other advanced technologies that could put our national security at risk,” said Attorney General Garland. “In this case, we allege the defendant stole artificial intelligence-related trade secrets from Google while secretly working for two companies based in China. We will fiercely protect sensitive technologies developed in America from falling into the hands of those who should not have them.”  

. . . “In the one year since its inception, the Disruptive Technology Strike Force has been relentless in protecting advanced U.S. technologies, like artificial intelligence, from malign actors,” said Assistant Secretary Matthew S. Axelrod of the Commerce Department’s Office for Export Enforcement. “Let today’s announcement serve as further warning – those who would steal sensitive U.S. technology risk finding themselves on the wrong end of a criminal indictment.”

According to court documents, the technology Ding allegedly stole involves the building blocks of Google’s advanced supercomputing data centers, which are designed to support machine learning workloads used to train and host large AI models. According to the indictment, large AI models are AI applications capable of understanding nuanced language and generating intelligent responses to prompts, tasks, or queries. The indictment describes how Google developed both proprietary hardware and software to facilitate the machine learning process powered by its supercomputing data centers. With respect to hardware, Google uses advanced computer chips with the extraordinary processing power required to facilitate machine learning and run AI applications. With respect to software, Google deploys several layers of software, referred to in the indictment as the “software platform,” to orchestrate machine learning workloads efficiently. For example, one component of the software platform is the Cluster Management System (CMS), which functions as the “brain” of Google’s supercomputing data centers. The CMS organizes, prioritizes, and assigns tasks to the hardware infrastructure, allowing the advanced chips to function efficiently when executing machine learning workloads or hosting AI applications.

According to the indictment, Google hired Ding as a software engineer in 2019. Ding’s responsibilities included developing the software deployed in Google’s supercomputing data centers. In connection with his employment, Ding was granted access to Goggle’s confidential information related to the hardware infrastructure, the software platform, and the AI models and applications they supported. The indictment alleges that on May 21, 2022, Ding began secretly uploading trade secrets that were stored in Google’s network by copying the information into a personal Google Cloud account. According to the indictment, Ding continued periodic uploads until May 2, 2023, by which time Ding allegedly uploaded more than 500 unique files containing confidential information.

In addition, the indictment alleges that Ding secretly affiliated himself with two PRC-based technology companies. According to the indictment, on or about June 13, 2022, Ding received several emails from the CEO of an early-stage technology company based in the PRC indicating Ding had been offered the position of Chief Technology Officer for the company. Ding allegedly traveled to the PRC on Oct. 29, 2022, and remained there until March 25, 2023, during which time he participated in investor meetings to raise capital for the new company. The indictment alleges potential investors were told Ding was the new company’s Chief Technology Officer and that Ding owned 20% of the company’s stock.

According to the indictment, unbeknownst to Google, by no later than May 30, 2023, Ding had founded his own technology company in the AI and machine learning industry and was acting as the company’s CEO. Ding’s company touted the development of a software platform designed to accelerate machine learning workloads, including training large AI models. As alleged in the indictment, Ding applied to a PRC-based startup incubation program and traveled to Beijing, to present his company at an investor conference on Nov. 24, 2023. As set forth in the indictment, a document related to Ding’s startup company stated, “we have experience with Google's ten-thousand-card computational power platform; we just need to replicate and upgrade it - and then further develop a computational power platform suited to China's national conditions.” 

The indictment alleges Ding’s conduct violated his employment agreement as well as a separate code of conduct that Ding signed when he became a Google employee. Further, the indictment describes measures that Ding allegedly took to conceal his theft of the trade secrets. For example, he allegedly copied data from Google source files into the Apple Notes application on his Google-issued MacBook laptop. By then converting the Apple Notes into PDF files and uploading them from the Google network into as separate account, Ding allegedly evaded detection by Google’s data loss prevention systems. Likewise, the indictment describes how in December 2023 Ding allegedly permitted another Google employee to use his Google-issued access badge to scan into the entrance of a Google building – making it appear he was working from his U.S. Google office when, in fact, he was in the PRC.

Ding is charged with four counts of theft of trade secrets. If convicted, Ding faces a maximum penalty of 10 years in prison and up to a $250,000 fine for each count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

The FBI and Commerce Department are investigating the case.

The U.S. Attorney’s Office for the Northern District of California and Justice Department National Security Division’s Counterintelligence and Export Control Section are prosecuting the case.

Today’s action was coordinated through the Justice and Commerce Departments’ Disruptive Technology Strike Force. The Disruptive Technology Strike Force is an interagency law enforcement strike force co-led by the Departments of Justice and Commerce designed to target illicit actors, protect supply chains, and prevent critical technology from being acquired by authoritarian regimes and hostile nation-states.

An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

US DOJ Sues Google for Anticompetitive Conduct in Advertising Practices

The U.S. Department of Justice has brought a competition suit against Google concerning its internet advertising practices.  The DOJ press release states:

Today, the Justice Department, along with the Attorneys General of California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee, and Virginia, filed a civil antitrust suit against Google for monopolizing multiple digital advertising technology products in violation of Sections 1 and 2 of the Sherman Act.

Filed in the U.S. District Court for the Eastern District of Virginia, the complaint alleges that Google monopolizes key digital advertising technologies, collectively referred to as the “ad tech stack,” that website publishers depend on to sell ads and that advertisers rely on to buy ads and reach potential customers. Website publishers use ad tech tools to generate advertising revenue that supports the creation and maintenance of a vibrant open web, providing the public with unprecedented access to ideas, artistic expression, information, goods, and services. Through this monopolization lawsuit, the Justice Department and state Attorneys General seek to restore competition in these important markets and obtain equitable and monetary relief on behalf of the American public.

As alleged in the complaint, over the past 15 years, Google has engaged in a course of anticompetitive and exclusionary conduct that consisted of neutralizing or eliminating ad tech competitors through acquisitions; wielding its dominance across digital advertising markets to force more publishers and advertisers to use its products; and thwarting the ability to use competing products. In doing so, Google cemented its dominance in tools relied on by website publishers and online advertisers, as well as the digital advertising exchange that runs ad auctions.

“Today’s complaint alleges that Google has used anticompetitive, exclusionary, and unlawful conduct to eliminate or severely diminish any threat to its dominance over digital advertising technologies,” said Attorney General Merrick B. Garland. “No matter the industry and no matter the company, the Justice Department will vigorously enforce our antitrust laws to protect consumers, safeguard competition, and ensure economic fairness and opportunity for all.”

“The complaint filed today alleges a pervasive and systemic pattern of misconduct through which Google sought to consolidate market power and stave off free-market competition,” said Deputy Attorney General Lisa O. Monaco. “In pursuit of outsized profits, Google has caused great harm to online publishers and advertisers and American consumers. This lawsuit marks an important milestone in the Department’s efforts to hold big technology companies accountable for violations of the antitrust laws.”

“The Department’s landmark action against Google underscores our commitment to fighting the abuse of market power,” said Associate Attorney General Vanita Gupta. “We allege that Google has captured publishers’ revenue for its own profits and punished publishers who sought out alternatives. Those actions have weakened the free and open internet and increased advertising costs for businesses and for the United States government, including for our military.”

“Today’s lawsuit seeks to hold Google to account for its longstanding monopolies in digital advertising technologies that content creators use to sell ads and advertisers use to buy ads on the open internet,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “Our complaint sets forth detailed allegations explaining how Google engaged in 15 years of sustained conduct that had — and continues to have — the effect of driving out rivals, diminishing competition, inflating advertising costs, reducing revenues for news publishers and content creators, snuffing out innovation, and harming the exchange of information and ideas in the public sphere.”

Google now controls the digital tool that nearly every major website publisher uses to sell ads on their websites (publisher ad server); it controls the dominant advertiser tool that helps millions of large and small advertisers buy ad inventory (advertiser ad network); and it controls the largest advertising exchange (ad exchange), a technology that runs real-time auctions to match buyers and sellers of online advertising.

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Google’s anticompetitive conduct has included:

• Acquiring Competitors: Engaging in a pattern of acquisitions to obtain control over key digital advertising tools used by website publishers to sell advertising space;
• Forcing Adoption of Google’s Tools: Locking in website publishers to its newly-acquired tools by restricting its unique, must-have advertiser demand to its ad exchange, and in turn, conditioning effective real-time access to its ad exchange on the use of its publisher ad server;
• Distorting Auction Competition: Limiting real-time bidding on publisher inventory to its ad exchange, and impeding rival ad exchanges’ ability to compete on the same terms as Google’s ad exchange; and
• Auction Manipulation: Manipulating auction mechanics across several of its products to insulate Google from competition, deprive rivals of scale, and halt the rise of rival technologies.

As a result of its illegal monopoly, and by its own estimates, Google pockets on average more than 30% of the advertising dollars that flow through its digital advertising technology products; for some transactions and for certain publishers and advertisers, it takes far more. Google’s anticompetitive conduct has suppressed alternative technologies, hindering their adoption by publishers, advertisers, and rivals.

The Sherman Act embodies America’s enduring commitment to the competitive process and economic liberty. For over a century, the Department has enforced the antitrust laws against unlawful monopolists to unfetter markets and restore competition. To redress Google’s anticompetitive conduct, the Department seeks both equitable relief on behalf of the American public as well as treble damages for losses sustained by federal government agencies that overpaid for web display advertising. This enforcement action marks the first monopolization case in approximately half a century in which the Department has sought damages for a civil antitrust violation.

In 2020, the Justice Department filed a civil antitrust suit against Google for monopolizing search and search advertising, which are different markets from the digital advertising technology markets at issue in the lawsuit filed today. The Google search litigation is scheduled for trial in September 2023.

Google is a limited liability company organized and existing under the laws of the State of Delaware, with a headquarters in Mountain View, California. Google’s global network business generated approximately $31.7 billion in revenues in 2021. Google is owned by Alphabet Inc., a publicly traded company incorporated and existing under the laws of the State of Delaware and headquartered in Mountain View, California.

Google: Investing in Education . . .

Google recently released some interesting information concerning its economic impact in the United States.  It is very impressive.  Google released its Economic Impact Report for 2021 and announced its investment of over $9.5 billion in U.S. Offices and data centers.  Notably, Google states in a blog post:

Google’s offices and data centers provide vital anchors to our local communities and help us contribute to their economies. In the U.S., over the past five years, we’ve invested more than $37 billion in our offices and data centers in 26 states, creating over 40,000 full-time jobs. That’s in addition to the more than $40 billion in research and development we invested in the U.S. in 2020 and 2021.

Google also notes that:

Today we are also releasing our 2021 Economic Impact Report, which reflects Google’s wider contribution to the economy. The report shows we helped provide $617 billion in economic activity for millions of American businesses, nonprofits, creators, developers and publishers last year. In addition, the Android app economy helped create nearly two million jobs last year, and YouTube’s creative ecosystem supported 394,000 jobs in 2020.

We also continue to help people get the skills they need to succeed in today’s economy, from our role as a founding member of the Michigan Central innovation district in Detroit to our $100 million Google Career Certificates Fund — a new financial model for helping people access education and digital skills.

The Google Career Certificates programs and Fund is an ambitious project:

The goal is to enable Social Finance to reach more than 20,000 American workers. This investment in America’s future has the potential to drive $1 billion in wage gains.

This fund is a new kind of financing model. We’ll invest Google capital and Google.org grants and provide our Career Certificate program. Social Finance will provide funding to nonprofit partners like Merit America and Year Up, who in turn will provide services like career coaching, living stipends and job placement support. And we’ll connect students to an employer consortium of more than 150 companies who are looking to hire workers with these skills.

It’s all designed around student success. They will receive all of this at no upfront cost. And will only pay it back once they find a job earning at least $40,000 a year. Social Finance will then redistribute those repayments to future learners, making this model more sustainable.

Anti-Troll LOT Network Expands to 500 members

The Anti-Troll (or Troll protection) LOT Network has expanded to 500 members.  I first wrote about the Google started LOT Network in 2015, and I believe it had about 47 members then.  Around four years later and we are at a significant increase.  For more on the LOT Network, please see these two prior posts, here and here.  Also, here is a blurb from a release by the LOT Network: 

"When you’re caught up in the day-to-day business of moving things forward, it’s easy to lose sight of accomplishments. It was in this way that a significant milestone — LOT Network’s membership reaching 500 members — caught us nearly by surprise. We are very proud of our community, which now counts Disney, Meituan Dianping, Centerpoint Energy, Synchrony, Yamaha,  VISA, Juniper Networks, 7-Eleven and Netgear as some of its newest members.

Our growth now spans industries — including automotive, finance, entertainment, cloud computing, retail, manufacturing, and emerging industries like blockchain — as well as continents. You can find LOT members in more than 35 different countries and counting; some of the biggest tech companies in Asia are among our strongest supporters.

Further, we’ve seen an uptick in startup membership, confirming that LOT is a solution for all companies regardless of their size or industry. Our momentum toward becoming a standard business practice grows stronger every day — more and more, we see members joining us based on information they’ve found online — often joining without contact from a LOT Network team member.  And that is because of you — the collective reputation of our membership makes joining LOT an easy decision."

US Supreme Court will hear Google v. Oracle Copyright Suit

The United States Supreme Court has just granted review of the Google v. Oracle Copyright law suit.  This is a huge case concerning copyrightability and the scope of fair use of software.  Additional information, including briefs, can be found at the SCOTUS blog, here.  Hat tip to Dmitry Karshtedt.  

Going After FAANG in the United States: States Attorneys General Begin Investigation into Google

An interesting question is when do you regulate a new technology.  Do you regulate it early, potentially impeding its development?  Or, do you give it time to develop and the industry around it?  One issue with respect to waiting to regulate concerns the difficulty in doing so because of public choice issues.  The industry becomes too powerful to regulate effectively, or essentially captures the agency regulating it.  Some may argue that the United States, through the federal government, has failed to effectively regulate the FAANG companies—Facebook, Amazon, Apple, Netflix and Google.  However, another set of potential regulators exist in the United States—State Attorneys General.  Indeed, state attorneys general have led lawsuits against many industries, including tobacco and more recently the pharmaceutical industry.  Those attorneys general may be subject to similar public choice issues; however, sometimes they still act.  And, now, 50 attorneys general are going after Google.  Here is the press release: 

Attorney General Ken Paxton today announced that Texas is leading 50 attorneys general in a multistate, bipartisan investigation of tech giant Google’s business practices in accordance with state and federal antitrust laws.

The bipartisan coalition announced plans to investigate Google’s overarching control of online advertising markets and search traffic that may have led to anticompetitive behavior that harms consumers. Legal experts from each state will work in cooperation with Federal authorities to assess competitive conditions for online services and ensure that Americans have access to free digital markets.

“Now, more than ever, information is power, and the most important source of information in Americans’ day-to-day lives is the internet. When most Americans think of the internet, they no doubt think of Google,” said Attorney General Paxton. “There is nothing wrong with a business becoming the biggest game in town if it does so through free market competition, but we have seen evidence that Google’s business practices may have undermined consumer choice, stifled innovation, violated users’ privacy, and put Google in control of the flow and dissemination of online information. We intend to closely follow the facts we discover in this case and proceed as necessary.”  

Past investigations of Google uncovered violations ranging from advertising illegal drugs in the United States to now three antitrust actions brought by the European Commission. None of these previous investigations, however, fully address the source of Google’s sustained market power and the ability to engage in serial and repeated business practices with the intention to protect and maintain that power.

Reinvigorating Competition Law in the United States: A Path Forward?

In late 2018, Professor Timothy Wu at Columbia University Law School published a short, readable and nicely priced book at about 140 pages titled, “The Curse of Bigness: Antitrust in the Gilded Age.”  This ambitious and accessible book lays out and defends the general thesis that American antitrust law (competition law) has gone astray.  He essentially attacks the narrow focus on the consumer welfare theory of antitrust law as failing to completely encompass other values, particularly related to the protection of democracy from influence by a concentrated private sector relying on the work of U.S. Supreme Court Justice Lewis Brandeis.  He traces the history of antitrust enforcement in the United States from the “Gilded Age” and notes that the remedy of breakup of concentration has historically led to more innovation, and an important harm of the narrow Chicago/Harvard School approach to antitrust is a failure to find actionable concentration enough and that “bigness” in and of itself is harmful.  Indeed, concentration leads to those benefiting from it doing whatever necessary to preserve their position, which includes suppression of innovation through raising rival costs, mergers and cloning, and exercising control over government.  Cloning is essentially copying of the features of smaller rivals, particularly in the technology/internet industry.  It seems that intellectual property protection may provide some cover for small firms from abuse.  He points to the lack of enforcement by the George W. Bush administration (and also points the finger at the Obama Administration, but gives them the excuse of the background of a judiciary that has adopted the Chicago/Harvard School approach--perhaps the W Bush Administration may benefit a bit from the same excuse) that led to a significant amount of concentration across several industries.  Interestingly, the Trump administration recently approved the Sprint/T-Mobile merger. 


Professor Wu is particularly concerned about the technology sector and specifically critiques the behavior of Google, Facebook and Amazon.  Professor Wu points to several policy prescriptions: 1) reinvigorate merger review, including “a simple but per se ban on mergers that reduce the number of major firms to less than four”; 2) "democratization of the merger process"; 3) taking on big cases (he lauds the EU's approach); 4) using the breakup remedy; 5) adopting a “market investigation” practice similar to the United Kingdom; and 6) essentially “abandoning ‘consumer welfare’ as the lodestone of antitrust law” and adopting a standard based on the “protection of competition” that is process oriented in nature.  Notably, other additional values worth protecting could include individual privacy and even more difficult to cabin in today's age--national security.  Professor Wu’s book lays out a strategy for approaching antitrust issues in the Internet Age and perhaps he will be the one to lead the next Democratic administration’s antitrust enforcement.  The book is available for purchase, here, for around $12 new and $8 used. 

Google's Competitors Take a Swipe at Google's "Academic Influence Campaign"

The Campaign for Accountability (CA) has released a report on Google's "influence" on academic papers.  Notably, The Chronicle for Higher Education states that "The Campaign for Accountability" is funded by Google's competitors.  The Wall Street Journal has followed up with an article titled, "Paying Professors: Inside Google's Academic Influence Campaign -- company paid $5,000 to $400,000 for research supporting business practices that face regulatory scrutiny; a 'wish list' of topics."  The CA report notes that "the influence" extends to direct funding of work by researchers, or researchers who were affiliated with institutions that were receiving funding.  The CA report then states that 66% of the papers funded did not disclose Google funding and that 25% of the directly funded papers did not disclose Google funding.  The information underlying the CA report was apparently partially obtained through state Freedom of Information Act Requests from professors at public universities.  Thus, there may not be a full picture of Google's activities--"influence" at private institutions. 

Here are a few preliminary thoughts.  First, Google is not the only company that strategically acts to influence academic research in fields that impact it.  As the Wall Street Journal points out, this happens in many industries.  My guess is that Google's competitors are acting similarly.  They just may not be as good at it, haven't had the light shined on them, or not have as many academics with similarly aligned values.  But, again, that is a guess.  Second, my impression is that Google's actions seem aimed at "rewarding" or "encouraging" research that it likes--not so much that it is paying people to make specific findings or skew research results.  Google encouraging research by people who have values aligned with Google doesn't seem too nefarious. This doesn't seem to be the same as paying for skewed or specific (incorrect) findings.  Third, my guess is that it is highly irregular to disclose every funding source that an institution has with whom you may be publishing or presenting an article.  I don't know the details, but that likely makes the numbers in the CA report higher. 

Fourth, it is plausible that the 25% number of directly funded papers that did not disclose Google funding could be an "oversight."  Importantly, it is unclear from the report when the funding was provided for all of the papers--either before, while, or after the papers were written.  I am assuming that the Wall Street Journal is using the most "damning" examples in its article.  Notably, some professors appear to have been in communication with Google about their papers in draft.  The point that some professors want feedback from the entity who they are writing about or in the industry is a pretty good one.  A conscientious professor would want to make sure they are accurately representing the way a particular technology or system or company operates.  Fifth, my understanding is that it is not entirely clear what should be disclosed and not disclosed in papers concerning source of funding.  I am sure my institution receives money from many sources, and I've never believed that I had to disclose those funding sources.  And, if Google or any other company sponsored a conference I presented at, I wouldn't mention that as a matter of practice in a paper.  Moreover, I find it hard to believe that if I received funding from Google once (or twice) that in the future I must disclose that every time I take a position that may support a position Google may have.  Sixth, public/private partnerships are not unusual and private funding of research happens somewhat regularly.  Professors frequently consult with private companies.  Seventh, this CA report (and the press it is receiving) may lead academics and companies to be more careful about disclosing funding sources.  That may be a good thing--within some reasonable bounds. [Hat tip to Professor Caron's Tax Prof Blog for a link to the Chronicle of Higher Education article and the CA report.]

Newspapers Fight Back Against Facebook and Google for Stronger IP Protection

In most intellectual property law courses and many property courses in the U.S., the INS v. AP case is taught.  In that case, the U.S. Supreme Court created the INS misappropriation claim which essentially protects the gathering of “hot” or “fresh” news from free riding competitors.  The decision was a close one and has been criticized over the years.  Occasionally, it rears its head in cases dealing with financial information and in one case seemed to cover paparazzi photos.  My impression has always been that the U.S. Supreme Court was attempting to protect the news gathering business because of the importance of having an informed citizenry in a democracy. 

Interestingly, at the confluence of fake news and President Trump’s attack on the media, the Washington Post added a slogan to its website: “Democracy Dies in Darkness.”  Prior to the fake news issue and presidential attack on the media, the newspaper business had not done well—arguably because of digital media and the internet.  Newspaper businesses through the News Media Alliance are now attempting to obtain an exemption to antitrust law which will allow them to negotiate collectively against entities such as Facebook and Google.  The Los Angeles Times states:

By banding together news outlets would have more leverage against two companies that command more than 70% of the $73-billion dollar digital advertising in the U.S.  By comparison, newspaper ad revenue in 2016 amounted to $18 billion, down from $50 billion a decade ago, according to the Pew Research Center. 

According to the article, "pushing for" stronger intellectual property protection is part of the goal.  It will be interesting to see whether the Trump Administration grants the exemption. 

"Opportunistic" Google and Intertrust Launch "Patent Shield": Protection for Startups

Google and Intertrust have announced the creation of Patent Shield, which is designed to protect startups.  Essentially, the exchange is access to a patent portfolio for an equity stake in the startup.  It seems to put startups in the position of a much more resourced company with a portfolio of patents and presumably freedom to operate.  This appears to be another attempt to get ahead of something like the patent troll problem; however, it seems to be aimed at patent demands from entities that are practicing not absolute non-practicing entities because the portfolio is supposed to provide leverage against the entity asserting infringement initially.  Interestingly, this appears to be a great way for Google and Intertrust to find licensing partners for their patented technology without looking like a “bad guy” by operating through patent demand letters—let them come to us.  Very clever.  It also gives Intertrust the opportunity to offer its IP services to startups, and maybe a chance for additional investment/acquisition opportunities through notice about great new startups that have attracted the attention of established players in the market. Very, very clever. For more details, please see here. 

UB3: Uber's New Patent Purchase Program

Uber has launched a patent purchase program called, “UB3.”  The program sounds very similar to the one founded by Google and run by Allied Security Trust.  Indeed, the announcement by Uber references the Allied Security Trust program, “IP3.”  The development of the program arrives during Uber’s much publicized suit involving Google.  Interestingly, this is perhaps a move by Uber to build a patent portfolio to be used in acquiring negotiation leverage, and thus freedom to operate.  Additionally, the value of some patents may be rising because of changing Federal Circuit law and the belief that the Patent Trial and Appeal Board at the United States Patent and Trademark Office is easing up on patents, so to speak.  Uber’s press release states:

The current market for patents is extremely challenging, especially for sellers. There is a ton of friction in the secondary market for all parties, but with our new UP3 program, sellers will submit patent family details and a price they are willing to accept directly into our submission portal. By eliminating price negotiations and providing quick reviews, UP3 will reduce the total transaction time compared to a typical patent transaction.

It is also clear that sellers want the flexibility to package multiple patents into a single submission. That’s why the UP3 program allows sellers to submit portfolios of up to five (5) patent families in one submission. That way, sellers can group patent families that complement each other in a way that best markets their assets.

Our short timeline will speed up patent transactions. The UP3 submission portal opens April 24, 2017 and closes May 23, 2017. After the submission period ends, Uber will review the submissions and provide sellers with our decisions by July 7, 2017.

The Uber website includes helpful frequently asked questions with answers, the patent purchase agreement, additional information, and submission terms and conditions.  The submission form will be available on April 24, 2017. 

Preparation for (more) Patent Assertion Entites in Europe: Intellectual Property 2 Innovate

As reported by Florian Mueller on the FOSS Patents Blog on April 5, a relatively new organization has been formed to raise awareness of and presumably lobby against patent assertion entities in Europe.  The organization is called Intellectual Property 2 Innovate and its members include: Adidas, Google, Intel, Bull AtWios Technologies, Proximus, Spotify, Wiko, Daimler, the European Semiconductor Industry Association, and Syndicat De Industrie Des Technologies De L'Information.  Notably, the Intellectual Property 2 Innovate website has references to a list of suits brought by patent assertion entities in Europe, media reports concerning patent assertion activity in Europe and third party studies concerning patent assertion entities in Europe.  The website includes link to a helpful seven page position paper, which states in part:

Patents support innovation by allowing companies to protect their technology from copying, to share and develop new technology, and to obtain the freedom to operate necessary to bring new products to market.  But a patent system that can be manipulated through abusive litigation tactics, including the assertion of low quality patents, will undermine rather than support innovation, disserving consumers and the economy by draining scarce resources from the development of new products.

The dramatic rise in patent litigation involving PAEs is a dangerous trend that merits the attention of EU policy makers. In the United States, lawsuits brought by PAEs have nearly quadrupled over the past decade.1 PAEs now account for a majority of all patent litigation.2  Small and medium-sized entities (SMEs) are frequently the targets of these assertions, facing lawsuits that can disrupt their business and even threaten their survival.3,4

In Europe, PAE lawsuits have begun to follow the same trajectory, growing in number and often targeting SMEs.  PAE activity has long existed in Europe, accounting for roughly 10% of the lawsuits filed in Germany between 2000 and 2008 and in the United Kingdom between 2000 and 2013.5 More recent evidence, however, suggests that PAE activity is accelerating rapidly. An empirical study of the registers for recording patent ownership in Europe demonstrated that PAE purchases of European patents increased ten-fold from 2005 to 2015.6 Most of the transferred patents involved communications or computer technology and were purchased by PAEs based in the United States. Those purchases now form the basis of a growing number of PAE lawsuits in Europe against productive companies. European countries together received 80% of all PAE cases filed outside the US over the past five years.7 Germany receives by far the greatest number, with the large majority of those cases proceeding during 2015 and 2016.8 A recent study provides examples of lawsuits brought by PAEs in Europe.9 According to this study, while PAEs account for 19% of known patent lawsuits filed in Europe accounted for in the study, it is nonetheless a significant fraction which will undoubtedly come to increase in the next years. This rate corresponds roughly to the same level of PAE activity in the US in the early 2000s to mid-2005. Despite the alarming data and active discussions amongst the legal community, US public authorities nevertheless did not seriously tackle this problem which has led patent lawsuits to skyrocket in the US since then.

The position paper further suggests: increasing judicial discretion to minimize abusive patent practices and encourage higher quality patents as well as make better data available concerning patent litigation across Europe.  According to the paper, these measures are necessary in light of the soon-to-be operational European Patent Court. 

IP3—The Industry Patent Purchase Program: Google and Friends Want to Buy Your Patents (Maybe, Again)

This blog recently covered Google’s Patent Purchase Program, here and here.  Google basically offered to consider purchasing submitted patents.  The Program is back, but this time expanded with a new group of players under the title, “IP3 by Allied Security Trust.”  Here is the announcement:

Calling all patent owners – some of the world’s largest companies including Google, Apple, IBM, Microsoft, Facebook, Adobe, SAP, Ford, Honda, Hyundai, Kia Motors, Verizon, Cisco and Arris want to buy your patents!

IP3 is a marketplace that offers patent owners a quick and easy way to access the secondary market and receive fair value for their patents.

For a two-week period, patent owners with great patents can submit their patents for consideration by leading multinational companies representing more than $2.5 trillion in combined enterprise value.

Starting May 25, 2016, through June 8, 2016, patent owners can submit their patents to the IP3 portal at a price they set. AST will then review the submissions, and if one or more of the participating companies are interested in funding the purchase, submitters will be notified by July 29, 2016.

Participants in IP3 include a wide array of industries including enterprise software, automotive companies, cable providers, networking communications equipment, semiconductor manufacturing, information technology and location-based services.

IP3 builds on the innovative approach taken by Google with their successful 2015 Patent Purchase Promotion (PPP), offering patent owners access to a well-funded buying consortium with no haggling. We created IP3 to try an innovative way to simplify patent owners’ access to the secondary market by eliminating the common hassles associated with it – like the need to prepare claim charts.

In short, patent sellers need to only identify the patent family and price at which they are willing to transact, IP3 does the rest!

There are several buying categories: Computers and Software; Consumer Electronics, Communications; Semiconductors & Components; Healthcare/Medical; Automotives; Lighting; and Financial Services.  The submission form will be available, here.  The terms and conditions sheet is available, here.  The license agreement is available, here.  And, if you miss the deadline, you can always contact Allied Security Trust—“Trust in Us -- Minimizing Threats from Adversarial Patents.” It will be interesting to see how much information is disclosed about the outcomes of the program.  Notably, the license agreement has “Confidential” stamped all over it.  I wonder what valuations may look like post-Enfish.  I am also curious to see IP Draughts Mark Anderson’s analysis of the agreement. (I thought his analysis of the prior license agreement was very helpful.)  [Hat tip to Professor Lucas Osborn of Campbell University Norman Adrian Wiggins School of Law]

Google's License on Transfer Network: A Good Way to Avoid Patent Trolls?

Google, along with a number of other companies, started the License On Transfer (LOT) Network on July 9, 2014.  The general purpose of the program is to reduce the risk of being sued by a Patent Assertion Entity (PAE) for network participants.  The danger present for all market participants is that an operating company with patent assets may fall on hard times and have to sell their patents to a PAE or may just choose to do so.  The LOT Network protects its members from suit from patents acquired by PAEs from their members.  Essentially, all parties agree that if one of the patents potentially subject to the license (the network members' patent portfolios) is transferred to a PAE then the license is effective as to that patent.  This means that the members of the LOT Network are basically immune from an infringement suit under that patent from the PAE once the transfer to a PAE occurs.  The agreement is carefully drafted to exclude “triggering events” from including transfers to non-PAE’s. The agreement can be found, here.  According to a presentation concerning the program, the members of the group have been insulated from at least one transfer of a subject patent to a Japanese PAE. 

There are currently 325,000 patent assets, including 99,000 US patents subject to the LOT Network.  The current membership of 47 companies includes: 3D Robotics, Inc., AddShoppers, Inc., Asana, Be Labs, Binatone Electronics, Breezy Print, CAN Telematics, Canon, Cinfo Contenidos Informativos Personalizados SL, Civis Analytics, Cloudability, Corvado, Cyclica, Dropbox, Edyt, Emaldo Techonolgies, Enplug, EPHE Corp., Ford Motor Company, GitHub, Google, Great Wave Tech, HLCA Media, Indri, Inductive Automation, JPMorgan Chase Bank, Kairos AR Inc., Khan Academy, Marine Traffic, Mazda Motor Corp., Naehas, Newegg, Pandora Media, Pure Storage, Red Hat, Ring Partner, Rocket Matter, SAASPASS, Sabai Technology, SAP SE, SAS Institute, SilverEdge, Sipree, SolarCity, Theralytics, Uber Technologies, and the Wikipedia Foundation.  This appears to be a particularly attractive option for companies without a lot of patents that may be sued by PAEs.  To join, you only need to pay a reasonable fee based on your companies’ annual revenue.  I suppose one downside is that the value of your patent may be less given that a potential PAE buyer will have fewer entities to sue.  Are there any other downsides? 

Patent Trolls Have a New Competitor: Google’s Patent Purchase Promotion Program

In an apparent effort to “clear up the secondary market for patents,” Google has launched its Patent Purchase Promotion Program.  Google is offering to purchase your patents.  The details regarding the submission process are here.  The general timeline for the program is as follows:  

April 27, 2015 Patent Purchase Promotion is Announced

May 8 to May 22 Submission Window is Open

May 23 to June 26 Submission Review Period

By June 26 Parties notified either of our intent to move on to the next stage ( e.g ., some further diligence) or our intent to pass on the opportunity.

By July 8 Parties that are notified of Google’s tentative intent to purchase must supply further information to Google regarding encumbrances, litigation, etc. and provide a signed agreement, banking information, and relevant tax related information.

By July 22 Google will further review the additional materials provided. Assuming Google remains interested in completing the transaction upon review of the above material, Google will return a fully executed agreement within about 10 days of receipt (and no later than July 22, 2015) and payment will occur within 30 business days thereafter.

As recently discussed here, patent package sales are up.  However, Google only allows you to submit one patent at a time, but a party can make multiple submissions.  This, perhaps, allows the submitter to focus on the patents of value.  Indeed, the submitter must disclose the sales price up front and is essentially “locked in” to that price (at least, I think, as a ceiling).  If a sale is approved, the submitter retains a non-exclusive, fully paid up, non-transferable, non-assignable, non-sublicensable worldwide license to practice the invention.  The sales agreement is here.  The program currently only applies to U.S. patents.  A good idea?  Google does state that the program is an experiment--perhaps patents from other jurisdictions are next. For more commentary, see Corporate Counsel’s Lisa Shuchman’s article, “Google Wants to Outfox Trolls by Buying Up Patents” (April 28, 2015). 

Motorola Mobility: Has there been an impairment of goodwill in Google's acquisition of its patent portfolio?

When companies face a decline in the value of a certain asset, they may find it necessary to write down the goodwill value of that asset to reflect such impairment. One need look no further than such august companies as News Corp. and Tata Steel. Thus News Corp., in what was described as a "goodwill impair charge", recently announced a write-down in the value of its Australian and US publishing assets in the amount of $1.4 billion, here. As for Tata Steel, it announced in mid-May that it was taking a write-down of $1.6 billion largely in connection with the commercial challenges in connection with its takeover six years ago of Corus, a British steel maker, here. Technically, since goodwill is the excess paid for an asset over its book value, it can be argued that the write down of the goodwill is a mere bookkeeping technicality since it is in effect a non-cash loss. Perhaps. But such write downs by high visibility companies attract media attention.

I thought of the issue of goodwill write-downs in reading a report about the most recent decision of the U.S. International Trade Commission (ITC) regarding the patent wars between Google and Microsoft, here. In particular, the ITC ruled that Microsoft's Xbox device did not infringe a patent belonging to the Google subsidiary, Motorola Mobility. Initially, Google alleged infringement by Microsoft of five Motorola Mobility patents. Four of these patent claims were dropped (including two patents that were deemed essential to a standard and which Google choose not to continue to assert against Microsoft), leaving the one patent at issue in the current ITC decision.

Readers will likely remember that, to great media fanfare, Google acquired the Microsoft Mobility patents in an amount described in excess of $12 billion,here. Later reports lowered the amount attributed to the patents. As reported on c/net on July 25, 2012, here, "[t]he search giant yesterday filed a document with the Securities and Exchange Commission (SEC) outlining how it valued its $12.4 billion (not $12.5 billion it originally reported) acquisition of Motorola Mobility. Google says that $2.9 billion of the purchase price accounted for Motorola's cash, while $730 million went to customer relationships and $670 million to other net assets.The largest percentage of Motorola's value, according to Google, was the $5.5 billion in "patents and developed technology." The remaining $2.6 billion went to goodwill, or the company's value above and beyond its assets."

Either way, this is an extraordinary amount to pay for a patent portfolio. How was Google intending to benefit from this acquisition? Did the amounts paid represent, in whole or in part, a good-faith estimate of an income stream that Google hoped to generate from receipt of payment of patent royalties? (This rationale has been mentioned as the basis for the initial and ultimately widely over-optimistic valuation placed on the Kodak patent portfolio at the end of 2011).  Or was the portfolio intended to provide Google with a ready arsenal of patents that it could threaten to use, or actually rely upon to extract a favourable cross-licensing arrangement (in that wonderful phrase taken from the Cold War, "mutually assured destruction"), should it be sued by a competitor? Or was the portfolio, or at least select patents within it, intended to provide offensive legal firepower, ideally serving as the basis for obtaining a court-ordered ban against sales of product by competitors?

It appears, at least until now, that the third alternative has become front and central in the exploitation of the Motorola Mobility patent portfolio. If so, then I wonder what happens to the valuation of the patent portfolio, or at least those patents that form the basis for an infringement suit, when a court or administrative agency rules that no infringement has taken place. By analogy to the write-down of the goodwill of other corporate assets, does there come a time when a company acquiring a patent portfolio has to write down the goodwill value thereof? In particular, what is a company to do when it acquires a patent portfolio, on the basis of which the company then sues upon and expends significant sums in the maintenance of the law suit, ultimately to be rebuffed by the courts? Has there been a material impairment of goodwill that should be recognized (to extent that the accounting principles of the jurisdiction recognize goodwill in a patent in such circumstances)?

Any readers who might have insights into how a company should properly value a patent portfolio, especially following an acquisition, and whether such valuation is subject to change based on the fate of the exploitation of the patents, are invited to share their insights.

Google buys up Modu's Patents

Modu was a small Israeli telecommunications company which attempted an IPO on the Tel Aviv stock exchange (see report here) but collapsed a few days later when the IPO failed, apparently USD 130 million (according to the report here). The 2008 investment round placed a valuation of USD 150 million on the company.

Modu made tiny little handsets which were no bigger than a credit card. Not much use either without a keyboard, but they were designed to be fitted out with jackets to add the functionality. Well it appears that the lack of a keyboard was their downfall since the company went out of business.

And their biggest asset left? Well apparently the patent portfolio, as Google came in at the last minute to pick up around 100 patents for a price of USD 4.9 Million. Quite a price for a bunch of patents - but probably only the cost of one saved litigation if the patents ended up in the wrong hands. I've no idea how many litigations Google have pending related to their Android-based telephones. It's probably into the tens and it would not surprise me if the fees were beginning to have an impact on the bottom line of the company. Google has never been a particularly aggressive company in asserting its patent rights and so these IP rights will probably end up in a dusty box somewhere in a lawyer's office (or since it's Google out in the big wide cloud) until the opportunity comes to defend itself.

 

 

 

 

Technorati Tags: Telecommunications, Google, Modu, Patent Sale

Latest on the Nortel bidding war

The deadline for submitting bids for the Nortel patent portfolio is clearly drawing near and "informed" leaks are appearing. Presumably intentionally to drive up the price. The latest leak is reported on the fierce wireless website and lists Apple, Google as well as the Chinese companies Huawei and ZTE as potential bidders. Nothing surprising there. The Nortel portfolio includes a number of gems which any company operating in the wireless space would love to have - if only to act as a bargaining chip in licensing and negotiating deals. Neither Apple nor Google have an extensive telecoms patent portfolio and so they would love to build the portfolio. Huawei and ZTE are starting to build massive portfolios, apparently subsidized by the Chinese government. Indeed Huawei is now one of the bigger PCT patent filers and ZTE claims to hold 10% of the essential LTE related patents. However, whilst they have many pending patents, their granted portfolio is much smaller.

Intriguingly two consortia including patent licensing firms are also in the running. One consortium apparently consists of Intellectual Ventures and InterDigital. IV is known for its accumulation of patents, whilst InterDigital possesses several patents that are relevant to mobile telecommunications standards (but has also lost some court disputes). The other consortium includes RPX - a patent aggregator that acts on behalf of several major companies to take patents "out of the market". RPX is currently planning its IPO as reported here and here. Will it be using some of the proceeds to purchase the Nortel portfolio.

These two consortia could clearly push the price of the portfolio up tremendously. Neither has much interest in cross-licensing since they do not actually make any products as such. RPX is aiming to buy up problematic patents to support their membership base (as explained here). No doubt having a ripe bag of telecoms patents will "encourage" a few more companies to sign up and help the IPO on its way. IV has until recently not been known for enforcement of its patent rights, whereas InterDigital has been active. So it will be interesting to see how that works out if they win the pot of gold. Both companies will have an interest in "monetarising" their new assets.

The sheer sums of money here are just mind-boggling. The size of the mobile telecommunications market is clearly massive, but it is also going to take a major investment for any company to justify the figures that are being talked about. It will not be unnoticed that none of the established players such as Nokia, Ericsson or Alcatel figure among the potential acquirers. They all have substantial portfolios of relevant patents - but then Nokia is known to be a backer of RPX and Ericsson purchased the LTE assets of Nortel some months ago and presumably got a license to the relevant IP thrown in with the deal. So they don't need the rights. Has this all been factored in? The IAM blog was sceptical about whether the bond purchasers who have pushed up the value of the Nortel bonds really understood the process.

Let's hope nobody has to see his car because of his Nortel patent portoflio.

Technorati Tags:
Nortel, Telecommunications