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Lehman's Bankruptcy Worked Out Well For Intel, Anyway

Dealbreaker — Fri, 3 May 2013 16:08:00 PDT

Cross-posted from

One possible reaction to Apple’s gigantic tax-optimized share repurchase program is to think that spending a lot of time fiddling with how to optimize your share repurchase program might mean you’re out of better ideas. You can ponder whether this Intel share repurchase trade described in a Lehman Brothers bankruptcy lawsuit filed yesterday supplies any evidence on that question. Intel decided to buy back $1bn of its stock in August and September of 2008, and rather than just buy it in the market it entered into a pretty fiddly forward contract with Lehman like so:¹

Intel gives Lehman $1bn on August 29.
Lehman hands the $1bn back to Intel for safekeeping – it’s Lehman’s money, but Intel keeps it as collateral.
On September 29, Lehman gives Intel some shares, based on the average price of Intel stock from August 29 to September 26.²
The dollar amount of shares Intel buys is $1bn, if the average price is $21 or below, or $250mm, if the average price is $25 or above, or some amount linearly in between if the average price is between $21 and $25:

If the dollar amount Intel buys is less than $1 billion, Lehman gives back the extra money.
So in other words as the stock price goes up Intel buys fewer shares, and vice versa, which is kind of wrong-way for them³ but right-way for Lehman.
In exchange for that risk Lehman agrees to give them a discount of 10.6 cents per share.⁴
The number of shares Intel buys is equal to the dollar amount divided by the average price minus 10.6 cents:

When they entered the contract, on August 1, Intel was at $22.35; on August 29, when the averaging started, it was at $22.87.

But then Intel’s stock price dropped rather sharply over the next two months, because all stock prices dropped rather sharply, because – well, among other things, because Lehman went bankrupt on September 15. So the average price ended up being $19.8872 and the number of shares was 50,552,943.⁵ But on September 29, when it was due to get the shares and give back Lehman’s collateral, Intel’s stock price was just $17.27, making those shares worth only about $873mm. That $873mm was less than the $1bn of collateral that Intel was holding for Lehman.

Intel, sensibly enough, decided it would rather have $1 billion of cash than $873mm worth of its own stock. So it decided to DK the trade and keep the collateral instead. This was not exactly sporting – it probably wasn’t exactly legal – but Lehman … I guess had bigger problems? In any case they seem to have been okay with this for five years, and only got around to suing about it yesterday.

Lehman’s basic argument is that it didn’t owe Intel $1bn, it owed 50.55mm shares, and so Intel had no right to seize its collateral instead of taking the shares. This is surely right. The question of damages is a harder one; basically Intel really ought to give Lehman back the difference between (1) $1bn and (2) the value of 50.55 Intel shares. But, when? On September 29, 2008, those shares were worth $873mm, so Intel should owe Lehman’s estate some $127mm. Lehman’s lawyers have a clever argument that Intel was required to cover its missing shares in the market, and that it couldn’t do so until November 2008 because it was in an earnings blackout, and if it had bought in the market over the course of November 2008 then it would have paid only $688mm for the shares and so I guess Intel owes Lehman $322mm.⁶ On the other hand, I suppose if I were Intel I’d say “okay, fine, we’ll give you back your $1bn with interest, you just give us 50.55 million Intel shares.” As of today those shares would seem to be worth about $1.2bn, making it basically a wash.⁷

We talk sometimes about how bad companies are at share repurchase and this Intel trade is no exception. Intel didn’t just decide to buy back a billion dollars of its stock six weeks before the market fell off a cliff in 2008:⁸ it decided to do so with a structured trade that amplified its risk, buying more stock if the market crashed and less if it went up. In exchange for this, Intel got a ten cent discount on its share price. It saved about $5 million – ten cents times 50mm shares – by entering a trade that ended up losing it $127 million.⁹

Or would have if it’d actually completed the trade. While Intel’s contract was sort of wrong-way – the lower the market goes, the more shares it buys back at an average price incorporating earlier higher prices – it had one, probably fortuitous but pretty important, right-way element. If the market went up, Intel would buy shares at the average price over the month of September, which would probably turn out to be a good price. If the market crashed, Intel would buy more shares at that average price, which would turn out to be too high. But if the market crashed and Lehman went bankrupt, then Intel would just take its billion dollars back and dare Lehman to sue it – saving $1bn that it would otherwise have spent buying back stock at pre-crash prices. So far that bet has worked out well for Intel.

Lehman v. Intel complaint [via Bloomberg]

Lehman Brothers Sues Intel Over $1 Billion in Seized Collateral [Reuters]

1. Most of this is from the confirm helpfully filed with the lawsuit as an exhibit. Intel does not seem to have publicly disclosed it, since a $1bn share repurchase for Intel is kinda small.

Here in this footnote I’ll say what’s obvious to the, like, twenty people who do these trades, one of whom is sort of Harvey Schwartz: this is an “accelerated share repurchase” without the acceleration. Companies often do trades similar to this to accelerate the accounting benefit of buying back stock, as well as to buy shares at a discount to VWAP. Intel’s approach – which is intraquarter and collateralized, has no accounting benefit, and is done just for the discount – is somewhat less common. Of course if you did the normal sort of ASR with Lehman in August 2008, in which you prepaid the purchase price and Lehman didn’t post collateral, you got screwed.

2. Actually Lehman can end the averaging period as early as September 22, giving it a bit more optionality.

3. Why is this wrong-way? Simplistically, if you’re buying stock and your stock craters, you might decide to buy back more stock at the new, lower price – but not at the one-month average price that reflects all of those days when your stock was higher. This contract in effect says “if your stock crashes, you’ll buy more shares at the new lower price – but you’ll also go back in time and buy more shares at the old, higher price.” If you had a time machine you would not, on your own, choose to do that.

4. The discount is actually on a sliding scale but it turned out to be 10.6 cents per this letter from Intel also filed with the lawsuit.

5. Again from that letter. I get like 100 more shares than they do but I guess that’s rounding.

6. From the complaint:

Furthermore, Intel is subject to securities regulations in connection with purchases of its own stock and in accordance with Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, cannot trade in its securities while in the possession of material non-public information. Accordingly, Intel could not have purchased its shares from the open market on September 29, 2008 and for a certain “blackout period” thereafter while it was in the possession of material non-public information. On information and belief, this “blackout period” ended on November 4, 2008. Upon information and belief, Intel could have acquired 50,552,943 shares of its own common stock in a related trade over the period from November 5, 2008 through December 1, 2008, for approximately $688 million, far less than the $1 billion it seized.

That seems wrong but I still admire its cleverness.

7. Ooh I’m sure that’s not right either – not really how Loss works under ISDA – but, still, it’s what I’d say.

8. In all, Intel “repurchased 324 million shares of common stock at a cost of $7.1 billion” in 2008, for an average purchase price of around $22. Intel ended 2008 at $14.66, and didn’t see $22 again until March 2010. In 2009, when INTC was cheap, it bought back about 88 million shares, and all in the third quarter when it was less cheap.

9. On the simplest and probably most defensible math, just the amount Intel paid ($1bn) minus the value of its shares on delivery date ($873mm).

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Facebook Backs Away Quietly From Its CISPA Support

Mike Masnick — Thu, 14 Mar 2013 15:08:57 PDT

Many in the internet community were disappointed a year ago when Facebook came out in favor of CISPA. Facebook made its case publicly, agreeing that there were some privacy and civil liberties concerns with the bill, but that on the whole the bill was good. Of course, more cynical people might point out that since the general immunity provisions of CISPA would protect Facebook from liability in sharing info with the government, that of course they'd like it. However, it appears that Facebook is reconsidering that position, perhaps aware of how much public opposition there is to CISPA. Facebook is no longer listed as a CISPA supporter, though it also has not come out directly against the bill. Instead, it issued a statement that says basically nothing:

We are encouraged by the continued attention of Congress to this important issue and we look forward to working with both the House and the Senate to find a legislative balance that promotes government sharing of cyberthreat information with the private sector while also ensuring the privacy of our users.

Still, it's encouraging that a company, like Facebook, which really does rely on the support of their userbase, appears to at least recognize that something like CISPA might not be good for its users. In fact, this seems similar to when Microsoft backed away from its CISPA support last year as well. The article linked above notes that Microsoft still feels the same way, citing the concerns about user privacy with the current draft of CISPA.

So, who is supporting CISPA? The telcos are still there, not surprisingly, as well as mostly infrastructure providers, rather than any company that has a bunch of its own internet users. So, you see IBM, Intel and Juniper Networks. But there is not a single real "internet" company in the bunch any more. Perhaps that should be a loud hint for CISPA's sponsors that the bill is not a good thing for the internet world.

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DailyDirt: Smarter Soda Machines

Michael Ho — Fri, 12 Oct 2012 17:00:00 PDT

Water fountains have improved somewhat over the years, but soda machines are really getting quite advanced. Not just limited to refrigerating sugary beverages, these vending machines are going to start tracking consumer behavior and offering some entertainment along with a frosty refreshment. Here are just a few examples of high-tech vending machines trying to connect with customers to sell more soft drinks.

A Coca-Cola vending machine in South Korea will dispense free Cokes if you dance for your drink. The machine uses a Kinect controller and promises not to make fun of your Gangnam-style moves. [url]
Intel has demoed a Coke machine that uses one of its Core i7 processors so that it can handle a giant touchscreen interface with interactive videos. Hopefully, the blue screen of death won't inconvenience too many thirsty patrons. [url]
Vending machines are going to start telling you how many calories are in the beverages they sell. Pretty soon, these machines will also start guessing your BMI and suggesting diet sodas... [url]
The Coca-Cola Hug Machine was dispensing free drinks to people who hugged the vending machine. Getting to first base with the soda machine didn't offer any additional benefits. [url]

If you'd like to read more awesome and interesting stuff, check out this unrelated (but not entirely random!) Techdirt post.

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Rather Than Pressuring The ITC Over Key Patent Cases, Congress Should Fix A Broken Patent System

Mike Masnick — Tue, 18 Sep 2012 19:59:00 PDT

For years we've talked about how many patent holders these days have two cracks at anyone they accuse of infringing: through the courts and then separately through the ITC, which can issue an injunction (but not monetary awards) that block a product made elsewhere from entering the US. The ITC doesn't have to follow the same rules as the courts. So, for example, it doesn't need to abide by specific Supreme Court precedent, which can lead to some wacky outcomes. But, really, it's just one more example of a broken patent system.

It's interesting to see that in a high profile case that the ITC is handling, between Intel and X2Y Attentuators LLC -- which describes itself as "an intellectual property company" -- various members of Congress are so worried about the possibility of an injunction issued against Intel, that they've specifically sent a letter to the ITC urging it to "consider the broader public interest" before making a decision. Two letters were sent -- one from the two Senators and all five House reps from Oregon, and another from the two Senators and all eight House reps from Arizona -- telling the ITC that a ruling against Intel would have a "detrimental effect" on the workforce and such an injunction could "discourage" US production and "could do more harm than good with respect to the public interest."

While they're right, this does seem like blatant pandering to constituents. Intel has very large presences in both states (16,000 employees in Oregon and 11,000 in Arizona). However, as the National Law Journal article linked above notes, this is becoming pretty standard, any time a large tech company faces an injunction from the ITC. Its Congressional reps get together and send the ITC a letter. While I agree that these injunctions can do serious harm and the economy, and innovation is much better without the ITC issuing them, it's troubling to me that these elected officials are resorting to pressuring the ITC, rather than doing what they should: recognizing this is just one small symptom of a truly broken patent system. Instead of trying to pressure that one symptom, why not focus on actually fixing the problems of the patent system? If they want a starting point, we've got some ideas.

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Apple And Microsoft Behind Patent Troll Armed With Thousands Of Nortel Patents

Mike Masnick — Wed, 23 May 2012 08:05:00 PDT

You may recall last summer that Apple, Microsoft, EMC, RIM, Ericsson and Sony all teamed up to buy Nortel's patents for $4.5 billion. They beat out a team of Google and Intel who bid a bit less. While there was some antitrust scrutiny over the deal, it was dropped and the purchase went through. Apparently, the new owners picked off a bunch of patents to transfer to themselves... and then all (minus EMC, who, one hopes, was horrified by the plans) decided to support a massive new patent troll armed with the remaining 4,000 patents. The company is called Rockstar Consortium, and it's run by the folks who used to run Nortel's patent licensing program anyway -- but now employs people whose job it is to just find other companies to threaten:

But Widdowson is a specialist. He's one of 10 reverse-engineers working full time for a stealthy company funded by some of the biggest names in technology: Apple, Microsoft, Research In Motion, Sony, and Ericsson. Called the Rockstar Consortium, the 32-person outfit has a single-minded mission: It examines successful products, like routers and smartphones, and it tries to find proof that these products infringe on a portfolio of over 4,000 technology patents once owned by one of the world's largest telecommunications companies.

When a Rockstar engineer uncovers evidence of infringement, the company documents it, contacts the manufacturer, and demands licensing fees for the patents in question. The demand is backed by the implicit threat of a patent lawsuit in federal court. Eight of the company's staff are lawyers. In the last two months, Rockstar has started negotiations with as many as 100 potential licensees. And with control of a patent portfolio covering core wireless communications technologies such as LTE (Long Term Evolution) and 3G, there is literally no end in sight.

The article admits that Nortel got most of these patents because it wanted them for "defensive" reasons. And now look at how they're being used. Remember that the next time you hear a company promise to only use its patents defensively. There's also a ridiculous quote from Rockstar's CEO, John Veschi:

“A lot of people are still surprised to see the quality and the diversity of the IP that was in Nortel,” he says. “And the fundamental question comes back: ‘How the hell did you guys go bankrupt? Why weren’t you Google? Why weren’t you Facebook? Why weren’t you all these things, because you guys actually had the ideas for these business models before they did?’"

The real answer, of course, is because patents are meaningless. Ideas are worth nothing by themselves. Ideas only matter if you execute, and anyone who's ever actually executed on an idea will tell you that the original idea almost is never reflected in the final product. The process of going from idea to actual product is a process by which you learn that what matters is not what you thought mattered. And yet, for reasons that make no sense to anyone who has ever actually built a product, creating monopolies around the ideas only serves to create a massive tollbooth towards actual innovation. And that's what we have here -- and it's funded by Apple and Microsoft.

Once again, we see that these two large companies are using the patent system not to innovate, but to stop up and coming competitors from innovating. The patent system isn't being used to encourage innovation but to protect incumbents from an open market.

Oh, and worst of all, the reason that the antitrust effort was dropped was because Apple and Microsoft promised to license the key patents under "reasonable terms." But... Rockstar is not subject to that agreement.

But the new company — Rockstar Consortium — isn’t bound by the promises that its member companies made, according to Veschi. “We are separate,” he says. “That does not apply to us.”

That seems quite problematic, and perhaps worthwhile for the government to reopen its investigation...

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Big Tech Companies Funding University Research Labs... Only If They Promise To Open Source The Results

Mike Masnick — Wed, 14 Sep 2011 22:07:00 PDT

The state of universities and intellectual property is pretty messy these days. Thanks to the screwed up Bayh-Dole law, many universities feel (wrongly) compelled to patent the research that they produce. This generally goes against their basic charters of sharing the knowledge that they create. It's also not very profitable. Only a small handful of universities have been able to make money off of patents. Most have lost a ton of money, setting up expensive tech transfer offices that don't return a dime.

However, in an interesting twist (pointed out by Glyn Moody), it appears that a variety of big tech companies, including Intel, HP and IBM, are now funding research centers on the condition that they open source anything that comes out of them.

Think about that for a second. These institutions of learning, who for decades have been built on education and sharing knowledge, want to lock up ideas. And the private companies, who are more commonly associated with trying to lock up proprietary information, are encouraging greater openness and sharing. That, alone, should show you just how screwed up our patent system is today.

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DailyDirt: Winners!

Michael Ho — Fri, 22 Jul 2011 17:00:00 PDT

Summertime, and the living is easy... but if you're a teenager with an interest in science or engineering, don't waste away your summer watching cartoon re-runs. Here are some kids who've worked on some cool projects outside of school.

Intel has honored some young innovators in science and engineering with awards and scholarships. Over 6 million young scientists apply to become one of the 1,500 finalists each year. [url]
Microsoft has named its ImagineCup winners who competed with over 358,000 other students from around the world. The ImagineCup encourages students to build solutions that might help address problems such as: combating diseases, improving education, ensuring environmental sustainability, etc. [url]
Google has picked three inaugural Google Science Fair winners. These winners were chosen out of over 7,500 entries -- so the odds of winning sound slightly better than some of the more established science/engineering competitions. [url]
To find more interesting stuff on entrepreneurship, check out what's currently floating around the StumbleUpon universe. [url]

By the way, StumbleUpon can recommend some good Techdirt articles, too.

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Dumb Trends: Tech Companies Hiring Pop Stars As 'Creative Directors'

Mike Masnick — Wed, 26 Jan 2011 11:55:00 PST

Last year, at Midem, one of the keynote interviews was with Jeffrey Hayzlett, who at the time was the Chief Marketing Officer for Kodak. Towards the end of the talk, someone in the audience asked Hayzlett if he could explain the thinking behind the hiring of Lady Gaga to be "creative director." Hayzlett smiled and responded along the lines of "Well, actually, that wasn't Kodak, but our competitor, and just the fact that you're confused about that is pretty much all I have to say about the wisdom of that decision." Of course, it was Polaroid who had made that "hire." At CES a few weeks back, one year after this announced "hiring," Lady Gaga debuted the results of her "job" at Polaroid to mostly unimpressed reviews.

Meanwhile, over at the Intel booth, I saw Will.i.am (and an entourage of folks) walking around and checking out the displays. Knowing that folks like Lady Gaga and Will.i.am don't just show up at CES for fun, I just assumed that he had some sort of endorsement deal with Intel. Now, comes the news that he's signed a similar "director of creative innovation" deal with Intel.

Now, to be clear, various reports claim that Lady Gaga was and has been actually involved in product design efforts. And, as an endorsement deal, there's something quite nice about that aspect to it. After all, lots of celebrities sign endorsement deals for products they don't even use or care about, let alone have at least some say in designing. But, does having a celebrity, who doesn't actually have any experience or knowledge about the specific business you're in, as a "creative director" really make sense? The Polaroid products announced by Lady Gaga at CES seemed sort of pointless -- sunglasses that take photos, a paperback book sized "portable printer" for photos (I've had a smaller portable printer in my bag for years, and only recently stopped carrying it around when I realized I never use it any more).

On top of that, the idea that these celebrities have "jobs" as "creative directors" is just silly. They're not creative directors at all, and it's actually something of an insult to people who actually do have jobs as creative directors. They're celebrity endorsers who are also advising on product ideas -- at best. I like the idea of celebrities actually being more involved with the products they endorse, but pretending they have a real "job" at these companies really just insults the intelligence of people.

Oh, and, did anyone notice that, in the photo of Will.i.am showing off his "Intel badge," it looks like he's wearing the "Polaroid sunglasses" that Gaga revealed at CES? Maybe they have some sort of "mutual celebrity fake creative director appreciation society" thing going on between them.

"But do HIS glasses take pics and have screens built in...?" -- caption and photoshop thanks to Notcot

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Intel Claims DRM'd Chip Is Not DRM, It's Just Copy Protection

Mike Masnick — Fri, 7 Jan 2011 12:44:19 PST

There's been a lot of talk this week about Intel building DRM into its Sandy Bridge chip. I had initially passed on writing this story, as we seem to hear the same thing every few years. Back in 2005, for example, there were similar stories about Intel planning DRM built into its chip. However, what got me interested enough to actually write about this is Intel's bizarre response to the press coverage, in which they play one of the most ridiculous games of corporate doublespeak in ages. First, they insist it's not DRM. They say that right up in the headline: "No, It's Not DRM" Then they kick it off with an explanation of what DRM is, followed up by again saying: "I am not going to get into a discussion about the pros and cons of DRM in this blog; but I will say that Intel Insider is NOT a DRM technology." Ok. So what is it. That's in the next paragraph:

Intel Insider is a service that enables consumers to enjoy premium Hollywood feature films streamed to their PC in high quality 1080P high definition. Currently this service does not exist because the movie studios are concerned about protecting their content, and making sure that it cannot be stolen or used illegally. So Intel created Intel insider, an extra layer of content protection.

Um. So it is DRM. You just said it's not, and then described DRM. Content protection is DRM. I'm not sure exactly what Intel thinks it's doing here. If they say it's not DRM and then explain how it is DRM, they think people will think it's not DRM? If you're going to include DRM, just admit that it's DRM. Then we can argue about whether or not it's smart (and, no, it's not).

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Intel Threatens To Use The DMCA Against Anyone Who Uses The HDCP Crack

Mike Masnick — Mon, 20 Sep 2010 02:25:44 PDT

Well, isn't this nice? Intel, who recently confirmed that the HDCP master key was, in fact, leaked, has also decided that it's going to threaten to sue anyone who makes use of it, under the DMCA's anti-circumvention clause. The last gasp effort of those who still want to believe in DRM: after it's cracked, they'll wave the DMCA at you. Perhaps rather than falling back on DMCA threats, Intel could spend its efforts explaining to Hollywood why DRM is a mistake.

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Intel Confirms HDCP Master Key Is Out

Mike Masnick — Fri, 17 Sep 2010 04:05:10 PDT

We were among the many folks who wrote about the supposed leak of the HDCP master key this week, leading to an interesting discussion in the comments -- including a comment from a big time DRM supporter (he's even written a book about DRM) who scolded us for getting the whole story wrong, insisting that there was no such thing as a master key and that Hollywood never would have agreed to HDCP if there were such a thing. This struck me and some others as odd, as many of us have followed the discussions on HDCP, and I tended to believe Ed Felten's explanation of how HDCP works, which indicated that there was, in fact, a master key. That was from a few years ago, but Felten also just posted another explanation about how HDCP works, and it still seems to involve a master key.

And, now, Intel is apparently confirming that the leak is, in fact, the master key. So, at this point, I'm going to have to assume that the DRM expert and the scolding were wrong, and that there is, in fact, a master key... and it's been leaked. Good thing the FCC gave the MPAA the okay to break your TV and DVR to release movies that would be "protected" by HDCP, huh? As Michael Weinberg points out, the FCC has now broken a bunch of TVs for nothing:

Today, it looks like HDCP -- the DRM that the MPAA insisted was required to allow them to securely distribute movies prior to DVD release -- has been broken. As a result, anyone who is motivated can make an exact digital copy of a "protected" high definition movie. Since all it takes is one motivated individual to make that first copy, this DRM (like every type of DRM before it) now serves absolutely no purpose but to inconvenience legitimate customers.

In May, I wrote that "Studios are asking the public to trade the use of any analog inputs on their devices for more magic beans." The FCC accepted that trade. At the time, it looked like those magic beans at least pretended to have some powers to slow down copying. Today they have been revealed for what they really are -- worthless.

Nice work, FCC.

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Oscar Winner Sues BBC & CBS For Copyright Infringement Of His Photo

Mike Masnick — Fri, 6 Aug 2010 03:09:09 PDT

THREsq has an interesting story about how the guy, Louie Psihoyos, who won an Oscar for best documentary this year for The Cove, apparently has a pretty quick legal trigger finger against anyone using a photograph he took 15 years ago. He's sued a bunch of companies over the years, and the latest is the BBC and CBS. He claims that it cost him $100,000 to create the photograph, which can be seen here: And, yes, THREsq is showing the photo as well. In these two cases, it seems like clear fair use, since we're both reporting on the photo itself. However, where the BBC potentially got into trouble is in using the same photo to illustrate an article about Intel betting on TV and video content. What's odd, however, is that the reason CBS is being sued is "that CBS Marketing appropriated it for commercial display at the 2009 Intel Developers Forum." This makes me wonder if CBS Marketing used the image at the event that the BBC was reporting on, leading the BBC to believe it had the ability to use that image. That could make the legal fight a bit more interesting.

However, the article also notes that Psihoyos has sued a bunch of times in the past over this photo as well. For example, a year ago, he sued Apple for the second time over this photo. While that lawsuit was eventually settled, the details suggest that Psihoyos was barking up the wrong tree on that lawsuit. It wasn't a case of Apple using the image, but a random iPhone app developer. You would think that Apple would have a clear DMCA safe harbor response, which would protect it from such a lawsuit, so I'm a bit surprised they ended up settling.

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Intel Refiles Questionable Trademark Lawsuit Against Newsletter About Latin America

Mike Masnick — Mon, 17 May 2010 18:46:54 PDT

Late last year, we wrote about the latest in an unfortunately long line of overreaching trademark lawsuits filed by Intel. Intel tends to act as if no one else can use the word Intel at all, leading it to get involved in legal disputes with companies in industries about as far away from Intel's business as can be -- including a travel agency and a maker of jeans. The dispute last year, was focused on the small producer of a newsletter about Latin America, which used the domain name LatinIntel.com. There was no way anyone would be confused by this site or think that it was somehow associated with Intel, even using my favorite "moron in a hurry" test.

So, we were happy, earlier this year, to get a report that Intel had dropped the lawsuit. Except... that turned out to not be exactly true. Intel got in touch quickly to insist that they had only dropped it because they planned to refile the lawsuit with much more detail to make their case. What Intel left out was the pretty serious skepticism the judge had expressed concerning their original filing: The key lines here being:

It really is lacking in enough specificity which would demonstrate that there was confusion or that you're even addressing the same markets. I mean, my understanding is that there may be no customer overlap at all in connection with this.

Intel, of course, shot back with the claim that this has nothing to do with likelihood of confusion, but it was really about dilution. Dilution is a more recent element of trademark law, which was not considered applicable for quite some time, but today has become more widely accepted, and keeps expanding in dangerous ways. It simply goes against the basic concept of trademark law -- which is supposed to be about protecting consumers from buying a product that is falsely labeled. That's why trademark law is limited to the areas where your trademark is actually being used in commerce. The judge's point that there is no customer overlap should be all that matters here. At that point there is no trademark issue. At all.

But Intel has, in fact, now refiled the lawsuit, and tries to get around this claim by pointing out that both Intel and this newsletter have customers that are Fortune 500 companies. Seriously. And then it still claims there is customer confusion, despite the judge making it pretty clear that he didn't believe there was any customer confusion at all:

I asked the spokesperson from Intel who had contacted us about the last post if he could offer an explanation of why it made sense for Intel to continue to pursue this lawsuit, and I got back the basic explanation for why dilution is considered trademark infringement -- which didn't answer the question I was asking. But it appears that Intel's definition of dilution goes way beyond even the current (already troubling) concept of dilution in trademark law. The way Intel sets it up, no one can use the word "intel" even if it's already a widely generic term in a totally different industry (as is the case with the newsletter). That makes no sense.

While I'm sure Intel's lawyers would claim that they have to defend their trademark to avoid it being declared generic, that's also a misrepresentation of trademark law. You do have to defend, but only in cases where there's actual confusion or actual risk of dilution. Someone doing business with a term that is generic in that industry, which is about as far away from Intel's industry as is possible, is not doing any harm, whatsoever, to Intel's mark. Intel should have just dropped the case and left it alone.

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Software Buyers Not Liable For Trade Secrets In Compiled Source Code

Mike Masnick — Thu, 6 May 2010 15:06:33 PDT

Mark B points us to an interesting and well-written ruling in a lawsuit where Silvaco Data Systems lost its argument that Intel and others could be found liable for violating Silvaco's trade secrets, because those companies purchased software from another company who had violated Silvaco's trade secrets.

The quick background is that another company -- Circuit Semantics Inc., (CSI) -- has apparently used trade secrets from Silvaco in creating its software. Silvaco won its lawsuit against Circuit Semantics, barring further sale of its code. Silvaco then sued buyers of CSI's code, including Intel, claiming that they, via CSI, had also violated Silvaco's trade secrets. The ruling against Silvaco is well argued and smashes Silvaco's argument -- noting the difference between the source code, which contained the trade secrets, and the compiled software, which Intel obtained. The judge points out how silly Silvaco's arguments are repeatedly, calling one of the main arguments "a smokescreen, a red herring, a straw man," and later saying of Silvaco's argument: "strained is too small a word to describe Silvaco's argument." You can read the full decision here: Separately, this ruling is getting extra attention from some lawyers because of the judicial smackdown the judge made concerning the rather wasteful decision to include excess information in the filings:

Although this case was decided largely on the pleadings, it has somehow generated an appendix over 8000 pages in length. Seldom have so many trees died for so little. We see three causes for this wretched excess....

It then goes on to detail three different bad choices made by the lawyers which made the filings so ridiculously large. Basically, the lawyers seemed to throw in all sorts of things that weren't necessary, and which the judges could have easily been pointed to that information to retrieve on their own.

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Intel Realizes No One Is Going To Confuse A Newsletter About Mexico With Its Processors [Update]

Mike Masnick — Tue, 6 Apr 2010 22:46:00 PDT

Last year, we wrote about Intel's trademark lawyers getting over aggressive in suing the owners of the Mexico Watch newsletter for using the domain name LatinIntel.com In this case, it was clear that "intel" was the commonly abbreviated version of "intelligence," and no one was going to be confused and think that a newsletter about Mexico had anything to do with a company making microprocessors. ~~For whatever reason, it appears that common sense has finally prevailed, and we've been alerted to the fact that Intel has dropped its lawsuit~~. Or not. Instead, it appears the details are that the court dismissed most of the claims, but left Intel the right to amend and refile its complain -- which Intel tells us it's going to do. We've asked for more info from Intel on its reasoning. Of course, a simpler course of action would have been to have not sued in the first place...

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Fake Processors, Passing The Blame, Legal Nastygrams And More...

Mike Masnick — Mon, 8 Mar 2010 13:33:16 PST

Richard Corsale writes in to let us know about how popular electronics e-commerce site NewEgg apparently received 300 totally fake Intel processors and at least some of them were sold. They're not processors at all. They're just made to look like them from the outside. NewEgg's initial response was to claim that its supplier shipped them demo boxes by accident -- but Intel is claiming that's not true, and the boxes are not official Intel demo boxes, but counterfeit demo boxes. Then, to make the story even odder, many publications reported that NewEgg's supplier for these fake processors was a company called D&H -- and D&H's response to all of these stories is to send out legal nastygrams to anyone reporting on the story and mentioning D&H. Perhaps it's worth giving D&H the benefit of the doubt, but why not just come out and say "hey, it wasn't us," and get NewEgg to confirm or deny who provided the fake processors before sending out a legal threat?

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Helping Everyone Become An IT Innovator

Michael Ho — Tue, 1 Dec 2009 06:30:00 PST

As many of our readers already know, we've been producing several topical conversations on a variety of subjects via the Insight Community, and we'd like to introduce our newly sponsored site, IT Innovation, brought to you by Sun Microsystems and Intel. (You may have missed the subtle new 'IT Innovation' link added to the top of our page.) First and foremost, the goal of this effort for us here at Techdirt is to create interesting and useful content for our readers in the realm of server hardware and datacenter management.

We'll be covering trends in datacenters and skills for IT managers -- and asking the Insight Community for its input on generating relevant insights for future conversations. And as with any natural conversation, we're not 100% sure where the topics will lead because the ideas will develop and evolve as we discuss them. But we'll start with current trends, as well as far off predictions, advice and tips for IT managers, business tools, and try to delve deeper into the subjects that resonate with the community participants. If you're already a member of the Insight Community, you can contribute your thoughts on the datacenter upgrade process. If you're not already a member, you can join now.

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Intel Lawyers Again Go Too Far In Trademark Bullying

Mike Masnick — Thu, 19 Nov 2009 12:57:28 PST

Chip giant Intel has a bit of a reputation for being a trademark bully at times, threatening or suing many companies just for having "intel" in their name somewhere -- including a travel agency and a jeans company. Now, before anyone brings it up, yes, as a trademark holder the law requires you to enforce your trademark against infringement, lest it become considered "generic" (such as xerox machines, kleenex tissues, aspirin and other brand names that became generic). But, the key in all of those generic situations was that the use was applied to things that directly competed with the original brand's products. People referred to other tissues as "kleenex" and it stuck. Intel's lawyers seem to go out of their way to find potential infringement where there obviously is none at all.

Paul Alan Levy alerts us to the latest such case, where Intel has sued the operators of the Mexico Watch newsletter, because its domain is LatinIntel.com. Of course, the reason for that is that it is using the commonly accepted abbreviation of "intel" as short for "intelligence." It's common shorthand, especially within government circles, to refer to gathered intelligence as simply "intel." The owners of the site explained this to Intel, and in return were given a boilerplate explanation about trademark law, insisting that since Intel's trademark is so valuable, it still has to stop others from using it -- even if they're in a totally different business, which is an interesting interpretation of trademark law, and one not supported by the courts in most cases.

More importantly, no one is going to look at LatinIntel.com and confuse it for the world's largest computer chip maker. No one is going to look at that site and wonder how come they can't order a Centrino processor. There's simply no confusion at all. Even worse, it appears that Intel's lawyers dragged out this situation far too long. They first contacted the site back in 2007, and the site's owner responded with a clear explanation of why the name was not infringing. Since then, there have been periodic bursts of contact from different Intel lawyers (it apparently seems to change each time), followed by months of silence, before a new group of lawyers starts pestering the site again. Finally, after more than two years of this back and forth, Intel sued Mexico Watch, even though it's not even close to competitive and any "moron in a hurry" (as the popular trademark test notes) would clearly know the difference between a site about Mexican politics and a company selling microprocessors.

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Why Is NY, Not The FTC Or DOJ, Filing Antitrust Claims Against Intel?

Mike Masnick — Wed, 4 Nov 2009 18:24:00 PST

I have no idea if Intel is really guilty of antitrust violations or not at this point -- though, considering the fact that its products keep getting faster and cheaper, it's not as if there's been some obvious huge monopoly rents handed out somewhere. However, I do find it quite odd that it's Andrew Cuomo, NY's Attorney General, filing antitrust charges against the company, rather than the federal government. The DOJ and the FTC have been investigating Intel for a while, and haven't yet filed charges. Europe has -- but Europe seems to do that against any successful American tech company eventually, as the European standard for "antitrust" often appears to be "big successful American company" rather than any proof of antitrust behavior. To have Cuomo file such a case just seems misplaced. What does it have to do with New York? Given Andrew Cuomo's rather long history of silly grandstanding to bully companies for the sake of getting his own name in the headlines, rather than any actual legal basis, it feels like more of the same. Pick a big target, don't worry about the legal specifics, but get headlines to build up the name of Andrew Cuomo. It's pretty sad that Cuomo seems to keep attacking innovative tech companies solely for the sake of building up his own political reputation. Tangling up innovation in pointless lawsuits doesn't help the economy in the slightest.

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EU Antitrust Regulator Scolded For Simply Ignoring Evidence In Intel's Favor

Mike Masnick — Fri, 7 Aug 2009 16:29:13 PDT

It's no secret that we think that EU antitrust regulators are way too aggressive in pursuing antitrust claims against US tech companies. The EU continues to view market size as a problem, rather than looking as closely at actual anticompetitive behavior. And, now, it's coming out that the EU's antitrust regulators may be so overzealous to take down companies that they'll ignore evidence that goes against their hypothesis. The EU's ombudsman has apparently issued a report scolding EU antitrust regulators for flat-out ignoring evidence from a Dell executive concerning Intel and AMD. The EU, as you probably know, fined Intel €1 billion a few months back, finding that the company had abused monopoly powers to force hardware makers into using its chips. But, the EU's ombud discovered that the antitrust regulators had interviewed Dell execs who said simply that AMD's chips didn't have the performance of Intel chips. In fact, in their tests, AMD's chips were "very poor," so they chose Intel chips entirely on the basis of performance. And... conveniently, the EU's antitrust regulators simply failed to record this info and did not include it in their report. Of course, you can make anyone appear to have violated antitrust rules if you purposely ignore all evidence to the contrary.

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Insight Community Webinar On Enterprise Knowledge Management

Mike Masnick — Mon, 3 Aug 2009 18:05:00 PDT

A few weeks back, we had an Insight Community case, sponsored by Sun & Intel, soliciting proposals for a webinar on enterprise knowledge management, targeting mid-market companies. We're happy to announce that this Thursday, August 6th, at 9am PT, we'll be hosting that webinar, moderated by me, led by Joel Alleyne, a member of the Insight Community, and a widely recognized expert on knowledge management, along with some additional guests as well. If you're interested in enterprise knowledge management, especially in the mid-market, hopefully, you'll be able to attend. If you have any useful questions that you'd like addressed in the webinar, feel free to ask them here and we'll see what we can do!

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Be Part Of A Webinar Discussion On Enterprise Knowledge Management

Insight Community — Tue, 30 Jun 2009 15:48:41 PDT

Sun and Intel are interested in holding a webinar around the topic of Enterprise Knowledge Management for their site, MidMarket Innovators. They are looking for experts to be featured in this online webinar, so this case is a little different in that sense.

We are looking for you to submit proposals that would describe a webinar topic that you would be willing to discuss. If your topic is chosen, then you will then need to be available to participate in the 1-hour online webinar, hosted by Techdirt's Mike Masnick. You can see the previous webinars here to get a sense of what has been done before.

The potential topics that they are interested in are:

What does “enterprise knowledge management” mean to you?
How is this strategy/approach evolving? 10 years ago? 10 years from now?
- How have advances in technology over the last 3-5 years made it easier for organizations to implement Knowledge Management?
How does technology supplement the business strategy? How does IT support/contribute? What is the role of technology?
How are the solutions that Sun & Intel are bringing to market contribute to “enterprise knowledge management”?
- New Sun Servers based on Xeon 5500? Performance, Energy Efficiency & Virtualization Capabilities. These new servers allow IT to replace 9 old single core x86 servers with one new Sun/Xeon 5500 server. IT can see a payback in less than one year.
- Software – How does software & software usage models factor into these solutions? For Sun Software – Sun & Intel have been working together to optimize Java, MySQL & Solaris for Intel processors.
What are the metrics and business benefits that organizations should expect from Knowledge Management?

Your proposal does not have to deal with all of these topics, these are merely suggestions.

In your proposal, please include:

The headline of your proposed webinar.
A description for the webinar that you would run.

If there are any questions, please do not hesitate to ask.

This is a case from the Insight Community, a powerful new marketplace that connects companies with intelligent communities like Techdirt. Click here to learn more.

Earn up to $500 for Insights on this case.
Insights Due: 2 Jul 2009, 11:59PMPT

View Case Details at InsightCommunity.com

Psion Gives Up Its Trademark Claim On 'Netbook'

Mike Masnick — Tue, 2 Jun 2009 03:45:00 PDT
Late last year, Psion kicked off a ridiculous legal fight, claiming that it owned the trademark on the word "netbook" and all of the companies offering "netbooks" today were infringing. While it is true that Psion had a (very different) product called a netBook many years ago, it had stopped offering it in the market, and the generic use of "netbook" was clearly referring to the new generation of small/cheap computers, having absolutely nothing to do with Psion's netBook. The whole purpose of trademark law is to avoid confusion of customers or some sort of misappropriation of brand value built up by the holder of the mark. That clearly was not the case here at all... and yet Psion continued to fight on. This week, the company finally withdrew its trademark claim after reaching some sort of "amicable settlement" with Intel. In all likelihood, this means Intel paid Psion to go away, though, one can hope that enough trademark attorneys explained to Psion that the company had almost no chance of succeeding in pushing its claim forward. There are certainly plenty of borderline trademark cases, but it's difficult to see how this one would even be in the same zipcode as a legitimate claim.

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Psion Not Going Down Without A Fight Over The Netbook Trademark

Mike Masnick — Tue, 3 Mar 2009 15:41:30 PST
Late last year, Psion kicked off an attempt to reclaim the "netBook" trademark the company had largely abandoned years earlier, now that it was suddenly popular for reasons that had nothing to do with Psion's old discontinued netBook product. After making a big stink about it, both Dell and Intel moved to have Psion's trademark cancelled as abandoned. However, Psion is fighting back, not just with a response to the request to cancel, but with a lawsuit against Intel on a number of different fronts. Psion is claiming unfair business practices and also challenging Intel for "cybersquatting" on the netbook.com domain name. Of course, given that Psion was selling its product long before Intel had the name, you have to wonder how that's cybersquatting? Shouldn't Psion have tried to acquire the name back when it actually mattered? In the end, it seems like Psion is spending an awful lot of money to try to get the goodwill put into the "netbook" name by others over the past year and a half. It's a pretty obvious abuse of trademark law that hopefully a court will slap down.

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Trusted Computing Not So Trustworthy

Mike Masnick — Wed, 7 Jan 2009 19:28:53 PST
As pretty much anyone in computer security recognizes, any bit of "secure" computing is only secure for a limited period of time. Eventually, the security will be cracked. Yet, we still keep hearing about expectations for some new technologies to solve all our security problems. For example, we've been hearing for years about the wonders of "trusted computing," which basically gets mocked every time some company tries to roll it out (which is why it's gone through five or six name changes over the years). The latest news is that Intel's implementation of a trusted computing offering, called Trusted Execution Technology, has security vulnerabilities that allow it to be circumvented. In other words, it's not trustworthy, nor secure. Of course, it's not widely used, either, so it's not a big deal. But, once again, there is no magic bullet for security that solves all security problems.

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