Cybersecurity, Piracy Bill, Yao Ming: Intellectual Property

The Obama administration proposed cybersecurity legislation aimed at protecting banks, power plants and government computers from hackers.

The administration wants tighter oversight of critical infrastructure and also proposed requiring companies to notify consumers of data breaches. The Homeland Security Department would “work with industry” to detect vulnerabilities in electrical grids and financial networks, according to a summary of the proposal released yesterday by the White House. The plan also calls for mandatory minimum penalties for computer-related crimes.

The administration’s proposal seeks to jump-start efforts in Congress to update U.S. laws in response to the increased threat of cyber attacks capable of crippling business and government operations.

“Cyber crime has increased dramatically over the last decade,” according to the summary. “It has become clear that our nation cannot fully defend against these threats unless certain parts of cybersecurity law are updated.”

U.S. lawmakers introduced about 50 cybersecurity measures in the last session of Congress, according to the White House summary. Those measures include at least eight bills that seek to boost security at energy and utility companies.

Senate Majority Leader Harry Reid, who is compiling comprehensive cybersecurity legislation on his side of Capitol Hill, solicited the administration’s proposal to guide Congress’s efforts on the issue.

The White House proposal would require companies that operate systems critical to the nation’s economy to develop plans for securing their systems. They also would have to hire commercial auditors to determine if the security procedures are adequate. If not, the company would have the option to work with the Homeland Security Department to strengthen the plan.

A “major concern for companies” is that the government may choose to disclose the audits publicly, which “could turn into a naming and shaming approach,” Travis Sharp, research associate at the Center for a New American Security, a Washington-based policy research group, said in an interview.

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Copyright

‘Rogue’ Websites Selling Pirated Goods Targeted by U.S. Bill

U.S. lawmakers introduced legislation yesterday to combat websites that distribute and sell pirated content and counterfeit goods.

The bill targets websites “dedicated to infringing activities” including the sale of illegally copied music, movies, pharmaceuticals and consumer products.

The measure would, among other things, allow the U.S. attorney general to serve a court order on U.S.-based search engines, Internet-service providers, payment processors and online advertising networks requiring them to prevent access to an infringing site or stop doing business with such a site.

“This legislation will protect the investment American companies make in developing brands and creating content, and will protect the jobs associated with those investments,” Senator Patrick Leahy, a Vermont Democrat, said in a statement.

Leahy, chairman of the Senate Judiciary Committee, introduced the bill with two Republicans, Orrin Hatch of Utah and Chuck Grassley of Iowa. It is co-sponsored by seven other members of the committee. Leahy introduced similar legislation that failed to advance in the last session of Congress.

The Business Software Alliance, which represents Apple Inc. (AAPL), Microsoft Corp. (MSFT) and other technology companies, and the Software & Information Industry Association, whose members include Google Inc. (GOOG) and International Business Machines Corp. (IBM), praised the legislation.

Warner Music, Sony Reach $105 Million Agreement With Lime Wire

Warner Music Group Corp. (WMG) and Sony Corp. (6758), along with other music labels, agreed during a trial to settle their copyright lawsuit against Lime Wire LLC and its founder, Mark Gorton, for $105 million.

“The case has just settled,” U.S. District Judge Kimba Wood told jurors yesterday.

Lawyers for both sides met throughout the day at the Manhattan courthouse. The defendants will pay a total of $105 million, according to e-mailed statements from the Recording Industry Association of America and Willkie Farr & Gallagher LLP, the law firm representing Lime Wire and Gorton.

During the trial, the music-label owners, which also included Vivendi SA (VIV)’s Universal Music Group and Citigroup Inc. (C)’s EMI Group, sought more than $1 billion. The labels claimed Lime Wire and Gorton induced the infringement of copyrights on thousands of songs through peer-to-peer file-sharing software on the Internet. Wood ordered Lime Wire to shut down its music service last year.

Glenn Pomerantz, a lawyer for the music companies, told the jury of eight women and one man in opening statements on May 3 that the record industry’s revenue fell 52 percent from 2000, the year Lime Wire was founded, to 2010.

“We are pleased to have reached a large monetary settlement,” the recording association said in its statement. “Designing and operating services to profit from the theft of the world’s greatest music comes with a stiff price.”

Gorton’s lawyers were trying to convince the jury that other factors were responsible for the decline in industry revenue besides peer-to-peer, or P2P, file-sharing.

Gorton, 44, declined to comment about the settlement. Besides founding Lime Wire, he operated a New York-based hedge fund, Tower Research Capital LLC.

The case is Arista Records LLC v. Lime Wire LLC, 06-05936, U.S. District Court, Southern District of New York (Manhattan).

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Yao Ming Sues Chinese Sportswear Maker, Xinhua Says

Yao Ming, the Houston Rockets basketball player, sued Wuhan Yunhe Dashayu Sportswear Co. for allegedly using his signature, image and the brand name Yaomingyidai -- Yao Ming Era in English -- without his permission, Xinhua News Agency reported.

Yao Ming has a sportswear contract with Reebok International Ltd., the official Chinese news service said.

Baidu Files Appeal Against China Ruling in Favor of Shanda

Baidu Inc. filed an appeal against a ruling by a Shanghai court in favor of Shanda Interactive Entertainment Ltd., Kaiser Kuo, a Baidu spokesman, said by phone yesterday.

Baidu was ordered to pay Shanda damages of 500,000 yuan in the May 10 ruling in the copyright-infringement case, Elyse Liao, a manager at Shanda’s investor relations department said yesterday. Both Kuo and Liao declined to comment further on the dispute, centered on electronic book products.

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Patent

Apple Loses Decision in Patent Case Against Kodak Before ITC

Eastman Kodak Co. (EK)’s digital-camera technology doesn’t violate Apple Inc.’s patent rights, a U.S. International Trade Commission judge said.

Judge Robert Rogers in Washington said yesterday that neither of the two patents in Apple’s case before the ITC were being infringed. The judge also held that one of the patents is invalid.

The judge’s findings are subject to review by the six- member ITC, which has the power to block imports of products that infringe U.S. patents.

Apple, maker of the iPhone and iPad tablet computer, filed its case in April 2010, about three months after Rochester, New York-based Kodak accused Apple and BlackBerry maker Research In Motion Ltd. of infringing a patent related to ways of previewing images. The ITC in March said it would review a judge’s findings in that case, which went in favor of Apple and RIM.

Kodak filed its initial complaint to force Cupertino, California-based Apple and Waterloo, Ontario-based RIM to pay patent royalties. Kodak Chief Executive Officer Antonio Perez has said a victory in the dispute may generate as much as $1 billion in new licensing revenue.

Officials for Apple didn’t immediately respond to telephone and e-mail messages seeking comment.

The case is In the Matter of Digital Imaging Devices and Related Software, 337-717, U.S. International Trade Commission (Washington).

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Trademark

ZTE Says Huawei ‘Roadblocks’ Won’t Keep It Out of Europe

ZTE Corp. (000063), China’s second-largest maker of phone network equipment, said “roadblocks” from rival Huawei Technologies Co. won’t keep it out of Europe after Huawei won a preliminary injunction for alleged trademark infringement.

The May 2 injunction from a German court is only a “temporary relief” and doesn’t constitute a ruling on whether ZTE actually infringed, ZTE said in an e-mailed statement. The court prohibited ZTE from using a mark on USB modem sticks or selling USB sticks that have a certain legally protected design, according to a copy of the judgment obtained by Bloomberg News.

ZTE and Huawei, both based in Shenzhen, China, are looking to expand sales in Europe. Huawei last month filed lawsuits in Germany, France and Hungary accusing ZTE of patent and trademark infringements related to data-card and high-speed mobile Internet technology.

ZTE said April 29 it filed its own lawsuit in China claiming Huawei infringed patents for fourth-generation mobile network technology.

Huawei is “committed to the protection of its own innovations,” Ross Gan, a spokesman, said yesterday. “We welcome the court’s decision to issue an injunction in favor of Huawei that prevents ZTE from continuing to infringe our trademark and patent rights.”

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Privacy

Disney Unit to Pay Record $3 Million to Settle FTC Charges

Walt Disney Co.’s Playdom online game unit agreed to pay $3 million to settle Federal Trade Commission charges of disclosing personal information about children without their parents’ prior consent.

The settlement is the largest civil penalty ever for violating the Children’s Online Privacy Protection Rule, the FTC said yesterday in a statement on its website.

Disney, based in Burbank, California, acquired Playdom in August.

Sienna Miller’s News of the World Lawsuit Abusive, Lawyer Says

Actress Sienna Miller’s lawsuit against Rupert Murdoch’s News of the World newspaper must be dismissed as abusive, a lawyer for the newspaper told a London judge.

The actress was offered 100,000 pounds ($163,000) by News Corp. (NWSA)’s U.K. unit to settle the suit over allegations that journalists at the newspaper hacked her mobile phone.

The sum is far more than she could hope to receive if the case goes to trial, Michael Silverleaf, the newspaper’s lawyer, told judge Geoffrey Vos at a hearing yesterday. The paper admitted liability for the wrongdoing Miller claims and offered her money, so there is nothing left for the court to decide, Silverleaf said. The case should continue only if Miller’s lawyers can show she’s entitled to more than 100,000 pounds, an amount he said U.K. courts award only for serious injuries.

Miller, 29, is one of more than 20 celebrities and politicians suing New York-based News Corp. (NWS) over the more than four-year-old phone-hacking scandal. The company apologized and offered to settle some of the cases last month after two journalists linked to the paper were arrested.

Silverleaf rejected suggestion by Miller’s lawyers in court documents that she might be entitled to as much as 400,000 pounds. Former Formula 1 president Max Mosley won a record 60,000 pounds in damages from the News of the World in 2009 over a story claiming he engaged in a Nazi-themed sex party. Mosley has said the party had no Nazi overtones.

Miller’s lawyer, Hugh Tomlinson, said that it was “nice to hear the News of the World admitting how bad the damage they did to Mr. Mosley was.”

To contact the reporter on this story: Ellen Rosen in New York at erosen14@bloomberg.net.

To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net.

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