Nearly lost in the news about the U.S. Federal Trade Commission's approval on Thursday of Google's acquisition of DoubleClick was another action by the agency: the publication of a proposed set of privacy principles governing online behavioral advertising.
The release of the privacy principles is an important and welcome step, said Peter Swire, a senior fellow at the Center for American Progress, a liberal think tank, and a law professor at Ohio State University. Although some privacy groups blasted the FTC for approving Google's DoubleClick deal, the acquisition has helped place focus on the entire online advertising industry's privacy practices, Swire said.
"It's good that the FTC is shining a spotlight on this industry," Swire said Friday. "Online advertising is in its second boom. They're trying lots of new techniques; some of those techniques have privacy problems."
The FTC hosted a workshop on behavioral advertising and privacy in November. The agency's proposed privacy principles, a series of "self-regulatory" steps the FTC is recommending for online advertisers, come in part from that workshop.
Among the FTC's proposals:
-- Web sites that collect information for behavioral advertising should provide a "clear, consumer-friendly, and prominent statement" about the reason for collecting that data. Consumers should be able to choose whether they will allow that information to be collected.
-- Any company that collects or stores consumer data for behavioral advertising should provide "reasonable security" and should keep data only as long as necessary to fulfill legitimate business or law enforcement needs.
-- Companies should only collect sensitive data for behavioral advertising if they obtain express consent from the consumer.
The Center for Democracy and Technology (CDT), a group focused on online privacy and civil liberties, also praised the FTC for releasing its privacy principles. The principles are a "clear sign that the commission does not believe that the industry's current self-regulation framework is sufficient to protect consumers today,” CDT Deputy Director Ari Schwartz said in a statement.
CDT also called on Google to "step up and make a clear, public statement about its plans for proactively protecting consumer privacy." Consumer privacy in the behavioral advertising market remains an industrywide concern that requires the focus of consumers, policymakers and companies, CDT said.
The release of the privacy principles should send a signal to online advertisers, said Leslie Harris, CDT's president. "In releasing these principles, the FTC hasn't closed the door to other options," she said in a statement. "Self-regulation is part of the solution for protecting consumer privacy, but clearly self-regulation hasn't lived up to its promises. ... We'll need a rigorous mix of self-regulation backed by regulatory enforcement."
Other privacy groups criticized the FTC for its ruling allowing Google's acquisition of DoubleClick to move forward. The agency had reason to act on privacy concerns raised by the merger and failed, said Marc Rotenberg, executive director of the Electronic Privacy Information Center (EPIC), one of three privacy groups that asked the FTC to block the merger or impose privacy conditions.
The FTC could have established "the necessary safeguards for personal data and competition that could have allowed a global [privacy] framework to emerge," Rotenberg said. "[The FTC's] sole purpose is to protect the public interest. It failed to do so ... in a case that will have far-reaching implications for the Internet economy and the privacy rights of American consumers."
Joseph Turow, a communication professor at the University of Pennsylvania, agreed. The European Union is still investigating the Google-DoubleClick deal, with a decision not due until April, and it is likely that regulators there will take a harder look at privacy issues, he said.
Consumer tracking and privacy should be part of the FTC's antitrust review when it looks at online advertising deals, he said. "You can't talk about the digital advertising market today without talking about competition in targeting Americans," he said.
Google supports the FTC's efforts to create privacy guidelines, David Drummond, the company's senior vice president for corporate development and chief legal officer, said in a blog post. "The FTC’s decision publicly affirms what we and numerous independent analysts have been saying for months: Our acquisition does not threaten competition in what is a robust, innovative, and quickly evolving online advertising space," Drummond wrote. "In fact, we firmly believe the transaction will increase competition and bring substantial benefits to consumers, web publishers, and online advertisers."
Critics failed to show specific privacy harms, added Thomas Lenard, president of iGrowthGlobal, a conservative think tank. "I don’t see a problem because nobody has demonstrated the acquisition will result in any privacy harm to consumers," he said. "All the allegations are very hypothetical. Privacy advocates assert that Google’s and DoubleClick’s activities injure consumers, but they don’t provide any evidence."
If the FTC had blocked the deal, it would be "penalizing success, and that would send a bad signal to the marketplace," Lenard added. "That would also be bad for consumers."
Sunday, December 23, 2007
McAfee to pay $13.8 million to settle backdating lawsuits
McAfee has taken two major steps toward closing the stock-option backdating scandal that has plagued the company for the past two years.
On Friday, the security vendor filed 10 years' worth of restated financial reports, a process that was set off by the scandal. The company also said it had reached a tentative settlement in a class-action lawsuit relating to its accounting practices.
Charges for the restatement will be $137.4 million. McAfee has also set aside US$13.8 million to cover lawsuits filed in 2006 on behalf of McAfee shareholders, the company said in a statement released on Friday.
McAfee is one of more than 100 U.S. companies that have been investigated by the U.S. Securities and Exchange Commission (SEC) for improper backdating of options. In backdating, companies would alter the date that stock options grants were made to certain employees so they could be purchased at a lower price and ultimately sold by the employee at a greater profit. The practice, while not illegal, was often improperly disclosed in regulatory filings, leading to SEC investigations of many high-profile companies, including Apple, Dell and Broadcom.
Earlier this year, McAfee's former legal counsel, Kent Roberts, was indicted on fraud charges related to the scandal.
The restated reports cover the period from 1995 until the first quarter of McAfee's fiscal 2006 year. The company has also filed 10-Q reports for the first three quarters of its fiscal 2007 year, putting it up-to-date with the SEC for the first time since March 2006.
On Friday, the security vendor filed 10 years' worth of restated financial reports, a process that was set off by the scandal. The company also said it had reached a tentative settlement in a class-action lawsuit relating to its accounting practices.
Charges for the restatement will be $137.4 million. McAfee has also set aside US$13.8 million to cover lawsuits filed in 2006 on behalf of McAfee shareholders, the company said in a statement released on Friday.
McAfee is one of more than 100 U.S. companies that have been investigated by the U.S. Securities and Exchange Commission (SEC) for improper backdating of options. In backdating, companies would alter the date that stock options grants were made to certain employees so they could be purchased at a lower price and ultimately sold by the employee at a greater profit. The practice, while not illegal, was often improperly disclosed in regulatory filings, leading to SEC investigations of many high-profile companies, including Apple, Dell and Broadcom.
Earlier this year, McAfee's former legal counsel, Kent Roberts, was indicted on fraud charges related to the scandal.
The restated reports cover the period from 1995 until the first quarter of McAfee's fiscal 2006 year. The company has also filed 10-Q reports for the first three quarters of its fiscal 2007 year, putting it up-to-date with the SEC for the first time since March 2006.
U.S. trade agency to investigate antivirus patent claims
The U.S. International Trade Commission (ITC) has voted to investigate claims by Trend Micro of competitors' patent infringement involving antivirus products.
Trend Micro filed a trade complaint Nov. 21 against fellow cybersecurity vendors Barracuda Networks of Campbell, California; Panda Software International, based in Spain; and Panda Distribution of Glendale, California.
Trend Micro's complaint accuses the three companies of infringing its patent for virus detection and removal apparatus for computer networks. The technology "represents a dramatic departure from the traditional antivirus methods of safeguarding individual computers," the company says in its complaint.
The Trend Micro complaint accuses Barracuda of importing antivirus software that infringes its patent. The complaint says Barracuda uses code from the open-source antivirus product ClamAV, which is written in part in Europe and Australia. Barracuda also imports hardware components, the complaint says.
Panda's products also contain code imported into the U.S., the Trend Micro complaint says.
A Barracuda spokeswoman said the complaint is curious. "It is interesting that the ITC has decided to take up an investigation, given Barracuda Networks manufactures all of its products in the United States and does not import anything of significance," said Kylie Heintz.
A Panda representative didn't immediately respond to a request for comments.
The ITC case will be referred to an administrative law judge, who will schedule and hold an evidentiary hearing. The judge will make an initial determination as to whether there is a violation of section 337 of the Tariff Act of 1930. That initial determination is subject to commission review.
The ITC will make a final determination in the investigation at the earliest practicable time, the commission said in a news release. Within 45 days, the ITC will set a target date for completing the investigation.
Trend Micro filed a trade complaint Nov. 21 against fellow cybersecurity vendors Barracuda Networks of Campbell, California; Panda Software International, based in Spain; and Panda Distribution of Glendale, California.
Trend Micro's complaint accuses the three companies of infringing its patent for virus detection and removal apparatus for computer networks. The technology "represents a dramatic departure from the traditional antivirus methods of safeguarding individual computers," the company says in its complaint.
The Trend Micro complaint accuses Barracuda of importing antivirus software that infringes its patent. The complaint says Barracuda uses code from the open-source antivirus product ClamAV, which is written in part in Europe and Australia. Barracuda also imports hardware components, the complaint says.
Panda's products also contain code imported into the U.S., the Trend Micro complaint says.
A Barracuda spokeswoman said the complaint is curious. "It is interesting that the ITC has decided to take up an investigation, given Barracuda Networks manufactures all of its products in the United States and does not import anything of significance," said Kylie Heintz.
A Panda representative didn't immediately respond to a request for comments.
The ITC case will be referred to an administrative law judge, who will schedule and hold an evidentiary hearing. The judge will make an initial determination as to whether there is a violation of section 337 of the Tariff Act of 1930. That initial determination is subject to commission review.
The ITC will make a final determination in the investigation at the earliest practicable time, the commission said in a news release. Within 45 days, the ITC will set a target date for completing the investigation.
AT&T, Vonage finalize patent lawsuit settlement
A patent infringement lawsuit filed by AT&T against voice-over-IP telephony provider Vonage has been settled, Vonage said late Friday.
The settlement brings an unusually speedy end to the lawsuit, which was filed by AT&T on Oct. 17. It alleged Vonage wilfully infringed an AT&T patent related to telephone systems that allow people to make VOIP (voice-over-Internet Protocol) calls using standard telephone devices. A breakdown in talks between the two companies over the issue led to the lawsuit, said AT&T at the time.
Less than a month later, on Nov. 7, the two companies said they had tentatively agreed to a settlement. At that time Vonage said it would pay AT&T around US$39 million under the terms of the settlement.
Final terms were not disclosed on Friday when, in a brief statement, Vonage said the dispute had been settled.
Vonage previously settled a patent suit with Verizon Communications for $80 million to $120 million, depending on the results of its appeal of a court ruling on two patents, and with Sprint Nextel for $80 million. As part of the Sprint Nextel deal Vonage agreed to license more than 100 patents covering technology for connecting calls from a traditional phone network to an IP network. The Verizon settlement came after a court found Vonage had infringed upon the carrier's patents.
The settlement brings an unusually speedy end to the lawsuit, which was filed by AT&T on Oct. 17. It alleged Vonage wilfully infringed an AT&T patent related to telephone systems that allow people to make VOIP (voice-over-Internet Protocol) calls using standard telephone devices. A breakdown in talks between the two companies over the issue led to the lawsuit, said AT&T at the time.
Less than a month later, on Nov. 7, the two companies said they had tentatively agreed to a settlement. At that time Vonage said it would pay AT&T around US$39 million under the terms of the settlement.
Final terms were not disclosed on Friday when, in a brief statement, Vonage said the dispute had been settled.
Vonage previously settled a patent suit with Verizon Communications for $80 million to $120 million, depending on the results of its appeal of a court ruling on two patents, and with Sprint Nextel for $80 million. As part of the Sprint Nextel deal Vonage agreed to license more than 100 patents covering technology for connecting calls from a traditional phone network to an IP network. The Verizon settlement came after a court found Vonage had infringed upon the carrier's patents.
Lucent agrees to pay fines for China dealings
Alcatel-Lucent has agreed to pay $2.5 million in fines to resolve allegations that it provided Chinese government officials with free trips to Disneyland and other tourist attractions.
The company has to pay $1 million to resolve U.S. Department of Justice charges that it violated the Foreign Corrupt Practices Act (FCPA) when providing travel and other perks to Chinese government officials, the DOJ said Friday. The company also agreed to pay a $1.5 million civil fine to the U.S. Securities and Exchange Commission.
The agreement with the DOJ wraps up a multiyear investigation into whether Lucent, before its November 2006 merger with Alcatel, provided things of value to the Chinese officials and improperly accounted for the expenses.
The company cooperated fully with the DOJ and SEC investigations, an Alcatel-Lucent spokeswoman said. The company is "glad to put the matter behind us" and looks forward to successful business dealings in China in the future, she said.
From about 2000 to 2003, Lucent spent millions of dollars on more than 300 trips for Chinese government officials that included sightseeing, entertainment and leisure, the DOJ said. The trips were approved by senior Lucent Chinese officials, with the support of Lucent employees in the U.S.
Lucent improperly recorded expenses for these trips and failed to implement internal controls to monitor the provision of travel and other things of value to Chinese officials, the DOJ said in a press release.
In 2002 and 2003, there were 24 Lucent-sponsored trips for Chinese government customers, and at least 12 trips were primarily for sightseeing, the DOJ said. The people participating in these trips were senior government officials, including the heads of state-owned telecommunications companies in Beijing and the leaders of provincial telecommunications subsidiaries.
Between 2000 and 2003, Lucent provided Chinese government officials with trips to the U.S., Europe, Australia and elsewhere that were often characterized as "factory inspections" or "training," the DOJ said. By 2001, Lucent had outsourced most of its manufacturing and no longer owned factories for its customers to tour. These trips were primarily sightseeing tours to locations such as Disneyland, Universal Studios and the Grand Canyon, and typically lasted 14 days and cost between $25,000 and $55,000 per trip, the DOJ said.
Lucent admits to all of this conduct in the agreement announced on Friday. The agreement also requires Lucent to adopt new or modify existing internal controls, policies and procedures. Those internal controls must ensure that Lucent keeps fair and accurate books, the DOJ said. The agency has agreed not to prosecute Lucent if it complies with all of the requirements in the agreement over a two-year term.
The company has to pay $1 million to resolve U.S. Department of Justice charges that it violated the Foreign Corrupt Practices Act (FCPA) when providing travel and other perks to Chinese government officials, the DOJ said Friday. The company also agreed to pay a $1.5 million civil fine to the U.S. Securities and Exchange Commission.
The agreement with the DOJ wraps up a multiyear investigation into whether Lucent, before its November 2006 merger with Alcatel, provided things of value to the Chinese officials and improperly accounted for the expenses.
The company cooperated fully with the DOJ and SEC investigations, an Alcatel-Lucent spokeswoman said. The company is "glad to put the matter behind us" and looks forward to successful business dealings in China in the future, she said.
From about 2000 to 2003, Lucent spent millions of dollars on more than 300 trips for Chinese government officials that included sightseeing, entertainment and leisure, the DOJ said. The trips were approved by senior Lucent Chinese officials, with the support of Lucent employees in the U.S.
Lucent improperly recorded expenses for these trips and failed to implement internal controls to monitor the provision of travel and other things of value to Chinese officials, the DOJ said in a press release.
In 2002 and 2003, there were 24 Lucent-sponsored trips for Chinese government customers, and at least 12 trips were primarily for sightseeing, the DOJ said. The people participating in these trips were senior government officials, including the heads of state-owned telecommunications companies in Beijing and the leaders of provincial telecommunications subsidiaries.
Between 2000 and 2003, Lucent provided Chinese government officials with trips to the U.S., Europe, Australia and elsewhere that were often characterized as "factory inspections" or "training," the DOJ said. By 2001, Lucent had outsourced most of its manufacturing and no longer owned factories for its customers to tour. These trips were primarily sightseeing tours to locations such as Disneyland, Universal Studios and the Grand Canyon, and typically lasted 14 days and cost between $25,000 and $55,000 per trip, the DOJ said.
Lucent admits to all of this conduct in the agreement announced on Friday. The agreement also requires Lucent to adopt new or modify existing internal controls, policies and procedures. Those internal controls must ensure that Lucent keeps fair and accurate books, the DOJ said. The agency has agreed not to prosecute Lucent if it complies with all of the requirements in the agreement over a two-year term.
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