August 24, 2017

DealBook: British Regulators Plan Major Overhaul of Rate System

Martin Wheatley, managing director of the Financial Services Authority, the British regulator that will conduct the review into the rate-setting process.Jerome Favre/Bloomberg NewsMartin Wheatley, managing director of the Financial Services Authority, the British regulator that will conduct the review into the rate-setting process.

LONDON – The system at the center of the rate-rigging scandal will be overhauled as regulators respond to public anger over the manipulation of the London interbank offered rate, or Libor.

Martin Wheatley, the British regulator in charge of overhauling the rate-setting process, outlined plans on Friday that could lead to wholesale changes to Libor, which is used as a benchmark rate for more than $360 trillion of financial products, including mortgages and loans.

The reforms may lead to the scrapping of the current system, which is overseen by the British Bankers’ Association, a trade body, and making it a criminal offense to manipulate benchmark rates.

“The existing structure and governance of Libor is no longer fit for purpose and reform is needed,” said Mr. Wheatley, who is managing director of the Financial Services Authority, the British regulator. “Trust in a vital part of the financial system has been badly damaged and timely action is needed to restore it.”

The tough words from British authorities come after one of the country’s biggest banks, Barclays, agreed to a $450 million settlement with American and British officials after some of its traders and senior executives were found to have manipulated the rate for financial gain.

A number of other global financial institutions, including Citigroup and HSBC, are under investigation for their role in the scandal. Analysts estimate the combined fines and penalties for the financial services industry may total more than $20 billion.

Mr. Wheatley is in charge of a British government review of the Libor-setting process, which will offer recommendations in late September about how the rate could be changed.

On Friday, the British regulator said the inquiry was likely to lead to major changes to Libor, including the use of actual trading data to set the daily benchmark rate.

Currently, a number of banks are polled each day about what their lending costs may be if they tapped the financial markets for financing. During the recent financial crisis, so-called interbank lending between firms was drastically curtailed, which led bank executives to submit incorrect data for Libor, according to regulatory filings.

“Libor is also intended to represent unsecured interbank borrowing costs for a range of maturities, but as this type of lending has severely declined since the financial crisis, submissions are more heavily reliant on judgment,” Mr. Wheatley said.

The review will center on potential criminal sanctions against individuals that manipulate the rate. American and British authorities are currently considering the prosecution of traders implicated in the scandal, though European officials want to write new legislation to make the manipulation of Libor and other benchmark rates a criminal offense.

The overhaul of Libor also will focus on increasing governance of the rate-setting process, after authorities found deficiencies in how the system was overseen. In discussions dating back to 2008, American and British central bankers had raised concerns with the British Bankers’ Association about how the rate was governed. In response, authorities forced the trade body to increase the auditing of banks’ Libor submissions from late 2008 to improve transparency.

“Any new governance framework should ensure that the compilation process itself is subject to a much greater degree of independence, transparency and accountability,” Mr. Wheatley said on Friday.

British authorities said they would be working with American and other international counterparts as part of the wide-ranging review. Banks are expected to provide feedback on the potential reforms by early September.

With regulators continuing their investigations into the activities of global firms, banks are likely to face pressure to support the changes to Libor.

“The past few months have presented a series of very significant reputational challenges for the financial services industry,” Mr. Wheatley said. “It’s clear from the reaction to the Libor scandal that consumers think it’s important.”

Article source: http://dealbook.nytimes.com/2012/08/10/british-regulators-plan-major-overhaul-of-rate-system/?partner=rss&emc=rss

DealBook: Geithner Tried to Curb Rate Rigging in 2008

When Timothy F. Geithner ran the Federal Reserve Bank of New York, he acknowledged fundamental problems with the process for setting key interest rates in the midst of the 2008 financial crisis, according to documents provided to The New York Times.

Mr. Geithner, who is now the United States Treasury secretary, questioned the integrity of the benchmark as reports surfaced that Barclays and other big banks were misrepresenting the rates. In 2008, Barclays had several conversations with New York Fed officials about the matter.

Mr. Geithner then reached out to top British authorities to discuss issues with the interest rate, which is set in London. In an e-mail to his counterparts, he outlined reforms to the system, suggesting that British authorities “strengthen governance and establish a credible reporting procedure” and “eliminate incentive to misreport,” according to the documents.

But the warnings came too late, and Barclays continued the illegal activity.

For years, Barclays reported false rates in an effort to bolster its profit and deflect concerns about the British bank’s health. Last month, the bank agreed to pay $450 million to American and British authorities to settle claims that it had manipulated key benchmarks, including the London interbank offered rate, or Libor.

Libor and other such rates affect the cost of borrowing for consumer and companies, providing a benchmark for trillions of dollars in mortgages and other financial products. The case against Barclays is the first action to stem from a broader multiyear investigation into how big banks set the rates. Authorities around the world are pursuing investigations against more than 10 big banks, including UBS, JPMorgan and Citigroup.

Since the Barclays settlement, regulators have faced scrutiny of their roles in the rate-manipulation scandal.

Lawmakers in London and Washington have questioned whether government officials turned a blind eye to years of misconduct at Barclays. The bank has disclosed that it informed regulators, including the Bank of England and the Federal Reserve Bank of New York, that it had reported artificially low rates, along with the rest of the Wall Street.

This week, the oversight panel of the House Financial Services Committee sent a letter to the New York Fed seeking transcripts from several phone calls involving regulators and Barclays’ executives. The New York Fed plans to release the transcripts on Friday.

Mr. Geithner is not mentioned in the transcripts, a person briefed on the matter said who did not want to be identified because the investigation was continuing. But it is unclear if other documents will detail whether he had deeper knowledge of the issues with Libor, and what further actions — if any — Mr. Geithner took. According to the person briefed on the matter, New York Fed officials told regulators in Washington about the problems with Libor.

The New York Fed, which oversees the holding company at some of the nation’s biggest banks, first got wind of brewing problems with Libor in the summer of 2007. At the time, Barclays executives started briefing the regulators in the United States and Britain about their interest rate submissions.

In April 2008, a Barclays employee acknowledged to the Financial Services Authority of Britain that the bank was lowering its Libor submissions. “So, to the extent that, um, the Libors have been understated, are we guilty of being part of the pack? You could say we are,” the Barclays manager said, according to regulatory documents. Barclays made similar comments to the New York Fed, the documents say.

The bank never explicitly told regulators that it was reporting false interest rates that amounted to manipulation, according to regulatory documents.

In Basel, Switzerland, Mr. Geithner discussed the Libor with Mervyn King, the governor of the Bank of England, Britain’s central bank, according to the documents provided to The New York Times. Mr. Geithner then followed up with a June 2008 e-mail to Mr. King, outlining in a two-page memo his suggested changes to the way big banks set the interest rate, a copy of the memo shows. Mr. Geithner made six main recommendations for “enhancing the credibility of Libor.”

“We would welcome a chance to discuss these and would be grateful if you would give us some sense of what changes are possible,” Mr. Geithner wrote.

Mr. King responded “favorably” the person briefed on the matter said. The person added that the respective regulators continued discussions.

The memo raises new questions about why the Bank of England failed to halt the actions. At a hearing this week, British politicians hammered a senior Bank of England official for failing to thwart the misconduct. The official, Paul Tucker, was copied on Mr. Geithner’s June 2008 e-mail.

Article source: http://dealbook.nytimes.com/2012/07/12/geithner-was-aware-of-problems-with-key-interest-rates/?partner=rss&emc=rss

DealBook: Libor Rate-Rigging Scandal Sets Off Legal Fights for Restitution

As unemployment climbed and tax revenue fell, the city of Baltimore laid off employees and cut services in the midst of the financial crisis. Its leaders now say the city’s troubles were aggravated by bankers’ manipulation of a key interest rate linked to hundreds of millions of dollars the city had borrowed.

Baltimore has been leading a battle in Manhattan federal court against the banks that determine the interest rate, the London interbank offered rate, or Libor, which serves as a benchmark for global borrowing and stands at the center of the latest banking scandal. Now cities, states and municipal agencies nationwide, including Massachusetts, Nassau County on Long Island, and California’s public pension system, are looking at whether they suffered similar losses and are weighing legal action.

Dozens of lawsuits filed by municipalities, pension funds and hedge funds have been consolidated into a few related cases against more than a dozen banks that are involved in setting Libor each day, including Bank of America, JPMorgan Chase, Deutsche Bank and Barclays. Last month, Barclays admitted to regulators that it tried to manipulate Libor before and during the financial crisis in 2008, and paid $450 million to settle the charges. It said other banks were doing the same, but none of them have been accused of wrongdoing.

Libor, a measure of how much banks must pay to borrow money from one another in the short term, is set through a daily poll of the banks.

The rate influences what consumers, businesses and investors pay on a wide range of financial contracts, as varied as mortgages and interest rate swaps. Barclays has said it and other banks understated the rate during the financial crisis to make themselves look healthier to the public, rather than to make more money from clients.

As regulators and lawmakers in Washington and Europe assess the depth of the Libor abuse and the failure to address it, economists and analysts are already predicting it could be one of the most expensive scandals to hit Wall Street since the financial crisis.

Governments and other investors may face many hurdles in proving damages. But Darrell Duffie, a professor of finance at Stanford, said he expected that their lawsuits alone could lead to the banks’ paying out tens of billions of dollars, echoing numbers from a recent report by analysts at Nomura Equity Research.

American municipalities have been among the first to claim losses from the supposed rate-rigging, because many of them borrow money through investment vehicles that directly derive their value from Libor. Peter Shapiro, who advises Baltimore and other cities on their use of these investments, said that “about 75 percent of major cities have contracts linked to this.”

If the banks submitted artificially low Libor rates during the financial crisis in 2008, as Barclays has admitted, it would have led cities and states to receive smaller payments from financial contracts they had entered with their banks, Mr. Shapiro said.

“Unambiguously, state and local government agencies lost money because of the manipulation of Libor,” said Mr. Shapiro, who is managing director of the Swap Financial Group and is not involved in any of the lawsuits. “The number is likely to be very, very big.”

The banks have declined to comment on the lawsuits, but their lawyers have asked for the cases to be dismissed in court filings, pointing to the many unusual factors that influenced Libor during the crisis.

The efforts to calculate potential losses are complicated by the fact that Libor is used to determine the cost of thousands of financial products around the globe each day. If Libor was artificially pushed down on a particular day, it would help people involved in some types of contracts and hurt people involved in others.

Securities lawyers say the lawsuits will not be easy to win because the investors will first have to prove that the banks successfully pushed down Libor for an extended period during the crisis, and then will have to demonstrate that it was down on the day when the bank calculated particular payments. In addition, investors may have to prove that the specific bank from which they were receiving their payment was involved in the manipulation. Before it even reaches the point of proving such subtleties, however, the banks could be compelled to settle the cases.

One of the major complaints was filed by several traders and hedge funds that entered into futures contracts that are traded through the Chicago Mercantile Exchange and that pay out based on Libor. These contracts were a popular way to protect against spikes in interest rates, but they would not have paid off as expected if Libor had been artificially lowered.

A 2010 study cited in the suit — conducted by professors at the University of California, Los Angeles and the University of Minnesota — indicated that Libor was significantly lower than it should have been throughout 2008 and was particularly skewed around the bankruptcy of Lehman Brothers.

A separate complaint filed in 2010 by the investment firm Charles Schwab asserts that some of its mutual funds, including popular ones like the Schwab Total Bond Market Fund, lost money on similar investments.

The complaints being voiced by municipalities are mostly related to their use of a popular financial contract known as an interest rate swap. States and cities generally enter into these swaps with specific banks so that they can borrow money in the bond market. They pay bondholders based on a floating interest rate — like an adjustable-rate mortgage — but end up paying their bankers a fixed rate through a swap. If Libor is artificially lowered, the municipality is stuck paying the same fixed rate, but it receives a smaller variable payment from its bank.

Even before the current controversy, some municipal activists have said that banks took advantage of the financial inexperience of municipal officials to sell them billions of dollars of interest rate swaps. Experts in municipal finance say that because of the particular way that cities and states borrow money, they are especially liable to lose out on their swaps if Libor drops.

Mr. Shapiro, who helps cities, states and companies negotiate these contracts, said that if a city had interest rate swaps on bonds worth $1 billion and Libor was artificially pushed down by 0.30 percent, which is what the lawsuits contend, that city would have lost $3 million a year. The lawsuit claims the manipulation occurred over three years. Barclays’ settlement with regulators did not specify how much the banks’ actions may have moved Libor.

In Nassau County, the comptroller, George Maragos, said in a statement that according to his own calculations, Libor manipulation may have cost the county $13 million on swaps related to $600 million of outstanding bonds.

A Massachusetts state official who spoke on the condition of anonymity because of potential future legal actions, said the state was calculating its potential losses.

“We are deeply concerned and we are carefully analyzing all of our options,” the official said.

Anne Simpson, a portfolio manager at the California Public Employees’ Retirement System — the nation’s largest pension fund — said that the fund’s officials “are sifting through the impact, but there certainly is an impact.”

In Baltimore, the city had Libor-based interest rate swaps on about $550 million of bonds, according to the city’s financial report from 2008, the central year discussed in the lawsuit. The city’s lawyers have declined to specify what they think Baltimore’s losses were.

The city solicitor, George Nilson, said that the rate manipulation claims meant that the city lost out on money when it needed it the most.

“The injury we suffered during the time we suffered it hurt more because we were challenged budgetarily,” Mr. Nilson said. “Every dollar we lost due to illegal conduct was a dollar we couldn’t pay to keep open recreation centers or to pay police officers.”

Article source: http://dealbook.nytimes.com/2012/07/10/libor-rate-rigging-scandal-sets-off-legal-fights-for-restitution/?partner=rss&emc=rss

Bits Blog: Google Cleared of Java Patent Violation

David Paul Morris/Bloomberg News

Google did not infringe on any Oracle patents when it used Java software in the Android operating system, a federal jury said on Wednesday.

The verdict, reached in Federal District Court in San Francisco, leaves Oracle with a relatively small claim of copyright infringement, making it almost certain that the judge will not demand a harsh penalty from Google.

That would be a mild end to what at one time seemed to be a major case between two of the largest companies in tech. Oracle, which picked up the Java software language when it bought Sun Microsystems, accused Google of violating both patent and copyright protections in developing Android, which is now the world’s most popular smartphone operating system. If Google had lost on several counts of the case, it could have been subject to severe fines or been forced to let Oracle in on future developments of Android.

“It’s a full win for us,” said Jim Prosser, a Google spokesman. “If you look at what has happened in this case so far, they didn’t have much.”

Deborah Hellinger, an Oracle spokeswoman, issued this statement:

“Oracle presented overwhelming evidence at trial that Google knew it would fragment and damage Java. We plan to continue to defend and uphold Java’s core write-once, run-anywhere principle and ensure it is protected for the nine million Java developers and the community that depend on Java compatibility.”

The case became notable for the star power of its witnesses, as both Oracle’s chief executive, Lawrence J. Ellison, and Google’s chief executive, Larry Page, took the stand. Evidence also included several embarrassing e-mails from Google executives discussing whether they needed to seek a software license for Java.

Earlier this month, the jury found that Google had violated Oracle’s copyright, but only on a few lines of code, out of millions of lines in Android. Other copyright claims were, like today’s patent claims, unconvincing to the jury.

Judge William Alsup of Federal District Court in San Francisco, who is presiding in the case, has revealed himself to be something of an amateur programmer. He has been somewhat dismissive of the sophistication needed to create the Android code that the jury earlier found had been stolen, another indication that he is unlikely to pass harsh judgment on Google.

While Oracle may appeal the verdict, there is still another wrinkle in the trial. The judge must still rule on whether or not application programming interfaces, or A.P.I.’s, can be copyrighted. A.P.I.’s are the specifications between different software components that enable them to communicate with each other. If he rules that they cannot be copyrighted, damages will be relatively modest. If he finds that they are, the case will be again presented to a jury.

Article source: http://bits.blogs.nytimes.com/2012/05/23/google-cleared-of-java-patent-violation/?partner=rss&emc=rss

Lagarde Urges Europe to Beef Up Bailout Funds

“We need a larger firewall,” Christine Lagarde, managing director of the I.M.F., said at a conference in Berlin.

Governments should add “substantial real resources to what is currently available,” she said, by adding the remaining resources of the ad hoc bailout fund rolled out in 2010 — the €440 billion, or $567 billion, European Financial Stability Facility
— into a permanent fund — the €500 billion European Stability Mechanism
— that officials hope to unveil by the middle of this year.

Ms. Lagarde spoke hours before euro zone finance ministers and representatives from the European Central Bank were to meet in Brussels, with the roll-out of the E.S.M. on their agenda.

Ms. Lagarde suggested simply “identifying a clear and credible timetable” for making the new fund operational “would help greatly.”

Eurogroup officials also were to receive an update on Greece’s negotiations with its creditors to restructure its crushing debt.

After days of talks between Greek officials and private lenders, the French finance minister, François Baroin, said at a news conference in Paris on Monday that it appeared a deal was taking shape.

His Greek counterpart, Evangelos Venizelos, told reporters as he arrived in Brussels that Greece was ready to complete a private-sector debt swap “on time.”

While the sense of crisis has ebbed and markets have calmed since the E.C.B. last month unveiled longer-term refinancing operations to inject nearly €490 billion of liquidity into the banking system, analysts say the central bank has only bought time for leaders to put the 17-nation currency bloc on a firmer footing.

Ms. Lagarde said it was “essential” that the E.C.B. continue “to provide the necessary liquidity support to stabilize bank funding and sovereign debt markets.”

Without more such actions from governments and the central bank to convince financial markets, Ms. Lagarde said, “countries like Italy and Spain, that are fundamentally able to repay their debts, could potentially be forced into a solvency crisis by abnormal financing costs. This would have disastrous implications for systemic stability.”

Greece’s talks with private-sector creditors have made significant progress, but have held up on the interest rate it will pay on restructured debt.

Private sector bondholders are seeking yields of near 4 percent, but Greece, as well as Germany and the I.M.F., argue that a yield closer to 3 percent is necessary to give the restructuring a serious hope of success. With the talks at an impasse, it is now up to finance ministers to come up with a solution.

The German chancellor, Angela Merkel, told reporters Monday that it was “high time to work on the new Greece program,” Bloomberg News reported from Berlin. “I expect that the negotiations with the private creditors and the new Greece program can be completed simultaneously and soon enough that no new bridge loan whatsoever will be needed,” Mrs. Merkel said.

The monthly Eurogroup meeting comes at a time of widespread gloom about the broad European economy. Austerity budgets in the euro zone are reducing demand and weighing on growth.

Even Germany, where factories are bustling, is feeling the effects. The Federal Statistical Office said last month that the German economy probably contracted by about 0.25 percent in the fourth quarter of 2011 from the prior three months.

The urgency of the problem was underscored Monday by economic data from Spain, which is struggling with an unemployment rate over 20 percent. The country will likely see its economy shrink by about 1.5 percent this year, after contracting by about by 0.3 percent in the last quarter of 2011, the Bank of Spain estimated
.

In Berlin, Ms. Lagarde questioned the wisdom of continuing down the path of extreme austerity at a time of economic weakness, noting that “several countries have no choice but to tighten public finances, sharply and quickly. But this is not true everywhere.”

In an apparent nod to Germany, which many economists say could help its neighbors by bolstering domestic demand, she noted: “There is a large core where fiscal adjustment can be more gradual. Automatic stabilizers, which let tax revenues fall and spending rise as the economy weakens, should certainly be allowed to operate. And those with fiscal space should support the common effort by reconsidering the pace of adjustment planned for this year.”

Ms. Lagarde also called for more fiscal integration among euro members, saying, “it is not tenable for 17 completely independent fiscal policies to sit alongside one monetary policy.” She called for new measures to increase the sharing of risk, including possibly jointly issued euro area debt instruments, or, as Germany has proposed, a debt redemption fund.

Ms. Lagarde said the I.M.F. had a role to play. “I am convinced that we must step up the Fund’s lending capacity,” to help defend “innocent bystanders” elsewhere in the world who are hurt by the euro contagion, she said. “A global world needs global firewalls.”

She reiterated her belief that the fund would need up to $1 trillion “in the coming years,” and it would need to raise $500 billion to bolster its lending resources.

James Kanter contributed reporting from Brussels and Landon Thomas Jr. from London.

Article source: http://feeds.nytimes.com/click.phdo?i=9d1bb9d12a72d084afbef33d778eb2ea

BlackBerry PlayBook Features Found Wanting by Analysts

OTTAWA — Nearly 10 months after its debut, the BlackBerry PlayBook tablet will finally get e-mail and other important missing features in February. But after examining a preview of the software upgrade last week, several analysts said the device’s maker, Research in Motion, continues to struggle with significant technical issues, which could hinder its effort to reverse its declining fortunes.

And they said the upgrade was unlikely to significantly improve sales of the tablet computer to businesses, a target market. RIM’s continued inability to make the PlayBook work directly with its global network means that corporations looking for high-security BlackBerry e-mail on their tablets will first need costly software upgrades to their computer systems. For consumers, it means that the popular BlackBerry Messenger instant-messaging system is still missing from the tablet.

Neither development, some analysts say, is a positive sign for the BlackBerry 10 operating system, a variation of the PlayBook’s software for the coming phones that RIM hopes will restore the BlackBerry’s popularity in North America.

“There are obviously some technical problems integrating this that they weren’t able to solve,” said Mike Abramsky, an analyst with RBC Capital Markets. “They’re being very disorganized and uncommunicative about it.”

Mr. Abramsky and other analysts who attended demonstrations of the software upgrade at the International Consumer Electronics Show in Las Vegas last week complained that RIM’s reluctance to provide specifics about the new software, known as PlayBook O.S. 2, led to widespread confusion about its capabilities, particularly for business users.

Given that RIM effectively created the wireless e-mail market with the BlackBerry, there was considerable surprise when the PlayBook appeared last April without e-mail software or software for synching entries from users’ electronic calendars and address books.

RIM has never publicly explained the reason for that omission. But many industry and financial analysts have said the features were absent because the company could not make the device work with its unique global data network. That network connects directly to cellphone companies’ networks. It is a major reason business and government BlackBerry phones have such high e-mail security that it has been a source of contention in nations where law enforcement and security services would like to monitor BlackBerry users’ messages.

For consumers, the RIM network bypasses carriers’ normal text-messaging systems, making BlackBerry Messenger messages less expensive and faster.

But RIM’s network was designed so that only one hand-held device can be used with any particular user’s account, creating problems for people with both a BlackBerry phone and a PlayBook.

From what RIM previewed in Las Vegas last week, it appears that most PlayBooks will rely entirely on Microsoft Exchange Active Sync, the same technology found on phones or tablets that people use on the other common mobile operating systems — Apple’s iOS, Android from Google and Microsoft’s Windows Phone.

RIM has not disclosed what specific roles its network will play in that arrangement. But Tenille Kennedy, a spokeswoman for the company, which is based in Ontario, said PlayBooks with the new software “will significantly leverage RIM’s global BlackBerry infrastructure.”

Nor has the company offered a full explanation about the continued absence of BlackBerry Messenger. In an interview with the Canadian Broadcasting Corporation last week, Alec Saunders, vice president for developer relations at RIM, offered only this explanation: “Building software takes time.”

In an e-mail, Ms. Kennedy said corporate and government users who want highly encrypted BlackBerry service must update to the latest version of RIM’s BlackBerry Enterprise Server software. They also must use BlackBerry Mobile Fusion, which will not be sold until late February. When it was announced last year, the Fusion software was described as allowing corporations to manage iPhones and Android phones through their BlackBerry servers.

But several analysts said most corporations were not likely to upgrade to accommodate the PlayBook because in addition to cost, there is a potential for errors causing widespread disruption.

“This is not something many enterprises will do proactively unless they already have an active PlayBook deployment program,” said Jan Dawson, an analyst with Ovum who also saw the software demonstrated last week.

Bill Kreher, an analyst with Edward Jones, said the announcement last week was more of a signal that RIM had been struggling to make the new phones work.

“We fear the company is having big difficulty porting native e-mail to the BlackBerry 10 O.S.,” Mr. Kreher said. “RIM has had a poor track record in recent history in delivering their products.”

But Jeff Orr of ABI Research described the new software as “phase one” and said he expected improved e-mail systems to be released eventually. He acknowledged, however, that the development of the new phones did not seem smooth from the outside.

“Until that vision plays out, it’s going to appear fragmented and chaotic,” he said.

Ian Austen reported from Ottawa and Brian X. Chen from Las Vegas.

Article source: http://feeds.nytimes.com/click.phdo?i=06d4118b6e05a70c15dce53f5e9976c6

Europe Stands Firm on Airline Emissions, Raising Fears of a Trade Conflict

BRUSSELS — The European Commission said on Thursday that airlines that did not follow a new European law requiring them to account for their emissions of greenhouse gases could face being banned from European airports.

The warning was the latest stage in an escalating war of words between the European Union and countries like China, which have expressed fierce opposition to a law that represents the European Union’s boldest move to date to protect the climate.

The initiative went into effect at the start of the year and involves folding aviation into the European Union’s six-year-old Emissions Trading System, in which polluters can buy and sell a limited quantity of permits, each representing a ton of carbon dioxide.

A European ban on noncompliant airlines would be a measure of “very last resort” applicable only in cases of “continued noncompliance,” Isaac Valero-Ladron, the commission’s spokesman for climate action, said on Thursday at a news conference in Brussels.

Mr. Valero-Ladron said airlines would initially face fines by national authorities of 100 euros ($130) for each ton of carbon dioxide that they failed to account for under the permit system.

“We’re confident the companies will comply,” Mr. Valero-Ladron said. “The penalties for noncompliance are much higher than compliance.”

Even so, the Europeans and opponents of the system, including airlines and the authorities in China and the United States, will probably have to compromise at some stage to avoid the dispute turning into a disruptive trade war.

In the United States, the House of Representatives has already approved a bill that would bar American air carriers from participating in the system. A similar bill has been introduced in the Senate.

Airbus, the European aircraft maker, and the Association of European Airlines, an industry group, have raised concerns that a trade conflict with the United States and China could affect their businesses.

Earlier Thursday, a Chinese foreign ministry official reiterated a call for Europe to seek an international agreement on how to regulate emissions from the aviation sector before imposing “unilateral legislation,” The Associated Press reported from Beijing.

Chinese airlines have not yet decided whether to add a ticket surcharge to help offset the costs of the system or to refuse to pay the fines entirely. “It has not come to that stage yet,” said Chai Haibo, the deputy secretary-general of the China Air Transport Association, according to The Associated Press.

Chinese carriers have also threatened to bring a lawsuit, possibly in Germany, where the authorities will oversee the application of the system to several Chinese airlines.

But airlines do not need to hand over permits accounting for their emissions until April 30, 2013, and that could leave room for a compromise to be found over the next year.

Last month, the European Union’s highest tribunal, the European Court of Justice, rejected a complaint by a group of American airlines that had argued that requiring them to participate in the emissions-trading system infringed on national sovereignty and conflicted with existing international aviation treaties.

Article source: http://www.nytimes.com/2012/01/06/business/global/eu-toughens-stance-in-airline-carbon-dispute.html?partner=rss&emc=rss

Europe Toughens Stance on Airline Emissions

BRUSSELS — The European Commission said on Thursday that airlines that did not follow a new European law requiring them to account for their emissions of greenhouse gases could face being banned from European airports.

The warning was the latest stage in an escalating war of words between the European Union and countries like China, which have expressed fierce opposition to a law that represents the European Union’s boldest move to date to protect the climate.

The initiative went into effect at the start of the year and involves folding aviation into the European Union’s six-year-old Emissions Trading System, in which polluters can buy and sell a limited quantity of permits, each representing a ton of carbon dioxide.

A European ban on noncompliant airlines would be a measure of “very last resort” applicable only in cases of “continued noncompliance,” Isaac Valero-Ladron, the commission’s spokesman for climate action, said on Thursday at a news conference in Brussels.

Mr. Valero-Ladron said airlines would initially face fines by national authorities of 100 euros ($130) for each ton of carbon dioxide that they failed to account for under the permit system.

“We’re confident the companies will comply,” Mr. Valero-Ladron said. “The penalties for noncompliance are much higher than compliance.”

Even so, the Europeans and opponents of the system, including airlines and the authorities in China and the United States, will probably have to compromise at some stage to avoid the dispute turning into a disruptive trade war.

In the United States, the House of Representatives has already approved a bill that would bar American air carriers from participating in the system. A similar bill has been introduced in the Senate.

Airbus, the European aircraft maker, and the Association of European Airlines, an industry group, have raised concerns that a trade conflict with the United States and China could affect their businesses.

Earlier Thursday, a Chinese foreign ministry official reiterated a call for Europe to seek an international agreement on how to regulate emissions from the aviation sector before imposing “unilateral legislation,” The Associated Press reported from Beijing.

Chinese airlines have not yet decided whether to add a ticket surcharge to help offset the costs of the system or to refuse to pay the fines entirely. “It has not come to that stage yet,” said Chai Haibo, the deputy secretary-general of the China Air Transport Association, according to The Associated Press.

Chinese carriers have also threatened to bring a lawsuit, possibly in Germany, where the authorities will oversee the application of the system to several Chinese airlines.

But airlines do not need to hand over permits accounting for their emissions until April 30, 2013, and that could leave room for a compromise to be found over the next year.

Last month, the European Union’s highest tribunal, the European Court of Justice, rejected a complaint by a group of American airlines that had argued that requiring them to participate in the emissions-trading system infringed on national sovereignty and conflicted with existing international aviation treaties.

Article source: http://www.nytimes.com/2012/01/06/business/global/eu-toughens-stance-in-airline-carbon-dispute.html?partner=rss&emc=rss

Bits Blog: Microsoft Follows Apple With Victory Against Android

A preliminary ruling found that Motorola Mobility Holdings was violating a Microsoft patent with its mobile products.Tim Boyle/Bloomberg NewsA preliminary ruling found that Motorola Mobility Holdings was violating a Microsoft patent with its mobile products.

Another day, another legal win by a member of the anti-Android axis.

Just a day after Apple notched a legal victory against HTC, a maker of smartphones based on Google’s Android operating system, the United States International Trade Commission issued a preliminary ruling finding that Motorola Mobility Holdings was violating a Microsoft patent with its mobile products. The ruling by an ITC judge still needs to be reviewed by a six-member commission, which can chose to reverse the judge’s preliminary decision.

Motorola portrayed the ruling as a victory for the company, since the judge tossed out six of seven patents that Microsoft had accused Motorola of violating in its original complaint with the ITC. But Motorola could still face an injunction — called an “exclusion order,” in the lingo of the ITC — that would force it to make changes to its smartphones and tablets so it no longer infringes on Microsoft’s patent.

The question is how big a headache those changes, if they’re necessary, will be. The Microsoft patent that Motorola was found to have violated is related to the scheduling of meetings from mobile devices, in which other participants are invited to attend and their electronic calendars are synchronized to reflect the meeting. It could be a big annoyance for its users if Motorola was forced to strip that scheduling feature out of its smartphones.

Motorola could also come up with a technical workaround that would satisfy the ITC’s final ruling — a tweak to its products, short of stripping the scheduling feature out. In a statement, Scott Offer, senior vice president and general counsel of Motorola Mobility, said the commission “may provide clarity on the definition” of the Microsoft patent that “will help us avoid infringement of this patent in the U.S. market.” The company also said it was still pursuing patent infringement cases of its own against Microsoft in various jurisdictions.

Microsoft’s lawsuit against Motorola could ultimately become a lawsuit against Google directly, if Google’s proposed $12.5 billion acquisition of Motorola, now undergoing regulatory review, is completed.

In a statement, David Howard, corporate vice president and deputy general counsel at Microsoft, said the company was pleased by the ruling and hinted that Motorola should reach a patent licensing deal with Microsoft, as others have. “As Samsung, HTC, Acer and other companies have recognized, respecting others’ intellectual property through licensing is the right path forward,” Mr. Howard said.

On Monday, HTC said it had a workaround of its own that would allow it to comply with an ITC ruling in the Apple case. The commission found that HTC was infringing on an Apple patent that detects things like phone numbers in e-mail and text messages so that users can automatically dial the number with a single tap.

So far, no ruling in a smartphone patent case has prompted product changes so major that they threaten to seriously undermine a product’s appeal. But with so many more legal decisions to come between Android device makers and the companies battling them, there is still plenty of time for that.

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Apple Wins Partial Victory on Patent Claim Over Android Features

The ruling, by the United States International Trade Commission, is one of the most significant so far in a growing array of closely watched patent battles being waged around the globe by nearly all of the major players in the mobile industry. These fights reflect the heated competition among the companies, especially as Android phones gain market share.

At the heart of the disputes are the kind of small but convenient features that would cause many people to complain if they were not in their smartphones. For example, the case decided Monday involves the technology that lets you tap your finger once on the touch screen to call a phone number that is written inside an e-mail or text message. It also involves the technology that allows you to schedule a calendar appointment, again with a single tap of the finger, for a date mentioned in an e-mail.

HTC, the defendant in the case and a Taiwan-based mobile phone maker using the Android system, said in a statement after the ruling that it would adapt its features to comply with the court’s decision. The company called them “small” parts of the user’s experience.

 The ruling was only a partial victory for Apple because the commission overruled an earlier decision in Apple’s favor in the case, involving a different, more technical patent related to how software is organized internally on mobile devices. It would have been hard for HTC to adapt its devices to avoid infringing that patent, legal experts said.

The decision could potentially affect far more phones than those made by HTC because the underlying target of the suit is Google, creator of the Android system that now powers more than half of all smartphones sold worldwide. Apple is suing several other makers of Android devices, as is Microsoft, and companies that make Android products are returning the favor in most instances through countersuits.

“It’s an important victory for Apple, but it’s just one of many battles,” said Alexander Poltorak, chief executive of the General Patent Corporation, an intellectual property strategy firm, adding that the ruling will pressure other Android phone makers to license the technology from Apple or make changes to avoid patent infringement issues.

The ruling by the six-member commission, which can take action against unfair trade practices by companies whose products are imported into the United States, will prevent HTC from selling phones in the United States that infringe the patent starting April 19.

To take effect, President Obama’s trade representative must sign the order. He could decide to overrule the commission’s finding, though such actions are rare. It also can be appealed.

Apple has also sued HTC in federal court accusing it of patent infringement, while HTC has filed suits of its own against Apple with the trade commission and in federal court.

The patent battles reflect the intense competition in the smartphone market. In the third quarter of 2011, phones running the Android system accounted for 52.5 percent of devices sold worldwide, up from 25.3 percent in the period of 2010. Apple’s share of this market fell to 15 percent, from 16.6 percent, in the same period.

Apple’s late chief executive, Steven P. Jobs, was outspoken in saying that Google had improperly copied many of the iPhone’s innovations, telling his biographer that he was going to “destroy Android, because it’s a stolen product.”

After the ruling on Monday, Kristin Huguet, an Apple spokeswoman, said, “We think competition is healthy, but competitors should create their own original technology, not steal ours.”

Grace Lei, HTC’s general counsel, said in a statement that the company was happy the commission ruled against Apple on other patents involved in the case. “We are very pleased with the determination and we respect it,” Ms. Lei said.

A Google spokesman did not respond to a request for comment.

The growing complexity of mobile devices has greatly expanded the range of patents that can be used as weapons in the business, and their robust sales have made them a lucrative target.

Florian Mueller, an intellectual property analyst in Germany and author of a popular blog on patents estimates that the number of patent lawsuits related to the mobile business worldwide is approaching 100.

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