Universal filed two lawsuits in United States District Court late Monday against Grouper Networks, which operates the Grouper.com site, and Bolt, which operates Bolt.com.

Seeking injunctive relief and damages in the sum of $150,000 per infringement, the world’s largest recording company stated the web sites are “copying, reformatting, distributing, and creating” music videos and songs developed by artists from the label.

“I don’t think this will get to the point where it is prosecuted in the courts,” said senior analyst Phil Leigh of Tampa-based Inside Digital Media. “I think they will come to an accommodation to satisfy Universal.”

If the case does go to trial, it will be the first time a major media company has sued an online company for video file-sharing rather than music. The U.S. Digital Millennium Copyright Act (DMCA) could save the web sites, however, from facing the large infringement sums Vivendi is demanding.

Under the “safe harbor” section of the DMCA of 1998, online music sites have limited liability for what the actions of their users.

Left out of the lawsuit is the largest video-sharing web site to date, YouTube.com (recently acquired by Google for $1.65 billion).

Last week, YouTube.com struck a deal with Vivendi Universal to allow file sharing of Universal artists, with some blocked content, in exchange for advertising revenues (see Deals Portend GooTube). Warner Music Group signed a similar agreement with YouTube in September.

“YouTube could complain if they are paying Universal for distribution of their content and then Universal let’s others distribute their content for free. It’s not fair for them [YouTube],” said Mr. Leigh. “Universal can’t give special treatment to one group.”

Sony acquired Grouper in August for $65 million, but has not been named in the lawsuit yet. Universal, the music group of French telecommunications and media company Vivendi, reserved the right to add Sony’s film studio as a defendant in the future though (see Sony Acquires Grouper for $65M).

Can’t Shake off Lawsuits

Universal stated in the lawsuit specific examples of copyright infringement for each site. One example was that Mariah Carey’s video “Shake it Off” had been viewed more than 50,000 times on Grouper without any payment to the music group.

One example against Bolt stated Mary J. Blige’s “Enough Cryin’” video had been viewed over 1,000 times.

Most recording companies have won their day in court against free file-sharing sites like Napster, Aimster, Grokster, Kazaa, and Morpheus. But all these sites were sued primarily for file sharing of music MP3 files.

This will be the first time a mostly music company sues a site for allowing primarily video copyrights to be infringed. If the trial goes forward, it will be an uphill battle for Vivendi.

“The web sites will probably use the ‘safe harbor’ exemption of the DMCA,” said Mr. Leigh. “There are ways to destroy that point in court. One way is to demonstrate that Grouper or Bolt is somehow inducing the consumer to violate copyrights. But it will be pretty hard to demonstrate that.”

Phone calls to recording companies and web sites involved in the case were not returned.

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“Microsoft has been engaged in a constructive dialogue with the European Commission for the past several weeks about Windows Vista,” said Microsoft spokesperson Guy Esnouf in an email. “The Commission has provided guidance on their concerns with certain aspects of Windows Vista, and Microsoft has taken significant steps to respond to the Commission’s concerns.”

The company also revealed changes to Vista for release in South Korea on Friday after discussions between Microsoft and the South Korea Fair Trade Commission.

The Redmond technology giant, which holds about 90 percent of the operating system marketplace, announced changes in the areas of security, searches, and fixed document formats within Vista to satisfy the European Commission’s antitrust concerns.

Microsoft has had longstanding antitrust fines and troubles in the European Union regarding its Windows operating system. E.U. Commissioner for Competition Neelie Kroes stated last March that she had concerns about Vista as well (see EU Warns Microsoft on Vista).

“I think at the moment the commission will be a bit relaxed,” said Shomik Banerjee, an industry analyst with the research firm Frost & Sullivan in the United Kingdom. “However, in quarter two, the commission will have a closer look at the market, especially around the feeds or RSS alerts and in the PDF space.”

Microsoft said it has changed Vista’s search options so customers can choose to set up Internet Explorer 7 as a default search engine rather than have it ingrained in the operating system.

The software giant also agreed to submit its new fixed-layout document format on XML (extensible markup language) specifications to a standards-setting organization. Microsoft will also revise licensing terms regarding the XML specifications made available to other software developers.

Another area that has been revamped in Vista is the security center. Vista will now enable third-party security products to access Vista’s kernel in a secure manner and not be overpowered by Microsoft’s security center alerts.

Shares of Microsoft rose $0.25 to $28.47 in recent trading.

Staggered Changes

The alterations forestall some of the complaints voiced in recent months about how Vista would allow other applications to provide security and other features like portable document format files.

“What Microsoft is doing is asking customers to un-install already-available applications and then bring in new solutions,” said Mr. Banerjee. “It's a disincentive to go to another vendor.If you can PDF with a Microsoft solution already built in, why would you go for Adobe?”

The changes in Vista will also be staggered, said JupiterResearch senior analyst Joe Wilcox. Some changes, like the patch guard, will not show up until Service Pack 1 of Vista.

The standardization body will not happen right away either. Undoubtedly complaints will be raised again by competitors and the commission during this lapse in time.

The Redmond technology giant has not only been challenged by the European Commission and the Korean Fair Trade Commission, but also by individual software providers and ex-partners like Symantec.

Once a partner of Microsoft’s, Symantec turned into a competitor as security packages like Microsoft’s built-in firewall in Windows XP Service Pack 2 became standard.

The security software company met with Microsoft on Sunday to express concern over Vista’s bundled security package (see Redmond Security Push Challenged). The added security features ingrained in Vista could cause fatal blows to sales revenue for security software providers like Symantec and McAfee.

“Microsoft is trying to make some good base changes to get its OS out the door,” said Mr. Wilcox. “I expect there will continue to be complaints though.”

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The acquisition has yet to clear the European Commission’s competition authority, but it is expected to close by December 31, 2006. Upon closing, Carphone Warehouse will become the third largest broadband provider in the U.K. behind BT and NTL.

Carphone Warehouse will add 2 million customers to its already established 421,000 customer base with a live broadband connection.

“Carphone Warehouse is in the fixed space of voice right now,” said Michael Philpott, principal analyst at U.K.-based research and analyst firm Ovum. “Most of their profits still come from their fixed voice lines, but we all know what’s happening to the fixed voice market. So they need to look away toward the future. This is a small step in that direction.”

Under the agreement, Carphone Warehouse will acquire AOL’s U.K. Internet access customer base, supporting management, and infrastructure. AOL will in turn provide co-branding on its web portal. AOL will also take on advertising sales for Car Warehouse in a revenue-sharing agreement.

Carphone Warehouse estimates the deal will increase its current year pretax profits by £10 million ($18.6 million) and next year’s pretax profits by £30 million to £40 million ($55.7 million to $74.3 million).

The acquisition of AOL U.K. is the latest move in parent company Time Warner’s plan to base AOL’s revenue more on advertising rather than subscriptions. After being broken into four sections—access, audience, digital services, and AOL Europe—AOL no longer needed the European sector.

In August, AOL announced it would begin the sale of its European branches. AOL France was sold to French fixed-line operator Neuf Cegetel for €288 million ($365 million) in September.

In September, Telecom Italia, an Italian mobile, fixed-line, and IPTV communications company, bought AOL Germany for €675 million ($856 million). The U.K. is the last branch to be sold.

Time Warner stock rose $0.12 to $19.10 in recent trading Wednesday. Carphone Warehouse was also up from yesterday’s close in London, climbing from 333.50 pence ($6.19) to 360.25 pence ($6.69) at the close of trading Wednesday.

Added Expense

“The only other thing people are making some noise about over here is the added expense,” said Mr. Philpott. “Carphone Warehouse expected to spend €50 million [$92.8 million] in this move, now they have upped that to €70 million [$130 million].”

With a rush of new customers signing onto Carphone Warehouse’s services, an enlarged customer service group, more employees, and more network capacity from BT Wholesale seem to be the foremost reasons for the increase in price.

While not a mobile operator, it looks as though Carphone Warehouse could be the next communications company to jump into the fixed mobile convergence market and provide fixed-line, mobile, and broadband to its customers. The move wouldn’t be surprising, but it might be a mistake.

In June, the U.K.-based research group Informa found the fixed mobile convergence market’s time had already come and gone.

“Do customers really want all their communication from a single source?” asked Mr. Philpott. “It’s still a debate as to what the customers really do want.”

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The agreement between the MCPS-PRS (Mechanical-Copyright Protection Society and The Performing Right Society) Alliance and the two United States-based digital download service providers will continue to give composers, writers, and music publishers 8 percent of Napster and MusicNet’s gross revenue, excluding the value-added tax.

“It’s good news for the industry that both parties were able to settle, but it remains unfortunate that this dispute was allowed to escalate the way it did,” said Paul Brindley, managing director of the digital music consulting firm Music Ally.

The two digital music download service providers are just the latest in a string of companies to reach a deal with the Alliance in time to escape a United Kingdom copyright tribunal.

Mobile phone service providers Vodafone, O2, Orange, and T-Mobile, along with Apple’s iTunes, all settled with the Alliance for the same 8 percent rate on September 28.

Music Royalty Switcheroo

The case has been a shocking twist of legal events within the music industry as the digital downloading companies and other music content sellers fought back against the artists and publishers for once.

Eighteen months ago, the MCPS-PRS sought to raise the 8 percent royalty rates paid from music content sellers to artists and publishers up to 12 percent.

The U.K.record industry’s trade association, the British Phonographic Industry, fought back, saying the publishing rates were too high. The BPI filed to take the Alliance to a U.K. Copyright Tribunal when music content sites like iTunes, AOL, MusicNet, Napster, RealNetworks, Sony Connect, and Yahoo all joined in the fight.

“The net impact of this on the market is nothing at all,” said Mr. Brindley. “All [the agreement] is saying is that the rates they’ve been paying for publishing royalties to date was a discounted rate, but it’s the same rate it is now.”

The controversy between the sellers and publishers centered on the fact that royalty rates on physical products were much lower than online sites were going to be charged.

Compact discs had a royalty rate of 6.5 percent of retail and 8.5 percent for wholesale prices; broadcast radio had anywhere from 3 to 5.25 percent of net advertising revenues rates.

A temporary discount was allotted to the music content sellers of 8 percent. Those who have fought to keep the royalty rate at that level have so far won accords with the Alliance.

The three-year agreement also ensures a minimum payment to an artist of £0.04 ($0.07). Other companies involved in the Tribunal like Yahoo, RealNetworks, AOL, and Sony Connect have yet to strike an agreement with the Alliance, as of press time.

The Tribunal, set for last week, will reconvene in November and help define what constitutes gross revenue for content sellers.

“There’s likely to be plenty of room for quantifying what constitutes ‘gross revenue’ from all different sources,” said Mr. Brindley. “That hasn’t even been agreed upon by the BPI, iTunes, or providers. I think it would be strange that a tribunal would start just to define what constitutes gross revenue, though.”

Contact the writer:Editorial@RedHerring.com

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Under an intense amount of public scrutiny lately from government and labor union officials and the press, Siemens said Monday its managing board has decided to forgo its 30 percent pay raise.

Siemens announced it will use the €5 million ($6.4 million) to provide financial aid to its former employees at the now-bankrupt BenQ Mobile (see Bankruptcy Threatens BenQ Mobile).

Last week, BenQ Mobile announced it was filing for bankruptcy, a move Siemens said it was not privy to and was shocked to see happen.

“The suggestion that we have been prepared to accept the bankruptcy of BenQ Mobile in Germany is pure slander,” Klaus Kleinfeld, president and chief executive of Siemens AG, said in a statement.

Siemens claimed that during the sale of its mobile division, BenQ of Taiwan assured the Munich-based engineering company that not only would mobile operations continue, but BenQ would expand mobile operations in Germany.

In exchange for taking the failing handset division off of Siemens’ hands and remaining in operation, Siemens offered 600 patents, branding rights as BenQ-Siemens for the mobile devices, and €350 million ($445.3 million).

Failing Math

But as one of the largest European telecommunications companies, Siemens should not act as shocked as it claims to be to see a failing company fail.

“The outcome is natural. It’s a simple math equation,” said Brad Akyuz, senior analyst in the mobile devices division of Current Analysis. “Competition is getting stronger, and if you don’t have enough resources to keep up, you are going to lose money. It’s as simple as 2 + 2 = 4.”

BenQ was given €413 million ($525 million) in the final acquisition deal from Siemens to keep the handset division afloat. Since BenQ took over the business in 2005, it has lost €600 million ($760 million) due to mobile operations.

Siemens stock rose $0.09 to $86.58 in recent trading on the New York Stock Exchange, while BenQ fell 2.7 percent to NT$18.25 ($0.55) at the close of the market in Taipei on Tuesday.

Last Sunday, after news of BenQ’s insolvency, German newspapers like Bild Am Sonntag, politicians like Chancellor Angela Merkel’s coalition government, and Economy Minister Michael Glos rained criticism on Siemens for the sale of their Siemens Mobile.

“Siemens should have been able to do what Nokia did,” said Mr. Glos to German newspaper Welt am Sonntag, referring most likely to Nokia’s 2004 networks equipment division that was saved through reorganization but still had some layoffs.

Making Amends

After Siemens sold its handset unit to BenQ, it announced a 30 percent raise was going to take place for its executives. This caused an outpouring of criticism from labor unions, the press, and public officials as Germany is a “labor-sensitive environment,” said Mr. Akyuz.

Siemens claims that all €5 million set for the raise will now go to former Siemens employees currently working for BenQ Mobile. The engineering company has also assured employees that Siemens will “provide financial support and pay for employee education and retraining.”

The statement Monday also said that Siemens will treat all BenQ Mobile employees as internal applicants for the 2,000 current job openings at Siemens in Germany.

“It’s natural they act surprised, because it wouldn’t be very unethical to say they knew the mobile division was going to go down so they wanted to get rid of it,” said Mr. Akyuz. “I’m not saying they knew this, but [I’m] pretty sure they knew this [unit] wasn’t doing very well.”

Contact the writer:Editorial@RedHerring.com

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British communications management provider Remote XT unveiled a security feature, named after the company, that sets off a screaming noise when the user reports the mobile device stolen. The stolen phones are also instantly disabled, once reported stolen, even if the SIM card is removed. The only way to stop the screaming sound is to take out the battery.

“By making the mobiles unusable to anyone but the rightful owner, the phones become worthless and we’ll see the market for stolen handsets stamped out once and for all,” said Mark Whiteman, managing director and founder of Remote XT, in a statement.

In a 2002 survey by the U.K.’s Home Office, mobile phone crime was seen to rise 190 percent since 1995 and comprised 28 percent of all robberies in the United Kingdom, opposed to 8 percent in 1999.

Synchronica revealed similar technology in the U.K. in August with their Mobile Manager. With Mobile Manager, however, only Windows-based mobile units could deliver the high-pitched scream when lost or stolen.

Remote XT offers users the joy of knowing a thief will be spotted and humiliated, and gives users the ability to back up their data to transfer to a new phone, including emails, text messages, ringtones, MP3 files, and pictures. The service is £9.99 ($18.84) a month or £1,198.99 ($2,260.86) per year.

Phone Value

As annoying and costly as it may be to lose a mobile device, the device itself is usually not worth £1,198.99.

Forty-eight percent of those who lose their cell phones are under 18 years old, said the same Home Office survey. With such a price tag, the more likely Remote XT target audience is senior executives and those who carry confidential information on their mobile device, like lawyers, accountants, and chief executive officers. Most of those people carry this kind of information on a memory card on their phone, not on the actual phone itself.

Remote XT will not solve the real problems those people face when they lose their mobile device.

“For a lot of people, losing a base-level handset, the biggest problem is losing their contact list; maybe calendaring information,” said service director Clive Longbottom at U.K. analyst firm Quocirca. “Ten pounds a month to give the thief a red face is probably not worth it.”

Getting Smart About Phones

Smartphones are already equipped with an online backup of a user’s data and nearly all mobile operators cancel the phone when you report it stolen. The real problem is not stolen mobile phones, but stolen memory cards, added Mr. Longbottom.

“The amount of information stored on those cards is phenomenal.”

While many mobile users enable a personal identification number (PIN) to use the phone itself, many leave the memory card without a PIN number, said Mr. Longbottom. The memory card can then be extracted from the stolen phone and easily read through a separate reader. Buying Remote XT will not protect the memory card from being extracted or read.

By simply putting a PIN number on the memory card, most thieves will abandon trying to read the information.

In a survey earlier this year, Quocirca asked 2,035 IT professionals about the biggest mobile security threat and policies for their companies. Eighty percent of the IT professionals said the ordinary worker at the company was their main threat from them misplacing or losing the device and not setting up proper security on it. And of those companies with a wide deployment of mobile devices throughout the company, 20 percent admitted to failing to implement effective security measures.

Contact the writer:Editorial@RedHerring.com

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The Redmond giant said the add-on drive will be available in the United States, the United Kingdom, France, and Germany in mid-November. U.S. pricing is set at $199.99, £129 ($243) in the U.K, and €199.99 ($253) in France and Germany.

The news arrives just as Microsoft announced its partnership with Peter Jackson, director of The Lord of the Rings films and the King Kong remake. A high-definition version of Mr. Jackson’s King Kong DVD will be bundled with the HD plug-in for a limited time (see Xbox: Say Halo to My Little Friends).

“I don’t think gamers are much interested in next-generation video,” said IDC games analyst Billy Pidgeon. “It’s still going to be about the games.”

“Blu-ray needs the PS3 more than PS3 needs Blu-ray, but Sony will tell you that they can fit more [data] onto their Blu-ray discs, and there is probably some truth to it,” he added. “As a peripheral, the Xbox add-on doesn’t do much for HD.”

Blu-ray and HD-DVD have been warring with each other to be the official next-generation, high-definition DVD format.

Shares of Microsoft fell $0.02 to $27.42 in recent trading, while Sony shares dropped $0.66 to $40.85.

At War

Sony’s PlayStation 3 includes a Blu-ray DVD player within the gaming console and is set to come out in mid-November in the U.S. and Japan, and March in Europe. The price is set at about $500 for the PS3. Many major Hollywood studios have announced their loyalty to the two formats (see Sony Cuts PS3 Price).

Microsoft has announced its allegiance to the HD-DVD format and charges $300 for the Xbox 360 game console (with the $200 add-on DVD player for the PS3 available at an equal cost). Toshiba also backs the HD-DVD format.

“It's actually all about the flexibility,” said games analyst Piers Harding-Rolls at JupiterResearch. “Those gamers that don’t want to pay up front for the HD-DVD technology can just buy the console [Xbox], whereas with the PS3 you don’t have that option.

“Unlike last time round with the PS2 and Xbox, where DVD was well established, so selling the technology was pretty easy, this time Sony has a real task on its hands educating the consumer to the benefits of high-definition video and getting them to pay for it,” he added.

What a Gamer Wants

A big selling point with gamers is the release date of game consoles and the quality of the graphics.

Xbox has been available to consumers since November 2005. Sony’s PS3 is still not available and will be 12 months behind the Xbox when it is finally released. This gives the Redmond giant a distinct advantage in developing its games and their quality.

According to JupiterResearch, Sony sold 90 million PS2 game consoles in-store worldwide in 2005. Microsoft has sold about 23 million Xboxes. One decisive factor behind the PS2’s overwhelming success over the Xbox was the exclusive release of the wildly popular game Grand Theft Auto III in 2001 for a number of months.

However, Microsoft said Wednesday that two episodes of Grand Theft Auto IV will be available exclusively for Xbox customers in mid-October next year. But the exclusive episodic content of Grand Theft Auto IV for Xbox means that PS3 could have nearly the same episodes with some content changes, said Mr. Pidgeon.

Graphically speaking, the Xbox 360 still uses the regular DVD format, while the HD add-on is just for films. However, the PS3’s high-definition player could be used for both videos and movies, which could definitely put Sony on top with an audience so seeped in graphics quality. Another force that could drive the product is sales for high-definition televisions.

“One thing is for sure—gamers have a propensity to adopt high-definition television more than non-gamers,” said Mr. Pidgeon. “Some of the biggest drivers for high-definition TV are sports and games. People who buy the Sony PS3 with next-generation game graphics are going to want to see those graphics.”

Contact the writer:Editorial@RedHerring.com

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The four-year project will be funded by the university to the tune of £850,000 ($1.6 million) and is the brainchild of Dr. Stephen Bingham, a research fellow in the physics department.

Dr. Bingham hopes to increase the speed and sensitivity of electron spin resonance imaging (ERI), also called electron paramagnetic resonance (EPR) machines.

The increased speed and sensitivity could enable more precise and earlier detection of fatal illnesses like heart disease, stroke, diabetes, septic shock, and cancer, as well as a deeper understanding of them.

“The basic idea of ERI has been around for a couple decades,” said Dr. Bingham. “But there are lots of technical problems for instrumentation and getting proof-of-principle [theories] into a genuinely useful medical tool. We’re going to try a number of different ways for the signal to be detected and analyzed.”

Resonance Rationale

Electron spin resonance imaging is used to detect the chemical state of organs. The device acts like a magnetic resonance imaging scanner (MRI), but MRIs are for soft tissue—the organs themselves.

For a person who has just experienced a heart attack, for example, chemicals called superoxide radicals can be present and continue to damage the heart long after the attack has subsided. An MRI can see damage done to the actual heart walls, but an ERI machine can detect the actual quantity of the radicals.

This detection could help with the treatment of illnesses like heart disease that form from chemicals undetectable with an MRI, said Dr. Bingham.

ERI machines today are able to view either large samples with little sensitivity or precision, or smaller sized samples with better sensitivity, said Dr. Bingham.

Using the latest research in measurement techniques and data analysis, Dr. Bingham hopes to increase the sensitivity of ERI machines by 100 times or more to allow images to be recorded 10,000 times faster and with 10,000 times more information—meaning the sample size can be large with better sensitivity.

“Usually the work we’re looking to view with this device is done in vitro, in a test tube, for cell cultures,” said Dr. Simon Jackson, professor of molecular immunology at the Centre for Research in Biomedicine at the University of the West of England, Bristol.

“Now it’s being developed using different frequencies [of ERI],” he added. “If we can change those frequencies, it could allow for deeper penetration of tissue and larger sample sizes.”

Hit the Market

The device is estimated to take about two to three years to construct. Once it’s built, biomedical experts like Dr. Jackson and Dr. Philip James from the Wales Heart Research Institute at CardiffUniversity in the U.K. will help optimize the device.

“It’s a long way down the line,” Dr. Jackson acknowledged. But once the device and techniques are developed, the collaborators will be looking at biomedical manufacturers—like Brooker and Siemens—to produce the device.

Contact the writer:Editorial@RedHerring.com

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Vivendi offered to buy out Deutsche Telekom’s 49 percent stake in Polska Telefonia Cyfrowa (PTC), confirmed Vivendi spokesperson Antoine Lefort.

Vivendi indirectly owns the remaining 51 percent through holding companies like Elektrim, a Warsaw-based holding company. And Elektrim owns 48 percent of PTC, part of that being Vivendi’s claim.

“We did make an offer for Deutsche’s stake in PTC, the now No. 2 mobile operator in Poland,” said Mr. Lefort. He declined to comment any further, stating that he could not “even give any clue if PTC has even answered yet.”

Deutsche Telekom (DT), T-Mobile’s German parent company, did not immediately return phone calls for comment.

The two European mobile operators have been struggling for control over PTC for about seven years. They have fought in both Austrian and Polish courts over the majority of shares for the Polish telecom company.

Vivendi’s move on Monday could be a way to extend an olive branch to finally settle the long-running dispute, or it could be a ploy.

“I don’t know if Deutsche Telekom will even consider the bid,” said Ulrich Trabert, an analyst with Metzler Equities, a Frankfurt, Germany-based bank. “I think this could be a Vivendi maneuver. Vivendi and Telekom have been fighting for quite a while.

“The offer sounds not too bad, but they are counterparts, and Telekom has the option to buy the remainder of Vivendi,” he added. “I think they won’t let this go, just to keep a handle on the telecom market in Poland.”

Vivendi shares rose €0.34 ($0.43), or 1.21 percent, to close at €28.43 ($36.06) on Tuesday, while Deutsche Telekom rose €0.03 ($0.04), or 0.24 percent, to close at €12.43 ($15.77).

Three’s a Crowd

In a convoluted triangle of shareholding, trouble starting brewing between DT, Elektrim, and Vivendi in 1999. Vivendi and Elektrim signed an expansion agreement on the condition that Elektrim would obtain 51 percent of PTC.

Deutsche Telekom blocked the share transfer as a then-majority shareholder of PTC, and the turmoil has avalanched since then.

Most recently, Vivendi challenged DT earlier this month after the German telecommunications company claimed in June that it owned 98 percent of PTC.

DT claimed a call option based on an arbitration award that passed in the Vienna courts in November 2004 gave DT control over 98 percent of PTC.

Vivendi countered, saying, “This arbitration award can have no effect in Poland at this time,” pointing out that the WarsawAppeals Court suspended its decision to recognize the arbitration award in August 2006.

Eastern Europe Tapped

A two-year-old study by Metzler Equities shows Poland was the second-largest market for Deutsche Telekom, with 6.2 million customers.

There was a time, said Mr. Trabert, when Western European telecommunications providers saw Eastern Europe as a great untapped resource.

“A couple years ago, the companies had visions on how to tap the Eastern European [telecom] market,” said Mr. Trabert. “They thought the rates would be inspiring, but those visions calmed down and almost all those companies now are looking desperately for new ways to come up with revenues. Some are potentially going to close their Eastern European markets now.”

Contact the writer:LSpinelli@RedHerring.com

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Digital Ultracap, a joint venture of Las Vegas-based Digital Gas Inc. and Holland’s ICCU Holdings B.V., will take part in the development of four energy centers in Europe. The energy centers will test the performance of hybrid energy systems for storing and balancing generated fuel cell power.

Fuel cells are electrochemical energy conversion devices that offer continuous replenishment of reactants consumed, such as hydrogen and oxygen as opposed to the limited internal energy storage of a conventional battery.

ICCU will partner with the capacitor company for the World Bank-funded project, whose center location possibilities include Germany, Poland, Portugal, and Bulgaria.

“As far as we’re concerned, the choice of the places is theirs,” said Brian Smith, founder of Digital Ultracap and Digital Gas. “We just recently signed into the project.”

World Bank press agents were unable to confirm or deny funding of the project.

Local fuel cell and alternative energy centers are highly sought after in Europe as the European Commission cracks down on automobile emissions and the EU’s reliance on external energy sources increases year upon year.

Last year, Janez Potocnik, the European commissioner for science and research, said the EU was 50 percent dependent on imported oil and petroleum for energy and the figure would increase to 70 percent by 2030.

Announced so far, the energy centers will consist of a manufacturing complex for intelligent ultracapacitors—capacitors with higher energy storage capacities than a regular capacitor; a bio-ethanol facility that changes biodegradable material into energy; and a Digital Gas energy and farming center to process local waste and provide food and pharmaceutical products. The production of the energy will be primarily, if not all, for European use.

Location Key

Digital Ultracap announced Thursday that the World Bank had given the green light for funding of one location, but Mr. Smith could not say which one. ICCU will announce the site in October. ICCU could not be immediately reached for comment.

The stateside capacitor company hopes to complete construction of the first facility in the EU within three years, generate income within 18 months after start-up, and provide 1,500 jobs for the local community.

German car makers BMW, Porsche, and Volkswagen concluded a collaboration contract for the development of hybrid drives with Digital Ultracap, according to an Ultracap statement. One of the considerations in locating the first plant will be to be in proximity to large corporate customers in the automotive and other industries.

Regulate

Ultracapacitors could help car manufacturers meet regulations the EU Commission put into place in 1999. The regulations will cut carbon dioxide emissions by 25 percent from 1995 to 2010.

And Digital Ultracap claims ultracapacitors take the idea of a hybrid energy system a step further. With the ultracapacitor hybrid electric battery-powered systems, like an automobile, can accelerate faster and live longer than a conventional electric battery system. Furthermore, ultracapacitors can store the energy available for braking as electric energy, whereas conventional batteries can not.

Digital Gas has set up a holding firm to run subsidiaries based on the development, which will include Digital Ultracap, Digital Sofcell, Synfuel, and Digital Electric.

Susan Crawford, law professor at Benjamin N. Cardozo School of Law in New York, planned and created the first annual OneWebDay, September 22, 2006, as a day to celebrate the World Wide Web and the Internet.

Events have been held and are planned from Tokyo to San Francisco, and from Vancouver to the Philippines.

“The web is seriously underappreciated,” said David Weinberger, a fellow at HarvardLawSchool’s BerkmanCenter for Internet & Society and a board member of the OneWebDay organization. “People forget how much of a difference the Internet has made in our lives and is making in our institutions.”

Mr. Weinberger is co-hosting a pizza party and open discussion on how the web has changed people’s lives, in Boston at the BerkmanCenter.

Ms. Crawford, also a member of the Internet Corporation for Assigned Names and Numbers, the organization that manages IP address and domain names, persuaded a number of Internet visionaries to speak worldwide about the Internet and how it has transformed their lives. Ms. Crawford was understandably too busy to comment at press time Friday.

Tim Berners-Lee, the inventor of the World Wide Web and director of the standards organization the World Wide Web Consortium, will speak at the Royal Exchange Grand Cafe & Bar in London.

The Lord Mayor’s office of London could not confirm Mayor Alderman David Brewer was speaking on Friday at the Manor House about the future of the web, as suggested by the OneDayWeb event listings.

Craig Newmark, founder of Craigslist, will be joined by Drew Schutte, vice president and publisher of Wired magazine, along with Ms. Crawford, in New York City’s Battery Park. Robert Pepper, senior managing director of policy at Cisco Systems and former chief of policy at the U.S. Federal Communications Commission, was in Tokyo with Internet entrepreneur Joi Ito earlier on Friday.

Some 20 other events, including meetings in surprising locations like Belgrade; Serbia; and Sofia, Bulgaria; also took place.

Shake Your Mouse

When Ms. Crawford asked Diana Marrone, one of the founders of the Media & Arts Office in Naples, Italy, to help host a WebOneDay in Italy, Ms. Marrone jumped at the chance.

“We recently founded this association, so we welcomed Ms. Crawford’s offer very much,” said Ms. Marrone. “OneWebDay will help promote the knowledge and the critical confrontation that goes along with media and the digital arts.”

Ms. Marrone has asked two Italian journalists—Daniela D’Antonio from La Repubblica and Natascia Festa from Corriere della sera—to speak about their blogs, and the real-time open dialogues that blogs can create, as opposed to paper newspapers. The Naples event will be filmed, and guests can choose the party’s music from playlists supplied by Pandora.com.

A Little History

The roots of the web can be traced back to 1980, in Mr. Berners-Lee’s ENQUIRE, a private closed system for the Switzerland-based European Organization for Nuclear Research.

It was not until 1990 that Mr. Berners-Lee, along with Robert Cailliau, created a proposal for the World Wide Web.

The web has grown remarkably since those early days. In a 2005 study by Antonio Gulli, director of search engine and advanced products at Ask.com, and Alessio Signorini, senior search engineer at Ask.com, there were 11.5 billion indexed pages on the World Wide Web. Eight billion of those pages can be found on Google, with over 50 percent of those pages in English.

Contact the writer:Editorial@RedHerring.com

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The complaint, filed in a French court, stated that a vast majority of the items sold on eBay claiming to be Vuitton or Dior were instead counterfeit.

Both high-fashion retailers allege the popular online auction company should have more checks and regulations in place to prohibit or at least cut down on the sale of counterfeit goods.

“Since so many more products are sold on the Internet now, opposed to five or 10 years ago, the manufacturers, the big ones, will look to do whatever they can to protect their goods,” said founding partner Theodore Eppenstein at the law firm Eppenstein and Eppenstein in New York.

“And they are going to sue intermediaries, like eBay, if that’s a way to stop the counterfeiting,” he added. “This lawsuit [if the retailers win] will have a big impact in the U.S.”

The Financial Times stated that Louis Vuitton, part of the LVMH (Louis Vuitton Moet Hennessey) group, is demanding €20 million ($25.6 million) in damages and interest from the sales of counterfeit goods between2001 and 2005 on eBay. Whereas Dior, also controlled by LVMH’s chief executive officer Bernard Arnault, is seeking €17 million ($21.7 million).

Sonya Sellmann, media contact for LVMH, said there was “no comment” at this time because it was against French law to discuss the case pre-trial.

Shares of eBay fell a penny to $26.13 in recent trading.

First Time’s a Charm

This is not the first time eBay has been taken to court by a high-fashion retailer for counterfeit sales. Tiffany took eBay to court in 2004 on the same premise, in the United States.

The New York-based jewelry maker said 75 percent of the 200 jewelry pieces it bought off of eBay’s site in 2004 were fakes.

The case has still not yet gone to trial, but it is expected to go to trial by the end of this year (see Tiffany Suit May Tarnish eBay).

Seller’s Responsibility

eBay has listed in its policies that the seller is responsible for the “authenticity or legality of the items offered in their listings.”

eBay asks its sellers to take steps to ensure their items are authentic before listing them on the auction site. “If a seller cannot verify the authenticity of an item, the seller is not permitted to list it,” reads eBay’s Listing Policies.

"We share rights owners’ concerns over the offering of infringing items on eBay, and for years, we have devoted substantial resources and invested millions of dollars to address this serious problem,” said eBay spokesperson Catherine England. “In fact, our efforts far exceed anything that is required by law. To the extent that these lawsuits suggest otherwise, we will fight them.”

LVMH also sued Google in 2003 for linking Internet users to sites selling counterfeit versions of Louis Vuitton-branded items. The giant search engine company lost its defense in France and was fined €300,000 ($383,609) last June.

Contact the writer:Editorial@RedHerring.com

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The Italian telecommunication company’s restructuring plan has set off a chain of events that have led to Telecom Italia Chairman Marco Tronchetti Provera’s resignation, along with the resignation of the economic advisor to the prime minister, Angelo Rovati.

Unions representing 85,000 employees within the Telecom group said Monday they will strike, starting October 3 in Milan, over the company’s restructuring plan to split itself into three separate units—Telecom Italia Mobile (TIM) unit, the “local loop” fixed-phone line unit, and the broadband unit (see Telecom Italia Splits Business and European Mobile Carriers Diverge).

The strategy places emphasis on media content being obtained from 20th Century Fox, a part of Rupert Murdoch’s News Corp. Mr. Tronchetti emphasized last week there were no offers for the sale of TIM.

Not being privy to the reorganization plans of Telecom Italia, despite previous meetings with Mr. Tronchetti, Prime Minister Romano Prodi lashed out last week at the formerly state-owned telecommunications company by publishing private conversations with Mr. Tronchetti on his web site (see Italy Opposes Telecom Split).

Mr. Prodi is skeptical that the segregation of TIM, the only remaining mobile Italian-owned company, may lead to a sale of the mobile subsidiary to foreigners.

Mr. Tronchetti announced his resignation as chairman last Friday, claiming tensions with Mr. Prodi’s center-left government. Mr. Tronchetti will remain chairman of Pirelli, the largest shareholder of Olimpia—an Italian holding company that owns 18 percent of Telecom Italia.

Unusual Investigation

On Monday, Mr. Prodi’s office announced a preliminary investigation would take place into Telecom’s restructuring plan to see if employees and shareholders alike had been given ample notification under Italian securities laws.

“This type of investigation is not common [in Italy],” said Elvezio Santarelli, a senior associate in the Rome office of United Kingdom-based law firm Watson, Farley & Williams. “It is exceptional really. It is mostly for the publicity of such efforts.”

Another matter in the investigation is Mr. Rovati’s conduct and its consequences. He admitted to sending documents to Telecom proposing a partial nationalization of Telecom’s “local loop” unit and a stake in the new company from Cassa Depositi and Prestiti, both state-owned companies.

Selling the TIM unit would provide enough revenue to help Telecom get out from under the €41.32 billion ($52.48 billion) net financial boulder it has been under. But there still have been no public offers.

Later this week, Communications Minister Paolo Gentiloni is expected to address Parliament and address questions regarding Mr. Prodi’s actions.

Shares of Telecom took a hit Tuesday after the recent negative publicity, with its shares falling €1.36 ($1.72) to €2.17 ($2.75) at the close of trading.

“Telecom has the freedom to do whatever it feels is best for the company,” said Mr. Santarelli. “If they want to do this [restructuring], they have to follow the procedures of the law, but they can do whatever they want.”

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A Brussels court ruled on September 5 that the Mountain View, California, search king was in breach of copyright and ancillary laws and must remove all articles from the Belgian publishing group CopiePresse from the Belgian Google News site.

“This has to be negotiated,” said Secretary-General of Copiepresse Margaret Boribon. “They [Google] have to ask for permission to reuse content and then we will settle on how the Internet viewers will be directed to the articles, what the conditions of advertising will be, and things like that.”

Google was given 10 days to remove cache articles from Google and Google News links to the articles or face a €1-million ($1.27-million) daily fine.

The Belgian court also ordered Google to publish the court order in a “visible and clear manner and without any commentary” on the home pages of Google.be and news.google.be for five continuous days within 10 days of the ruling, or face another fine of €500,000 ($634,134) per day.

Of the 400 Belgian news sites that Google scans for their Belgian news site, only three French-speaking newspapers—Le Soir, La Libre Belgique, and La dernière herure—filed a complaint.

Links to the newspapers were still present on the news site Monday morning, 13 days after the ruling. Google claimed it had received no word of the decision until last Friday, September 15, and was therefore unable to abide by the request as well as unable to state its case directly to the judge.

“We are disappointed by the decision, which we believe is flawed and which we intend to appeal,” said D.J. Collins, Google’s head of corporate communications for the United Kingdom, Ireland, and Benelux (Belgium, the Netherlands, and Luxembourg). “In order to comply with the court’s ruling, we have removed the relevant sources from Google News Belgium.”

Ms. Boribon said her association had been contacted by Google lawyers on Monday and hopes to reach a fair negotiation with the popular search engine company in the near future. There has been no set date to meet with the Google lawyers as of yet.

Shares of Google rose $6.58 to $416.46 in recent trading Monday.

Search Conflicts

“For the most part this is an accepted practice in the U.S.,” said Lance Koonce, a copyright lawyer and partner at Davis Wright Tremaine LLP. “This lawsuit is setting up a conflict for search engine companies that, depending on their jurisdiction, will have to possibly abide by different laws.”

Google is also facing lawsuits in Washington, D.C., and in France over its news service. In a similar case last year, Agence France-Presse (AFP) sued Google over the removal of photo credits and copyright violations. AFP content was removed from Google’s news service.

A similar issue arose in eight European Union countries last year when Google Print was launched. The Google Library Program within Google Print digitizes books so web users can search for text within books. However, book publishers and authors were not asked permission (see Publishers Sue Google).

Google had much the same reaction to the controversy over Google Print as with the Belgian news lawsuit. Authors and news sources can opt out of the program if they so desire.

Contact the writer:Editorial@RedHerring.com

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On Wednesday Italian government officials, including Prime Minister Romano Prodi, publicly criticized Telecom Italia’s recent reorganization strategy to split the formerly state-owned telecommunications company into three separate units—mobile, fixed network, and fixed line.

Mr. Prodi responded with an unusual approach by publicly detailing two private conversations with Telecom Italia Chairman Marco Tronchetti Provera. Mr. Prodi told Mr. Tronchetti it would be "advisable" to keep the mobile unit, and all other units of Telecom Italia, in “Italian hands.”

The prime minister also said on Tuesday he was “disconcerted” with Telecom Italia’s restructuring plans (see Telecom Italia Splits Business and European Mobile Carriers Diverge).

During the conference Monday night Mr. Tronchetti repeatedly emphasized that a sale was not on the table for either the Telecom Italia Mobile (TIM) unit or Telecom Italia’s Brazil mobile unit.

“I don’t think that it is illegal [for Prodi] to say something, but is it worthwhile?” asked IDC research director Roberto Mastropasqua. “The government cannot enter into the strategy of a privately owned company, because it belongs to Tronchetti and the companies that manage this business. So of course Telecom can do, and is expected to do, its own strategy—even if this strategy can affect the competition.”

Mr. Prodi’s public discouragement about Telecom Italia’s reorganization has left Mr. Tronchetti in a rather awkward spot. Investors would likely benefit from a sale of the financially strong mobile unit.

Stock Market Fears

However, with Mr. Tronchetti’s repeated statements that a sale of the mobile unit is not under way, in addition to the Italian government’s opposition, selling the mobile unit could send the company’s shares into a nosedive and drag the entire Italian stock market down with it.

“By default you can expect if a big company and its own government are one against the other, it is going to lose shares,” said Mr. Mastropasqua. “Telecom is one of the biggest companies quoted in Milan and the Italian stock exchange. If you have such a single important company losing shares, it will affect the whole market.”

Telecom shares on Friday did in fact dip €0.87 ($1.10) to €2.27 ($2.87) per share. However, that figure is up €0.01 from Friday last week, before the split was announced. On the New York Stock Exchange, TI shares fell $0.66 to $27.87 in recent trading Friday.

Research firm Current Analysis published a report on Wednesday also taking a negative stance on the issue, citing the unwarranted degree of stress on TIM employees and midterm uncertainty for the mobile unit.

With Telecom Italia’s debt reaching up to €41 billion ($52 billion) last June, drastic measures are needed to keep the company afloat. A sale of the mobile unit would solve a number of financial woes for the company. But no one can say for certain what unit is going to be sold.

Murdoch Role Questioned

The statements most in question from Mr. Prodi’s office are those concerning News Corp. Chairman Rupert Murdoch and his involvement with Telecom.

Mr. Prodi’s comments noted that Mr. Tronchetti detailed plans for News Corp.’s Italian subsidiary Sky Italia to merge with Telecom Italia as part of Mr. Tronchetti’s focus of turning Telecom into a more media-content-focused company. News Corp. would in turn receive equity in Telecom Italia.

During the analyst conference Mr. Tronchetti said there would be media content provided by 20th Century Fox, a division of News Corp., to Telecom Italia’s IPTV subscribers. He did not, however, mention a News Corp. stake in the company or a merger.

Telecom Italia could not be reached immediately for comment.

Contact the writer:Editorial@RedHerring.com

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