Law & Entrepreneurship News

Center For Public Integrity Attacks Federal Government's Small Business Contracts

As reported by the AP, critics are crying out that the federal government is bending the rules of small business contracting by not complying with mandatory quotas for rewards and by misconstruing the definition of "small business."

The critics point to The Titan Corp. (Titan) as its "poster-child" for a company taking advantage of small business loopholes by purchasing small businesses with lucrative government contracts. Titan, a company with $1.8 billion in revenue in 2003, received $550 million in small business contracts from 1998-2003 thanks to a string of acquisitions.

The critics also point to GTSI Corp. as its "poster-child" for a corporation that continues to obtain small business contracts when the firm has outgrown small business status long ago. GTSI has won over $1.2 billion in government contracts over a 6 year period, even though GTSI's total sales in 2003 was $954 million.

These two "poster-child" corporations provide critics with reason to question SBA's claims that they are meeting their contracting targets. The main problem that critics point to is that government contracts allow companies to maintain small business status over the life of the contract, which can extend upwards of twenty years. SBA maintains that it is meeting its goals and its numbers are sound.

FAT Patent Falls Short of Non-Obvious

A search for FAT in news.google.com today will bring up over 60 articles relating to the PTO’s recent preliminary rejection of Microsofts FAT patent. In an ex parte reexamination instigated by the Public Patent Foundation, the PTO declared claims 1-4 of U.S. patent no. 5,579,517 invalid as anticipated by prior art. Commentators are calling this the rediscovery of 35 U.S.C. 103(a), which prohibits patents on inventions that would have been obvious to a person of ordinary skill in the relevant art at the time the invention was made. Open source programmers, who feared the patent might be used to claim royalties against Linux, may be heaving a preliminary sigh of relief, but FAT users probably shouldn’t rip up their licensing agreements just yet. The FAT license covers a portfolio of four patented Microsoft technologies and several others with patents pending.

FAT denotes “File Application Table” and refers to a data structure that tells higher-level systems how to assemble scattered strings of bits in a storage device into a single conveniently named file. The rejected claims refer to a system of mixing DOS file names with longer and more descriptive file names. The file format is used to store files not just on computers, but also on removable flash memory cards such as those in digital cameras. It is also used in the open source software Samba, that lets Linux and Unix computers exchange data with Windows computers, and allows Linux users to read and write files on Windows hard drives. In 2003 Microsoft began attempting to collect royalties of 25 cents per device, maxing out at 25,000 dollars a year, from digital camera manufacturers using the technology in flash cards.

The patent was originally issued to Microsoft in 1996, but the company claims it developed the technology as early at 1976. If the technology had been publicly used or sold in the United States more than one year prior to the application for the patent, it would also be unpatentable under 35 U.S.C. 102(b). But, software was held unpatentable, as expressions of naturally occurring algorithms, until the State Street Bank decision in 1998. The ex parte reexamination of the patent was instigated by an organization known as the Public Patent Foundation.

The Public Patent Foundation declares, “Wrongly issued patents and unsound patent policy harm the public…by making things more expensive, if not impossible to afford, by preventing scientists from advancing technology, by unfairly prejudicing small businesses, and by restraining civil liberties and individual freedoms.” Their mission is to represent the public interest against wrongly issued patents and unsound patent policy. In April of this year the organization filed it’s formal request for reexamination and revocation of the FAT patent with the PTO, presenting significant evidence of prior art, predating the 1996 patent application. Although in the aftermath of the PTO’s preliminary rejection of the FAT patent, Microsoft spokesman announced only that the company looks forward to the opportunity to show how innovative the technology really is, PubPat notes that 70% of patents subject to reexamination instigated by third parties are either revoked or significantly narrowed.

Economy Grows In Second Quarter

The government announced that the economy grew 3.3% in the second quarter. The gross domestic product was revised upward from its initial reading of a 2.8% increase.

Wisconsin Investigating Best Buy Stores

The Wisconsin Division of Trade and Consumer Protection has received numerous complaints over the way Best Buy stores in the state treat customers, and is referring its investigation to the state attorney general's office for possible enforcement, according to the Wisconsin State Journal. 89 complaints have been received over the past two years, involving problems such as unauthorized credit card charges, unpaid rebates, failure to refund for faulty products, repackaging old or used products in new boxes and difficulty in obtaining warranty service. State law allows the attorney general to sue for restitution for customers plus impose a fine of $200 per violation. The attorney general's office is reviewing the case and has not commented. Best Buy denies any wrongdoing.

Wisconsin Jobless Rate Continues to Fall

Wisconsin's unemployment rate dropped to 4.4% in August, down from 4.6% in July and 5.3% in August of 2003 according to new federal statistics released Wednesday. That puts Wisconsin in almost the best shape among Midwestern states, with Iowa having the lowest rate at 4.2% and Michigan having the highest rate at 6.2%

10,000 forced laborers in U.S., according to study

Berkeley's Human Rights Center has released a study on Capitol Hill today that claims that there are as many as 10,000 workers laboring for little or no pay in the United States.

The Washington Post reports that the 10,000 person estimate is actually lower than the U.S. Department of Justice estimate of 14,500 people annually trafficked into the U.S.

Delta to Cut Employee Pay 10%

In an effort avoid bankruptcy, Delta Airlines announced on Tuesday that it will cut pay by 10% for all employees. Executives are also subject to the pay cut, in fact, Delta’s CEO will not be paid the rest of the year.

Delta pilots agreed to allow Delta to contract with retired pilots if needed. Their agreement was in exchange for Delta’s assurance that they will not cancel the pension plans of their pilots before February 1, regardless of the company’s bankruptcy status. Delta is also going to increase the amount it pays into employee shared health costs while offering two voluntary exit packages to employees. Chief Executive Gerald Grinstein is seeking the cooperation of all employees. In a memo to employees, Grinstein stated ``We have a small window of opportunity available to us to avoid Chapter 11 that some other carriers do not have. It is in everyone's best interest that we protect Delta's future by taking these steps together now.''

Trade Agreement Signed for Microbusinesses

Representatives from the US and Mexico signed a “mini-NAFTA” agreement on Monday designed to benefit microbusinesses—companies that employ five workers of less. Tuesday’s issue of the Tuscon Citizen reports that the deal will reduce the barriers to trade for the smallest of businesses. The goal of the project is to establish a strong support system for companies of both countries. It will also aid in education of trade laws and usage of the internet to sell across borders. 52% of all US businesses are microbusiness.

Recording Films in Theaters a Felony in Proposed Bill

A bill passed yesterday in the House aims to make a federal crime of using video cameras to record films in movie theaters. The Piracy Deterrence and Education Act could be considered in Senate as early as next week.

Strategic Partnership with Microsoft Garners Interest from VCs

Former Amazon.com executive builds new technology offering and, with the help of a partnership with Microsoft’s eHome Division, is attracting attention from the VC community.

The Seattle Post-Intelligencer reports that Scott Lipsky, a former executive of Amazon.com, has started a new venture in Seattle that delivers high-quality images of artwork to flat screen televisions. The company, Beon Media, originally targeted business users who pay $195 to access four galleries of images, presumably to display in rotation on flat screen monitors in their lobby or throughout their offices.

Looking to penetrate the home market, Lipsky contacted Microsoft’s eHome Division and the service will now be an offering of Windows Media Center, at a much lower price. The company has now seen a lot of interest from VCs and is planning to start its first institutional financing efforts this fall.