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"We're kind of back in panic mode." — RBS Greenwich Capital chief economist Stephen Stanley on the stock market's latest slide, caused by subprime mortgage woes and weak economic data, as reported by The Wall Street Journal. As cheap Web-based phone service flourished, so did the industry's image as a hotbed of innovation that cleverly pulled one over on the phone giants. But after a Mar. 8 federal court verdict that Web phone pioneer Vonage (VG
) infringed on key Verizon (VZ
) patents, it's clear that Net calling owes a debt to some well-established technologies. And patent owners are lining up to collect.
Anthony Cataldo, CEO of VoIP Inc. (VOII
), has already hired lawyers to demand payments from outfits using his company's Web calling patents, one of which, he says, covers a way to place calls by clicking a name in an e-mail, online ad, or social networking site. "You are going to see a lot of demand letters going out from us," Cataldo says.
There's a deep vein left to mine. The U.S. Patent & Trademark Office says 2,273 are registered for Voice over Internet Protocol (VoIP) or related technologies. Many belong to players like Verizon, AT&T (T
), Motorola (MOT
), Broadcom (BRCM
), and Cisco Systems (CSCO
). Verizon's patents apply to older technologies such as call waiting and security. Others claim to cover how traditional phone and ip networks talk to each other or a method behind enabling wireless Web calls.
Until the Verizon case, most Web-calling patent lawsuits were quietly settled or elicited small awards. But with 9.5 million Americans using services that allow calls over the Web—double the number a year ago—serious money is at stake. The eight-member jury that considered the case against Vonage in the U.S. District Court for the Eastern District of Virginia awarded Verizon $58 million in damages and a per-user licensing fee. (Vonage, which plans to appeal, declined comment.)
"Before, this was about running around, thumbing your nose at big bad phone companies," says David McClure, CEO of the U.S. Internet Industry Assn. Now, he says, Web-phone companies "are facing reality." America Online (TWX
) co-founder Stephen Case is out to upend another "old" business model. Case's latest venture: using the Internet to try to revolutionize the credit-card business.
His new payment system, GratisCard, aims to lower the credit- and debit-card fees paid by merchants ($48.6 billion in 2005). It plans to charge retailers 0.5% of the cost of a purchase—vs. 2.2% per sale, on average, for Visa and MasterCard (MA
) credit cards. (GratisCard uses proprietary software to route payments over the Internet free of charge.)
Scheduled for a formal launch in April, GratisCard is negotiating with Amazon.com, among other big outfits, in the hopes that such companies will accept the card, according to a source familiar with the matter.Amazon did not respond to requests for comment.
Revolution, the private holding company Case started in 2005 with $500 million of his AOL fortune, is the largest shareholder in GratisCard, which is based in St. Petersburg, Fla. Case is packing his new venture with heavyweights: Former Treasury Secretary Lawrence Summers sits on its board, and the CEO is Jason Hogg, formerly at credit-card giant MBNA, now owned by Bank of America(BAC
). Can a virtual betting parlor predict pestilence? A new Avian Flu Market aims to find out. Started on Mar. 1 to predict the chances of a bird flu pandemic, it's being run by the University of Iowa with funding from the Robert Wood Johnson Foundation.
The market gives a select group of international public health and pandemic experts $100 each in virtual money. The idea is to wager on if, when, and how bird flu will spread, with participants betting on specifics: when it might arrive in North and South America, for instance.
So far, the H5N1 strain of avian influenza virus has killed 154 humans, all of whom contracted the illness from close contact with fowl. But infectious disease experts believe that over time the virus is likely to mutate and become highly contagious among people, leading to a pandemic that could rival the 1918 influenza outbreak.
The university has had success in predicting seasonal flu outbreaks using a similar market. Its Avian Flu Market is scheduled to run for three years. Beijing is cracking down on wealthy families flouting its one-child policy. In force for almost three decades, the rule helped limit the country's population to 1.3 billion as of January, 2005. But it has become irrelevant to China's rich and famous, who can afford fines of up to three times or more the average yearly urban income to have an extra child or two.
Now the government's National Population & Family Planning Commission says it will hit wealthy offenders with bigger fines—no word yet on how big—and set up a "bad credit" list to bar scofflaws from receiving honors. Such prizes count a lot to celebrities such as singers and movie stars, who build careers on them. "They will have to pay a dear price if they violate the family planning policy," said Yu Xuejun, director of the commission's Policies & Laws Dept., the English-language China Daily reported in early March.
The policy has been loosened in poorer rural areas, where some farmers get exemptions. But, perhaps responding to the many Chinese who feel it's unfair for the privileged to shrug off the regulation, Yu says the commission wants to persuade China's rich urbanites and celebrities to stop after one child. Now, "10% of them even have three," he complained to the press. It typically costs a company $10 to $13 to reset an employee password, according to Forrester Research (FORR
)—adding up, in some cases, to millions in annual expenditures as passwords get more complex. "It's always been a problem, but it's gotten a lot worse," says Jonathan Penn, the Cambridge (Mass.) firm's research director.
Now, Penn says, companies are trying to cut down on resets. One solution: a computer tool that allows an employee to use just one password to get access to e-mail, intranet, and other accounts. New York-based Passlogix has supplied such a system to companies like Kaiser Permanente and IBM (IBM
), selling licenses for 6 million users last year, up from 2 million in 2005.
For those who can't remember even one password, the remedy is to create a Web site where employees answer a security question and reset on their own. Combining such automation resets with the Passlogix system, the U.S. Postal Service—with more than 300,000 computer-using employees—now spends less than $1 million annually on resets. Before it began to battle the problem in 2003, it spent more than $3 million a year—with half the number of computer users. "We needed a range of solutions to make this better," says Rick Weigand, an it program manager at the agency. With opening day for Major League Baseball near, many of the 16 million stat heads who play fantasy games are lining up their teams. Sports network ESPN (DIS
) aims to stack its own lineup. It has been snapping up fantasy sites, hiring big-name writers, and offering its online games free to grab share from rivals, including CBS SportsLine.com (CBS
) and Yahoo!, (YHOO
) which, with ESPN, make up fantasy gaming's Big Three. "Our goal is to be the unquestioned No. 1," says John Kosner, ESPN's senior vp and general manager of its new media unit.
So far, participation in ESPN fantasy football has risen eightfold over two years, and gamers playing the baseball version have tripled this year. The goal is to lure users with freebies—ESPN used to charge $30 a team—then sell them ESPN Insider fantasy expert advice and use the bigger audience to raise online ad revenue.
The fantasy world, growing 10% a year, attracts a hot demographic. Players are generally 19 to 49 years old, earn an average $77,000 yearly, and spend up to five hours a week online running their teams. And 80% buy beer, says the Fantasy Sports Trade Assn. ESPN isn't alone in chasing fantasy's fortunes: Last year, newspaper chain American City Business Journals acquired the Sporting News, a big player. NBC (GE
), too, is scouting for sites. Sounds like an aggressive free-agent market. What's the most interesting thing you learned this year at TED, the annual invitation-only Technology, Entertainment, and Design meeting held in Monterey, Calif.?"I was surprised that it was such a consistent environment of inspiration to act and live green. I didn't think that was going to be so much a part of this conference." — Katrina Markoff, founder, Vosges Haut-Chocolat"I loved Paul Ewald's talk about evolving pathogens in an intentional way—the idea you can help a disease evolve to be less virulent." — Tim Brown, CEO, design firm IDEO"Sometimes spectacle can take away from substance. [Swedish global health professor] Hans Rosling swallowed a sword. Everyone forgot what he said before that." — John Maeda, author, The Laws of Simplicity; associate design professor, MIT Media Lab