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F.T.C. Targets Patent Companies

The action is only the first step in what is likely to be a lengthy and broad investigation, which could eventually result in antitrust lawsuits against the companies.

Edith Ramirez, the chairwoman of the F.T.C., said in June that she believed there is little real evidence about the costs and benefits of a rising tide of patent litigation.

By a 4-to-0 vote, the commission agreed to seek public comments on an investigation of “approximately 25 companies that are in the business of buying and asserting patents,” the agency said in a statement. It also will look at about 15 other companies that assert patents in the wireless communications industry, including manufacturers of smartphones.

After reviewing public comments, the trade commission will seek to issue subpoenas to the patent assertion entities, which are also known, unflatteringly, as “patent trolls.”

“Patents are key to innovation and competition, so it’s important for us to get a better understanding” of how the entities operate, Ms. Ramirez said in the statement Friday.

She said the Federal Trade Commission Act allows the agency to gather information about the financial operations of the companies, and it will seek to uncover how much they earn from patent lawsuits and licensing and how the profits are distributed to investors.

That information can form the basis of antitrust lawsuits, among other actions.

The purpose of the inquiry is “to expand the empirical picture on the costs and benefits” of the companies’ activity, Ms. Ramirez said. “What we learn will support informed policy decisions.”

The New York Times reported in June that Ms. Ramirez was trying to get the approval of the full commission to begin issuing subpoenas to the companies, which accounted for more than 60 percent of the 4,000 patent lawsuits filed in 2012. That figure was up from 29 percent two years earlier.

President Obama also has called for the federal government to ascertain how patent assertion entities are operating; he directed executive agencies to take steps to “protect innovators from frivolous litigation.”

The companies that are generally pointed to as the largest of the litigators say that while there is abuse of patents in some sectors, they are not themselves involved in frivolous litigation.

Patent assertion entities span a spectrum. On one end are companies that are essentially legal shells that send letters to businesses claiming infringement and demanding payments; in 2011, for example, such a company targeted coffee shops for setting up Wi-Fi networks for customers.

At the other end are companies like Mosaid Technologies and Intellectual Ventures, which buy large portfolios of patents from technology companies like Microsoft and Nokia, using them to generate licensing payments that run to the millions of dollars.

Advertising: With Change Coming, Aetna Targets Employers

But because a majority of Americans are insured through their employers, the insurance companies have to reach several audiences. Speaking to human resources professionals, health care providers and policy makers is still an important part of many insurance companies’ marketing plans.

Aetna, one of the largest of the companies, will introduce a new campaign on Tuesday aimed at those groups. It will highlight the company’s goal of cutting billions of dollars of expenditures through so-called Big Data, electronic health records and other technologies as well as encouraging better coordination among health care providers. The campaign, called “Our Healthy,” will run online, in print and on mobile devices through the end of 2013.

“We believe that the health care system is desperately in need of improvement,” said Robert Mead, the senior vice president of marketing, product and communications at Aetna. Mr. Mead cited a report by the Institute of Medicine that tallied more than $760 billion in health care “waste” created annually as a result of consumer fraud, unnecessary procedures and excessive administrative costs.

The campaign was created by OgilvyOne in New York and is an extension of a consumer campaign called “What’s Your Healthy?” that Aetna began earlier this year. Both “What’s Your Healthy?” and “Our Healthy” are part of a $50 million advertising and marketing strategy for the company.

“If you’re a consumer, you don’t know what things cost,” Mr. Mead said. “You don’t know what things are worth. You don’t always know how to get the most value out of the health system. We have to bring everybody to the table.”

Mr. Mead said the campaign also stressed the need for health care providers to shift to a model known as “accountable care,” which shifts their reimbursement models for health care professionals from being paid for the volume of services they perform to being paid based on the outcomes of patient care. Accountable care systems are usually linked to technologies that help health care providers measure performance and manage patient data. Aetna has 27 accountable health care agreements with hospitals and other health care providers around the country.

A video for the “Our Healthy” campaign features Mark T. Bertolini, the chief executive of Aetna, explaining the company’s goals. “Unless you fix that health care system, you cannot fix the economy,” Mr. Bertolini said in the video. “If we fix just 20 percent of it, we could pay for the Affordable Care Act. We could insure everyone without increasing taxes.”

Like other insurance companies, Aetna has over the last few years been ramping up its technical products and services. It created Healthagen, a division of the company that sells health technology services to consumers and providers, like a mobile application that helps patients assess their symptoms and find doctors.

“The fee-for-service model is broken,” Mr. Mead said. “The Affordable Care Act encourages the system to move to accountable care,” he added. “The challenge with that is that doctors and hospitals need technology and support to make that work.”

But more technology and more data may not solve the problem of waste in health care, said Robert S. Huckman, a professor of business administration at Harvard Business School and the faculty co-chairman of the Harvard Business School Healthcare Initiative. “When you’re talking about having to manage waste in the system, most would agree that a lack of coordination rests at the heart of a lot of it,” he said. “Data without an educated way of querying that data is not helpful. It is a start.”

While insurance companies like Aetna have access to vast amounts of patient data that could be used to manage costs, according to Mr. Huckman, the economic impact of even widely adopted technologies like electronic health records is still unclear. “Within providers and within a hospital, the electronic records have made greater inroads. But the question of moving toward greater coordination and greater interoperability is an issue we are still grappling with.”

The cost of health care, however, is something everyone can agree is too high, Mr. Huckman said: “I think the cost issue is most salient right now for most Americans. It hits you front and center when you look at some of the prices.” He noted how costs could vary widely depending on where a person lived and who their insurer was. “It shouldn’t vary that much,” Mr. Huckman said. “The cost of a product on Amazon is the same no matter where I buy it from. It does defy a little bit of explanation.”

Disruptions: New Targets for Hackers: Your Car and Your House

Copyright Lawsuit Targets Cover Songs on YouTube

In the latest sign of friction over the licensing of online music, a group of music publishers has sued Fullscreen, one of the largest suppliers of videos to YouTube, saying that many of Fullscreen’s videos — particularly cover versions of popular songs — infringe on the publishers’ copyrights.

Fullscreen is one of the largest of the so-called multichannel networks, or M.C.N.'s, which produce their own content — the company’s offices are in Culver Studios in Los Angeles, where “Gone With the Wind” and “Citizen Kane” were filmed — and represent the work of thousands of other creators of widely varying sizes. According to Fullscreen, the 15,000 channels the company represents have a total of 200 million subscribers and draw more than 2.5 billion views each month.

Among the most popular videos on YouTube are cover versions of popular songs, often by amateurs or semiprofessionals who have built a following online. But according to the suit, filed in United States District Court in Manhattan on Tuesday by groups represented by the National Music Publishers’ Association, most of these lack the proper licenses and do not pay publishers and songwriters the royalties earned from ad revenue. (Publishers represent the music and lyrics underlying songs, not recordings of them, which are covered by a separate copyright.)

According to the suit, Fullscreen and its founder, George Strompolos, who is named as a defendant, “have willfully ignored their obligation to obtain licenses and pay royalties to exploit the vast majority of the musical content disseminated over Fullscreen’s networks.” A spokeswoman for Fullscreen declined to comment.

The publishers represented in the suit include Warner/Chappell Music, which is owned by the Warner Music Group and is one of the biggest publishers, along with several independents like Songs Music Publishing and Peermusic. An exhibit submitted with the suit lists dozens of songs that Fullscreen is accused of using without proper licenses, including hits by Lady Gaga, Kanye West, Britney Spears and others.

As YouTube has become the default listening service for young people, the music industry has frequently sparred with YouTube and its owner, Google, over the licensing issues, which can be confusingly opaque. YouTube, for example, is responsible for the licensing and royalties of user-generated content loaded directly to its system, but often yields that responsibility to M.C.N.'s and other major partners.

In turn, those networks have come under fire from music groups, and negotiations have been slow. In February, Fullscreen and Maker Studios announced licensing deals with the Universal Music Publishing Group, one of the largest publishers, but most others had no such deals.

An announcement on Tuesday about the publishers’ suit against Fullscreen suggested that it had been prompted by a breakdown in licensing negotiations. At the same time that it announced the suit, the association said it had reached an agreement in principle with Maker Studios on licensing.

DealBook: Hedge Fund Manager Loeb Targets Sony for a Breakup

Steve Marcus/ReutersDaniel S. Loeb’s hedge fund, Third Point, has amassed a stake of about 6.5 percent in Sony.

3:42 a.m. | Updated

An American hedge fund billionaire known for starting big fights has called for a breakup of the entertainment and electronics colossus Sony, according to people briefed on the matter, possibly setting off a battle that could roil Japan’s famously staid corporate culture.

The call, which came on Tuesday, will most likely be viewed by government officials and corporate leaders in Tokyo as a shot across the bow from Wall Street, just as Western investors begin piling into Japanese stocks.

The hedge fund manager, Daniel S. Loeb, is pressing Sony to spin off part of its entertainment arm, which includes one of the biggest film studios in Hollywood and one of the largest music labels in the world, responsible for movies like “Skyfall” and artists like Taylor Swift.

Mr. Loeb — known for ousting Yahoo’s former chief executive and luring Marissa Mayer away from Google to run the company — also signaled that he would accept a seat on Sony’s board.

His hedge fund has quietly amassed a stake of about 6.5 percent in Sony, making it one of the biggest shareholders. The holding, made up of stock and derivatives, is valued at about $1.1 billion.

Still, even big Japanese investors have often faced resistance in seeking changes at companies, a hurdle that may be significantly higher for a foreign hedge fund manager.

A spokesman for Sony, Shiro Kambe, said in a statement that the company welcomes investments. “We are focused on creating shareholder value by executing on our plan to revitalize and grow the electronics business, while further strengthening the stable business foundations of the entertainment and financial services businesses,” he said.

But Mr. Kambe also pointed to repeated assertions by Sony’s chief executive, Kazuo Hirai, that Sony Entertainment contributes significantly to the overall company and is not for sale. “We look forward to continuing constructive dialogue with our shareholders as we pursue our strategy,” he said.

Mr. Loeb, 51, the founder of the hedge fund Third Point, flew to Tokyo this weekend for three days of meetings with government officials, regulators and senior Sony executives, according to people briefed on the matter. He hand-delivered a letter on Tuesday to Mr. Hirai that praised a turnaround effort but asked for more.

“So while Third Point supports your agenda for change, we also believe that to succeed, Sony must focus,” Mr. Loeb wrote in the letter, a copy of which was obtained by The New York Times.

After the meeting, the hedge fund manager told associates that he was impressed by Mr. Hirai and supported management, according to a person briefed on the matter.

Mr. Loeb said he believed that spinning off a portion of the entertainment business to Sony shareholders could sharpen the company’s focus and lead to higher profit margins, while helping to revive the core electronics business. He has also contemplated a potential spinoff or sale of other operations, including Sony’s insurance division, which accounted for much of the company’s profit last quarter.

The campaign is a bet that Japan will prove the next gold mine for global investors. Long hobbled by a so-called lost decade of little economic growth, the country has come to life in recent months under the stewardship of Shinzo Abe, who as prime minister has promoted policies meant to attract private investment. Mr. Loeb is betting that Mr. Abe will expand deregulation.

“Under Prime Minister Abe’s leadership, Japan can regain its position as one of the world’s pre-eminent economic powerhouses and manufacturing engines,” Mr. Loeb wrote in his letter.

Despite its decade-long slump, Sony, the 67-year-old electronics pioneer, remains one of the most prominent companies in Japan, with a market value of roughly $18 billion.

Still, Mr. Loeb has plenty of ammunition. Shares of Sony have plunged nearly 85 percent over the last 13 years. The company long ago ceded its crown as the king of cool electronics to Apple, and its dominance in televisions was eroded by the emergence of Korean rivals like Samsung and LG.

Last week, Sony reported its first annual profit in five years. But it reached that milestone thanks largely to the weakening yen and some belt-tightening, including the consolidation of businesses and the sale of its American headquarters.

Sony’s chief executive, Mr. Hirai, is scheduled to make a presentation about the company’s turnaround plan next week. He has argued that despite having come late to the era of digital media, the company that made the Walkman, the Trinitron television and the PlayStation can rebound.

To Mr. Loeb, more must be done, starting with the spinoff of Sony Entertainment. Though the division accounts for more than 40 percent of the company’s enterprise value, he said in his letter that it needed discipline to raise its profit margins. Mr. Loeb estimated that a partial spinoff of the entertainment business could bolster Sony’s share price by as much as 60 percent.

In his letter, Mr. Loeb proposed handing 15 to 20 percent of Sony Entertainment to existing shareholders. His firm would be willing to backstop the initial public offering up to $2 billion to ensure its success.

Other underappreciated assets include the company’s 60 percent stake in Sony Financial, which largely sells life insurance policies, as well as real estate holdings and stakes in other companies. And Mr. Loeb is expected to argue that Sony’s electronics division must sharply reduce costs, including by taking a cue from its protégé, Apple, in focusing on a few core products.

Mr. Loeb has recently expressed his interest in Japan. Referring to the changes by the Abe government, he called it “a huge game change” at an industry conference last week. “And there’s a lot more room to go,” he added.

Mr. Abe has called his revival effort a plan of “three arrows,” including aggressive monetary easing by the Bank of Japan and enormous stimulus spending by the government.

So far, that effort appears to have drawn investor plaudits. The yen weakened in value last week, to 100 to the dollar, a level unseen in four years, helping local companies like Sony and Toyota. And the Nikkei 225-stock index has risen 43 percent so far this year. At the same time two years ago, the Nikkei was down 5.7 percent.

Shares in Sony rose 1.2 percent in Tokyo on Tuesday, while the Nikkei closed down 0.16 percent.

But it is the third arrow that has Mr. Loeb’s attention. The Abe government hopes to shed Japan’s reputation as a land of strict hierarchy and bureaucracy. Business mistakes were often seen as shameful, and outright confrontation largely disdained.

“There’s an entrenched management culture there,” said Lawrence B. Lindsey, a former top economist in the administration of President George W. Bush. “Activists aren’t particularly popular here among management, and they won’t be popular in Japan either.”

No less than Howard Stringer, Sony’s own chairman, has criticized the status quo.

“Japan is a harmonious society which cherishes its social values, including full employment,” he said in a speech last year. “That leads to conflicts in a world where shareholder value calls for ever greater efficiency.”

Yet there have been changes. The percentage of foreign ownership in companies on the Tokyo Stock Exchange nearly quintupled, to 24 percent, from 1990 to 2008. And Japanese shareholders have increasingly adopted the aggressive tactics of Western fund managers.

Sony is the biggest bet yet for Mr. Loeb, an intense California native who built his name largely upon acidly written letters, berating targets for mismanagement and calling for change.

The strategy has proved profitable. Third Point’s returns are up 13.3 percent this year and up 2.6 percent for the first week of May. Forbes estimates Mr. Loeb’s net worth at about $1.5 billion.

Perhaps the most prominent victory has been Third Point’s investment in Yahoo, where Mr. Loeb pushed for the dismissal of a chief executive after exposing the executive for falsifying academic credentials.

Mindful of Japanese decorum, however, Mr. Loeb strikes a more conciliatory tone in his letter to Mr. Hirai of Sony. His calls are couched as suggestions aimed at improving the company, rather than aggressive demands.

“Third Point would not have made this substantial investment if we did not believe in a bright future for Sony’s global brand, superior technology, and dedicated employees,” he wrote. “We are confident that by acting as partners, Sony will grow stronger.”

Hiroko Tabuchi contributed reporting.

Jones Day Targets India With London Hire

Jones Day has added an India practice partner to its London office.

Sumesh Sawhney was previously a partner at Clifford Chance, where he was co-head of that firm's India corporate group.

Sawhney's practice has focused on India-related mergers and acquisitions, joint ventures and cross-border investment. Previous clients for India deals include Bayer and Malaysia's Maxis Communications Bhd.

Between 1992 and 2000, Sawhney worked in-house for Indian conglomerates Thapar Group and the Escorts Group of Cos. In 2003, he joined Amarchand & Mangaldas & Suresh A. Shroff & Co. as a partner and moved to Clifford Chance as an associate three years later. He became a partner at the British firm in 2010.

Bits Blog: Google Warns of New State-Sponsored Cyberattack Targets

The warning from Google.

In June, many Google users were surprised to see an unusual greeting at the top of their Gmail inbox, Google home page or Chrome browser. “Warning: We believe state-sponsored attackers may be attempting to compromise your account or computer.”

On Tuesday, tens of thousands more Google users will begin to see that message. The company said that since it started alerting users to malicious — probably state-sponsored — activity on their computers in June, it has picked up thousands more instances of cyberattacks than it anticipated.

Mike Wiacek, a manager on Google’s information security team, said in an interview on Tuesday that since Google started to alert users to state-sponsored attacks three months ago, it had gathered new intelligence about attack methods and the groups deploying them. He said the company was using that information to warn “tens of thousands of new users” that they may have been targets, starting on Tuesday.

By Tuesday afternoon, several people — many of them American journalists and foreign policy experts — had already taken to Twitter to say they had seen the warning. Noah Schactman, the editor of Wired’s national security blog “Danger Room,” tweeted: “Aaaaand I just got Google’s ‘you may be a victim of a state-sponsored attack’ notice. #WhatTookYouSoLong?” Daveed Gartenstein-Ross, a senior fellow at the Foundation for Defense of Democracies, also reported getting the message.  As did Joshua Foust, a fellow at the American Security Project, a nonprofit research organization, who has written extensively about Afghanistan.

Mr. Wiacek noted that Google had seen an increase in state-sponsored activity coming from the Middle East. He declined to call out particular countries, but he said the activity was coming from “a slew of different countries” in the region.

Those findings triangulate with recent discoveries by security researchers that Middle Eastern states, including Iran, Qatar, the United Arab Emirates and Bahrain, have used spyware to monitor citizens and activists overseas.

Last week, several American banks were hit with cyberattacks by hackers claiming Middle Eastern ties. Security researchers have said they have noticed an increase in cyberattacks originating in the region. “We absolutely have seen more activity from the Middle East, and in particular Iran has been increasingly active as they build up their cybercapabilities,” George Kurtz, the president of CrowdStrike, a computer security company, said in a recent interview.

Mr. Wiacek said there were several steps Google users, especially those who get its warning, could take to protect themselves, like changing their e-mail and account passwords, enabling Google’s two-step authentication service and running their computer software updates.