Tuesday, March 22, 2011

Digital Wallet Battle Heating Up

In the very near future, I believe phones will replace credit cards as the physical instruments used to purchase goods and services. All the big carriers as well as the manufacturers - Google, RIM and Apple - are jockeying for position to control this new engine of commerce.

Mobile payment data is what we are talking about here. How to store it? Who has access to it? How it is deployed? And most importantly, who makes the most money from it? Today, payment credentials are stored on magnetic strips on plastic credit cards. That technology is about to be rapidly replaced. Visa, American Express and Mastercard might be left out in the cold or need to adapt their business models radically.

This new technology will move payment credentials from magnetic strips on plastic cards to your phone. The act of purchase becomes contact-less whereby the swipe of a credit card through a terminal is replaced by simply waiving your phone in front of some sort of monitor that records the transaction and debits your account.

Where on the phone will payment credentials be stored? RIM would like the payment credentials hard-wired into the handset itself, allowing RIM to play a role in transactions and presumably earn percentage points on each purchase. Google has some phones that already have this capability. This would limit, to some extent, portability of information. Apple does not have built-in technology to allow mobile payments on the Iphone.

Carriers like Verizon and ATT want payment credentials contained on tiny SIM cards which store a user's data and allow such data to be swapped in and out of phones. In other words, the SIM card model would give the carriers greater control over payment credentials and presumably a slice of each transaction. The carriers' model weakens the link between consumer and handset and allows portability.

Currently, the Wall Street Journal reports that there are only 110,000 terminals in the U.S. where a person could pay with smart phones. Of the 55 billion credit card transactions last year, only 80 million were smart phone contact-less purchases. This market will be huge, I have no doubt. In light of ATT's recent acquisition of T-Mobile, this is something federal regulators should consider before approving the further consolidation of the wireless telecom industry.

As an experienced Internet Attorney, I offer a couple of predictions. First, the portable SIM card model will win and control/profits will fall to the carriers. Second, this will open up a whole new slew of financial fraud and identity theft the likes of which we have never seen.

Friday, March 18, 2011

Microsoft Shuts Down Spam Network

Today the Wall Street Journal reported on a gigantic spam network that was shut down by Microsoft and the federal government. The spam network, labeled the Rustock "botnet" by Microsoft in a federal civil lawsuit, is alleged to be the leading source of junk email on the internet.

The spam allegedly peddled everything from vitamins to counterfeit software - an invitation for Microsoft to act. The lawsuit had been previously sealed, likely to enable covert and coordinated action across the country by Microsoft and the feds. U.S. Marshals and Microsoft lawyers raided hosting companies from Seattle to Chicago.

The lawsuit is now unsealed at Microsoft's request. One can only speculate that Microsoft's desire to unseal the suit at this point stems from some urge to parlay its efforts into goodwill with consumers. I wonder if this is a tactical error in the litigation currently underway. Surely there are some advantages in keeping this under seal on a litigation operational and investigative level.

As an internet attorney specializing in commercial email issues, I know that evidence collection and identification of proper parties can be challenging. Furthermore, the line between illegal spam email and legitimate bulk commercial email is often a point of confusion among both consumers and email service providers.

In this case, it appears Microsoft has dealt a blow to an anonymous, international source of much of the illegal spam email making its way through various networks and hosting companies. E-commerce rule-breakers are, if anything, adaptable. Let's see if a new threat rises to fill the vacuum caused by Microsoft's efforts.

Monday, March 14, 2011

9th Circuit Deals Blow to Trademark Owners

In the past week, the 9th Circuit Court of Appeals handed down a decision impacting the internet keyword advertising industry. In Network Automation, Inc. v. Advanced Systems Concepts, Inc., the Court ruled that a preliminary injunction entered against Network Automation in District Court must be vacated. The companies are business software producers. The Injunction prevented Network Automation from bidding on Advanced Systems' trademarked term "ActiveBatch".

The District Court went awry by applying analytical factors in a rigid manner from precedent set forth in a domain name infringement case. Clearly, a domain name infringement case is a much different animal from a keyword infringement case. The Court found that there was no likelihood of confusion caused by Network's bidding on Advanced Systems' trademarked term.

The 9th Circuit has now laid down important precedent for all future trademark keyword advertising cases in the west. From now, District Courts must apply factors in a flexible manner and engage in real keyword analysis. In essence, the 9th Circuit is mandating that Courts peel back the onion and look at what is really happening in a given keyword advertising campaign. This will likely entail an analysis of the party responsible for composing the adwords text, the content of the text itself, the product or service being sold and sophistication of consumers purchasing the good or service. This case will serve as an important guidepost for all future keyword advertising campaigns.

Those engaged in keyword advertising and affiliate marketing would be wise to hire an experienced keyword advertising lawyer to review campaigns for likelihood of confusion and trademark infringement risk.

Friday, March 11, 2011

Google Search Algorithm Controversial

The biggest news regarding the world of internet search this year has been Google's search algorithm change. Recently, Google revised its secret search sauce in an effort to provide ever-improving quality in its search results. Google's goal appears to be to elevate, original fresh content and devalue stale content lifted from other sources or sites that are simply not updated frequently. A warning to those like myself to get back to blogging and create some new content.

As reported by Paidcontent.org, some early results are in. Traffic has surged on content rich premium sites as well as local entertainment/sports sites. What constitutes high quality content as opposed to low quality content is an issue of debate. But, it looks like content remains king at Google and large doses of fresh and original content is the surest way to assert natural search dominance.

I suspect the quality of in-bound links is playing an elevated role as well. High numbers of links from low quality sites and link farms will likely be penalized. It may get harder to game Google's system and employ black hat search engine marketing techniques such as those employed by JC Penney recently. JC Penney employed such black hat techniques and was punished by receiving a de-listing from many search results where it had previously ranked one or two.

Smaller companies may be having a tough time coping as reported by the Los Angeles Times. Such companies have likely invested thousands to millions of dollars in search engine marketing techniques and in-bound linking that may now be obsolete or worthless.

I wonder if this change will lead to better search engine real estate for large corporate entities. One of the endearing and enduring qualities of the e-commerce revolution has been its democratizing effect and promotion of main street businesses to new heights. That may change now - or it might not. As an internet attorney, I am left to ponder how this will affect areas such as trademark rights, cybersquatting, paid search, affiliate marketing and search engine optimization. Will this lead to a new land grab for domains and/or increased trademark right enforcement by large entities? Will this be a boon to paid search marketers as companies who have lost their natural search positions scramble to make up for that loss by buying top positions on keywords. Does this signal a shift toward the interests of large corporations and away from the mom and pop main street vibe that has previously populated many search results. Answers to such questions should become apparent relatively quickly.