Goldman, Stanford, Insider Trading, Facebook, BNY, JPMorgan in Court News

A former Goldman Sachs Group Inc. (GS) computer programmer was freed after his conviction for stealing the bank’s high-speed trading code was reversed by a U.S. appeals court.
Wearing a gray sweatsuit, white tennis shoes and a huge grin, Sergey Aleynikov, 42, left the Manhattan courthouse where he had been convicted in December 2010 and entered a waiting car with his lawyer, Kevin Marino.
“Justice occasionally works,” Aleynikov told reporters as he left. “This was such big news to me I haven’t had any time to think about what would happen.”
Aleynikov, a naturalized U.S. citizen born in Russia, said he hoped to be with his three daughters, ages 8, 6 and 3. Until Feb. 17, he had been serving an eight-year sentence at the federal prison in Fort Dix, New Jersey.
After hearing oral arguments from both prosecutors and Marino on Feb. 16, the U.S. Court of Appeals in Manhattan issued a one-page order vacating Aleynikov’s convictions for economic espionage and the interstate transportation of stolen property. The appeals court said it would issue an opinion explaining the ruling later.
The appeals court also issued a mandate that would have foreclosed any further challenge to its decision. The office of Manhattan U.S. Attorney Preet Bharara persuaded the court to set aside the mandate so it can argue for a rehearing of the appeal, either before a three-judge panel or all the court’s available judges. Ellen Davis, a spokeswoman for Bharara’s office, declined to comment on the ruling.
U.S. District Judge Denise Cote, who presided over the trial, ordered Aleynikov released from prison Feb. 17.
Aleynikov was convicted by a jury of violating the Economic Espionage Act and the Interstate Transportation of Stolen Property Act. He was sentenced last March.
On his last day of work at New York-based Goldman Sachs in June 2009, Aleynikov uploaded hundreds of thousands of lines of source code from the firm’s high-frequency trading system, prosecutors said.
He circumvented Goldman Sachs’s security, sent the code to a server in Germany, compressed and encrypted it, and took it with him to a meeting with new employers in Chicago, the U.S. said. Prosecutors argued Aleynikov wanted it as a “cheat sheet” to start a trading system at his new job.
During oral arguments on Feb. 16, the three-judge appeals panel criticized the government’s application of the espionage act to Aleynikov’s actions, asking the prosecutor how the crime occurred and how it affected commerce.
The judges -- Dennis Jacobs, 67, Guido Calabresi, 79, and Rosemary Pooler, 73 -- also asked if taking Goldman Sachs’s trading code was comparable to taking copyrighted material or bringing an employee manual to a new job.

Apple goes after Motorola and Google with legal guns blazing

One measure of how quickly events are unfolding in the smartphone patent wars is the number of typos appearing in Florian Mueller's FOSS Patents dispatches. The German-born blogger's coverage of the "thermonuclear war" Steve Jobs promised to unleash against Google's (GOOG) Android operating system are closely read by all sides in the cross-continental disputes, and lately he's hardly had time to breathe, never mind spellcheck. "There's just too much going on these days," he wrote in the second of two long reports filed Saturday, "and contrary to popular misbelief (which I've seen on Twitter), I do sleep." As Mueller sees it, the subject of his two latest reports, a pair of federal lawsuits filed by Apple (AAPL) in two California district courts, are signal events that could turn the tide in Cupertino's favor. Galaxy Nexus In the Northern District: In the first suit, Apple is asking for a preliminary injunction against the Galaxy Nexus -- the official "Ice Cream Sandwich" lead device developed by Samsung in close cooperation with Google -- based of four court-tested "high-powered" patents that Mueller dubs the Four Horsemen of the Apocalypse. Google's decision to keep using one of them -- the so-called "data detector" patent -- in the latest version of Android, even after the U.S. International Trade Commission ruled that an HTC Android phone had infringed it is, in Mueller's words, "unfair vis-à-vis HTC..., snubs Apple, and shows disregard for intellectual property in general and the ITC in particular. This is a case of willful, extremely reckless infringement." In the Southern District: Here Apple is trying to shut down Motorola Mobility's (MMI) legal strategy -- endorsed implicitly and "irrevocably" last week by Google, which is about to purchase MMI -- of blocking sales of iPhones in Germany on the grounds that they infringe industry-standard broadband patents that Motorola pledged years ago to license to all comers on so-called FRAND (fair, reasonable and non-discriminatory) terms. Motorola licensed the patents to chipmaker Qualcomm (QCOM) and that license would normally extend, by the principle of "patent exhaustion," to a company like Apple that buys Qualcomm chips. But in an exchange of letters revealed in Apple's suit, Motorola asked Qualcomm "to terminate any and all license and covenant rights with respect to Apple, effective February 10, 2011." Mueller writes that "even though Qualcomm may benefit from weak patent exhaustion defenses in other situations because it is a major patent holder who could do a lot of 'double-dipping', it appears that it supports Apple, and I don't think that's just because Apple is a customer. I think it's most likely because MMI's discriminatory termination relating to only Apple is, quite probably, unjustifiable and ineffectual." "If it's true that patent exhaustion is a valid defense in Apple's favor," Mueller concludes, "Google-MMI is playing with fire here." Apple was forced to temporarily remove the iPhone 3G and 4 from its German online store based on Motorola's FRAND complaint, and now sales of the iPhone 4S could be at risk. The company is seeking damages that could run to many billions of dollars.

New Vonage Mobile apps offer free smartphone to smartphone calling

Vonage has released new mobile apps for iOS and Android offering free voice and texting throughout the world. In 2010 Vonage expanded into Skype territory with a Facebook app to offer free calling to other Facebook users. Their new Vonage Mobile apps take this a step further by combining free app to app calling on iOS and Android with prepaid calls to other phones. Voice calls and texts between Vonage Mobile clients are free, potentially allowing people who have dropped home phone service to save on wireless minutes. Calls made through mobile data connections will still count against your data plan. Of course you can avoid that when your phone is connected to a Wi-Fi network. Vonage Mobile works with your phone's existing address book. It will show you which contacts have Vonage Mobile accounts, and there's a SMS powered Invite feature (see the video below). To call a phone directly, instead of from app to app, you will need to buy credits. When you select a contact it will show you the per minute rate before you make a call.

Louisiana city blazes high-speed Web trail

In this tradition-rich city known for its crawfish etouffee and Zydeco stomps, high-speed Internet rules. Web videos upload in a few quick seconds. Surgeons review online pathology reports from their living rooms. University students share bulky research files with one another electronically at lightning speeds. More than 800 miles of fiber-optic cable hum invisibly underground in Lafayette, a city of 120,000, delivering Internet speeds of up to 100 megabytes per second — rare for even major cities. The cutting-edge connectivity in the heart of Cajun country is due not to a private telecom giant but to a public municipal service that offers higher speeds and often lower rates than the private sector. It hasn’t come without a fight. From the time the cyber network was just a far-fetched concept, the city’s two main private providers, Cox Communications and BellSouth (now AT&T), have fought the initiative every step of the way — from an information campaign against the project to civil lawsuits. LUS Fiber, a subsidiary of Lafayette Utilities System, the city-owned power company, offers the speedy Internet service along with cable television and phone service. The Louisiana Supreme Court ruled in favor of the city in 2007, allowing the project to proceed. “We expected some opposition. But no one has had the level of push-back we got here in Louisiana,” LUS Fiber director Terry Huval says. Telecom companies “want to nip it in the bud to keep other municipalities from doing the same thing.” The battle over broadband in Lafayette is part of a growing number of clashes across the USA that pit municipalities against telecom firms for the right to deliver Web access to homes and businesses. More than 150 local governments across the country have built or are planning to build cyber networks, says Christopher Mitchell of the Minneapolis-based Institute for Local Self-Reliance, a non-profit group that advocates community development and local access to technology. Mitchell says those efforts often draw opposition in the form of misinformation campaigns, lawsuits from private providers or unfavorable state laws resulting from telecom lobbying. Nineteen states either ban cities and counties from getting into the broadband business — or make it difficult. As the Obama administration advocates greater broadband connectivity across the USA, communities vying to build the networks are being fought by state legislators backed by telecom companies or the companies themselves. At the core of the debate is whether local governments should be getting into the costly and at times risky business of providing Internet service and whether public financing and other options give cities an unfair advantage over private companies. Telecom companies often pay “franchise fees” to cities for the right to sell cable TV programming, a tool the cities can leverage against companies, telecom officials say. “Our initial objection was, and remains, that it is an unfair advantage for your competitor to also be your regulator,” says Todd Smith, a Cox spokesman. “Many states prohibit government from competing with the private sector.” Falling behind Once a broadband leader, the USA has slipped to 15th in a poll by the Organization for Economic Cooperation and Development that ranks countries according to the percentage of households and businesses using broadband, falling behind Finland, France, Canada and other countries. The USA’s “duopoly problem” — 96% of households have access to two or fewer broadband service providers — has contributed to the slide in ranking, according to the Federal Communications Commission. In its National Broadband Plan, the FCC urges Congress to clarify federal rules allowing state and local governments to provide broadband service. Local governments are increasingly trying to bring broadband service to rural stretches where private providers don’t operate but they are met with stiff resistance from the companies, Mitchell says. “These companies fundamentally aren’t built for acting in a competitive environment,” he says. “They’re built as monopolies. They don’t know how to operate any other way.” Cases where private providers have opposed community broadband projects: •Telecom lobbyists spent more than $350,000 last year on TV and newspaper advertising and other strategies to try to defeat a referendum in Longmont, Colo., that would allow the Boulder suburb to provide Internet service to businesses and residents, says Vince Jordan, a software entrepreneur who led efforts to pass the vote. The referendum passed with 60% of the vote. •Monticello, Minn., officials fought off several legal challenges by Bridgewater Telephone and TDS Telecom when the city announced it was bringing Internet service to residents. In 2009, the Minnesota Supreme Court threw out the cases, allowing the project to continue, Monticello City Administrator Jeff O’Neill says. •After heavy lobbying from Time Warner Cable and other companies, North Carolina lawmakers passed a law last year making it harder for communities to build their own broadband networks, says Democratic state Rep. Bill Faison, who opposed the bill. “It should have been named the ‘Time Warner Cable monopoly bill,’ ” he says. South Carolina and Georgia are considering similar bills. “Pick a battlefield,” says Craig Settles, a California-based broadband analyst and consultant. Telecom companies “will figure out a way to kill as many of these projects as they can.” Telecom industry supporters say cities shouldn’t risk millions in taxpayer dollars in an industry already saturated with private sector investment. Cable TV companies, which supply the majority of Internet service to residents in the USA, have invested more than $185 billion since 1996 to upgrade their networks and equipment — a level local communities can’t compete with, says Brian Dietz of the Washington-based National Cable & Telecommunications Association. “The evidence shows many municipal broadband projects haven’t succeeded, and taxpayers are on the hook for those failures,” Dietz says. “It hasn’t been a success story by any stretch.” A lure to new business Lafayette headed toward cyber connectivity more than a decade ago, when it laid 65 miles of fiber optics to bring better Internet connection to its city-owned power company, Huval says. Businessmen approached the city about expanding the network throughout Lafayette as a way of drawing businesses, he says. City leaders asked BellSouth and Cox representatives to partner on the project – but they declined, Lafayette Parish President Joey Durel says. So city leaders decided to do it themselves “They needed a much quicker return on their investment for their stockholders,” Durel says. “That wasn’t our mission. Our mission was to serve our community.” In 2005, voters passed a referendum with 62% of the vote to invest $125 million in city funds to bring fiber-optic connections to every home and business, Huval says. BellSouth and some residents filed lawsuits against the city, claiming it had an unfair advantage over private companies because it had access to city funds. The challenge reached the state Supreme Court, which ruled in 2007 in favor of the city, Huval says. Today, Lafayette’s system is drawing attention from the tech world. California-based visual effects house Pixel Magic opened a studio in Lafayette two years ago, partly based on the Internet connectivity, and more tech companies continue moving in, Huval says. “We’ve built the infrastructure of the future,” he says. Scott Eric Olivier moved his tech startup firm, Skyscraper Holding, from Los Angeles to Lafayette when he heard of the speeds and service offered by LUS Fiber. The same connectivity of 100 megabytes per second, which allows him to move large files across the Web for clients, would cost him several thousand dollars a month on the West Coast, he says. In Lafayette, he pays $200 a month. Another plus: He’s getting what he paid for — exactly 100 megabytes per second — while his previous provider rarely delivered the promised speeds, Olivier says. “The fact that these guys were able to build this and go to war with the larger telecommunication companies is very impressive,” says Olivier, a Lafayette native. “Their advertised speed is actually what you get. I don’t know any other provider in the United States that can do that.” For Stephen Abshire, founding partner of the Gastroenterology Clinic of Acadiana, the city’s fiber upgrade allowed him and his partners to finally make the switch to a fully electronic clinic. Health records, billing, pathology reports and endoscopy readouts are all reviewed digitally, he says. The high speeds and secure connections between his home and office allow him to review patient records at home and have online conferences between doctors and nurses in different parts of the city — feats impossible without the fiber-optic network. “Everything is paperless at this point,” Abshire says. “The only paper we have are consent forms.” Lafayette businessman Tim Supple is among those who haven’t embraced the network. He opposed the initiative from its inception, arguing that the city is creating an unfair advantage by financing the venture through favorable, long-term bonds and could some day hike utility rates to pay for the fiber connections. He subscribes to LUS Fiber and says the service is much quicker than commercial alternatives but says government should stay out of the retail Internet market. “Who will come and compete with the city? Who will come here with the ‘next best plan’?” asks Supple, who owns a software company. “At the end of the day, it’s going to destroy the market, not create it.” LUS Fiber has captured nearly one-third of the city’s 45,000 residential and business subscribers, and more are steadily joining each month, Huval says. To compete, Cox has slashed its rates for some residents and business customers, lowering TV and Internet bills across the city, he says. Questions linger as to whether LUS Fiber can be a solvent business and pay for its expensive day-to-day costs. Huval says the draw of new companies to the city and the connectivity of schools, libraries and every home in the city already make the venture more valuable than its price tag. “It’s given Lafayette a true edge,” Huval says. “Other communities around the country 20 years from now will want what Lafayette has today.”