Sprint and SoftBank Near Agreement to Restrict Use of Chinese Suppliers

The agreement would allow national security officials to monitor changes to the company’s system of routers, servers and switches, among other equipment and processes, the officials said. It would also let them keep a close watch on the extent to which Sprint and SoftBank use equipment from Chinese manufacturers, particularly Huawei Technologies. The government officials spoke about the possible agreement on the condition of anonymity because negotiations are continuing.

While common to most technology investments in the United States by foreign companies, such agreements have come into sharper focus recently because of accusations by United States government officials of espionage by foreign countries.

SoftBank and Sprint have already assured members of Congress that they will not integrate equipment made by Huawei into Sprint’s United States systems and will replace Huawei equipment in Clearwire’s network. Clearwire is a discount cellphone firm Sprint is seeking to buy.

In meetings here on March 14, Masayoshi Son, the chairman and chief executive of SoftBank; Daniel Hesse, chief executive of Sprint; and Erik Prusch, chief executive of Clearwire, sought to reassure United States officials that the merged company would take the steps necessary to ensure that its networks would not endanger United States communications networks.

SoftBank, one of Japan’s biggest cellphone companies, is offering to buy majority control of Sprint for $20.1 billion.

Representative Mike Rogers, Republican of Michigan and chairman of the House Permanent Select Committee on Intelligence, said on Thursday that he also met this month with the company executives, who promised him that they would not use equipment from Huawei.

“I expect them to make the same assurances before any approval of the deal” by national security officials, Mr. Rogers said. “I am pleased with their mitigation plans but will continue to look for opportunities to improve the government’s existing authorities to thoroughly review all the national security aspects of proposed transactions.”

A recent report by the intelligence committee identified Huawei and the ZTE Corporation, another Chinese equipment provider, as possible security risks. The report cited the companies’ potential ties to Chinese intelligence or military services.

In a filing with the Federal Communications Commission, whose approval of the merger is needed to allow the transfer of wireless-phone licenses, the Communications Workers of America said that Huawei and ZTE were “helping to build SoftBank’s next-generation 4G wireless network in Japan” and that Huawei also helped build wireless networks for Clearwire.

But in their own F.C.C. filing, SoftBank and Sprint called the union’s concerns “misplaced.” The companies noted that national security reviews were already being conducted by Team Telecom, an interagency group that includes the Federal Bureau of Investigation and the Homeland Security, Justice and Defense Departments.

Tadashi Iida, a senior SoftBank network executive, said recently that the company and its subsidiaries did not “use any equipment manufactured by Huawei Technologies Co. or its affiliates in their core network infrastructure,” according to an affidavit attached to the document.

In another, related filing, Sprint similarly dismissed the concerns. “Not only is there no evidence of any national security threat that might arise from the proposed transaction, but the expert authorities on national security issues — in particular the agencies that work together in Team Telecom — already are engaged with Sprint and SoftBank on these questions,” it said.

Also studying the potential consequences of the transaction is a national security unit within the Treasury Department that reviews foreign acquisitions of American businesses: the Committee on Foreign Investment in the United States. The interest of government officials in monitoring Chinese manufacturers around the Sprint deal was reported on Thursday by The Wall Street Journal.

Officials at the Treasury and Justice Departments declined to comment, as did spokesmen for the F.C.C. and Sprint.

Roland Sladek, a spokesman for Huawei, said, “Huawei is a company that meets the highest standards of network security, is a trusted vendor to 45 of the world’s top 50 network operators and is an active investor and employer in the U.S.”

It will not be easy for SoftBank and Sprint to avoid all equipment made by Huawei, because it is second in size only to Ericsson of Sweden. American manufacturers of telecommunications equipment have been struggling to remain competitive in the fast-changing industry.

Michael J. de la Merced contributed reporting from New York and David Barboza from Shanghai.

Europe Reaches Agreement on System for Patents

BRUSSELS — It only took four decades of wrangling.

On Tuesday, the European Parliament adopted a uniform patent system for Europe. If it goes into affect as expected by early 2014, it would try to remedy the country-by-country approach whose time and costs have long been an impediment to innovation across the European Union.

Achieving the new, unified system could conceivably provide encouragement for another, far more ambitious project that European leaders will be grappling with at their summit meeting this week: a uniform system of banking regulation and supervision for the euro area. But the long, tortuous route to the patent agreement might also serve as a cautionary tale.

The banking union already has bogged down in national battles that some experts warn could drag the process out for years — particularly if changes to the Union’s treaties are needed to endow the central bank with new and wide-ranging supervisory powers, or to set up a joint financial backstop to ensure the orderly winding up of failing banks.

“What’s clear is that the E.U. continues to operate on a hopelessly optimistic time scale,” wrote Mats Persson, the director of Open Europe, a research group, in a briefing note on Tuesday. Mr. Persson was referring to the time it would take to set up a “proper safety net” for Europe’s banks, including a bank resolution fund.

In the case of the patent, decades of discussions resulted in an unsatisfactory compromise, according to Bruno van Pottelsberghe, the dean of the Solvay Brussels School of Economics & Management. The new system will “still be a mess” and “we should not expect any of a change in Europe’s innovative performance,” Mr. van Pottelsberghe said.

Meeting in Strasbourg on Tuesday, the European Parliament voted 484 to 164 to pass the key plank of the new patent system. Nation-by-nation vetting of the new system will formally start in February, when governments are expected to sign a treaty creating special patent courts.

The system would supplement the current patchwork of patent rules in the Union; under the current system, a ruling in one of 27 countries has no automatic bearing on another. The patchwork approach has made protecting inventions and innovations in Europe 15 times more expensive than in the United States, harming competitiveness, according to the European Commission, the executive arm of the European Union.

The cost of patent protection should initially drop to around €6,500, or $8,450, from around €36,000, or $46,790, the commission says. That is largely because the new so-called unitary patents granted by the European Patent Office in Munich would no longer need to be validated in all of the countries where protection is sought. Nor would it need to be translated into all local languages. Instead, English, German or French would suffice.

Benoît Battistelli, the president of the European Patent Office office, said the decision on Tuesday would “equip the European economy with a truly supranational patent system.”

Yet the long, tangled history of working toward a common patent — repeatedly shelved after bumping up against national interests and amid squabbling over languages — is a timely reminder of how much easier it is to make commitments to a unified Europe than to put unity into practice.

In the case of the banking rules, also known as banking union, E.U. governments still must overcome differences over its most fundamental element: a single banking supervisor operating under the aegis of the European Central Bank.

European finance ministers are expected to work through the night on Wednesday in Brussels debating whether a new supervisor would oversee all 6,000 lenders in the euro area. France, Germany, Sweden, Hungary and Britain are among countries with concerns about the plan. The timing for an agreement “is likely to slip, as member states remain far apart on a number of key substantive issues,” Mujtaba Rahman, an analyst for the Eurasia Group, wrote in a briefing note Tuesday.

On Thursday, the finance ministers will give way to the European Union’s 27 leaders, gathering for their year-end summit meeting. When the leaders met in June, their joint decisions were cast as the starting point for tighter economic and monetary union in Europe. A central pillar of that agreement was a banking union, which would end the so-called doom loop in which frail banks endanger national finances and cause countries to need bailouts.

Valve Facing Legal Trouble over Steam Agreement

Valve Software could be facing legal trouble in Europe thanks to Steam’s End User License Agreement. The Federation of German Consumer Organization (known as the Verbraucherzentrale Bundesverband e.V. in German, or VZBV) has given Valve until October 10th to respond to a claim that its recently-modified user agreement is unfair to consumers. If Valve doesn’t respond, the group will seek to “resolve the dispute in the court.”

The VZBV believes Valve’s agreement coerces users into accepting, as hitting "cancel" when the agreement pops up prevents users from logging into their accounts. The group believes this leads to "disadvantaged" Steam users and that Valve should uphold a recent ruling by the EU Court of Justice that users should be able to resell digital software.

Recently, Valve has been in the news for its Big Picture Mode beta, sweeping changes to Steam’s community and launch of Steam Greenlight. Last week, reports of Valve’s hardware plans continued circulating, including the fact that its first hardware beta could come as soon as next year.

We’ve reached out to Valve for comment about the Federation of German Consumer Organization’s claims and will update with any statement we receive.

Source: CinemaBlend