Korea's sovereign rating rises most among OECD nations: report Korea's sovereign rating climbed the most among members of the Organization for Economic Cooperation and Development (OECD) in the last five years, largely due to its fiscal soundness, a report showed Sunday.  Between the end of 2007 and October of this year, the country's credit rating was upgraded by two notches to "Aa3", the fourth-highest level by Moody's Investors Service, according to the data by the Korea Center for International Finance (KCIF).  Fitch Ratings lifted the rating to "AA-" from "A+", with Standard & Poors notching it up to "A+" from "A" over the cited period, the report showed. South Korea's four-time upgrades by the three global credit appraisers in the last five years trumped other OECD nations, as so-called "triple A" developed nations like the United States lost their top status amid the protracted global downturn, the KCIF said. Turkey's rating was also notched up on four occasions over the same period but its status remains at junk level, though with a positive outlook, it noted. Four countries including Chile, Estonia and Israel trailed behind Korea with three-time upgrades, followed by Australia with a single notch-up. The report said South Korea's fiscal soundness played a vital role in the back-to-back rating upgrades despite the flagging world economy. The country's debt-to-growth ratio stood at 33.5 percent this year, compared with an average of 125.1 percent for Group 7 nations. "Since Korea suffered from the 1997 Asian financial crisis, we've kept tabs on capital in and outflows, foreign exchange volatility and managed the foreign reserves," said Lee Hee-jeong, an economist at Hyundai Economic Research Institute. The credit index gauging risk-hedging costs for Korea recently fell to a level lower than that of Japan and China, reflecting fiscal stability for Asia's fourth-largest economy, the report said. In contrast, 15 nations including the U.S. and Japan saw their sovereign rating retreat over the cited years, while Germany and 11 others maintained their own. Japan saw its credit rating fall six times by the three major credit appraisers. Over the tallied period, 5 out of 15 top-notch countries saw their ratings get downgraded, with the U.S. losing its "AAA" rating by Standard & Poor's to "AA+" in August, according to the report. (Yonhap)

US military seeks to develop 'silent bullets' Commandos attack during an exercise at Fort Bragg in April 2012. Most bullets make small sonic booms when flying through the air, which to our ears sound like a loud, distinct "crack!" For the Pentagon's special forces, that makes it hard to be sneaky about what they're shooting. Now the commandos want to be sneakier with slower, quieter bullets, U.S. information telecommunication magazine Wired reported Tuesday. According to the magazine, the Special Operations Command (SOCOM) under the U.S. Department of Defense plans to develop rifles in the 5.56, 7.62 and.338 calibers, which will travel at low enough velocities to avoid breaking the sound barrier, thus creating no “crack” noise. In the solicitations, the special forces said the bullet aims to “provide superior covert and stealth capabilities” for not only the military,but police forces and the Department of Homeland Security. Commandos have used subsonic bullets since World War II, though these are mainly effective in smaller guns like the .22 and 9 mm caliber pistols. Breaking the sound barrier also pretty much negates the use of a sound suppressor, or "silencer," which the special forces would likely want to use against militants in Afghanistan and around the world, the magazine said. One solution could be using "polymer cased ammunition" as opposed to brass or steel. Polymer-cased bullets "produce a reliable and consistent powder burn." More specifically, polymer obturates at lower pressures, which means it may be possible to shoot a heavy bullet with less propellant while theoretically not trading for accuracy and range. According to the solicitation, subsonic bullets "experience significant accuracy problems due to excessive deviations in velocity." The gunpowder (or propellant charge) for a subsonic bullet has to be used in smaller quantities than for a normal bullet, and the bullet itself has to be heavier. This results in bullet that is far and away less accurate, doesn't go nearly as far, and "creates lower pressures which ... makes it hard to get a clean burn of the propellant causing rapid fouling of the weapon."

HP claims fraud prompted $5 bil. overpayment Hewlett-Packard’s woes deepened Tuesday as the U.S. tech giant reported a massive loss, blaming deliberate financial misstatements from a British software firm it bought last year. HP called for a probe by U.S. and British authorities of software maker Autonomy, saying “accounting improprieties” before the acquisition led to an “overvalued” acquisition price, which forced HP to take a huge writedown in value. HP’s share price tumbled 11.95 percent to close at $11.71, as the new woes weighed on the U.S. computer giant already struggling with a changing technology landscape. The bombshell came when HP said it was taking a writedown of $8.8 billion, largely because of the reduced value of the software company acquired just over a year ago. While writedowns under accounting rules are not unusual for slumping firms, HP said this was a case of deliberately misleading statements by Autonomy that went unnoticed until now. “HP has referred this matter to the U.S. Securities and Exchange Commission’s Enforcement Division and the U.K.’s Serious Fraud Office for civil and criminal investigation,” HP said, as it announced a big hit to earnings. The California firm said it was also “preparing to seek redress against various parties in the appropriate civil courts” over the losses. HP announced the news as it reported a $6.9 billion quarterly loss. The company was pushed into the red by the writedown, of which $5.5 billion was linked to Autonomy and the rest to the slumping value of HP’s own share price. The announcement triggered stunned reactions from people involved in the Autonomy deal, and skeptical comments from analysts about HP’s future. HP chief executive Meg Whitman, who took over after the acquisition, said “the two people that should have been held responsible are gone” but noted that board members and others were not alerted by financial reviews from well-respected auditors. “The board relied on audited financials, audited by Deloitte, not brand X accounting firm but Deloitte,” she said. “We hired KPMG to audit Deloitte, and neither of them saw what we now see.” An HP statement said “some former members of Autonomy’s management team used accounting improprieties, misrepresentations and disclosure failures to inflate the underlying financial metrics of the company.” “These efforts appear to have been a willful effort to mislead investors and potential buyers.” HP said it launched an internal investigation “after a senior member of Autonomy’s leadership team came forward,” prompting a fresh review by PricewaterhouseCoopers. As a result, HP said it “now believes that Autonomy was substantially overvalued at the time of its acquisition.” Former HP chief Leo Apotheker, who spearheaded the Autonomy deal in 2011 before being forced out, said he was “stunned and disappointed” by the allegations, and claimed there was a “meticulous and thorough” review before the deal closed. Mike Lynch, founder of Autonomy, told The Wall Street Journal the allegations were “completely and utterly wrong.” The news added to woes at HP, which remains one of the world’s biggest PC makers but has been struggling to keep pace with a shift to mobile computing and tablets. The U.S. computer giant closed its the fiscal year with a $12.65 billion loss.(AFP) kwh8121@gmail.com,

IMF: Myanmar could be Asia’s ‘rising star’

Published : 2012-11-22 19:41
Updated : 2012-11-22 19:41

Sule Pagoda stands in downtown Yangon, Myanmar. (Bloomberg)

WASHINGTON (AFP) ― Myanmar could become Asia’s next economic engine if it enacts vast reforms, the IMF said Wednesday, signaling the country could receive a Fund monitoring program in 2013.

“With a commitment to strong reforms, Myanmar has the potential to vastly improve the living standards of its people and emerge as Asia’s next rising star,” IMF mission chief in Myanmar Meral Karasulu said in a statement.

The International Monetary Fund said the discussions pointed to the possibility of a staff-monitored program next year that would jointly monitor progress on the government’s own reform plans.

Karasulu, who wound up weeks of talks with the finance minister, central bank chief and other senior officials, said the government had made rapid strides in reforms to modernize the economy since taking over from a military junta in 2011.

“Nevertheless, the government recognizes there is still a long way to go,” she said.

The IMF official said the Myanmar authorities had discussed reforms over the coming year that would focus on continuing to unify the foreign-exchange rate, strengthening the central bank and improving revenues to fund its development needs.

In May, the IMF published its first report on Myanmar in decades, calling on authorities to step up reforms to enhance the business and investment climate, including modernizing the financial sector and liberalizing trade.

Myanmar is one of the poorest countries in Asia after decades of economic mismanagement and isolation under army rule.

LG Electronics’ Optimus G ranked top in U.S

South Korean tech giant LG Electronics Inc.’s latest Optimus G has been picked as the best smartphone by a U.S. magazine in its latest handset survey, industry sources said Friday.

Consumer Reports said the Optimus G is the best smartphone choice for subscribers of two major mobile carriers in the United States.

It is the first time that an LG smartphone has been the top recommendation of Consumer Report, according to the sources.

The LG phone released by AT&T Inc. received the highest 79 points in categories of battery and display, outshining the Galaxy S3 from Samsung Electronics Co. at 78 points and the iPhone 5 from Apple Inc. at 77.

The Optimus G available via Sprint Nextel Corp. also garnered the top score of 77, while the Galaxy S3 got 76 points and the iPhone won 75.

The latest Optimus G has a 4.7-inch high-definition IPS+ display, developed by LG Display Co., and runs on Qualcomm Inc.’s Snapdragon S4 Pro processor run on the faster long-term evolution network. (Yonhap News)

Psy's 'Gangnam Style' soon to be most-viewed video on YouTube

The music video of "Gangnam Style" by South Korean singer-rapper Psy is soon expected to become the most-viewed video on YouTube, as the number of views topped 800 million as of Saturday.

The music video is already ranked second on YouTube's all-time most-viewed videos, according to the Web site.

"Gangnam Style" is only short of some 3 million views to take the No. 1 position, which is only a matter of time, industry observers said, especially when considering the short period of time it took for the music video to reach 800 million views.

YouTube's current most-viewed video is the music video of "Baby" by U.S. singer Justin Bieber, which made its debut on the Web site nearly three years ago. Psy's "Gangnam Style" hit YouTube's online video streaming service only four months ago on July 15.

Psy also holds the Guinness World Record of "the most liked video" on YouTube with 2,295,231 likes by viewers. "Gangnam Style" had over 5.3 million "likes" on YouTube as of Friday. (Yonhap News)

Ahn withdrawal shakes up presidential race

Independent candidate Ahn Cheol-soo quit the presidential race Friday, calling for support for the Democratic United Party’s Moon Jae-in, after prolonged negotiations over a candidacy merger failed. 

With the independent candidate stepping down, Moon will now represent the main progressive bloc against the ruling Saenuri Party’s Park Geun-hye in the Dec. 19 election. 

“I am relinquishing my role as a candidate. My becoming the president to bring new politics is important but a politician keeping the promises made to the public is the most important value of all,” Ahn said in a press conference. 

“The unified candidate is now Moon Jae-in, so reprimand me for all the discord during the process, and give Moon your support.” 

Ahn, a former software businessman and professor, jumped into the presidential race in September. He sought an alliance with Moon for political reform and a change of government.

Ahn Cheol-soo grimaces after announcing his withdrawal from the presidential race at a news conference in Seoul. (Yonhap News)

In the news conference, he added that he would continue to work for reform. 

“I step down without bringing the public’s desire for change because I am lacking, but I will not forget the duty given to me. I will throw myself into the task regardless of how thorny a path that may be.” 

Minutes after his announcement, Moon said on his Twitter account, “I am deeply sorry to Ahn and his supporters.”

The decision came after Ahn and Moon’s representatives, including special envoys, failed to reach an agreement over the format and wording of the opinion poll to decide the single progressive candidate after days of negotiations. 

In the final discussions, the two sides had been negotiating for a compromise The DUP proposed asking the respondents who was more suitable as a candidate and who was more likely to beat Park. Ahn’s “final proposal” substituted the question of suitability with approval rating in the survey. 

As the two sides fought over the details, the pressure from outside the political arena had been mounting. 

On Thursday, a man in his 50s killed himself after leaving a note urging Ahn and Moon to form a united front, while an organization of young Ahn and Moon supporters issued a statement calling for the two candidates to work together. 

“Ahn has made a big decision for bringing about a change of administration. We all have a big debt to Ahn,” said DUP Rep. Jin Sung-joon, Moon’s campaign spokesman. He also conveyed an apology and thanks to the independent candidate, echoing Moon’s Twitter comment. 

“We will work with Ahn and all the members of the public who supported him to obtain the change of administration and pioneer new politics and a new era.” 

Jin also said that Moon would take the time to show due courtesy to Ahn in the near future. 

Although the election remains more than three weeks away, Ahn’s decision came as Moon was seeing his highest approval ratings as a presidential candidate, and also as the representative of the progressive bloc. 

Gallup Korea’s polls for Nov. 19 to Nov. 21 placed Moon ahead of Park in a two-way race, with 46 percent against the conservative candidate’s 45 percent.

Ahn and Park tied in the latest poll with each garnering 45 percent.

The polls also showed that Moon had a significant lead over Ahn as the favored unified candidate for the progressive bloc. 

The ruling party, which had been mounting increasingly vehement attacks against Ahn and Moon, did not miss out on the opportunity and directed an attack against the DUP.

“Ahn Cheol-soo’s experimental efforts for political reform appear to have run into the wall of the DUP’s crafty old politics and fallen apart,” Ahn Hyeong-hwan, spokesman for Saenuri Party’s central election committee, said in a statement released immediately after Ahn’s announcement. 

“The Saenuri Party and Park will continue to move forward for political reform and for social integration.” 

By Choi He-suk  (cheesuk@heraldcorp.com)

Europe losing its golf stars

DUBAI (AP) ― The European Tour has no problem producing star players. Keeping them is the challenge.

Seven players from Europe’s Ryder Cup team are PGA Tour members. Five have made the United States their main residence, and the list is only growing.

Martin Kaymer, a former world No. 1 and past PGA Championship winner, announced this week that he’s joining the PGA Tour. Lee Westwood is moving from England to Florida. And big-hitting Nicolas Colsaerts of Belgium told the Associated Press that he will cut his European Tour events to the minimum 13 next year so he can play a full schedule in America.

“It’s a stronger tour and you have the best players in America,” Colsaerts said Wednesday. “This is perfect timing for me. I’ve had a pretty good year over here and it’s maybe time to have a taste of somewhere else, see if I like it and see if it it’s the tour I will be playing for the next couple of years.”

Luke Donald, Ian Poulter, Justin Rose, Graeme McDowell and Peter Hanson already were based in Florida, with Donald splitting time between Florida and Chicago. Hanson finally earned enough money this year to take up PGA Tour membership, though he had been living at Lake Nona in Orlando, Florida. 

European Tour chief executive George O’Grady said the departure of so many stars was a testament to the quality of players in Europe and the increasing openness of the U.S. tour to take them.

But he agreed that keeping the top talent requires larger amounts of prize money, an increasingly difficult prospect at a time when the financial crisis led this year to the loss of four European Tour events in Spain and one in Czech Republic.

“We are concerned, but not panicking,” O’Grady said. “We have to improve our game back here in heartland Europe, make our tournaments better and that also means richer. We don’t seem to have any problem on the structure in the game in Europe developing the talent. But you want to see more of your talent as much as you can.”

Kaymer, Colsaerts and Hanson will be full PGA Tour members for the first time next year, meaning the U.S. tour will have 28 of the top 30 players in the world ranking. Also joining is Ryo Ishikawa of Japan and David Lynn of England, the PGA Championship runner-up by eight shots to Rory McIlroy.

“The U.S. tour is an attractive tour. You play in one place and it’s quite an easy tour to travel around,” said Donald, who won an NCAA title at Northwestern. “Europe is becoming increasingly difficult. There are a fewer events in Europe and more in Asia. They have done well to create a schedule with lots of events in Asia, but it has its disadvantages through travel. You can’t blame any player for wanting to go play on the U.S. tour.” 

Poulter, who has called Florida home for the past four years, said high-profile sponsors are needed to ensure the European Tour remains relevant.

“It’s a tough situation for the tour to be in, and I really hope there’s a plan to help the tour get more big sponsors,” Poulter said. “Obviously, Europe in general as a continent is struggling. There’s not much money and it’s very hard to convince sponsors to put big tournaments on. I don’t think that trend is going to change just yet.”

Not every big name is ready to give up on the European Tour. McIlroy, the No. 1 player in the world, still plans to make it a central part of his season.

“I think with the way golf has gone, you can be a global player and you can play all over the world,” said McIlroy, who won the European and PGA Tour money titles this season. “I don’t think anyone is going to neglect the European Tour.

“The European Tour gave me a lot of opportunities coming through, and it’s something that I’ll never forget and something that I’ll always hold onto.”

ISD remains a sore spot in Korea-U.S. FTA

Eight months since the effectuation of the Korea-U.S. Free Trade Agreement, rival parties are locking horns over some of its contentious clauses and whether the pact can or should be renegotiated.

The three major presidential candidates each hold a different position on the economically and diplomatically crucial deal that lifts market barriers for the two countries’ goods and services.

The ruling Saenuri Party’s Park Geun-hye believes the FTA should no longer be politically debated, while the main opposition Democratic United Party’s Moon Jae-in contends that the pact’s “poison pill” clauses must be re-negotiated. Taking the middle ground, independent Ahn Cheol-soo argues that discussion to revise relevant clauses is possible if any problems arise.

At the center of the debate is the Investor-State Dispute Settlement, which enables investors to initiate dispute settlement proceedings against counterpart governments under international law. 

Opposition lawmakers protest after the ruling Saenuri Party passed the Korea-U.S. FTA bill through the National Assembly on Nov. 22, 2011. (Park Hyun-koo/The Korea Herald)

The case, when filed, is arbitrated usually through the three-person tribunal at the World Bank’s International Centre for Settlement of Investment Disputes or the U.N. Commission on International Trade Law.

Most of the some 2,500 trade treaties worldwide include the ISD (or ISDS) provisions, and the number of filed cases is on a constant rise, from 325 in 2008 to 450 in 2011, leading to growing debate worldwide over their validity. 

Of the 86 bilateral investment treaties signed by Korea, 82 of them contain ISD provisions. Korea has been filed through the ISD once so far, by Colt Industries Operating Corporation of the U.S. in 1984, and the case was settled in 1990. 

The ISD clause in the FTA effectively makes the process compulsory with more closely specified areas of application.

The opposition parties and civic groups claim the ISD clause should be removed completely, along with nine other clauses. They say that the ISD system will work in favor of the internationally influential United States, and that it would infringe upon Korea’s judicial sovereignty. They also claim that it will confine the government when making public health or environment protection legislation. 

They cite the case of Australia, which has rejected the ISD clause in its FTA with the U.S. and later said it would leave out the provision in their future bilateral or multilateral trade agreements. They claim the judiciaries in Korea and the U.S. are advanced enough to settle any disputes and that it could prompt a chilling effect on regulation, with the ambiguous scope of a government’s indirect expropriation possibly leading to arbitrary interpretation.

Advocates, on the other hand, counter that the ISD is not only to protect American investors but also Koreans, and that the near-ubiquitous system has proven effective in stabilizing investment by adjusting the benefits of investors and states.

They contend that the ISD clause in the long run will have a positive impact on Korea’s policymaking process to become more transparent, reasonable and consistent. They also point out that Korea’s investment in the U.S. has surpassed that of the U.S. into Korea since 2006, with the gap reaching $8.5 billion in June 2011.

In addition, the relevant annex to the FTA with Washington is the most “adequately constructed” one in the history of Korea’s investment-related treaties, they say.

Taking a more conciliatory approach, the Seoul government instead opened a service and investment committee meeting with its Washington counterpart in June and decided to discuss ways to make adjustments to the ISD clause.

The ISD issue reared its head again this week as the six-month waiting period for Lone Star Funds of the U.S. ended this Thursday, allowing the private equity fund to enter the settlement process based on the investment treaty between Korea and Belgium.

Lone Star had filed for the ISD on May 22 demanding trillions of won worth in compensation from the Korean government, citing “unlawful” interference.

The final report released by the government-civic task force on ISD advised against re-negotiating the ISDS altogether, instead recommending tweaking the clause such as by changing the single-trial system into a multiple-trial system for better transparency, and revising domestic laws to protect Korean companies from reverse discrimination.

The report is to be approved by the government and submitted to the National Assembly before the discussion begins with the United States.

By Lee Joo-hee (jhl@heraldcorp.com)

Fitch cuts ratings on Panasonic, Sony to junk

TOKYO (AFP) ― Japan’s embattled electronics sector suffered another blow on Thursday as ratings agency Fitch downgraded industry titans Sony and Panasonic to junk status for the first time.

The agency slapped a speculative rating on each firm, pointing to their weak balance sheets and declining position in the global electronics sector as they come up against stiff competition from overseas.

Fitch said it cut Panasonic by two notches to “BB,” while it slashed Sony’s rating by three notches to “BB-,” with both firms given a negative outlook ― meaning their debt was no longer considered a safe investment.

Earlier this month Fitch slashed rival electronics giant Sharp’s rating to junk, which followed a similar decision by Standard & Poor’s.

Japan’s electronics sector has suffered from myriad problems including a high yen, slowing demand in key export markets, fierce overseas competition and strategic mistakes that left their finances in ruins.

Panasonic has warned it is on track for a $9.6 billion annual loss, while Sony expects to eke out a small profit, after four years in the red.

The television business has been a major money loser owing to falling prices as Japanese firms try to compete with lower-cost South Korean and Taiwanese rivals.

In the wake of huge losses, Panasonic, Sony and Sharp have announced massive corporate overhauls that include tens of thousands of job cuts as their shares plunged in value.

On Thursday, Fitch said its downgrade of Panasonic was due to its “weakened competitiveness in its core businesses, particularly in TVs and panels, as well as weak cash generation from operations.”

“It also reflects the agency’s view that the company’s financial profile is not likely to show a material improvement in the short to medium term,” it added in statement.

Panasonic’s huge restructuring “will help gradually improve operating margins,” Fitch said, but warned over the pace of any recovery.

It also cast doubt on Sony’s prospects, saying a “meaningful recovery will be slow, given the company’s loss of technology leadership in key products, high competition, weak economic conditions in developed markets and the strong yen.”

The strong yen makes Japanese firms’ products less competitive overseas, while high labor costs at home have also made it tough for the nation’s electronics companies to compete globally.

Since September, a diplomatic row over an East China Sea island chain claimed by Tokyo and Beijing has seen many Chinese consumers boycott Japan-branded exports, also digging into manufacturers’ results.

Israel, U.S. to jointly fight Iranian arms smuggling

JERUSALEM (AFP) ― Israel and the United States have agreed to work together to prevent the smuggling of weapons from Iran to militant groups in the Gaza Strip, Prime Minister Benjamin Netanyahu said on Wednesday. 

“Israel cannot sit idly by as its enemies strengthen themselves with weapons of terror so I agreed with President (Barack) Obama that we will work together ― Israel and the United States ― against the smuggling of weapons to terror organizations, most of which comes from Iran,” he said in a televised address.

His remarks were made as an Egyptian-brokered truce agreement went into effect, ending more than a week of bloodshed ending eight straight days of bloodshed in and around Gaza.

Netanyahu said that Israel’s Operation Pillar of Defense began after increasing attacks by Gaza militants.

“I said we’d extract high price from terror organizations. The terror organizations thought we’d refrain from strong action. They were wrong,” he said.

Israel, he said, had hit militant commanders, had destroyed thousands of rockets and had wrecked Hamas command centers in its relentless aerial bombing campaign which began on Nov. 14 with the targeted killing of top Hamas military chief, Ahmed Jaabari.

The Israeli army also claimed success in the operation, which killed 155 Palestinians and seen more than 1,300 rockets fired over the border, killing five Israelis, one of whom was a soldier.

“Following eight days of operations, the IDF (Israeli Defense Forces) has accomplished its pre-determined objective for Operation Pillar of Defense, and has inflicted severe damage to Hamas and its military capabilities,” the army said in a statement.

Assembly OKs military extensions in UAE, Somalia

The National Assembly voted Thursday to extend the nation’s troop deployment in the United Arab Emirates and Somalia for another year to the end of 2013. 

South Korea has dispatched 310 naval commandos in the Gulf of Aden since 2009 as part of a global effort to tackle piracy in the region. About 150 soldiers have also been based in the eastern region of the UAE, tasked with training the Middle Eastern nation’s special operations forces.

Separately, the National Assembly approved a bill to extend the mission of some of its troops protecting aid workers in Afghanistan by one year. (Yonhap News)

Spending a year in jail for no reason The couple as classmates in college in 2007 and became lovers since February last year. The man was angered by his girlfriend meeting up with other men for drinks and eventually resorted to physical abuse. The woman later charged her boyfriend with sexual assault at knifepoint. He denied the charges but the court found him guilty and sentenced him to five years in prison. Then something strange happened. Last March, the woman posted a message on Facebook, saying that she made false charges because she could no longer bear being vocally and physically abused. In the appeals court, she told judges that she heard voices that threatened to kill her if she did not post the message on Facebook, throwing the court into confusion. The presiding judge of the appellate court ordered all evidence to be reviewed, following which he reduced the sentence to one year jail-term suspended for two years. “There is sufficient evidence to believe that the woman is telling the truth about having made false charges,” the judge said. Still, the man had already spent nearly a year in jail.

'Apple verdict made on technically, morally wrong bases'

Rutgers U.S. patent expert advises Judge Koh ahead of Dec. 6 ruling Michael A. Carrier American Antitrust Institute (AAI) advisor By Kim Yoo-chul, Cho Mu-hyun A U.S. patent expert has argued that the jury made two mistakes in awarding Apple $1.05 billion in its verdict against Samsung Electronics.  “It seemed that the jury wanted to send a message to Samsung. But it’s not supposed to do that,” said Michael A. Carrier, a member of the Board Advisors of the American Antitrust Institute (AAI) in a recent interview. ``(Jury foreman Velvin) Hogan apparently explained to the jury, who deferred to him because he had patents, that the issue of prior art depended on interchangeability,” Carrier said. “But it actually doesn’t ― the law asks if the invention was new and not preceded by sources such as earlier patents.” Hogan was fired from Seagate, a company that formed a strategic partnership with Samsung.  His failure to reveal it and other circumstances that may make him biased are now emerging to be a bone of contention that some experts as well as Samsung cites as to why U.S. Federal Judge Lucy Koh should reconsider the verdict. AAI is a Washington-based non-profit advocacy organization. It advocates more aggressive antitrust enforcement by the federal government and is funded through contributions from a wide variety of law firms, economics consulting firms, trade associations with substantial support from Cypress grants approved by courts in antitrust cases. Accordingly, Carrier advised Koh, the presiding judge in the biggest technology dispute in history, to very carefully evaluate the jury’s verdict and the statements of the foreman to decide if the decision should be allowed to stand. ``As this is an extremely important case that has received a lot of attention, Judge Koh should look into the case very carefully,’’ said the professor from Rutgers University School of Law-Camden in the United States. Koh earlier confirmed she will re-examine Hogan’s alleged misconduct during the California trial before the Dec. 6 hearing. That day, the presiding judge will hear Apple’s motion for an injunction against eight Samsung mobile devices, as well as the Korean electronics giant’s expected motion to have the jury’s verdict set aside. Referring to Hogan’s misconduct, Samsung is seeking a new trial. Carrier is also the chair of the executive committee of the Antitrust and Economic Regulation section of the Association of American Law Schools (AALS). Before entering academia, he clerked for John D. Butzner, Jr. on the U.S. Court of Appeals for the Fourth Circuit and litigated antitrust, intellectual property in Washington, D.C. Although one of Apple’s key patents ― bounceback ― was recently nullified by the U.S. Patent and Trademark Office (USPTO), Carrier said the decision by the USPTO is no surprise. Bounceback is one of the patents Samsung was found to have infringed on and any action by the USPTO is expected to have big consequences, according to market analysts. ``This is a confusing situation. The jury can conclude that a patent is invalid even if the USPTO reaches a different conclusion.’’ The law professor sided with Apple by insisting that design can play an important role in making consumers more interested in products. Apple previously offered a deal where Samsung would pay $1 per device in return for using the Korean firm’s wireless patents, which Samsung said was ``unacceptable.’’ ``Both design and technology are necessary for innovation. Without the technology, there are no products as well,’’ he said. Apple’s stock has recently been declining after its CEO Tim Cook embarked on a sweeping management overhaul at the Cupertino-based consumer electronics giant. Cook, who succeeded co-founder Steve Jobs last year, is revamping the firm’s leadership as Apple’s share price sags and rivalry accelerates with competitors including Google, Microsoft and Amazon. Carrier understands it’s difficult to follow Jobs in terms of perspective in new leadership. ``But Cook may not wish to continue the smartphone patent wars if Apple is blocked from certain markets.’’ Samsung is too powerful Carrier was pessimistic that Samsung Electronics and Apple will reach a settlement in the foreseeable future, though Taiwan’s HTC, another Google Android ally, struck a licensing agreement with the iPhone maker. ``That’s because Samsung is too powerful a competitor to settle right now,’’ he said. ``Both companies probably feel that they have too much at stake now to settle and aren’t willing to give up much until more courts weigh in on these issues.’’ Carrier continued; ``Apple settled with HTC because Apple has a strong market position and HTC has a weak position. Apple probably got excellent settlement terms. My guess is that Apple would not be able to get terms like that right now with Samsung or even Motorola Mobility.’’ As pre-conditions for Samsung and Apple before entering a comprehensive agreement period over patents he said, ``The companies must feel that they have something to lose or have already lost in court before they feel compelled to sit at the table and make a concession. We are not at that point yet.’’ Neither Samsung nor Apple have seen clear victories in the courts. Courts in Europe sided with Samsung, while a Japanese court gave mixed rulings. In August, Apple won in California. But that’s controversial, according to patent experts. To match analytic views about the fight, Carrier said the patent problem is a ``growing pain’’ for Samsung, as well as other technology companies. ``There are so many patents in a single handset that there can always be an argument of copying. That’s why there is so much litigation,’’ the professor stressed. According to his observation, Apple wants to have a higher market share in relation to Android competitors. ``Apple would argue that it introduced many of the features that led to the success of the smartphone market. Samsung would argue that Apple is not entitled to block others from improving on its features. It does seem that innovation takes place in a cumulative manner in this industry, in which one generation of phones builds on its predecessors,’’ Carrier said in relation to claims that Apple is an innovation killer. In a related note, U.S. Magistrate Judge Paul Grewal ordered Apple to disclose the licensing terms of its settlement with HTC to Samsung. He ordered Apple to produce a copy of the agreement under an ``Attorneys-Eyes-Only’’ designation, meaning it won’t be publicly available. Samsung argued the terms of the licensing agreement between Apple and HTC are relevant to Apple’s request for an order blocking U.S. sales of Samsung smartphones. Lawyers for Apple said HTC was willing to provide a copy of the accord with the financial terms redacted, according to legal sources. Despite the story updates, Carrier retained his ``no imminent cross-licensing agreement between Samsung and Apple’’ stance. Rather, the scholar said that it’s a shame that so many millions of dollars are being spent on litigation rather than innovation. ``With supposedly 250,000 patents in a smartphone, it’s always possible to claim that someone is infringing one of the patents and we don’t often know if the patent is valid until a court decides the issue and much money is spent in the meantime.’’ Park Han-yong, a spokesman for Samsung, declined to comment on whether the company has any updates on its fight with Apple. yckim@koreatimes.co.kr, impale@koreatimes.co.

Samsung’s smartphone shipments forecast to top 60m in Q4

HONG KONG (Yonhap News) ― Samsung Electronics Co.’s smartphone shipments will likely exceed 60 million units in the fourth quarter of this year, proving its prowess in the world’s mobile phone market despite its ongoing patent war with Apple Inc., an investment bank said Wednesday.

UBS estimated that Samsung Electronics will sell 61.5 million units of smartphones in the October-December period, up 5 percent from an estimated 58 million in the previous quarter. The number could reach as high as 63 million depending on the sell-through, or the volume that is actually sold to consumers.

The key contributor to the growth will be the Galaxy Note 2, an hybrid form of a smartphone and a tablet PC, released in late September, it said.

“The Galaxy Note 2 has shipped 3 million units in its first five weeks of sales, with sell-through strong in Asia and Europe, and the U.S. gathering pace post-launch,” said Nicolas Gaudois, an analyst at UBS. “We hence forecast 7 million Galaxy Note 2, compared to our initial expectation of 5 million for the fourth quarter.”

Solid sales of the Galaxy Note 2 suggest the impact of Apple’s latest iPhone 5 may be less than expected, he said. 

The flagship Galaxy S3, which hit the market in late May, continues to show strong performance, with more than 5.5 million units sold in October alone, the Swiss bank said.

“We see a limited ramp-down, if any at all, for the Galaxy S3, and we feel comfortable with our 15 million estimate for the fourth quarter of 2012,” Gaudois said.

Samsung and Apple, who are both rivals and partners in the mobile business, have been involved in a dogged war over design and technology patent suits in four continents since April 2011.

Samsung Electronics overtook Apple as the world’s top smartphone maker in the first quarter of this year, when its sales reached 42.2 million units, compared to the latter’s 35.1 million units.