Lawsuits in the Tech Sector

Brittney Barrett  |

The tech industry has been under fire from the old guard to the new developing IPOs like Pandora, LinkedIn (LNKD) and Twitter. New companies are being deemed overvalued or “in the bubble” while old companies like Blackberry maker, Research in Motion (RIMM) are having their technology replaced by an influx of the moment-app developers and the ever-evolving Apple. Right now in the tech industry, no one is safe. Even the top companies, like Google Inc. (GOOG) and Netflix (NFLX) have been enduring endless legal action that has begun a downtrend that has impacted much of the rest of the sector.

Google, as of today, is being sued in France by a local competitor, 1PlusV. The company claims that Google prevents rival companies from reaping advertising revenue and boosts preference to its own sites in search results. Google is often accused in the media of failing to adhere to anti-trust laws or suspected of monopolizing the search engine industry but has had little in the way of actual legal action against these elements.

The 1PlusV lawsuit brings these ideas to life again in the Paris Commercial Court as the company attempts to recover 295 million euros ($421 million) in what they consider while presenting details of Google’s of allegedly “anti-competitive behavior.” Currently, the company is presenting these details on their homepage, according to a statement from the company.

The company’s statement is as follows:

“Google employed a number of anti-competitive practices and unethical behavior over a period of four years to cripple 1PlusV’s ability to generate business and advertising;” 1PlusV also mentions tactics such as “suffocation of technological competitors” and “manipulation of what it deems would have been the natural results.

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How these accusations will impact Google, whether they will launch a more thorough investigation into the companies practices remains to be seen. Already EU and U.S. federal and state antitrust regulators are investigating Google in an attempt to determine whether it does in fact discriminate against other services in its search results and prevent websites from showing the ads of rival companies. The U.S. Federal Trade Commission on June 23, subpoenaed Google to evaluate its search and advertising procedures.

For an investor though, chances are there will be so much coverage on the goings on in this investigation that there is still time to decide whether the goliath search engine will have to dramatically change its current practices and risk losing money or having to pay major fines.

It also may be worth looking into whether suspicion that Google’s growth is slowing.

Meanwhile Netflix (NFLX) is also in hot water following a decision from the National Association of the Deaf to file a lawsuit against the company for a failure to provide closed captioning on its “watch instantly” steamed movies and TV so.  The organization believe this is an injustice and  a violation of the Americans with Disabilities Act.

According to the statement, president Bobbie Beth Scoggins sais "We must have equal access to the biggest provider of streamed entertainment," adding that"As Netflix itself acknowledges, streamed video is the future and we must not be left out."

The group has done an excellent job of drumming up attention for the suit, distributing information on the case on Facebook and Twitter. Greater awareness of the suit could help the National Association of the Deaf rectify the current situation and cost Netflix . The fact that a lot of investors are already terribly bearish on NetFlix means that this could be a further blow or the tipping point for those on the fence in terms of buying or selling.

Apple  (AAPL) and Amazon (AMZN) are also involved in lawsuits. Apple has accused of patent violation and this particular battle is for the phrase “App Store.” Both Amazon and Apple will likely come out of this one alive though, as a federal judge advised Apple to drop the suit after a hearing in Oakland, Ca. The motion would “probably” be denied on the basis that Apple failed to produce evidence that there was confusion among consumers between the two companies and their products. Though Hamilton said she would review the court filing before making a conclusion, it could be speculated that regardless, both companies have a strong enough brand name and earnings that the end result would not hugely effect the bottom line.




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