SATURDAY, AUGUST 28, 2010


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Economy & Business


In fight for 3Par, HP tops Dell’s bid with a $1.88 billion offer Both companies


looking to expand into cloud computing


BY JESSICAMINTZ


seattle — Hewlett-Packard boosted its bid for 3Par to $1.88 billion Friday, topping Dell’s offer by 11 percent and again raising the stakes in the bidding contest for the data-storage company. The $30-per-share offer from HP came just hours after Dell


Co-founder of Microsoft sues tech giants


Allen company accuses Apple, Google, others of patent infringement


BY JIA LYNN YANG Microsoft co-founder Paul Al-


len lobbed a patent violation law- suit at some of Silicon Valley’s most prominent companies on Friday, accusing them of using ideas hatched at one of his former businesses. Allen’s now-defunct company,


Interval Licensing, is suing Ap- ple, Google, Facebook, Yahoo and seven other firms, accusing them of infringing on four of its patents related to Internet search and e-commerce. According to the suit, Interval


is asking foraninjunction against the companies to prevent further infringement. “This lawsuit is necessary to


protect our investment in innova- tion,” David Postman, a spokes- man for Allen, said in a state- ment. Patent lawsuits have become controversial in the tech industry with the rise of so-called patent trolls, which amass patents but then don’t make any products with them, instead taking compa- nies to court for violations that can result in big settlements.Tech firms such as Intel and Apple have supported comprehensive rule changes that would stem such patent lawsuits, but Con- gress has not taken up the issue. In July, Virginia-based NTP


suedGoogle,MicrosoftandApple alleging patent violation. NTP holds patents but does not make any products. Interval took pains in its news


release to emphasize that it not only owns the patents in question but developed them, too — head- ing off criticism that it is a patent troll taking advantage of other companies’ innovations. “Interval Research was an ear-


ly, ground-breaking contributor to the development of the inter- neteconomy,”Postmansaid in the statement. “Interval has worked hard to bring its technologies to market through spinning off new companies, technology transfer arrangements, and sales of its patented technology.” The patents named in the suit


cover technology that would sound familiar to many Internet users. One lets people see periph- eral content while they’re focused on something else. Another feeds users’ suggestions for related con- tent — say, a product they might want to buy. The other companies named in


the suit include AOL, eBay, Netf- lix, YouTube, Staples, Office De- pot and OfficeMax. Two big names, however, were missing from the list:Microsoft and Ama- zon. Facebook and eBay bothvowed


to fight back. “We believe this suit is com-


pletely without merit and we will fight it vigorously,” Facebook said in a statement. Google decried the rise of pat-


ent lawsuits. “This lawsuit against some of America’s most innovative com- panies reflects an unfortunate trend of people trying to compete in the courtroom instead of the marketplace,” a Google spokes- mansaid in a statement. “Innova- tion—not litigation—is the way to bring to market the kinds of products and services that bene- fit millions of people around the world.” AOL said it would not com-


ment on the lawsuit. Netflix, Sta- ples, Office Depot and OfficeMax did not respond to requests for comment. Allen founded Microsoft with


his childhood friend Bill Gates in 1975.He served on the company’s board until 2000. He was diag- nosed last year with non-Hodg- kin’s lymphoma. In July, Allen said he was leaving most of his estate to philanthropy. yangj@washpost.com


matched HP’s Thursday bid of $27 per share. The latest price is three times what 3Par was trad- ing at before Dell made its first bid last week, for $18 per share, or $1.13 billion. Dell and 3Par said earlier Fri-


day that 3Par’s board had accept- ed the latest bid from Dell, which only has to match the terms of other offers under its initial agreement with 3Par, based in Fremont, Calif. On Friday, 3Par shares surged


$6.43, or 25 percent, to close at $32.46, which is aboveHP’s latest


offer price, signaling that inves- tors expect Dell to respond. In a statement, Dell spokesmanDavid Frink said the company will re- view HP’s latest offer and “act in the best interests of our custom- ers, shareholders and long-term value creation.” HPandDell,amongtheworld’s


largest personal computer mak- ers, are looking at 3Par as away to build up their “cloud computing” businesses, delivering software, data storage and other services to customers over the Internet. They’re also both trying to ex-


pand beyond the PC business, where profits are shrinking as computer makers compete with lower pricesandwhere the cost of parts has increased. Cloud computing holds the


promise of rich profits for tech- nology providers. Many compa- nies aren’t buying their own com- puter servers for certain tasks anymore. Instead, they’re paying to have software they would have stored on those machines deliv- ered to them over the Internet. Dell, HP and others are taking advantage of the trend by offering


cloud-computing services on a subscription basis and selling equipment and software to help customers build their own cloud systems. Cloud computing can help re-


duce data-center expenses be- cause the systems are designed to be shared by multiple customers, which spreads out the cost of operating pricey equipment. The servers and storage computers need to ramp up or scale down quickly based on demand to give customers the same high level of service; 3Par’s storage machines


A9


are made for that kind of system. Both HP and Dell can afford to continue bidding. Even though Dell is half HP’s size, Dell has almost as much cash as HP. Dell reported $12.4 billion in cash and short-term investments at the end of last quarter. HP had $14.7 billion.


Shares of Dell, which is based


in Round Rock, Tex., gained 14 cents, or 1.8 percent, to close at $11.89. Shares of HP, which is based inPalo Alto, Calif., declined 22 cents, or 0.6 percent, to $38. —Associated Press


Competition for D.C. marijuana licenses will be fierce pot from A1


in 2001. He has launched a con- sulting service, CannBe, to advise pot capitalists, such as those hop- ing to stake their claim to the District’s highly anticipated green rush next year. Officials are wary of DeAnge-


lo's closely guarded plans — he unexpectedly partnered with a team of Rhode Island investors that is planning to sell medical cannabis out of a 75,000-square- foot warehouse in downtown Providence, stoking concerns that he is expanding his empire nationwide. “We started this with the inten-


tion of selling medical cannabis in a safe, seemly and responsible way,” said DeAngelo, whose Har- borside Health Center along the Oakland, Calif., waterfront em- ploys 80 people and pulls in more than $20 million in revenue per year. “We didn't want to set up a chain-store arrangement . . . but wedo want to replicate the model for others.” DeAngelo, 52, said the 2001


arrest was a “case of mistaken identity,” and hisMaryland attor- ney,BruceL.Marcus, saidcharges were never filed because it “lin- gered for eight yearsandprosecu- tors forgot it was still out there.” Many of the potential appli-


cants CannBe might advise — from dispensary owners and “bud-tenders” (those who handle and package marijuana) to grow- ers, lab technicians, lawyers and “pot docs” (medical marijuana- friendly doctors who can pre- scribe) — also fail to meet the standards envisioned by the D.C. Council or have other ideas for the city’s medical marijuana in- dustry than those outlined in the pages of draft regulations re- leased by the District two weeks ago.


One thing is certain: The Dis-


trict is uninterested in controver- sy.


“People are scared D.C. could


be Amsterdam on the Potomac and, if Congress changes leader- ship, they’regoing tocomebarrel- ing down on us,” said Wayne Turner, a longtime AIDS activist in the District who was instru- mental in drafting the 1998 refer- endum on medicinal marijuana. “We’re going to be under so much scrutiny that any slip-up is going to be noticed.”


A local advantage? City health and regulatory offi-


cials tasked with crafting and overseeing the District’s strict new medical marijuana law are carefully reviewing about 300 proposed rules, listening to stake- holders and hoping to avoid some of the mistakes made by the 14 other states that have enacted medical marijuana statutes over the past decade. InMaine, officials realized only


after they approved licenses for eight state dispensaries that half were connected to a very profit- able medical marijuana group in Berkeley, Calif., when local busi- nesses were preferred. In Colora- do, more than 700 dispensaries have been licensed, overwhelm- ing regulatory and law enforce- ment agencies. The administration of D.C.


Mayor Adrian M. Fenty (D) is expected to formally solicit bids in the fall to operate up to five dispensaries and as many as 10 “cultivation centers,” which can be run by nonprofit and for-profit organizations and be overseen by the city’s Alcoholic Beverage Con- trol Board and its enforcement arm, the Alcoholic Beverage Reg- ulation Administration. Competition is expected to be


fierce. Winning bidders would ideally have experience growing medical marijuana, giving a leg up to established outfits. ButD.C. CouncilmemberDavidA.Catania (I-At Large), chairman of the Health Committee, and other city officials have expressed a prefer- ence for locally owned vendors. “This is forD.C. residents only,”he said.


But some local aspirants have problems, too. Alan Amsterdam and Adam Eidinger, the owners of Capitol


One of the varieties of marijuana atHarborsideHealth Center.


“They’re creating a lot of nervous energy.”


—David A. Catania, D.C. Council member


and of a parole violation, a misde- meanor, in 2000, according to court documents in Oregon. He has also been arrested, but not convicted, two other times on drug-related offenses. “We run a very professional


business here, and we follow all regulations,” Stanford said. Afull-time doctor, nurse and at


least five other employees would staff Stanford’s clinic and screen potential patients through medi- cal records, questionnaires, inter- views and physical exams. Stan- ford’s nonprofit, the Hemp and Cannabis Foundation, pulls in roughly $5 million per year. “Wehaveaprotocol,werequire


RANDI LYNN BEACH


Steve DeAngelo runsHarborsideHealth Center in Oakland, Calif., and launched a consulting service to advise pot capitalists.


Hempin AdamsMorgan andChi- natown, have started the D.C. Patients’ Cooperative and are looking at a location in Adams Morganor CapitolHeights,where AdvisoryNeighborhood Commis- sion members have publicly sup- ported the marijuana legislation. Amsterdam, 43, opened the


first American-owned marijuana coffee shop in 1998 in theNether- lands. He pleaded guilty to mari- juana possession after being ar- rested in 1995 but was sentenced to probation before judgment, al- lowing him to avoid a standard conviction. It’s unclear whether he would be able to be involved in his shop’s day-to-day operations. “My lawyer is working on it,” he said. “He says everything is ko- sher.”


Amsterdam’s original plans for


a “showroom-type feel” for his dispensary had to be scrapped after D.C. proposed what he called “the most restrictive regu- lations in the nation.” Another local businessman,


BrianRubin, owner and manager ofMarylandHydroponics in Lau- rel, which is expanding with a D.C. location near Tenleytown, hopes to apply for dispensary and growing licenses.Rubin, 42, grew marijuana while living in the Netherlands for a decade and was known up and down the Eastern Seaboard for his “Potomac Indi- ca” strain of pot. “We’re totally geared up. The


cultivation centers are ready to go,” Rubin said. “We’re just wait- ing for the lawtogointo effect. It’s a little bit of a gamble, but we


wanted to be the first one there.” All of the attention might not


be a good thing forWashington’s pot capitalists. “I don’t think they're serving themselves well by weighing in this much so early in the process,” Catania said. “I just think, frankly, that they’re creating a lot of nervous energy.” D. Paul Stanford, a Portland,


Ore., marijuana activist who runs “pot doc” clinics in nine states, said he is moving forward with plans for a nonprofit office here. But officials say Stanford’s opera- tion could run afoul of regula- tions that require doctors offer- ing marijuana referrals tohavean “ongoing” and “bona fide” rela- tionship with the patient. Stanford’s criminal history


might also be an issue. He has been convicted of four felonies related to drug possession and distribution, in 1987 and 1991,


documentation andwe’re looking to lend credibility to the process, not take away from it by supply- ing medical marijuana to those who aren't qualified,” he said. As part of Stanford’s plan, a


Denver-based ophthalmologist, Eric Eisenbud, is working on be- coming licensed in the District. Stanford said he is researching


the idea of operating a dispensary in the District but has no immi- nent plans to apply for a permit. “It won’t be any huge gold rush,” he said.


D.C.’s strict rules The District’s rules would in-


clude a first-in-the-nation provi- sion requiring dispensaries to price marijuana on a sliding scale so that the poorest patients can obtain medicinal pot for free. There would also be a 95-plant limit on those who grow and sell marijuana, which is mirrored in NewMexico and designed to pre- clude federal intervention. But the limit on plants could


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severely cut into supply, causing shortages, reduced profits and black-market deals, according to those who want the D.C. law ex- panded.NewMexico’s2,000med- ical marijuana patients routinely exhaust the supply within 24 hours of it hitting the market. Dispensaries would also have


to pay an annual $10,000 regis- tration fee, and all company offi- cers, managers and employees would have to pay annual city dues. Security systems would need to be installed and special packaging labels used; records would need to be kept for at least three years; and advertising wouldbeminimal—nogreen leaf images or neon signs. Despite the extensive rules,


many would-be medical cannabis dealers say they expect the dis- pensaries to be profitable. Jeffrey Kahn, a rabbi who has


led congregations for 27 years, is considering opening a dispensary in the Takoma section of North- west Washington with his wife, Stephanie. Kahn, 58, has already held a town hall forum with neighbors and is committed to renting an old law office on Blair RoadNWif he gets a license.He’s set aside “several hundred thou- sand dollars” for the venture. “We want to be very open and


very upfront with the community onthisandget their input early in the process,” said Kahn, the for- mer executive director of the D.C.-based nonprofit Interfaith Drug Policy Initiative. Catania said officials will be


tough on anyone coming to the District to take part in the city’s new legal drug trade. “We have a lot of time to seehowit works,” he said. “And we’re going to be doing a lot of thorough background checks all the time.” kravitzd@washpost.com


Staff writer Dan Morse and researchers Madonna Lebling and Meg Smith contributed to this report.


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