For months, Aaron Greenspan, the founder of the now-defunct mobile payments service FaceCash, has been getting deeper into a legal battle with the State of California over the way it regulates money transfers. And he thinks the implications of his fight go well beyond his startup.

According to an open letter Greenspan wrote to Governor Jerry Brown, a new financial regulation enacted in the state last year “makes it nearly impossible for new companies to offer disruptive products and services. By virtue of the fact that Silicon Valley is in California, this means that innovation in the payments sector in this country has more or less stopped.” In November, Greenspan filed a civil complaint against the State of California, claiming that the new law, called the Money Transmission Act, is unconstitutional because it attempts to regulate interstate commerce, and because the burden of the law outweigh the benefits. Greenspan also claims that arbitrary enforcement of the law violates the 14th Amendment.

Greenspan, 28, founded his company with the aim of changing the traditional payment model, creating a system that allowed merchants to accept payments by scanning barcodes off of shoppers’ phones. The bar codes were linked to bank accounts and worked like debit cards, eliminating interchange fees that merchants pay credit card companies (FaceCash charged its own 1.5 percent fee). They also provided a measure of security for consumers, whose photos popped up with their bar codes.

But as Greenspan was getting pilot vendors and users on board in Silicon Valley, the state enacted the MTA, which requires that companies that work as domestic money transmitters within California obtain a license to operate. Under the new legislation, these companies are required to have a minimum net worth of $500,000, as well as bonds or securities on deposit of at least $500,000 or 50 percent of daily outstanding payments, whichever amount is greater. On top of that, companies like FaceCash that receive money to transmit have to have securities of $250,000.

Before the MTA, only companies that provided international money transfers needed to abide by the deposit requirement, and there was no net worth requirement

After seeing news about the change on the Internet, Greenspan set up an appointment with the state Department of Financial Institutions (DFI) to obtain a license so that he could comply with the law by the time it went into effect on July 1, 2011. Since he met the $500,000 net worth requirement—and could afford the bonding requirements—he was unconcerned.

But the meeting did not go well. Greenspan says he soon found that to ensure smooth sailing for his license application, he had to have more than $500,000 on hand. The problem was that the DFI couldn’t tell him exactly how much more—even though he had provided audited financial statements to the state before the meeting.

“It was a pretty epic disaster,” Greenspan says. “From his point of view I was undercapitalized, from mine I was fine, but I didn’t know the number they needed. It clearly didn’t matter what I told them, they still were not able to provide an answer.”

Following through with an application that might fail would cost Greenspan a $5,000 application fee, but it could also affect his ability to get licenses in other states, he says. If he moved on to apply in say, Pennsylvania, he would have to explain why he failed to get a license in California.

“It’s like car insurance,” Greenspan says. “It’s an important factor.”

Not only that, Greenspan also claims the department warned him that if he continued operating in other states where he already had licenses—Idaho and Alabama—he could face jail time in California for operating without a license. But the law was so new, they weren’t sure.

Greenspan wasn’t about to take chances. The day before the law was set to take effect, he shut down his operations, laying off a full-time programmer and six contractors.

The regulatory troubles have been particularly devastating for Greenspan, who was self-funding the company. The 28-year-old entrepreneur is a longtime programmer who created a precursor to Facebook at Harvard—a Web service he called … Next Page »

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Microsoft is joining several other notable corporate names throwing their support behind full marriage rights for gay couples in Washington state, a move that could give a final push to gay-marriage efforts at that state Capitol this year.

The companies—including RealNetworks, Concur, and Paul Allen’s Vulcan—announced their support for a possible state gay-marriage law on Thursday. The Seattle Times has a copy of the letter the firms sent to state officials.

Microsoft further explains its position in a blog post by its head lawyer, Brad Smith, who says that granting full rights to same-sex couples would reflect the company’s values and be “good for our business and good for the state’s economy.”

“As other states recognize marriage equality, Washington’s employers are at a disadvantage if we cannot offer a similar, inclusive environment to our talented employees, our top recruits and their families. Employers in the technology sector face an unprecedented national and global competition for top talent,” Smith wrote.

Smith noted that gay marriage is legal in six other states, including Massachusetts and New York. California’s gay-marriage laws are still tied up in court, after one federal judge overturned a previous gay-marriage ban.

In a short statement on its Facebook page, Vulcan said supporting gay marriage “is part of our company’s core values, which include appreciation and support for employees with diverse backgrounds. We believe that everyone has the right to be valued on their merits and contributions, not on their sexual orientation.”

Microsoft’s support for gay marriage in Washington is hugely significant.

Legislators in Olympia are now just one vote shy of being able to pass a bill legalizing civil marriages for same-sex couples, and one of the state senators representing parts of Microsoft’s hometown of Redmond, Republican Andy Hill, has been among the undecided.

As a humongous publicly traded corporation with tens of thousands of employees, Microsoft also has to sound a bit of a cautious note, saying that it respects the views of employees who might disagree with the company’s embrace of gay marriage rights.

“We’re not asking anyone to change their views to conform to the company’s position,” Smith wrote.

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A dark day in Boston is a little darker now. Jerome Rubin, the publishing executive and inventor who co-founded the display company E Ink and helped commercialize the online database that became LexisNexis, died from a stroke on Monday in New York City, according to a report by the Associated Press. He was 86.

Rubin worked at the MIT Media Lab in the 1990s, where he helped spin out Massachusetts-based E Ink, the electronic-paper company that makes the display in the Amazon Kindle and other e-readers.

Before that, Rubin, a Harvard University alum trained in physics and law, helped launch an Ohio-based research database for lawyers in 1973. The database search and retrieval system eventually became LexisNexis, specializing in news, legal, and public records information. Harvard Magazine wrote about some of Rubin’s achievements back in 2000.

Rubin lived in Manhattan and is survived by his children, Richard Rubin and Alicia Yamin, according to the AP report.

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A lot has happened in the technology world in the past year. So let’s take a minute to reflect on the defining moments of 2011 and where we stand now, as a local tech community with increasingly global impact.

This is by no means comprehensive, or even a summary of the most important stories of the year. It’s just a select few of the biggest highlights and lowlights, organized in spaghetti western fashion (cliché alert).

The Good: Oracle Buys Endeca

Some might argue this wasn’t necessarily “good” for the local tech scene, but Oracle’s $1B+ purchase of Cambridge, MA-based Endeca, the enterprise search and business intelligence firm, was one of the biggest deals of the year, and was kept under wraps pretty well. It will be interesting to watch whether Endeca’s technology and talent give Oracle a leg up in its competition with IBM, SAP, Microsoft, and Google. Endeca, which started in 1999, stands as a testament to the notion that billion-dollar tech companies can be built—and are being built—in Massachusetts. (See Acme Packet, Progress Software, Wayfair, and others on their way.)

Honorable mention: Carbonite, TripAdvisor, and Zipcar each went public with successful IPOs in 2011. That’s three more publicly traded tech companies in Boston that seem to be thriving in a tough market. Who will join them in 2012?

The Bad: RSA Gets Hacked

No one would argue this isn’t bad—and not just for local companies. In March, RSA Security reported a data breach involving its authentication products, which are widely used by big companies and government agencies. The Bedford, MA-based division of data storage giant EMC said it had … Next Page »

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Some big acquisition news before the holidays here. Cambridge, MA-based Akamai Technologies (NASDAQ: AKAM), the Web delivery and networking giant, said today it is acquiring a competitor, Sunnyvale, CA-based Cotendo, for $268 million in cash. The deal, which has been rumored for the past month, is expected to close in the first half of 2012.

Akamai has been positioning itself as a provider of a secure software platform for businesses to reach customers via Web, mobile, and cloud. Cotendo competes with Akamai in the realm of accelerating Web and mobile applications. The California-based company started in 2008 and has about 100 employees, more than half of them based in Israel.

About a year ago, Akamai and MIT filed a lawsuit against Cotendo alleging patent infringement. Presumably that case is resolved now.

This is a relatively rare case of a Boston tech company acquiring a Silicon Valley company. Most of the other big deals this year have gone the other way (such as Oracle-Endeca, Google-ITA, eBay-Where, and HP-Vertica).

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AT&T’s $39 billion takeover of T-Mobile is on hold in the federal courts as the parties look for a new way to structure a deal that could get approval from regulators. The merger is currently tied to a federal antitrust lawsuit, which was postponed today. AT&T and Deutsche Telekom, the parent company of Bellevue, WA-based T-Mobile USA, asked for the delay along with the Justice Department.

In a joint statement on their website dedicated to promoting the transaction, AT&T said it was still working with Deutsche Telekom to find a deal—even if that’s different than the wholesale purchase first contemplated.

“We are actively considering whether and how to revise our current transaction to achieve the necessary regulatory approvals so that we can deliver the capacity enhancements and improved customer service that can only be derived from combining our two companies’ wireless assets,” the AT&T statement says.

The judge in the case is asking the companies to come back with an update by Jan. 12, although generally speaking those deadlines can be changed if parties ask for more time. If you see that deadline getting delayed, especially if the DOJ is among those asking for more time, it’s a sign of a possible resolution in the works.

This story probably goes one of two ways at this point: Either AT&T comes up with a new kind of transaction that satisfies the feds and leads to a lawsuit settlement and FCC approval, or it gets called off and AT&T ponies up its hefty $4 billion breakup fee.

Maybe there are two and a half possible outcomes, since I guess Deutsche Telekom could let AT&T off the hook on at least some of the cash and spectrum at stake for a failed merger—but that would still leave the nagging question of what to do with a fourth-place carrier (T-Mobile) that its owner does not want.

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As we turn the page on the year 2011, there is no shortage of topics about which the entire world seems to be debating. One that interests me the most is the renewed debate on the role of government in the energy sector, specifically in the United States. Budget shortages, deficit increases, front-page analysis of public-backed private enterprises, and a particularly bitter political climate have combined to push this topic to the forefront more so in 2011 than in recent years. It’s as though we are back in the smoky classrooms of the University of Chicago in the ‘50s and ‘60s where economists engaged in frequent Keynes Vs. Friedman (Milton not Thomas, mind you!) debates.

Energy is always a popular topic in the U.S., given its strategic importance to national security. All this recent debating has been interesting to follow but a bit confusing. Economists, reporters, business folk, and politicians do not seem to agree on what constitutes a government subsidy, let alone which sub-sector is the recipient of how much. While I do not want to take any sides, I thought it would be worthwhile to examine what constitutes a government subsidy, and what subsidies and how much were provided by the U.S. government historically.

As I began to think about what sectors to focus on, it made sense to examine those that have been of significant strategic importance to U.S. economic growth in the past. The rise of the U.S. to be the largest economy in the world was driven to a large extent by what some refer to as the second industrial revolution constituting the rise of the railroad, steel making, telecommunications, petroleum, and the automobile industries. This article attempts to capture the subsidies provided by the U.S. government to some of these industries at different stages of their growth cycle.

What is an energy subsidy?

I am no economist, but it seems to me that we can all agree on what constitutes a government subsidy without too much debate. Table 1 (below) attempts to summarize the different forms that energy subsidies can take. Most of these subsidy types are immediately recognizable. The “type” that has generated much debate so far is the “Failure to include Externality Costs.” No matter where you stand on the climate change debate, it is not that hard to see that pollution has at the very least caused smog and acid rain—ask the residents of the Los Angeles from the ‘80s and, more recently, those from Beijing. There has not been a worldwide accepted externality cost measure yet, but as we move forward the chances of that happening are higher.

Regardless, it is safe to say preferential tax treatments and price controls are as much a government subsidy as a cash grant or a low-interest loan. The U.S. government wallet is a bit lighter in both cases.

Historical U.S. government subsidies

The growth of the U.S. economy after the Civil War to become the world’s largest economy was driven by increasing commercialization of technologies including the railroad, iron and steel making, petroleum, and the internal combustion engine. Besides private capital and resources, an important catalyst behind the development and growth of these industries were U.S. government subsidies at different stages. Table 2 summarizes the amounts, types, time period, and stage at which government subsidies were provided to these industries.

Railroad and transportation

U.S. railroad companies laid more than 35,000 miles of track between 1867 and 1873—more than three times that laid in the previous 30 years. Congress gave the railroad companies more than $64 million ($8 billion in 2011 US$ at 3.5 percent inflation) in loans and tax breaks and more than … Next Page »

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All this talk about quarterly earnings and venture stats reminded me: I never posted my favorite stories from Xconomy Boston’s third quarter.

Yes, I know it’s almost the end of October, and the third quarter ended a month ago. I must have been traumatized by the collapse of the Red Sox or something (is baseball still going on?). Go ahead, run me out of town like Theo and Tito.

This time, I’m not consulting with my colleagues. I’m a rebel, a maverick. I work alone. Without further ado, here are my favorite stories from July through September:

Top 10 Tech Stories:

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A Boston-area security tech company and the University of Michigan are involved in one of the most ambitious—and potentially controversial—transportation projects of our time. It could have major impact on federal legislation, and almost everyone you know.

Picture this: You’re driving in your car, approaching an intersection. Maybe you’re speeding a little, going 40 mph in a 35 zone, say. Unbeknownst to you, another driver is racing down the cross street and is about to run a red light (probably texting or something). This could spell disaster. But instead, your car picks up a wireless signal from the other vehicle. A beeping sound or flashing light on your dashboard alerts you to slow down, so you hit the brakes. Disaster averted.

Now let’s take it a step further. Maybe the alert is hooked into your car’s control system, so if you don’t put on the brakes, your car does it automatically. And maybe that’s fine with you. But you might be a little worried about giving up that kind of control in life-and-death situations. After all, computers get hacked and software crashes. Not to mention, you might not want your car broadcasting its speed and location out there for all to see (especially not the cops, since you were speeding).

This scenario isn’t the future. It’s happening already—at least the driver-alert part. In six cities around the U.S., trials of about 100 drivers each are underway to see how people react to in-car alerts (such as collision warnings, do not pass, and vehicle stopped ahead). But the next step is bigger. In Ann Arbor, MI, some 3,000 cars will be equipped with onboard wireless devices for communicating with each other and signaling to drivers when there’s an imminent hazard. This 12-month pilot study, which was announced recently and starts next August, is being led by the University of Michigan’s Transportation Research Institute (UMTRI) through a $14.9 million contract from the U.S. Department of Transportation. The state of Michigan has been heavily involved as well.

The goal of the federal initiative is, ultimately, to save lives. In the U.S., auto accidents are the leading cause of death for people aged 15 to 34; more than 30,000 people are killed on the nation’s roadways each year. The hope is that with new early-warning systems in place, a sizable fraction of would-be victims could be saved—some say 80 percent of non-alcohol-related cases—especially when high speed is involved.

The idea of wirelessly connected cars isn’t new, of course. The field of vehicle telematics has been around for years, with applications in fleet management, tracking, and safety. But advances in GPS location technologies, wireless communications, sensors, hardware, and algorithms are enabling smarter, better-connected vehicles to be tested on a bigger scale. And recent breakthroughs such as autonomous road-racing vehicles and Google’s self-driving car are starting to propel the technology into the mainstream.

Nevertheless, the Michigan study raises some serious real-world concerns. “This is a massive system with tremendous security and privacy implications,” says Ed Adams, the chief executive of Security Innovation in Wilmington, MA. And that’s exactly where his software security firm comes in.

Security Innovation developed the mobile software being used in the U-M study to … Next Page »

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It’s been a wild few months for companies peddling daily deals. As market leader Groupon faces criticism for its accounting and turmoil in its executive ranks, bigger competitors continue to expand or kill their efforts, while smaller fish get gobbled up in a spree of consolidation.

If that’s not enough churn, you can also add some pretty hefty lawsuit filings.

Over the past several months, the parent company of Seattle-based Tippr added defendants to a federal patent-infringement lawsuit, eventually targeting a total of 14 other daily deals companies. The roster of defendants included reasonably well-known players like BuyWithMe, DealOn, and HomeRun, along with a clutch of smaller companies like Click-N-Shout and Deal Co-Op—but not the biggest players, Groupon and LivingSocial.

The case file is crowded with claims, motions, accusations, and denials—the kind of paperwork warfare that can earn intellectual property lawyers a pretty good living. Some of the defendants struck back, countersuing Tippr’s parent company, Kashless.

But now, suddenly, the fight is over. As of Sept. 15, every last defendant has settled with Kashless or been dismissed—in fact, the federal judge signed seven of the dismissal orders on one day.

The idea of some IP lawsuits from Kashless/Tippr isn’t really shocking. Martin Tobias, the entrepreneur behind Tippr, has been pretty outspoken about his patent holdings and their usefulness as a lever in the current Wild West era of daily deals offerings.

When he acquired a trove of related patents from the former Paul Allen company Mercata in 2010, Tobias told us that he’d just picked up “the pocket aces of IP in group collective buying.” He later said that “Tippr has the most extensive and deep patent portfolio in group buying.” And when Tippr acquired Austin, TX-based FanForce, Tobias said the deal was driven by the fact that “They realized what they were doing was covered by my patents.”

The sheer scale of this lawsuit is pretty interesting, however. When we originally reported on the lawsuit (and a related local case) in February, the patent claims only targeted BuyWithMe and DealOn. Why such a flurry of lawsuits through the daily deals chain? Even though the cases are now all settled, I couldn’t get any of the other companies involved to comment on the record (some were not even reachable).

Via email, Tobias confirms that his company “reached agreement” with all the defendants. Asked if that meant Tippr/Kashless had cut patent licensing deals with them, Tobias says, “I don’t want to say licensing agreements. The correct term is ‘settlement agreements.’ We are not disclosing the details of any of the settlement agreements. Tippr is extremely happy with the outcome of these settlement agreements.”

In my spelunking of the court files, I found just one reference to a licensing agreement (I could have missed something, since there are nearly 190 separate filings). It’s in this proposed dismissal motion, which says Kashless and Demand Chain (parent of Homerun) have “a settlement and license agreement … executed July 26, 2011, the terms of which shall remain confidential.”

One source with knowledge of the lawsuit, who insisted on anonymity, said Kashless had been trying to get many defendants to sign a licensing agreement to settle the cases—one that would take 4 percent of gross revenues. “That’s like the profit margin in this business,” the source said.

“But they probably got someone to. That’s what they were trying to pressure everyone into,” the source said. “A lot of these guys that he had on there were pretty small … People are going out of business like crazy.”

That’s not to say there’s no money left in the sector. Two days before the final Tippr/Kashless settlements were signed, research firm BIA/Kelsey bumped up its growth forecast for daily deals, instant deals, and flash sales, saying the market “will grow from $873 million in 2010 to $4.2 billion in 2015.”

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Seattle has already birthed a couple of early stage companies trying to help shoppers track the price swings and model rollouts of expensive electronic gadgets. Well, add another one to the mix—thanks in part to the national battle between Amazon.com and big-box retailers over collecting taxes for online sales.

I’m talking about Shopobot, which just set up shop in the TechStars/Founder’s Co-op building in South Lake Union, right next door to Amazon. Shopobot crawls product and price data around the Web and helps shoppers decide where to get the best deal on cameras, laptops, TVs, and other products.

The company got started in January when co-founder Dave Matthews (no, not that one) left his job at Microsoft and moved to the San Francisco area to join co-founder and longtime friend Julius Schorzman, also a former Seattleite. They originally were targeting book shopping online, until Matthews’ passion for photography led to an experiment tracking the price of camera gear. Voila! Shopobot’s mission was clear.

Schorzman and Matthews

The startup got into the AngelPad accelerator program, and landed seed investments from Google Ventures, AOL Ventures, and others. The company’s public rollout was covered in the New York Times and other media.

With Seattle entrepreneur Dan Shapiro selling similar startup Sparkbuy to Google this spring, and Farecast co-founder Oren Etzioni now tackling electronics shopping with Decide.com, it was clear that this was now a hot area for startups to focus on.

So, everything seemed to be going fine—until the state-by-state battle over online sales tax collections re-emerged in California.

As I wrote in March, recession-hammered state governments are starting to eye online sales as a juicy source of revenue. That’s a problem because, until now, the national laws governing online sales tax collection meant that there was a pretty narrow set of circumstances in which officials could force a company to collect local taxes on its sales in a given state.

Amazon has been very aggressive in making sure the number of states in which it collects sales taxes is low, but bigger bricks-and-mortar retailers hate the price disadvantage and are pushing hard to make online sellers collect sales tax in more places.

In late June, California officials passed a law trying to force Amazon and other online sellers to collect sales tax on purchases from Golden State residents. Amazon promptly followed through with its threat to drop some 10,000 affiliate businesses, third-party portals that market Amazon products through their own sites.

That included Shopobot. Just like that, a major source of revenue for the little company was gone, stuck in a political battle between very big players. “All of a sudden, we were … Next Page »

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It looked like so much fun, they just had to join. Sprint is an unabashed fan of the U.S. Justice Department‘s lawsuit to block the AT&T and T-Mobile merger, and has now jumped into the fray itself with a separate antitrust lawsuit that expands on the DOJ’s arguments.

Interestingly, Sprint (NYSE: S) reportedly wanted to buy T-Mobile before it was cool. But, like the feds, Sprint sees eliminating the fourth-place carrier as a death knell for competitiveness in the red-hot mobile sector. My big question: What becomes of T-Mo if this merger is indeed blocked? Deutsche Telekom clearly doesn’t want the property, but could it survive untethered?

Stop me if you’ve heard this one: Amazon (NASDAQ: AMZN) is working on its own tablet computer. Yeah, it’s been a rowdy few months for leaks and rumors surrounding such a device, so I used the aggregation and curation tool Storify to keep a running list detailing the trail of information.

Gamification is one of those next-wave tech trends that gets a lot of eye-rolling for each bit of promising news. Here’s something that makes it look like this emerging trend is acting more grown up: Seattle’s BigDoor Media acquired OneTrueFan, a 500 Startups company based in the San Francisco area. The OneTrueFan gang is now BigDoor’s Silicon Valley branch, working on expanding their footprint in helping website publishers keep readers clicking along by offering all kinds of rewards for their activity.

The crew at Seattle TechStars alum Giant Thinkwell is taking its creative and technical talents into a new environment: the “Live Web.” The startup, best known for its Facebook-based game promoting Seattle hip-hop icon Sir Mix-A-Lot, found that very few fans actually wanted to jump in and play the new game. So Giant Thinkwell took a page from one of its biggest promotional successes and assembled FlickMob, a new social YouTube-based video sharing site that mimics the experience of Turntable.fm‘s music rooms.

Robert Nelsen, co-founder and managing director of ARCH Venture Partners, says a patent reform bill making its way through Congress is a loser for American innovators and a win for big-business lobbyists. “The bill was conceived to solve the problem of truly frivolous lawsuits in the technology and banking industries,” Nelsen writes. “That problem was solved in five minutes, and then the big companies got ahold of the bill and added all their bells and whistles and it passed based on sheer inertia.”

Dan Shapiro, who recently joined Google through its acquisition of Sparkbuy, has some sage advice for entrepreneurs: If you’re looking for investors, make sure to use your network right. The easiest way to screw up your fundraising dreams, Shapiro writes, is to just lazily cast about for introductions to investors. “It’s sort of like when, on the second day of school, a goofy freshman asked me if I could introduce him to any girls.”

Seattle’s Livemocha has remade its business model in recent months, going after big-fish customers in business and government who want to leverage the company’s web-based in-person language-learning tools for their employees. That kind of scale also didn’t hurt when a big Brazilian company, Abril Educacao, came calling about a partnership in the up-and-coming nation. Abril wound up investing in Livemocha, and CEO Michael Schutzler is bullish about the prospects for future countries and partners.

Finally, a couple of personnel moves of note: BigFish Games has added former Amazon VP David Stephenson as its new CFO, and Kal Raman has resigned as CEO of the GlobalScholar unit of Scantron.

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Rocket Lawyer, a San Francisco-based provider of online legal documents and attorney-finding services, said today that has collected $18.5 million in Series D financing. The round was led by August Capital, with Google Ventures and Investor Growth Capital also participating. August Capital partner David Hornik has joined the company’s board. “We see a large market opportunity for legal solutions that are easily accessible and affordable to users,” Google Ventures partner Wesley Chan said in a statement. “Rocket Lawyer’s combination of an intuitive user-driven front-end with a strong technology-based platform uniquely positions the company to scale and deliver the type of ‘wow’ user experience that online customers love.” The startup has now raised $28 million all told.

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Zishen Fan, of Chino Hills, CA, pleaded guilty today in U.S. District Court in Seattle to charges that he traded on insider information on Seattle Genetics (NASDAQ: SGEN) in 2010, according to a statement from the U.S. Attorney’s Office for Western Washington. Fan’s brother, Zizhong “James” Fan, now deceased, was at the time a manager of clinical programming at Seattle Genetics, and was accused by securities regulators of providing tips to Zishen that enabled the brothers to make more than $700,000 on the nonpublic information, officials said. Zishen Fan could face up to 20 years in prison when he faces sentencing on Oct. 7.

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Whether you’re part of the Boston-Cambridge technology community, or just an interested observer, you’ve probably been to the Microsoft New England Research and Development Center (known affectionately as NERD) at least a few times in the past year. But do you know what Microsoft is actually working on there? I didn’t.

Until last week, that is, when I visited Microsoft Research New England, one of the main groups at NERD, housed near Kendall Square. The tower at One Memorial Drive rises majestically from the banks of the Charles River, but it guards its secrets closely. Jennifer Chayes, the managing director of Microsoft Research New England, which occupies the 12th floor, reveals the projects her group is working on slowly. But she does reveal them.

OK, it’s an open research lab with hundreds of visitors and collaborators from academia and industry, so secrecy isn’t the culture here—at least, not amongst the research community. But from the lab’s opening in 2008 until now, Chayes, an expert in discrete mathematics, networks, and game theory, has said very little to the technology and business media about what her teams have been working on—and what it all has to do with Microsoft’s (NASDAQ: MSFT) business. And that’s just fine, because I’m about to tell you.

Microsoft Research New England is three years old this month. Although the full-time research staff has doubled in size since inception, it’s still a fairly small operation—12 staff researchers (including deputy managing director Christian Borgs), another dozen postdocs, a half-dozen software development engineers and support staff, and any number of students and interns. Their research breaks down into six main areas—computer science (including algorithms, cryptography, machine learning and vision, and security), computational biology, economics, mathematics, networks, and social media. (Microsoft declined to say how much it has invested in the lab so far.)

It’s not a typical lineup for a Microsoft research lab, of which there are six worldwide, including the mother lab in Redmond, WA. “Our lab has gone into certain areas that haven’t been nearly as emphasized by the other [Microsoft Research labs]. Most of them are fantastically strong in mainstream computer science disciplines,” Chayes says. “One of the reasons for opening the lab here was because we wanted to help advance the state of the art at the boundaries between computer science and other fields. And Cambridge is a place—of course it’s very strong in computer science—that’s phenomenally strong in other fields.”

Take empirical economics. Susan Athey, the renowned Harvard economist (and Microsoft consultant), heads up a year-old group in the lab that’s focused on analyzing huge datasets that Microsoft has access to—things like online advertising trends and performance, search-engine user behaviors, Xbox Live networks, e-mail and instant-messaging patterns, healthcare trends, and so on. Chayes pitched the idea for the economics group to CEO Steve Ballmer in December 2009, and he said to go for it.

The group’s goal is to find patterns in databases that could make various systems more efficient. Little did they know this would lead to the lab’s first technology to become a Microsoft product. … Next Page »

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South San Francisco-based Fluidigm (NASDAQ: FLDM) said today it has settled a legal dispute over intellectual property with Carlsbad, CA-based Life Technologies (NASDAQ: LIFE), as the companies have agreed to cross-license and sub-license certain technologies from each other. Fluidigm, which went public in February, makes microfluidic instruments that biologists can use to identify rare and valuable cells in samples, while Life Technologies makes a variety of tools for genetic and cell analysis. In this case, Fluidigm will get access to Life Tech’s polymerase chain reaction (PCR) technologies, in exchange for access to certain IP on imaging readers and other technologies, Fluidigm said. “This is a very positive outcome for both companies. It provides each company with the freedom to compete in the marketplace instead of the courtroom,” said Gajus Worthington, Fluidigm’s CEO, in a statement.

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The Supreme Court today released its opinion regarding California’s attempt to ban the sale of so-called violent video games to those under 18. My company, Vindicia, filed an amicus brief in the case, Brown v. Entertainment Merchant’s Association, to make sure the Court was aware of the ramifications of the California law in the digital gaming world.

The decision is being widely reported as 7-2, which is true enough on the merits of this law. But looking closer, the decision is really 5-4 when it comes to the question of whether the First Amendment categorically protects the sale of video games to minors.

As I noted in a blog post after attending oral arguments in the case, Justice Alito and Chief Justice Roberts both seemed willing to allow states an ability to restrict the sale of violent video games. The Chief Justice seemed to miss the point that Postal 2, the game in question in the case, appears designed specifically to make white middle-aged conservative fathers like him angry. Justice Alito’s concurrence, with which the Chief agreed (bringing the two additional votes in the 7-2 vote), argues that some other law that better defines “violent” could pass constitutional muster.

Justice Thomas wrote a dissent in which he continues to take the position that kids really don’t have any free speech rights as an originalist matter. The flip side being that game creators have no right to sell to them if they’re under 18 (and as an original matter, probably under 21). Justice Scalia rightly points out in the majority opinion that Justice Thomas’s theory may support a system where parents could put their kids on a state-wide “do not sell video games to” list, but Scalia asserted that game makers’ free speech rights are violated when all kids are banned from buying their games.

Justice Breyer continues simply to believe that everything is a balancing test, regardless of the fundamental enumerated right in question, and that therefore judges should be allowed to use political arguments about what is best for society to balance laws against their harms. I’m reminded of Justice Scalia in another recent opinion replying to an almost identical Breyer argument with, “the very enumeration of the right takes out of the hands of government—even the Third Branch of Government—the power to decide on a case-by-case basis whether the right is really worth insisting upon.”

Today’s decision is good news in that the Supreme Court has found that states attempting to severely restrict the sales of video games have been going about it using unconstitutional methods. What’s still frightening is that we appear to be only one vote away from a state finding a way to restrict sales of video games to minors. Luckily, most of the methods that legislatures who really just don’t like video games would want to use would fail other constitutional tests. However, the “do not sell” list concept combined with the existing rating system does leave open a path for legislation that may not burden video game makers much. (That concept, however, faces the difficulty of the changes the digital revolution is bringing to the game industry’s business models, as we outlined in our Amicus brief.)

For adults, this opinion reaffirms something many of us knew. The fact that some people don’t like the content of video games is no basis for curtailing or choking them off at what many consider to be the beginning of a revolution in creativity, realism, and storytelling.

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This may give away my age and musical tastes, but I’ve noticed how entrepreneurs nearly always end up sounding like AC/DC. It’s hard. It takes a long time. Capital raising is brutal. It’s a Long Way to the Top if You Wanna Rock and Roll.

Over the years, I’ve mentioned some of the following. It takes a bit of license, but when the realities do hit home, this other group of very resilient, very successful survivors actually becomes strangely relevant. They “teach” what everyone seems to end up learning about surviving on the entrepreneurial street.

Ain’t no Fun Waitin’ Round to Be a Millionaire

“I got holes in my shoes I got holes in my teeth; I got holes in my pockets I can’t get no relief: I’m tryin’ to make a million.” Founders must be able to hang on and endure. It nearly always seems to surprise them how much of their job description, and how demanding, the hanging on part turns out to be. Vision and dynamism have their place, but they rarely accomplish much without herculean powers of deferral and endurance.

Highway to Hell

“Ain’t Got no reason, ain’t got no rhyme; there ain’t nothin’ I would rather do“… I’m always interested as I meet a new founders group: How sane are they? Too sane, or off their rockers a little, a little intense like the CIA tough guy, hand over the flame, flesh smoking? Founding companies is an inherently unfair, disproportionate activity. If someone is too reasonable, I worry about implosions when the unfairness starts happening five minutes after inception. Don’t found a company unless there ain’t nothin’ you would rather do because, where you’re headed (Hell), that is the only thing that will sustain you(!)

Downpayment Blues

“Hidin’ from the rent man, lord it make me wanna cry; sheriff knockin’ on my door, ain’t it funny how the time flies.” My most-repeated AC/DC lyric. In twenty-five years, capital raising has happened easily for clients perhaps once or twice, yet the assumption always seems to be that this will be okay and relatively crisp. Then the investors don’t show, the finders fail, and the recoil always seems to happen: Oh no, there’s the rent man — a lot of times it’s me, with my clockwork monthly invoices.

Money Talks

“The pain is on you, the sights are on me, so what do you do that’s guaranteed?” AC/DC frequently focuses on the world’s oldest form of entrepreneurial venture, where cash is king and love has nothing to do with it. Founders can still be so attached to the promise of an opportunity that they can be strangely magical in their thinking about cash. On the other hand, investors, customers and corporate partners know that cash is king and love has absolutely nothing to do with it. If you need cash, you’ll pay. If you really need it, you’ll really pay. As the song says, Money talks talks talks!

Who Made Who?

“Who made you? Who picked up the bill and who made who? Ain’t nobody taught you?” Founders are non-stop negotiators, with investors, employees, … Next Page »

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InSite Vision, the Alameda, CA-based developer of drugs for eye diseases, said today it has joined pharma giant Merck in bringing a patent infringement lawsuit against Sandoz, a generic drugmaker. Sandoz has recently filed an abbreviated new drug application with the FDA for clearance to start marketing a generic version of azithromycin (Azacite) for the treatment of eye infections. Merck will the take the lead in the patent litigation, Insite said.

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Mountain View, CA-based Symantec (NASDAQ: SYMD), the company best known for the Norton AntiVirus software line for PCs, said today that it has agreed to acquire Clearwell Systems, a maker of archiving and e-discovery software for litigation support. Symantec will pay $390 million in the transaction, net of Clearwell’s $20 million in cash. Clearwell, which is also based in Mountain View, was founded in 2004; its investors included Sequoia Capital, Redpoint Ventures, Northgate Capital, and DAG Ventures.

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