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EisnerAmper Blog

Technology and Life Sciences Blog

Will San Francisco Levy a Tech Tax?

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July 14, 2016

By Amar Bhatkhandé

San Francisco—home to technology powerhouses such as Twitter, Uber, Yelp and others—is facing a unique ballot proposal that, if it comes to fruition, would require technology companies to pay a 1.5% payroll tax. This tax revenue would be used to fund programs and affordable housing for the city’s 6,700 homeless people.  

The tax would apply to technology companies with more than $1 million in gross receipts. Estimates place the revenue from a tech tax at upwards of $140 million annually.  

This action is the culmination of increasing tension between tech companies, legislators and area residents. Some claim that the tech companies have received generous tax incentives (of more than $30 million), while at the same time tech wages have made affordable housing in the city extremely difficult. The average salary of a technology employee in San Francisco is $150,000 to $200,000. 

However, tech industry advocates, along with the San Francisco mayor, counter that technology companies have used those tax incentives to successfully build-up previously rundown areas of the city. Furthermore, they claim a tech tax will have a negative impact on tech employment and investment—possibly forcing some companies to relocate out of the city or state.  

One way or the other, the tech tax faces an uphill battle. In order to make it on the November ballot, it needs approval of 6 of the 11 members of San Francisco’s Board of Supervisors. Currently, only 3 board members support such a tax. And if the board does approve the ballot resolution, then 2/3 of voters would need to agree to the tech tax at the polls in November. 

Solar Plane Flies the Sunny Skies

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July 1, 2016

By David Katz, CPA 

After landing in southern Spain, the Solar Impulse 2 will now embark on the home stretch of its trans-global journey—all without as much as a teaspoon of jet fuel.

Swiss pilots Bertrand Piccard and Andre Borschberg have alternated between different legs of the around-the-world flight, which started in the United Arab Emirates in March 2015. Their route, which is entirely in the northern hemisphere, should take them back to the UAE later this summer. 

Solar Impulse 2 runs on 17,000 solar cells that power propellers and charge batteries. The solar plane, which features carbon-fiber wings that are wider than those of a Boeing 747, weighs only 5,000 pounds.

While this clean-tech solar plane can reach an altitude of 39,000 feet, similar to what commercial aircraft fly, its top speed is less than 100 miles per hour. Combine that with some weather problems over China and a 9-month layover in Hawaii due to technical malfunctions and you can see why this has become a year-long odyssey.

Dating back to 2002, the Solar Impulse project has cost more than $100 million, which has been financed by a combination of private companies, individuals and the Swiss government. Google has sponsored the flight and the European Space Agency is providing technical guidance.  

Piccard and Borschberg,who piloted the first balloon to circle the world non-stop, began the Solar Impulse project as a way to shine a light on renewal energy. While commercial viability may be years away, Solar Impulse does give us a glimpse at air travel without the need for fossil fuels.

 

Each Barrel of Crude Oil Makes
Gasoline 19 gallons
Diesel 12 gallons
Jet Fuel 4 gallons
Others 11 gallons
Source: U.S. Energy Information Administration
 

Court Chooses Side on Net Neutrality

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June 23, 2016
By Marc Fogarty, CPA 

A U.S. Court of Appeals indicated that Internet service providers can be classified as a common carrier and are subject to similar regulations as utility companies. This also reaffirms a 2015 rule by the Federal Communications Commission (“FCC”), the Open Internet Act, declaring net neutrality. 

Net neutrality is the principle that Internet service providers should enable access to all content and applications regardless of the source, without blocking particular content or websites or charging extra fees for “data express lanes.”

The decision is seen as a victory for consumers and online content providers as well as tech start-ups. However, Internet service providers have vowed to appeal the case to the Supreme Court. 

“The ruling was a victory for consumers and innovators who deserve unfettered access to the web, and it ensures the Internet remains a platform for unparalleled innovation, free expression and economic growth,” said FCC Chairman Tom Wheeler. “It affirms the Commission’s ability to enforce the strongest possible Internet protections–both on fixed and mobile networks–that will ensure the Internet remains open, now and in the future.” 

Internet service providers fear the ruling opens the door to additional FCC initiatives in the areas of pricing and data security. Members of Congress opposed to the ruling have signaled a willingness to cut the FCC’s budget by $69 million and place restrictions on the Commission using any funds to enforce net neutrality until all legal challenges and appeals have been exhausted.
 

Is Blockchain Finally Going Mainstream?

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June 15, 2016

By Amar Bhatkhandé

Blockchain technology, first used to support the Bitcoin digital currency, has been around since 2008. However, Bitcoin acquired a questionable reputation when one of its prominent networks failed and it became linked to nefarious activities on the “darknet.” This hampered broad-based adoption of blockchain.  

What Is Blockchain?

Blockchain is a data architecture that allows users to create a digital ledger of validated transactions that can be shared among a computer network. It maintains and settles transactions between participants in a distributed fashion, without a need for a central authority such as a bank or brokerage house.  

Once an encrypted block of data is created within a blockchain, each participant gets a copy of the block (a singular or series of transactions created at the same time and grouped in a cluster). Everyone within the network can verify the transaction. After a majority of the participants agree on the transaction’s validity, the new transaction is approved and a new block gets added to the chain. The ever-expanding chain becomes nearly impossible to compromise, because a single transaction adjustment invalidates the entire block. 

Why Now?

Blockchain is finally gaining the attention of central bankers who have spent the last year determining how to leverage the technology. In a meeting of the central banks of 90 countries, U.S. Fed Chair Janet Yellen urged attendees to accelerate their studies of various financial system technologies, including blockchain.  

Blockchain’s Future 

Bad publicity typically becomes a barrier to mainstream users of a technology. Also, institutional users were skeptical due to blockchain’s enigmatic developer, Satoshi Nakamoto. Ultimately, however, if a new technology has a marketable use, it’s only a matter of time before people adopt it. One key is the banking system’s growing confidence in the security and stability of blockchain. It appears, though, we’ve only scratched the surface of blockchain’s applications. 

Microsoft and LinkedIn Agree to Historic M&A

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7 Ways This Could Reshuffle the Tech Deck 

June 13, 2016

By Marc Fogarty 
In a cash deal valued at $26.2 billion, Microsoft has agreed to purchase social media giant LinkedIn. The per-share offer of $196 is nearly a 50% premium on LinkedIn’s closing price the day before the deal was announced. According to Bloomberg, the offer values LinkedIn 91 times EBITDA. 

The merger has been approved by the boards of both companies and now awaits the green light by regulators. LinkedIn will remain an independent business unit of Microsoft, and LinkedIn’s CEO Jeff Weiner will report to Microsoft CEO Satya Nadella. 

The merger offers both companies possible synergies into the consumer and professional markets:  

  1. Microsoft takes a giant step into the social media space with access to LinkedIn’s 430 million-plus members. 
  2. It bolsters Microsoft’s Dynamics customer relationship management software segment. This could make it a strong competitor to market leader Salesforce, who Microsoft was in merger talks with as recently as last year.
  3. LinkedIn will benefit from Microsoft’s leadership in cloud computing as well as its 1 million customers. 
  4. LinkedIn can become a sales platform for Microsoft products such as Office, Bing, Windows and apps. 
  5. LinkedIn has a leading presence in job recruitment. In fact, the recruitment segment accounted for 2/3 of LinkedIn’s $3 billion in revenues for 2015. There has been some recent slippage here, however.
  6. LinkedIn’s online learning platform, Lynda.com, could mesh around Microsoft's certification and education initiatives across its product lines.
  7. It enhances Microsoft’s all-important presence on mobile, with an average of 15 million mobile profile views on LinkedIn daily. 

Ultimately, according to the principals involved in the deal, it’s about giving professionals more tools to increase their productivity. If LinkedIn halts the deal, it will have to pay Microsoft a $725 million termination fee.

Is Yahoo Putting the For-Sale Sign on Patents?

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June 2, 2016

By Marc Fogarty, CPA  

It’s no secret that Yahoo has struggled a bit lately. First-quarter sales and net income for 2016 were down significantly compared to the same quarter last year, and the company announced a $4.4 billion loss for the 4th quarter of 2015. The announcement included a planned 15% staff reduction along with office closings in Brazil, Italy, Mexico, Spain and the United Arab Emirates. 

As part of its “simplification measures,” Yahoo is exploring the sale of non-core businesses such as patents and real estate. Some estimates place the value of its patents at $3-$4 billion and real estate at $1 billion. Approximately 2,000 of Yahoo’s 6,000 patents may be for sale in the areas of mobile messaging, data mining and behavioral ad targeting. The company has reportedly sold or licensed more than $600 million in patents over the last 3 years. IP Watchdog reported that in October of 2014 Google acquired 55 Yahoo patents in mapping, online search and other digital technologies. 

For all of its challenges, Yahoo is still a force on the technology scene, with 280 million email accounts and 1 billion monthly users. Among the names mentioned as buyers include Verizon Communications and Time Inc., along with several private equity companies. 

Global Search Engine Market Share
Google 71%
Yahoo 10%
Bing 10%
Baidu 8%
Others 1%
Source: Net Applications

 

During a recent earnings report, Yahoo CEO Marissa Mayer said the company was looking into the “responsible monetization of nonstrategic patents.” Many interpreted the inclusion of “responsible” in her statement as a desire not to let Yahoo intellectual property fall into the hands of patent trolls. Time will tell how the sales process—and Yahoo’s future—will play out. 

New Guidelines a Shot in the Arm for Life Science Patents?

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May 31, 2016

By John Pennett

On May 5, the U.S. Patent and Trademark Office issued updated guidelines to its examiners regarding patent eligibility under Section 35 U.S.C. § 101. The guidance reinforces that examiners must carefully consider all of an applicant’s arguments and evidence. Furthermore, examiners must now communicate a more detailed rationale on why they rejected an application, as well as use best practices in evaluating an applicant’s response to the rejection.  

This is welcome news to the life sciences community that many said was severely hampered after the landmark 2012 Supreme Court decision in Mayo v. Prometheus. In that case, the Supreme Court ruled that a process invented by Prometheus to administer drugs based on a person’s level of metabolites was not eligible for patent protection because it covered a law of nature, not an innovative new process. 

The new guidance also gives examiners some broader flexibility with regard to interpreting the merits of a patent application. Examiners will also receive an extensive list of new life science eligibility examples, along with additional training. According to the U.S. Patent Office, of the 629,647 patent applications in 2015, a total of 325,979 (or 52%) were granted. This is up 1% from 2014.  

While it’s too early to tell what the impact will be on life science patents, there are those who believe  the U.S. Patent Office is attempting to soften what many experts felt was a rigid Supreme Court interpretation of what is considered patentable. Stay tuned….

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EisnerAmper is an independent member of EisnerAmper Global.