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The Morning Risk Report: Apple Faces $1.4 Billion Lawsuit by Chinese AI Firm in Siri Patent Fight
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Trying out an iPad at an Apple Store in Beijing in July. PHOTO: KEVIN FRAYER/GETTY IMAGES
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Good morning. An artificial-intelligence company recently awarded a Chinese patent for a voice assistant similar to Apple’s Siri has filed a patent infringement lawsuit against Apple that, if successful, could prevent the American tech giant from selling many of its products in the world’s second-largest economy.
Shanghai Zhizhen Network Technology Co. said in a statement it was suing Apple for an estimated 10 billion yuan ($1.43 billion) in damages in a Shanghai court, alleging the iPhone- and iPad-maker’s products violated a patent the Chinese company owns for a virtual assistant whose technical architecture is similar to Siri. Siri, a voice-activated function in Apple’s smartphones and laptops, allows users to dictate text messages or set alarms on their devices.
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As part of the suit, Shanghai Zhizhen, also known as Xiao-i, asked Apple to stop sales, production and the use of products flouting such a patent.
China’s Supreme Court ruled in late June that Xiao-i owns the patent for the virtual assistant in China. The patent ruling, which brought to an end a process that spanned several court trials since 2012, is the third time in less than a decade that Apple has faced trademark and patent challenges in China. China is Apple’s most important sales market outside the U.S., second only to its home market in terms of sales.
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Customs and Border Protection officers in late June checked a shipment of products to the New York City area. PHOTO: U.S. CUSTOMS AND BORDER PROTECTION OFFICE OF PUBLIC AFFAIRS/AGENCE FRANCE-PRESSE/GETTY IMAGES
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U.S. Customs officials plan to issue a ruling today intended to give border agents more transparency about the origin of imports destined for U.S. warehouses, improving their ability to police shipments for counterfeits and other illegal goods.
With the ruling, Customs and Border Protection aims to clarify what information some shippers must include about shipments valued at less than $800 that are heading to U.S. fulfillment centers and warehouses. Congress set that monetary threshold in 2016 as the amount at which goods can pass into the U.S. tax-free and with minimal documentation.
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Bausch Health Cos. agreed to pay $45 million to resolve regulatory claims that it improperly booked some revenue and misled investors about the impact of a significant price increase on a single drug. The Securities and Exchange Commission said three former executives also agreed to pay penalties to settle the agency’s claims against them. Bausch Health was formerly known as Valeant Pharmaceuticals International Inc., a company that five years ago became a poster child for national criticism of high drug prices.
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The Trump administration imposed sanctions on a Chinese organization and two current and former officials that U.S. officials say are linked to human-rights abuses against the Uighur Muslim population in northwestern China. The blacklisting of Xinjiang Production and Construction Corps, known as XPCC, and the two men connected to the group came amid calls for the U.S. to intervene against Beijing to curb abuses of China’s ethnic Muslim population in the Xinjiang region.
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Financial-technology firm Varo Money said it had received a national bank charter, clearing the final hurdle in its quest to become a bank. The national charter from the Office of the Comptroller of the Currency marks one of the first granted to a fintech company. It gives the startup the ability to make loans and safeguard deposits across state lines.
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Wells Fargo unloaded hundreds of millions of dollars of assets during this spring’s market collapse to stay out of trouble with the Federal Reserve. The Fed put limits on Wells Fargo’s size as punishment for its 2016 fake-account scandal. Loans the bank made to customers drawing on credit lines in the pandemic’s early days increased its size, and the bank scrambled to sell assets to get back in line, according to people familiar with the matter.
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Questionable online sales tactics used by some foreign merchants have been brought into focus after the federal government said that mysterious seed packages postmarked from China may be an e-commerce scam. The U.S. Agriculture Department said that “suspicious, unsolicited packages of seed that appear to be coming from China” are potentially part of a brushing scheme.
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Mexican security forces arrested the alleged head of a violent organized-crime group that stole tens of millions of dollars worth of gasoline each year from the state oil company and whose war with the powerful Jalisco cartel had turned the central state of Guanajuato into Mexico’s most violent.
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Treasury Secretary Steven Mnuchin, center, was among those favoring a Microsoft deal for TikTok. At right is White House Chief of Staff Mark Meadows. PHOTO: STEFANI REYNOLDS/BLOOMBERG NEWS
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Microsoft said it will move forward with plans to buy the U.S. operations of the hit video-sharing app TikTok, capping weeks of covert dealmaking that were almost upended by an 11th-hour intervention from President Trump. The transaction could reshape the global tech landscape and further strain already tense U.S.-China relations.
U.S. officials have expressed concern that TikTok would let China’s authoritarian government have access to the data TikTok collects from Americans and other users. TikTok has said it would never hand over such data. Under China’s laws, companies operating there must comply with any government request to turn over data.
“Microsoft appreciates the U.S. Government’s and President Trump’s personal involvement as it continues to develop strong security protections for the country,” the company said in a statement. It added it would ensure that the data of American TikTok users is transferred to the U.S., where it would remain. For Microsoft Chief Executive Officer Satya Nadella, it would mark the boldest in a string of big deals and could reshape a tech giant that has lately thrived by focusing on corporate customers.
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Twitter’s worst-ever hack began months earlier with a teenager on a telephone, according to an indictment filed by federal authorities charging three males in connection with the episode. The three were charged in connection with the July 15 hack, including a 17-year-old juvenile whom authorities have accused of masterminding the scam.
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A group of members of Congress is asking the Federal Trade Commission to open an investigation into the mobile advertising industry’s practice of covertly tracking consumers using digital display ads. The complaint sent to the FTC cites a little-known practice of using what is called “bidstream” data derived from the ads that appear on websites and in mobile applications to obtain sensitive information about consumers that can include their real-world locations and information about their age and gender.
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A barista makes coffee at a Luckin branch in Beijing in February. PHOTO: YAN CONG FOR THE WALL STREET JOURNAL
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Chinese regulators are preparing punitive action against Luckin Coffee Inc., less than four months after the company revealed that it had fabricated hundreds of millions of dollars in sales. In vowing to penalize the once-hot startup, China’s Ministry of Finance and commerce regulator are moving ahead of any U.S. regulatory measures, although Luckin’s U.S.-traded stock has been delisted. The scandal has fanned calls in Washington to kick Chinese companies off American stock exchanges unless their audits can be inspected by U.S. regulators.
China’s Ministry of Finance said it would reprimand Luckin after completing a monthslong investigation. The ministry’s Supervision and Evaluation Bureau, which regulates accounting and other activities, said it would punish two of Luckin’s Chinese-registered subsidiaries. It said it would later disclose the administrative penalties it had imposed.
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Economists surveyed by The Wall Street Journal expect employers added jobs in July. A job seeker was interviewed at a curbside recruitment fair in Michigan in June. PHOTO: JAMES T. AREDDY/THE WALL STREET JOURNAL
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The July jobs report, to be released Friday, could be among the most politically consequential of the economic downturn caused by the coronavirus pandemic. Allowing employers to reopen and recall workers subsequently resulted in the best back-to-back months of hiring in May and June, with employers adding a combined 7.5 million jobs. The July report is expected to show whether the healing continued or sputtered amid rising Covid-19 cases and deaths, as some jurisdictions halted or rolled back reopening plans. The information could influence policy makers’ next steps, businesses’ hiring strategies, consumers’ confidence and voters’ moods.
Stringent lockdowns to prevent the spread of Covid-19 weighed heavily on Europe’s economy in the second quarter, causing a record contraction more severe than experienced by the U.S., but analysts said the continent’s success so far in avoiding a resurgence of the disease coupled with aggressive government stimulus should help support a nascent recovery.
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McDonald’s moved to a limited menu in the quarter, helping to simplify operations. PHOTO: WILFREDO LEE/ASSOCIATED PRESS
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Business executives say they are getting a better grip on what a world transformed by the coronavirus looks like, giving them more confidence to lay out strategies that account for the new reality. Corporate leaders are changing company operations and resetting assumptions, after having absorbed months of fresh information about how customers act with everyday life often marked by working and staying home, traveling less and social distancing. In response to the emerging environment, businesses are retooling pricing, store designs and production—for the immediate and long-term future.
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After cutting thousands of jobs during the coronavirus pandemic, the oil industry is accelerating its embrace of remote drilling and fracking, changes that will reshape its workforce permanently. Schlumberger, Halliburton and Baker Hughes, the world’s three largest oil-field service providers, are shifting more tasks from drilling specialists at well sites to remote engineers working from offices or, increasingly, their homes.
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For many people, particularly essential workers who can’t do their jobs from home, longer waits for Covid-19 test results can mean time without pay while they wait to be allowed back to work. Others have been forced to use vacation time. The rules for unemployment benefits vary by state, but in many cases, individuals who haven’t been laid off and aren’t positive for Covid-19 aren’t eligible.
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Adobe's political-ad ban is expected to be effective as of Aug. 30. PHOTO: LUCY NICHOLSON/REUTERS
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Software giant Adobe plans to ban political ads from its digital advertising sales platform, the latest company to make such a move just months away from the U.S. presidential election. Digital platforms have been writing their own rules for political ads in the absence of federal guidelines. Twitter and streaming-music site Spotify, two other large players in political advertising, banned political ads last year.
President Trump faces new legal allegations that he violates the First Amendment by blocking Twitter users who criticize him, in a lawsuit filed in Manhattan federal court. “It unconstitutionally restricts their rights to read or participate in the discussion,” and to access statements the president is “making available to the public at large,” the lawsuit said.
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Marathon had been close to a deal with the parent of 7-Eleven Inc. earlier this year, but talks fell apart in March as the coronavirus pandemic took hold. PHOTO: STACIE SCOTT/BLOOMBERG NEWS
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Fuel maker Marathon Petroleum said it has agreed to sell its gas stations to the owners of the 7-Eleven convenience store chain for $21 billion in the largest U.S. energy-related deal of the year.
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Luxury department store chain Lord & Taylor, an industry pioneer dating back nearly 200 years, filed for bankruptcy along with its owner, the venture-backed fashion-rental subscription service Le Tote.
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Tailored Brands, the parent company of Men’s Wearhouse and Jos. A. Bank, filed for bankruptcy after the coronavirus pandemic slashed demand for dress clothes.
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