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National

Axios AI+

Microsoft is suing a unit of Taiwanese contract manufacturer Foxconn over unpaid patent royalties on the consumer devices it makes for others.

Why it matters: Microsoft has a patent license with Foxconn that calls for it to make payments for smartphones, tablets and other devices and to provide an annual audit to Microsoft. The software maker says the company has not been doing either in recent years.

Microsoft's suit, filed on Friday in federal court in San Jose, California, seeks to require Foxconn to produce required royalty reports, pay the royalties it owes and open its books to the court.

Microsoft has historically gotten significant royalties on Android-based phones and tablets from most key manufacturers.

In the suit, Microsoft says Foxconn submitted an inaccurate report for 2014 and issued no report and paid no royalties for 2015–2018.

What's not clear is why exactly Foxconn stopped making the payments and whether it was at the behest of Google or the device makers.

What they're saying: Microsoft said in a statement to Axios that it values its relationship with Foxconn, also known as Hon Hai Precision Industrial Co., and is working to resolve the disagreement.

“Microsoft takes its own contractual commitments seriously and we expect other companies to do the same. This legal action is simply to exercise the reporting and audit terms of a contract we signed in 2013 with Hon Hai. Our working relationship with Hon Hai is important, and we are working to resolve our disagreement.”

A Foxconn representative was not immediately available for comment.

Microsoft is suing Foxconn unit over unpaid royalties

Redmond says it hasn't received the money it's due under a patent-licensing deal.

A Foxconn building in Taipei, Taiwan. Photo: SAM YEH/AFP/Getty Images

Technology

Microsoft

Business

Big Tech

From the Valley to D.C., Big Tech players like Facebook, Google and Amazon are under more scrutiny than ever as new technology develops and privacy and antitrust concerns grow in lockstep with companies’ ambitions.

Amazon will no longer tell third-party merchants that sell products on its platform in the United States that they cannot offer the same goods for a lower price on another website, according to a person with direct knowledge of the company's decision.

Why it matters: Critics have said the so-called "most favored nation," or "price parity," provisions could violate antitrust law. But even without them, the company still faces a broader set of attacks on its size and power in the United States and around the world.

Flashback: Sen. Richard Blumenthal (D-Conn.) in December asked the Department of Justice and the Federal Trade Commission to investigate the requirements for possible antitrust violations late last year.

Blumenthal said he was concerned that they could "stifle market competition and artificially inflate prices on consumer goods."

His request followed a May law review article that found that the most favored nation requirements "employed by online platforms can harm competition by keeping prices high and discouraging entry" in many cases.

Amazon dropped the requirement for merchants on its platform in Europe under regulatory pressure in 2013.

What they're saying: "Amazon’s wise and welcome decision comes only after aggressive advocacy and attention that compelled Amazon to abandon its abusive contract clause," Blumenthal said, while issuing a wider call for antitrust investigations into large tech companies.

Amazon declined to comment on the change.

The big picture: Amazon has become a symbol for progressives of the ill effects of corporate power in an age of increasing consolidation. Last week, 2020 presidential candidate Sen. Elizabeth Warren (D-Mass.) said Congress should pass a law banning large companies from operating and owning participants on the same online platform.

That proposal would make it impossible for Amazon to sell its house brand products, like the popular AmazonBasics batteries, that critics say hurt other brands that sell on its platform.

Amazon to end price practice critics said could violate antitrust law

But the company is still facing plenty of attacks on its size and power.

A bald man sits in front of a sign that says "WIRED"

Amazon CEO Jeff Bezos. Photo: Matt Winkelmeyer/Getty Images for WIRED25

Amazon

The crashes of two brand new Boeing 737 MAX 8 aircraft during the past 6 months, including the latest on Sunday outside Addis Ababa, Ethiopia, that killed all 157 aboard, present a major challenge for Boeing. 

Why it matters: The Chicago-based company has bet much of its future on the success of the Boeing 737 MAX series, which are the newest versions of the best-selling jet of all time. However, the stakes for Boeing couldn't be higher, as the loss of two brand new aircraft in 6 months has no precedent in modern aviation history and threatens one of the company's main profit engines. 

The big picture: The aircraft is aimed at countering competition from Airbus for the lucrative single-aisle jet market. According to Boeing, the company has already notched more than 4,700 orders, keeping a bustling production line open in Renton, Washington, along with part manufacturers located elsewhere. 

The plane offers airlines a more efficient and longer-range option compared to older generations of the 737 and the aging Boeing 757. Its engines are quieter than older 737s, with raked nacelles giving them a futuristic look. Its jagged wingtips point outwards in two directions, an effort to minimize its wake and maximize efficiency. 

Context: The investigation into the Lion Air crash near Jakarta, Indonesia, on Oct. 29 has centered on an angle-of-attack sensor that juts out from the plane's fuselage near the nose. 

A preliminary investigation shows the sensor may have provided erroneous readings to the plane's fight control system. 

This led the system to sense the plane's nose was tilted up at a high angle and that a potentially disastrous flight condition known as a stall — in which a plane loses its ability to generate lift — was imminent. 

This then led a flight computer system known as MCAS to push the plane's nose forward to avert the stall. 

On Monday evening, the FAA issued a notification to all operators of the 737 MAX series, stating in part: "... This investigation has just begun and to date we have not been provided data to draw any conclusions or take any actions." Drawing from the Lion Air crash, the agency is working with Boeing to roll out a software fix to the MCAS system by April. 

The plane's altitude fluctuated wildly as the pilots appear to have fought with the MCAS system, before the pilots lost control and the plane plunged into the ocean, according to preliminary findings. A final cause of the crash has not yet been determined. However, in the wake of the crash, Boeing issued guidance to airlines about how to disable the MCAS system.

According to reporting by the New York Times, the MCAS system could be disabled using a checklist already in the cockpit, meant for use when encountering specific control problems.

Backstory: In developing the 737 MAX 8, Boeing worked to minimize training costs for airlines to operate the new version of the 737, since so many airlines already operate other versions of the same plane. Pilots did not receive special training on the MCAS in particular. 

The Ethiopian Air crash bears initial, eerie similarities to the Lion Air disaster, in that both planes crashed soon after takeoff and that preliminary radar data shows both aircraft oscillated in altitude before plunging toward the ground. 

While the cause of the latest accident won't be known for months, the possibility that the accident is also the result of the MCAS system has prompted three countries — China, Indonesia and Ethiopia — along with several airlines, including Ethiopian Airways and Cayman Airways, to temporarily ground the planes. 

Boeing has sent an investigative team to Ethiopia to assist with the investigation. “Safety is our No. 1 priority and we are taking every measure to fully understand all aspects of this accident, working closely with the investigating team and all regulatory authorities involved," a Boeing spokesperson said. "The investigation is in its early stages, but at this point, based on the information available, we do not have any basis to issue new guidance to operators." 

The big picture: Boeing last encountered a similar crisis with its introduction of the 787 in 2013, with issues centering around the lithium-ion batteries that power the aircraft's computer systems. The FAA grounded all 787s for 4 months, even though the incidents were non-fatal, and the program bounced back.

Between the lines: It's not just Boeing that could be affected, depending on the crash investigations. Axios' Courtenay Brown points out that Boeing is the most influential stock in the oft-cited Dow Jones Industrial Average, which gives the heaviest weighting to the company with the highest share price.

A continued sell-off in Boeing's shares — which accounted for about 25% of the Dow's rebound this year — would drag the index down with it.

The bottom line: Right now, three U.S. airlines operate a 737 MAX series plane: American, Southwest and United. Some international airlines, such as Norwegian Air and Icelandair, are taking advantage of the planes' improved range by flying long-range routes across the Atlantic. 

Should a systemic flaw in the 737 MAX series be found that results in a lengthy grounding or complicated fix, Boeing's bottom line could be significantly impacted. 

Editor's note: This piece has been corrected to show that United operates a 737 MAX series airplane (not the MAX 8).

Boeing's back-to-back 737 MAX 8 crashes are a nightmare scenario

There is no precedent in modern aviation history.

An American Airlines Boeing 737 8Max lands in New York City.

An American Airlines Boeing 737 Max 8 lands at LaGuardia Airport. Photo: Drew Angerer/Getty Images

Plane crashes

World

In an interview released Monday, House Speaker Nancy Pelosi told the Washington Post that impeaching President Trump is "just not worth it."

"Impeachment is so divisive to the country that unless there’s something so compelling and overwhelming and bipartisan, I don’t think we should go down that path, because it divides the country. And he’s just not worth it."

Why it matters: Pelosi’s comments — which mark the most definitive public stance she's taken on impeachment — will certainly rattle rank and file Democrats, especially progressives and party activists who have been calling for impeachment since the day they took back the House in the 2018 midterms.

"I don’t think he’s fit to be president of the United States. And that’s up to us to make the contrast to show that this president — while he may be appealing to you on your insecurity and therefore your xenophobia, whether it’s globalization or immigrants — is fighting clean air for your children to breathe, clean water for them to drink, food safety, every good thing that we should be doing that people can’t do for themselves."

On the Green New Deal, Pelosi reiterated how important the issue climate change has always been to her: "Here’s the thing: When I was speaker, the first time, my flagship issue was climate and energy. ... [T]he fact that the Green New Deal raises the profile of the issue, that’s really important. But any proposal that someone has, has to come through the committee process."

Pelosi said the president has "been a great organizer for Democrats, a great fundraiser for Democrats and a great mobilizer at the grass-roots level for Democrats. And I think that’s good for America." 

When asked if she's anxious about the state of the country, Pelosi said: "Our country is great. It’s a great country. Our founders gave us the strongest foundation. … All the challenges we have faced, we can withstand anything. But maybe not two [Trump] terms. So we have to make sure that doesn’t happen."

Pelosi says impeaching Trump is "just not worth it"

"I don’t think we should go down that path, because it divides the country."

Politics

Donald Trump impeachment

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President Trump on Monday sent a record $4.75 trillion 2020 budget proposal to Congress, in which he called for a 5% increase in military spending, a $1.9 trillion cut to safety net programs and an additional $8.6 billion for his border wall.

Why it matters: Trump's budget won't balance for 15 years, and Capitol Hill will promptly reject this budget, as it does every year with every president. But the proposal nonetheless highlights the White House's priorities for 2020.

By the numbers: Trump's budget, the largest in history, would make cuts to the following programs and departments ...

State Department and other international programs: -23.3%

Medicaid: $1.5 trillion in cuts over 10 years

Medicare: $845 billion in cuts over 10 years

These departments and programs would receive increases in funding ...

National Nuclear Security Administration: +8.9%

Trump proposes record $4.75 trillion budget, with $8.6 billion for border wall

Congress will reject the budget, as it does every year.

Federal budget

2024 will be an election year like no other, as President Biden seeks re-election amid economic uncertainty, two wars and questions about his age. His likely foe, former President Trump, faces felony charges and vows revenge on his political enemies. Meanwhile, Americans generally are dissatisfied with those choices and are divided over immigration, race, education and more.

Politics & Policy

Dan and Axios' David McCabe discuss Sen. Elizabeth Warren's plan to break up tech giants like Amazon, Google and Facebook.

Podcast: Elizabeth Warren vs. big tech

Should Amazon, Google and Facebook be worried?

Pro Rata Podcast

Axios Re:Cap

Podcasts

Macro

Axios Macro

Consumer-driven stocks are leading the way in the market rebound since the S&P 500's Christmas Eve selloff.

Driving the news: As of Friday's close, the top 5 companies with the best returns since the S&P's 2018 low includes just one tech name, and it's Xerox.

Within the same time frame a year earlier — Dec. 26, 2017 to March 8, 2018 — the list looked very different. 3 out of the 5 best performing stocks were tech companies: Netflix, Twitter and Seagate Technology.

What's happening: As Nicholas Colas, co-founder of research firm DataTrek, points out, many of this year's best performing stocks are "simply the names that got really clobbered" in December's sell-off.

Xerox, Hanesbrands and Mattel all fell more than 20% during December.

Chipotle and Coty were less beat up — dropping by around 10% each.

Consumer-driven stocks are leading the market rebound

Top stories & latest news on the Federal Reserve, real-time data, plus the biggest shifts happening in the U.S. and global economy.

Economy

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

Fed Chair Jerome Powell has done his part to deflate the very strong U.S. dollar. 

The state of play: Powell announced in December that he could feel the market and at last month's policy meeting announced his plans for the central bank to stop with the 50 B's by year-end. Still, the dollar has continued to rise.

What's happening: Analysts and fund managers had largely expected the dollar to weaken this year as other central banks initiated quantitative tightening and stimulus from the 2017 U.S. tax cuts and spending increases lost their impact.

What they're saying: But other central banks have followed Powell's lead in reversing the QT trend, and political dysfunction and economic malaise are keeping the greenback bid, John Doyle, vice president of dealing and trading at Tempus Inc., tells Axios.

King dollar keeps rising

President Trump may also be to blame for the dollar's value.

Axios

Monday's top stories

Microsoft is suing Foxconn unit over unpaid royalties

Amazon to end price practice critics said could violate antitrust law

Boeing's back-to-back 737 MAX 8 crashes are a nightmare scenario

Pelosi says impeaching Trump is "just not worth it"

Trump proposes record $4.75 trillion budget, with $8.6 billion for border wall

Podcast: Elizabeth Warren vs. big tech

Consumer-driven stocks are leading the market rebound

King dollar keeps rising

Politics invades SXSW

What Google knows about you

Trump administration divided over OPEC oil policy

The growing push to raise the smoking age to 21

Woman accused of killing Kim Jong-un's half-brother freed