Posts Tagged ‘Microsoft’
Wednesday, March 31st, 2010

A decade of private antitrust lawsuits for Microsoft Corp. came to a quiet end on Tuesday when a federal judge in Maryland granted Microsoft’s motion for summary judgment and dismissed the last pending suit against the software giant that followed the government’s landmark monopolization case.

David Tulchin (Sullivan & Cromwell)

Around 200 cases followed the 1999 ruling in U.S. v Microsoft that found that Microsoft used its dominance in the operating system market to crush potential rivals.

Microsoft’s general in the battle against the private suits, Sullivan & Cromwell’s David Tulchin, sounded a note of relief as he traveled back to New York from a Philadelphia hearing Wednesday morning.

“It has been a long time,” Tulchin said. “Sometimes the legal system moves a little more slowly than we would like, but all things good and bad must come to an end, and it’s time for this to be over.”

Tulchin reminisced about the good: a half-dozen arguments in the 4th Circuit Court of Appeals, another half dozen in state supreme courts, two state court trials, visits to 40 states and a goldmine of unused frequent flier miles.

He also reflected on the not so good: “I thought we’d probably be done with it within five or so years,” he said.

The suit dismissed on Tuesday was brought by software maker Novell Inc. in November 2004 and involved the word-processing program WordPerfect. Novell acquired the software in 1994 and sold it, at a significant loss, two years later.

In its complaint, Novell accused Microsoft of using its monopoly in the operating system market to hurt WordPerfect and promote its own word-processing software, Microsoft Word. One Microsoft executive told investor Warren Buffet, according to the ruling, “[i]f we own the key ‘franchises’ built on top of the operating system, we dramatically widen the ‘moat’ that protects the operating system”.

In dismissing the case, Judge J. Frederick Motz, of the U.S. District Court for Maryland, said when Novell sold WordPerfect and other products, it also sold the right to any claims on them.

The case took so long to resolve, in part because it was filed several years after most of the others. In 2004, Microsoft and Novell announced a $536 million settlement to resolve some disputes, but couldn’t come to an agreement on the WordPerfect claims.

After the lawsuit moved from Utah, where Novell was headquartered when the suit was filed, to the consolidated cases in Baltimore, Motz dismissed parts of the lawsuit based on the statute of limitations. A 4th Circuit panel affirmed his decision but not until 2007. Motz then granted Novell’s request for more than one year of discovery on the remaining counts. Both sides filed motions for summary judgment last year, and Motz heard arguments in February.

In his ruling, Motz said: “I find that Novell no longer owns the claims and may not pursue them here.” He also explained how he would rule on the merits of the claims if the 4th Circuit overturned his decision. Of the two remaining counts, one would survive Microsoft’s motion for summary judgment while the other would not, he said.

Novell lawyer R. Bruce Holcomb who is a partner at his own firm Adams Holcomb, did not immediately return a call seeking comment, but did tell Main Justice in an interview last week: ”It has been going on for years, somebody has to be the last.”

Tulchin was appointed to lead the charge for Microsoft after he scored a victory defending the company against an antitrust complaint brought by a small software provider in Connecticut federal court around the same time as the government’s case.

That company was asking for hundreds of millions in damages, Tulchin said. After a seven-week trial, the jury returned a verdict of $1 and sided with Microsoft on all the antitrust claims. “That was a great victory,” he said.

Tulchin said that he has visited every state but one — Arkansas — thanks in large part to his work for Microsoft.

“I have to go to Memphis in a month,” he said. “I will walk across the bridge” to Arkansas.

The state of Wisconsin also announced on Tuesday it was collecting $80 million to purchase technology for low-income schools as part of its own 2006 settlement with Microsoft that resolved a related antitrust lawsuit.

Tuesday, March 23rd, 2010

An Ohio state judge on Tuesday denied Google Inc.’s request to hold off on discovery in an antitrust suit filed by a small comparison shopping Web site, myTriggers.com, putting the dispute on track to potentially go to trial next spring.

The lawsuit began last October as a collection action, when Google sought to recoup $335,000 in unpaid bills. MyTriggers filed its own counterclaims, accusing Google of making the company’s ads prohibitively expensive in an effort to starve it of Internet traffic and push it out of business. The company operates several vertical Internet search sites, which lets users shop and compare prices.

According to the complaint, Google raised the minimum bid myTriggers would have to make on its key words between 1,000 and 10,000 percent in March, 2008.

Joseph Bial (Cadwalader)

“We look forward to moving the case along, including initiating discovery immediately and gathering the documents and evidence to prove the claims that are alleged in the complaint against Google,”  myTriggers attorney Joseph Bial, who is special counsel at Cadwalader, Wickersham & Taft LLP, told Main Justice.

Google is expected to file an answer to the claims next month. A Google spokesman declined to comment Tuesday.

The company has argued it sets rates based on the quality of the Web site and considers how many users click on a link to measure how relevant the ad is. Google maintains that if it does not use such rankings, advertisers unrelated to the search terms would often buy up the display space.

In addition to Bial, MyTriggers.com is represented by Cadwalader partners Rick Rule and Jonathan Kanter, both of whom have previously worked for Microsoft.

James Wilson (Vorys, Sater, Seymour and Pease)

Google is represented by Jim Wilson, a partner at the Ohio firm Vorys, Sater, Seymour and Pease LLP. Wilson is a former head of the American Bar Association’s antitrust section.

Similar Lawsuit

Earlier this month, a federal judge in New York dismissed a similar suit against Google filed by Cadwalader on behalf of another vertical search operator, TradeComet.com. In that case, the judge ruled that a contract required the company to bring its claims in California, and not in New York.

Bial said TradeComet has filed notice that it will appeal the ruling to the New York-based 2nd Circuit Court of Appeals.

The two lawsuits, along with separate complaints filed with European regulators, argue that Google is using its muscle in the online search market to restrict competition and shut out potential rivals.

Broader Implications

U.S. regulators appear to be considering similar arguments.

In a little-noticed speech in January at a telecom conference at the University of Colorado, FTC economics bureau deputy director Howard Shelanski used a thinly veiled example to argue that a giant in online search could potentially hurt competition.

“I think we need to think more broadly on keeping an eye on possible anti-competitive discrimination … within the applications market,” Shelanski said.

A key policy question for tech antitrust regulators is how to encourage developers to continue creating new products online. That debate has largely focused on so-called network neutrality. Its proponents have argued that cable and telecom companies that pipe Internet into homes present the key potential bottleneck. If the people that make the software and content rely on Internet service providers to distribute their products to consumers, and those providers have the power to block some content, some have argued the government should prevent those networks from discriminating against any applications.

In his speech, Shelanski said this view might be too narrow to understand how competition in the market for Internet applications works. He used a “hypothetical” search giant as his example.

“If there is a hypothetical search engine, that because of various scale and network economy issues, becomes a must-have application for consumers,” Shelanski said, “then the locus of possible bottleneck discrimination possibly shifts upstream within the applications market itself.”

“So we need to think more broadly than network neutrality is currently conceived,” he said.

His argument essentially boils down to this: If a consumer would rather switch to a different Internet provider than lose access to an application like Google, the provider cannot dump Google off its network. If the provider loses that leverage, the real power lies with Google, which finds itself in a position to decide how to treat smaller applications and content providers.

“It can make marginal decisions about how it lists various further upstream applications or content on the Internet, how it promotes them, whether it promotes them at all,” Shelanski said. “It’s not the downstream network that has bottleneck control, it’s the upstream network.”

Shelanski’s example is essentially the same argument that the smaller search Web sites myTriggers and TradeComet are making in their lawsuits against Google.

Critics of Google’s bid for mobile advertising platform Admob also argue that Google is trying to buy its way into this kind of leverage in the mobile advertising market. The FTC is currently reviewing the deal, and recent reports have suggested the agency will potentially challenge the acquisition.

Google has said the mobile advertising market is dynamic and growing, with a dozen providers.

“If one of these hypothetical upstream applications providers can dump the most populous nation on earth, it can dump you as an applications provider,” Shelanski said, referring to Google’s recent move to pull its search engine out of China.

Observers have downplayed such criticism and said Google doesn’t appear to be on the same path that led tech giants like Microsoft and IBM to tangle with antitrust regulators in the past.

“In contrast to Microsoft, you don’t have a clear package of conduct that is identified as being anticompetitive,” Andrew Gavil, a professor at Howard University’s law school told Main Justice last month.  “For all the discussion on Google, no one can point to the core group of anti-competitive conduct. Individual firms are complaining about practices particular to them, but there is no broad based attack on the market.”

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Tuesday, March 9th, 2010

A New York federal judge dismissed the first of two antitrust lawsuits against Google filed by smaller Internet search engines that accuse the search giant of manipulating its rankings in order to punish rivals.

In a ruling on Friday, Judge Sidney Stein dismissed the complaint brought by TradeComet.com and said that the company should bring its claims in California, not in New York.

“We’re pleased that the court agreed that the Tradecomet case was filed in an improper venue,” said Google spokesman Andrew Pederson.

Tradecomet’s attorneys said the dismissal was only a minor setback.

“It’s a purely procedural ruling, and doesn’t affect the underlying claims in TradeComet’s case,” said the company’s lawyer, Jonathan Kanter, a partner at Cadwalader, Wickersham & Taft, which also represents Microsoft Corp. “We are considering all options at this point, but we intend to press forward.”

The TradeComet lawsuit, filed a year ago, was one of the first attempts by rivals to go after Google on antitrust grounds. Since the TradeComet suit, Microsoft’s lawyers at Cadwalader filed a similar case on behalf of myTriggers.com, a comparison shopping Web site, in Ohio state court. The European Commission also is looking at similar complaints filed by smaller search Web sites ejustice.fr, Foundem, and Microsoft’s Ciao!

TradeComet, which operates a business-to-business search Web site called SourceTool.com, accused Google of making the Web site’s ad rates prohibitively expensive in an effort to shut a potential competitor out of the market. The company also claimed that Google cut deals with various Web sites in order to exclude SourceTool and other potential rivals.

Google urged the judge to dismiss the complaint because TradeComet’s contract with Google required advertisers to bring any claims in a California court near Google’s headquarters.

TradeComet argued that a previous contract applied, but the judge disagreed. The company can either appeal the ruling to the 2nd Circuit Court of Appeals or file the case in California.

The Ohio suit against Google was filed last month in response to an attempt by Google to collect on $335,000 of unpaid bills. MyTriggers accused Google of changing the company’s Web site ratings, known as quality scores, in order to raise the price of its ads. Google has not yet responded to the claims.

In a recent SEC filing, Google said it competed not only with traditional search engines run by Yahoo! Inc. and Microsoft, but also with specialized search Web sites like WedMD, Kayak, Monster.com, Amazon.com, and eBay, social networks like Facebook and Twitter, and mobile applications that let users bypass search engines and access Web sites directly.

Separately, the Federal Trade Commission is examining Google’s purchase of mobile advertising platform AdMob to determine whether it violates antitrust laws. According to a person familiar with the review, Google has turned over the bulk of the documents needed for the review; in industry parlance, Google has certified that is has “substantially complied” with the FTC’s request for documents. A decision is expected in the next month.

Wednesday, March 3rd, 2010

In contrast to Microsoft Corp.’s recent pronouncements, Yahoo! Inc.’s chief executive Carol Bartz told reporters yesterday that she didn’t think her company needed to talk to regulators about Google’s search tactics.

Carol Bartz (Yahoo)

Microsoft and several small search engines have complained to U.S. and European authorities about Google’s search ranking, accusing the search giant of punishing potential rivals by pushing them down in search results.

“I think for the most part the markets work and I’d rather be competitive in the market,” Bartz said at a lunch celebrating Yahoo’s 15th anniversary, according to Reuters.

Yahoo won antitrust approval last month  for its advertising pact with Microsoft, wherein Microsoft’s Bing will handle search for both companies and Yahoo will focus on ad sales. Yahoo previously dropped a similar pact with Google after the Justice Department threatened to block it.

The Federal Trade Commission is currently reviewing another Google deal: it’s proposed purchase of mobile advertising firm AdMob. According to Reuters, Bartz said that Yahoo did not reach out to the FTC to discuss the Google-AdMob deal but “may have been asked” about it by regulators.

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Tuesday, March 2nd, 2010

Microsoft CEO Steve Ballmer touched on his company’s growing antitrust battles with Google at an industry conference in Santa Clara, Calif. Tuesday, telling an audience that regulators need to look at the internet search giant’s behavior. Ballmer also answered questions, posed by Danny Sullivan, who edits the trade publication Search Engine Land, about Microsoft’s involvement in other lawsuits against Google.

Steve Ballmer

Microsoft CEO Steve Ballmer (Microsoft)

In recent months several smaller search engines have accused Google of punishing potential competitors, both through lawsuits in the U.S. and through complaints filed with the European Commission body that investigates antitrust violations. Some of the firms on both sides of the Atlantic have ties to Microsoft.

In responding to the accusations that Microsoft is leading the charge, Ballmer said, “We’re not being silent, we’re expressing some of the issues and frustrations we see.

“Certainly sometimes that is unsolicited, but often times it’s because we’ve been asked,” Ballmer said, according to PCWorld.

“There are a set of issues we think are worth commenting about,” he continued, according to PCWorld. “Ultimately, what’s lawful and unlawful is the purview of regulators.”

The magazine also said that Sullivan asked the audience, which included “a few hundred advertisers, marketers and consultants,” if any of them were “‘frustrated’ with Google’s behavior.’” Only one or two hands went up, according to the magazine.

Read the full story, with interesting thoughts from Ballmer on the possibility of Bing beating Google and why Twitter is better off as an independent company, here.

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Monday, March 1st, 2010

Kudos to Main Justice competition reporter Aruna Viswanatha for her scoop — five days ago — about Microsoft Corp.’s apparent stealth war on Google Inc. on antitrust grounds.

Today, the Wall Street Journal re-packaged our story on its front page, deploying four reporters to do a job that Viswanatha managed to do all by herself. Since the WSJ didn’t give proper credit, we’ll do it ourselves.

Some excerpts from Viswanatha’s Feb. 24 article:

In January, Google filed suit against a comparison shopping site myTriggers.com in Ohio state court, hoping to collect on $335,000 in unpaid bills.

Instead of paying the bill, myTriggers enlisted the help of both Microsoft’s antitrust lawyer, Rick Rule at Cadwalader, Wickersham & Taft, and famed trial lawyer Stanley Chesley, who worked on several of the largest settlements of the past few decades including those for the Lockerbie bombing and Dow Corning’s injury-prone silicone breast implants. [...]

Rule also advises another search engine, TradeComet.com, which filed a similar suit against Google in a New York federal court last year.

Observers have questioned both lawsuits’ ties to Microsoft, but in an interview with Main Justice, Rule denied Microsoft’s interest in either matter.

“Microsoft is not involved,” he said, “our clients are only the named plaintiffs.” Rule declined to explain how his firm was hired in either case, but did say: “It is my practice to answer phone calls, and I’ve been blessed that I haven’t had to go out and elicit clients.”

And from the WSJ today:

Seeking $335,000 in unpaid advertising bills, Google Inc. filed suit against a small Internet site in Ohio in October. The complaint was so routine it was just two sentences long.

Google never expected the response it got. Last month, the small Internet site countered with a 24-page antitrust lawsuit against Google, accusing the search-engine giant of a litany of monopolistic abuses.

But what really caught Google’s attention was the Internet site’s legal counsel: It was Charles “Rick” Rule, long the chief outside counsel on competition issues for Google archrival Microsoft Corp.

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Wednesday, February 24th, 2010

The battle between Google, Inc. and Microsoft Corp. has now kicked into high gear on both sides of the Atlantic.

On Tuesday, Google acknowledged that European antitrust regulators had opened an inquiry into its business practices, at the behest of some Microsoft-connected firms. The announcement of the European probe comes after recent disclosures that German antitrust authorities were investigating similar claims.

In the U.S., Google has not had it any easier. Earlier this month, Google was hit with its second U.S. antitrust lawsuit brought by the same lawyers who have long advised Microsoft.

In January, Google filed suit against a comparison shopping site myTriggers.com in Ohio state court, hoping to collect on $335,000 in unpaid bills.

Instead of paying the bill, myTriggers enlisted the help of both Microsoft’s antitrust lawyer, Rick Rule at Cadwalader, Wickersham & Taft, and famed trial lawyer Stanley Chesley, who worked on several of the largest settlements of the past few decades including those for the Lockerbie bombing and Dow Corning’s injury-prone silicone breast implants.

(Creative Commons)

The company then filed a counterclaim earlier this month accusing the search giant of violating antitrust laws by manipulating search results to punish potential rivals.

“Google employs a variety of exclusionary acts that ensure that rivals cannot divert traffic to their own competing search websites, particularly if the effect of such diversion is substantially to compete against Google’s dominant platform,” myTriggers said in its complaint.

Rule also advises another search engine, TradeComet.com, which filed a similar suit against Google in a New York federal court last year.

Observers have questioned both lawsuits’ ties to Microsoft, but in an interview with Main Justice, Rule denied Microsoft’s interest in either matter.

“Microsoft is not involved,” he said, “our clients are only the named plaintiffs.” Rule declined to explain how his firm was hired in either case, but did say: “It is my practice to answer phone calls, and I’ve been blessed that I haven’t had to go out and elicit clients.”

Microsoft-related entities also appear to be going after Google on the other side of the Atlantic.

In a blog post last night, Google acknowledged that it had received word from the European Commission that it was investigating complaints filed by three companies accusing Google of manipulating its search rankings to punish other search engines and engaging in other anti-competitive conduct.

“This kind of scrutiny goes with the territory when you are a large company,” wrote Google senior competition counsel Julia Holtz,  on the company’s blog.

In her discussion of the investigation, Holtz fingered Microsoft as the unseen hand directing the complainants. One, a U.K.-based shopping search site called Foundem, is part of a Microsoft-backed organization called ICOMP, she said.  Another, a search engine called Ciao!, was bought by Microsoft in 2008. The third company is a French legal search engine, ejustice.fr.

The attacks against Google are reminiscent of similar campaigns against Microsoft over the past two decades.

“It’s not surprising that Google would start to see lawsuits, and it’s ironic that Microsoft is trying to foist upon Google the experience it had,” Andrew Gavil, a professor at Howard University’s law school, said in an interview.

But just how much Google’s experience will mirror Microsoft’s is unclear.

(Microsoft)

“In contrast to Microsoft, you don’t have a clear package of conduct that is identified as being anticompetitive,” Gavil said.  ”For all the discussion on Google, no one can point to the core group of anti-competitive conduct. Individual firms are complaining about practices particular to them, but there is no broad based attack on the market.”

Industry groups that have long been a part of tech antitrust battles also said Google’s conduct did not raise as many concerns as previous investigations.

“We have for over 30 years been involved in fighting the biggest and most abusive monopolies and industry heavyweights who have abused their power,” said Edward Black, president of the Computer and Communications Industry Association, which counts both Google and Microsoft as its members. “We do not see Google’s behavior fit that pattern.”

In its lawsuit last year, TradeComet alleged that Google massaged its Web site ratings, known as quality scores, to make TradeComet’s ads prohibitively expensive once it realized the company posed a potential threat to its business.

Google says a Web site’s quality score is based on the number of users that have clicked on its link in the past, and search advertising analysts have said there usually is a strong correlation between the two.

MyTriggers’ case also accused Google of punishing its site in search rankings, but it goes further. The complaint argued that Google entered into “favorable agreements” with Shopping.com, Shopzilla.com, PriceGrabber.com, Ask.com, Aol.com and others but discriminates against other search websites.

The complaint alleged Google entered into “horizontal agreements” with some rivals to use the same quality score for certain advertisers. It further accused Google of maintaining a secret “whitelist” of firms that are blacklisted by it and the other search sites it has agreements with.

Since March 2008, according to the complaint, myTriggers rates to advertise on Google and other search sites rose between 1,000 percent and 10,000 percent.

The TradeComet complaint included accusations of one similar partnership, between Google and Business.com, but a executive from that Web site told the New York Times last year it had no special relationship with Google.

Whether such agreements violate any laws might have to play out in court. “There is nothing wrong with partnership agreements, there’s no abstract reason that these need to be illegal, but if it was tantamount to an agreement on price,” there could be a problem, said Geoffrey Manne, a former Microsoft lawyer who is now a professor at Lewis & Clark Law School in Portland, Ore.

Rule said he looked forward to his day in court. “The complaint speaks for itself. The whole point of litigation is a plaintiff’s ability to prove its case, and to be awarded damages for the violation,” Rule said. “That’s what this is about.”

Last year, Wired magazine detailed Microsoft’s efforts to tar Google’s reputation.

Monday, February 22nd, 2010

(iStock)

In an interview with the Seattle Times, Microsoft’s top lawyer likened the company’s recent discussions with antitrust regulators in Brussels to scenes from the movie ‘Fatal Attraction.”

“Each time they thought they had reached a settlement,” Microsoft’s general counsel Brad Smith related to his hometown paper, “someone would come back and try to kill the agreement, like psychopath Alex Forrest rising from the bathtub with a knife.”

In December, Microsoft and the European Commission announced a truce in their long-running battle. The Commission would drop its antitrust investigation into the software giant, and Microsoft would offer Windows customers in Europe the option of using browsers that compete with its own Internet Explorer.

The settlement took months to reach, Smith said. His days catered to the Brussels work-day, with 8 a.m. conference calls with the Commission’s attorneys, and 10 p.m. proposals sent to them to review, according to the paper.

The contact added up to 24 video conferences, 34 conference calls and 76 e-mail submissions, the Times reported.

The commission’s lawyer on the deal, Philip Lowe, told the Seattle Times that Smith was “somebody who comes out, looks for a solution, gets things done, remains calm.”

Read the whole profile of Smith’s career, starting with his time at Covington & Burling, here.

Thursday, February 18th, 2010

Microsoft Corp. and Yahoo! Inc. received approval for their advertising pact from both the Justice Department and the European Commission today, the companies announced.

Main Justice reported earlier today the Justice Department had closed its investigation into the deal and was set to approve it. Through a listing provided by the Federal Trade Commission this afternoon, the DOJ also said it signed off on the deal.

The partnership was announced last July, but the details took several more months to work out. Under the terms of the agreement, Microsoft’s Bing will be the search engine for Yahoo sites, and Yahoo will handle search advertising sales for both companies.

The deal has been through several iterations. It began in January 2008, when Microsoft announced a $44.6 billion hostile bid for Yahoo. Yahoo rejected the bid and struck a search partnership with Google, but the Justice Department threatened to block the deal in November 2008 and the companies abandoned it.

The less formal alliance between Microsoft and Yahoo is an attempt to build a viable competitor to the Google search juggernaut.

In its investigation into the Google-Yahoo deal, the Justice Department found that Google had more than 70 percent of the market in both Internet search advertising and in the market for handling searches on other Web sites.

In assessing whether the Microsoft-Yahoo pact raises antitrust concerns, regulators look both at the structure of the whole market, which Google dominates, and also at what competition between the two companies the deal would eliminate.

In clearing the deal without conditions, the Justice Department concluded that the parties don’t compete head-to-head much either for advertisers, or for publishers that use search engines on their own sites.

“Most customers view Google as posing the most significant competitive constraint on both Microsoft and Yahoo!, and the competitive focus of both Microsoft and Yahoo! is predominately on Google and not on each other,” the Justice Department said in a statement announcing its decision.

According to a person familiar with the investigation, the Justice Department’s Antitrust Division had largely signed off on the matter several months ago, before Microsoft and Yahoo filed their formal paperwork on the deal. The notice released today by the FTC signals that Justice officials approved the pact without opening an extended review after the companies sought formal approval.

updated at 6:35 p.m.

Thursday, February 18th, 2010

According to a person familiar with the matter, the Justice Department has closed its investigation into an advertising pact between Microsoft Corp. and Yahoo! Inc. and will approve the deal shortly.

The European Union approved the deal, without conditions, earlier today.

The partnership was announced last July, but the details took several more months to work out. Under the terms of the agreement, Microsoft’s Bing will be the search engine for Yahoo sites.

The deal has been through several iterations. It began in January 2008, when Microsoft announced a $44.6 billion hostile bid for Yahoo. Yahoo rejected the bid and struck a search partnership with Google, but the Justice Department threatened to block the deal in November 2008 and the companies abandoned it.

The less formal alliance between Microsoft and Yahoo is an attempt to build a viable competitor to the Google search juggernaut.

In its investigation into the Google-Yahoo deal, the Justice Department found that Google had more than 70% of the market in both Internet search advertising and in the market for handling searches on other web sites.

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