Martin Crutsinger writes that the US today started a world wide effort to expand enforcement of copyright link here. "U.S. Trade Representative Susan Schwab said the administration planned to join with other countries to negotiate an Anti-Counterfeiting Trade Agreement that would toughen efforts to confront copyright piracy." The move is initially directed at Canada, the 27-nation European Union, Japan, South Korea, Mexico, New Zealand and Switzerland. Schwab is quoted, "Today launches our joint efforts to confront counterfeiters and pirates across the global marketplace."

Her statement raises a lot of questions. Where do most of the violations occur? I suspect in poor developing countries which are not immediately the target here. But if we rope in the developed countries, copyright enforcement is likely to be part of more free trade agreements, extending the power of the new effort.

Schwab said the new agreement, which the administration hopes to negotiate quickly, would set a higher benchmark for enforcement that countries will be able to join on a voluntary basis voluntary if they want access to US markets. If the wording has to be negotiated among that large a group of countries, one wonders how quickly it can be done.

Schwab is also quoted, "Global counterfeiting and piracy steal billions of dollars from workers, artists and entrepreneurs each year and jeopardize the health and safety of citizens across the world." One may ask who benefits from copyright other than the owner of the copyright, typically a big company. Think Disney and Mickey Mouse, created by the long dead Walt.

So here we go with another effort to expand the reach of our state created monopolies.

Compulsory arbitration is incorporated into many service contracts such as those that cover credit cards, wireless phones, internet access, and stock brokerages. Unless you agree, you don't get the service. When all the providers have the same provision, the consumer has no alternative.

For many, arbitration seems quite fair until they look at actual experience which shows just how corrupt it is. A recent study of cases in California used an "8-month analysis of 34,000 cases decided by the National Arbitration Forum over a four year period and found link here:

* 188 of the cases were brought before NAF by consumers, 99.6% by corporations

* On one arbitrator's busiest day, assuming an eight-hour workday, he decided a case once every seven minutes. 100% of those were in favor of the business, awarding 100% of the request money.

* 28 NAF arbitrators handled about 9 out of 10 of the cases, ruling for business 95% of the time.

* 120 other arbitrators handled 10% of the cases, ruling for businesses 86% of the time."

Since third-party arbitrators are usually part of the deal and avoid the courts, most people think that money can be saved and that they are fair because they are third-party professionals. Not so according to ex-arbitrator West Virginia judge Richard Neely who has written a short graphic description of the wrongs involved link here. "For example, arbitration has been an imaginative way for monopoly business to circumvent statutory and common law protections. Relying on the Federal Arbitration Act, [federal] courts have allowed consumer arbitration clauses to undermine the deterrent effect of class action remedies." Interestingly, he has a cure, but not on the federal level--he wants the state courts to apply new rules, requiring full disclosure of arbitrators possible conflicts of interest and voiding arbitration clauses in any consumer contract that are illegal or unconscionable.

It seems to me that the real issue here is the support the arbitration system gives to established monopoly. Business has found another way to avoid competition and it has all the appearance of fairness but not the reality. Is the remedy a requirement to go to court rather than to arbitration?

John had several posts here and here about the high price of textbooks. He had urged me to write a response to an op-ed by Michael Granof arguing that textbooks are so expensive because of the secondhand market, and that the solution is to kill that market. I was to slow off the mark and never got around to it, but the entire thing came back to mind today when I got a copy of something called "ACUMEN" A Faculty Newsletter from something called the "Follett Higher Education Group" about current legislative proposals concerning textbook prices. It contains such gems as "When fully integrated into a course by the instructor, the value a student receives from a textbook shold always outweigh costs," (i.e. who cares about price?) and some stuff about jawboning with publishers to set lower prices.

To take these one at a time: no doubt the high cost of new textbooks reflects the active second hand market - but of course the overall prices paid by students is lower on account of cheaper used versions. It is pretty well established in economics that producers of durable goods hate competing with themselves - it is equally well established that from a welfare perspective there is nothing inefficient that results from the presence of second hand markets. That leaves the conclusion that either Granof is ignorant of basic economics, or a stooge of publishers who would surely love to get rid of the secondhand market. The "Follet" whatever urges inaction - which despite the vacuity of their arguments is probably the right action; it is hard to see how local governments regulating the textbook market is going to improve things.

That is not to say that the textbook market is perfect by any stretch of the imagination. There is an enormous agency problem since the faculty who assign the books don't pay for them, so don't care much about whether they assign cheap or expensive books. On top of this is the lucrative copyright monopoly for individual books (you knew that was coming, right?). This encourages the proliferation of nearly identical books to grab a share of the lucrative monopoly. Michele and I have written about that problem here. On top of which we have the proliferation of new editions in an effort to keep the second hand market down. The solution is as simple as it is unlikely to occur: abolish the copyright monopoly, force the producers of textbooks to compete like everyone else, and ... well the agency problem won't matter so much as students can just buy one book and copy it among themselves; we may actually get good textbooks, as authors of new textbooks won't have to start from scratch, and who knows, maybe - like the fashion industry - we will see real innovation.

Scientific journals serve to sell stuff they get for free to libraries at a substantial price. At one time this made sense, since paper copies of journals played an important role in communicating scientific information. Since the advent of the internet, these journals are dinosaurs, much like the music industry. Like the music industry, they are not fading quietly into the good night. Here, via James Dow, is an amusing example:

If you click here, you will find a website offering you a chance to buy a book review. The six page book review can be downloaded in exchange for $42 plus tax. If you click here you can buy the 320 page book: for $17.19. (Or, still for less than the price of the book review, they'll throw in Daron Acemoglu's latest book.)

Astounding...but not at all surprising.

Patent litigation probably couldn't get more high stakes than a Delaware lawsuit currently unfolding against Intel Corp. Transmeta Corp. has accused the Silicon Valley chip giant of infringing on 10 patents in its hugely successful Pentium products.

Yet rather than battle it out in court, Intel is trying to put the brakes on the proceedings. The company is making use of a relatively new government process, known as inter partes re-examination, that is becoming an increasingly popular way for accused infringers to get patents invalidated. It's far less costly than litigation, and even if the patent is upheld, a stall in court proceedings increases the likelihood of a settlement, patent attorneys say.

Since the inter partes procedure started in 1999, the yearly number of these requests has increased dramatically, and U.S. Patent and Trademark Office statistics show the process is likely to result in the invalidation of patents at issue. In 2006 there were 70 requests, and six months into this year, there have already been 90.

And of the inter partes re-exams that have been completed, the patent claims were invalidated 88 percent of the time, according to the PTO.

Read more about it here.

Michelle Slatalla has a piece on saving money when buying college textbooks link here. She recognizes their high cost for college students ($700-1000 per year) and suggests going to the internet. She notes that there are lots of sites but up to now, there has been no single way to find the best deal. That has changed with the creation of Bookfind.com that checks most suppliers. She also suggests getting an early start as the market in used books has gotten more competitive.

All this is good advice so long as texts are so expensive, but small potatoes when the alternative is considered. Students and parents need to start putting pressure on schools to put the texts on the web, as David so strongly advocates. That is the solution that makes texts cheap and easy to update at the will of the author and in response to evolving definitions of generally accepted truth/wisdom.

The NYTimes reports today that America's 47th largest law firm, Nixon Peabody, is making a fool of itself (the Times didn't of course say that out loud) link here. N-P celebrated its banner year with a banquet and a show in which the in-house singers parodied a well known song, with lyrics patting the firm on the back. It got to YouTube and N-P got it taken down as a violation of its copyright. Ain't copyright wonderful.

But then someone else put up a short version, arguing it is okay as protected by “Fair Use”. Now, however, it seems to have disappeared even as I write.

It is interesting that the firm initially decided to let the complete YouTube piece run–and then changed its mind. Speaks well for lawyerly judgment. Now I'm beginning to wonder about YouTube.

As I have increased my understanding of IP law and pondered the success of IP owners in expanding their monopoly interests, I have come increasingly to wonder if a more effective way of fighting back can be found. Advocacy is obviously important in increasing public understanding and I think that it has had some success, as for example, in getting the Patent Office to revise its procedures for vetting patent applications link here. Another track has now been suggested by a suit against the RIAA whose misbehavior has prompted a victim to seek to get her suit granted class-action status, potentially multiplying the cost for the offender link here. Still another avenue emerged when I encountered the story of a youngster who taped a few seconds of a feature film, was prosecuted, and got the movie chain boycotted link here.

Anybody else have more ideas of how to fight back?

As a neophyte in IP, I am repeatedly struck by the absurd level to which protection has been taken. Matt Yglesias has a short but striking example involving Senator Schumer's proposed copyright for fashion design and refers us to this website link here. Its authors point out, "To understand exactly how the Schumer bill would affect fashion innovation, it helps to review one basic point about copyright law: it does not simply prohibit "exact" copies. Rather, copyright law makes unlawful any use of a copyrighted work that results in a new work that is 'substantially similar' to the old."

Yglesias then goes on to compare the vitality of the cookbook industry based on the fact that recipes cannot be copyrighted, even while the cookbook can be link here. Without that, he suggests, "the bulk of the market would already be locked-down by older cookbooks, and to publish anything new you'd have to be prepared to lawyer up and fight off a thousand lawsuits alleging that your recipes are too derivative."

Via Mark Thoma, Paul Krugman's New York Times op ed for today observes that despite a considerable lead over Japan and Europe in broadband connectivity in the late '90's and early '00's, the U.S. now lags both Europe and Japan considerably in both percentage of population with broadband internet connections, and in bandwidth for those with broadband connections.

This is a classical example of the disincentive of monopolies to innovate. Various decisions by the Bush administration and its Congressional allies over the past 6 years -- particularly the decisions not to impose common carrier status on local telephone and cable TV companies with respect to broadband services -- left control over virtually all local U.S. broadband markets in the hands at most two service providers: the local telephonce company or the local cable company. The result has been predictable. Americans now pay more for internet connectivity and receive lower quality service than do Japanese or European consumers.

Krugman concludes his column by saying:

It's too early to say how much harm the broadband lag will do to the U.S. economy as a whole. But it's interesting to learn that health care isn't the only area in which the French, who can take a pragmatic approach because they aren't prisoners of free-market ideology, simply do things better.

I would add that economists need to work a little harder to make the public understand that economics itself has nothing to say about the benefits of free markets. The benefits economists associate with market allocations are those brought about by competitive markets, and this is precisely what is lacking in American broadband today.