Interesting discussion on the struggle to maintain monopolies over classified information in the digital age here:

http://www.newyorker.com/online/blogs/newsdesk/2010/08/chasing-wikileaks.html

The New York Times has a good short article on the growth of patent trolls (which it terms as non practicing entities or NPEs) link here. The story hangs on the suit against EBay for $3.8 billion by XPRT Ventures which goes unmentioned thereafter.

It then describes the basic patent troll model: "The basic idea is that an investment firm buys a pre-existing patent for, say, $2 million. It then sues perhaps a dozen companies that use technology potentially overlapping the patent. Each firm that fights may end up paying $500,000 or more to defend itself and could also face penalties. The alternative is to settle for, say, $1 million or so. If just three firms pay up to avoid a battle, the patent owner makes big money."

The EBay example is not particularly apt here since it is for so much money that EBay is likely to fight it. But the story provides the excuse for the article which goes on to cite the rise in the number of such suits, 500 last year or six times the number in 2001.

The article then switches to a "new" business response to the patent troll threat, the counter-troll that acquires patents to sue or cross license other firms by which its member companies might be sued for infringement. Thus for a generous annual fee, it seems to offer some insurance against loss.

Its exemplar, roughly two year old RPX, has an extensive website link here, a puff piece, and Google adds little more. However, the Times piece reminded me of ten-year-old Intellectual Ventures about which we wrote link here and which now has a Wiki write-up link here . I checked quickly for officer names of the two but found no overlap. I do note, however, that IV has some big corporate subscribers including Microsoft, Verizon (also "insured" by IV), and Intel.

Thus the "counter-troll" model seems to have proved so attractive that it has spawned a rival. Here is another reminder of how patents enrich the big oligopoly companies and exploit the consumer while providing no benefit to the inventor in whose name patents are issued.

CMR International, a firm that tracks that performance of the pharmaceuticals sector, released a rather depressing report on research and development productivity last week. The report will set you back $10,000, but highlights have been made public:

- A total of 26 new molecular entities (NMEs) were launched onto the global market in 2009, an increase on 2008's 20-year low of 21. But the number of launches last year was still only a little more than half the peak level in 1997.

- The number of experimental drug projects terminated at the final Phase III stage of development had doubled in the period 2007-2009 compared with 2004-2006.

- Total global R&D expenditure dropped by 0.3 percent in 2009, after a 6.6 percent rise in 2008 and rapid growth seen in earlier years.

- Pharma is having a tough time selling its new drugs: New drugs launched within the last five years accounted for less than 7 percent of industry sales in 2009, down from 8 percent in 2008, highlighting the big problems that companies are having in trying to reinvigorate their portfolios.

The Economist has two articles this week of interest to IP critics. The first addresses detecting what the article calls piracy link here. It cites a new way to do the deed using a scan of all the frames in a video to tell whether the "copy" is really a copy. It hyperventilates," The technology is said to have an average detection rate of 96% and a low rate of false alarms: a mere five per million, according to tests by the ISO. It can detect if a video is pirated from clips as short as two seconds. And an ordinary PC can be used with the system to scour through 1,000 hours of video in a second."

The problem with that is whether the portion "detected" as a copy is really piracy. The article totally ignores whether fair use would allow the "copy."

More important would be the temptation to redefine piracy as any "copy" which included more than some arbitrary percentage of the original. Under that doctrine, one may foresee the final end of fair use by defining it so narrowly that none would be legal. That could end up, for example, outlawing all satirical take-offs and other indisputably legitimate uses of original material.

The second Economist article discusses open access to the internet and net neutrality link here. It has an interesting account of the long history of the legal doctrine of common carrier status.

It concludes, "America's regulatory approach has left much of the country with a cable monopoly for truly fast broadband access. The single largest reason given for failing to purchase broadband access in America is price, and many non-adopters are stymied by hardware fees, a lack of billing transparency and the extra cost of bundled services that providers often add to internet access. The FCC's current plan to ask last-mile providers to subsidise rural service, and to ensure equal treatment of packets of information is a mild intervention by global standards. America's modern-day common carriers should count themselves lucky."

Both articles are definitely worth a read.

We don't often think of the courts as playing an active role in the evolution of intellectual property law, perhaps because we tend to accept the assertion by judges that they follow precedent. Writing in the Washington Post, Steven Pearlstein cites four cases where the D. C. Circuit Court has gone out of its way to assert that the regulators have exceeded their Congressionally granted authority. link here

The key graph: "Many of the D.C. Circuit judges have long since stopped pretending to defer to the factual determinations and policy judgments of duly appointed regulators, as the law requires. Deference has now given way to skepticism, hostility and contempt that can easily be read between the lines of overly legalistic opinions that routinely ignore the plain language of statute and the clear intent of Congress. It's gotten so bad that top regulators told me privately this week that they routinely put aside consideration of needed new initiatives because they assume they will be foiled by the hostile appeals court."

In the first case, the DC court went after the Federal Communications Commission for exceeding its authority in trying to regulate Comcast violations of net neutrality. In the second case, Pearlstein charges the Court with interfering in the development of generic drugs, thus extending the drug patents of the large pharmacy companies. Thirdly, he knocks the Federal Trade Commission for going beyond the pale in trying to reign in " a tech company for enhancing its monopoly in a certain chip-making process by deceiving an industry standard-setting body. According to [Judge] Williams, the fact that its deceit 'merely' enabled a monopolist to charge higher prices doesn't constitute illegal anti-competitive behavior." Huh? Finally, the court stopped the Securities and Exchange Commission when it tried to require that 75 percent of the directors of a mutual fund be independent of the company chosen to manage the fund's investments, in order to protect small investors.

I can't find the quote, but Supreme Court Justice Oliver Wendell Holmes Jr. argued that justices first decide how they want a case to come out and then pick the arguments to reach that end. With that in mind, it is much easier for us commoners to understand how judges reach their judgments and that being human, they are not averse to expanding their own powers.

Studio publicity execs were unimpressed by the move. "It's a terribly analog way of thinking in a digital world," said one studio PR chief. "It's just a totally unrealistic response, since if we've learned anything about the flow of information these days, it's that it gets out in all sorts of uncontrollable ways. The minute we have a meeting or make a decision, it's up on someone's blog. We're not the announcer anymore. We're the responder to what someone's already written. All we can do most of the time is damage control."

Read about what he is referring to here:

http://www.laobserved.com/archive/2010/03/variety_threatens_studios.php

Two articles in the New York Times today point up the need for financial sector reform and the problems doing it.

The first, by Andrew Ross Sorkin, observes that the regulators must have been aware of Lehman's illegal financial deals to hide its financial weakness, since the company made no effort to hide them even as the feds made no mention of the questionable moves in its reporting link here. It is no great leap of logic to conclude that the regulators had no interest in disclosing what amounts to fraud on Lehman's part in hiding its truly precarious financial condition from its creditors and stockholders. One need not exert too much effort to recall that the regulators at the time were appointees of the Bush administration--and then to also observe that many of the same guardians are still on duty.

The second article, by Sewell Chan, reviews the financial reform bill and provides lots of detail about its new provisions, ostensibly to overcome the shortcomings revealed by recent experience link here. However, the drafts remain a confusing array of agencies and responsibilities among them such that there is plenty of room for regulatory arbitrage and little certainty that provisions will be appreciably strengthened in practice. None of this addresses the question of restructuring the banking system so that the big banks are radically reduced in size and the threat that as a group they are "too big to save" in a catastrophe like the one we have just experienced.

So the opportunities for extreme leverage remain, as do the temptations of excessive risk for hugely overpaid bank executives. The probability? Disaster.

The Washington Post has just given front page coverage to Murray Hill, a PR firm in Maryland that wants to run for public office link here. The article has a tongue-in-cheek character but it also has a serious objective--to make clear the absurdity of the Supreme Court determination in the Citizens United case that corporations have rights normally reserved to citizens, a position that is in fundamental conflict with common sense and precedent.

In quotations, the article says, "After the Supreme Court declared that corporations have the same rights as individuals when it comes to funding political campaigns, the self-described progressive firm took what it considers the next logical step: declaring for office." "It's an opportunity to see this court opinion play out to its logical conclusion.", "...the firm appears to be the first "corporate person" to run for office and is promising a spirited campaign that 'puts people second, or even third.'" "I guess with a corporation, should someone go on vacation, like many of our current members of Congress, you'd have fill-ins to take their place."

The tongue may be in cheek but the edge to its humor also comes through and the Supreme Court looks pretty bad. After President Obama spoke critically of the Court's finding and Chief Justice Roberts fired back, the Court seems to be getting the kind of treatment it deserves.

I wrote earlier about the Supreme Court ruling in Citizens United v FEC and expressed doubt that it would produce much additional corporate money in politics because there wasn't much additional air time free to buy. I watched Bill Moyers Journal last night and wish to revise my conclusion. Moyers has a long review of money in elections of state court justices link here. That is where the decision is likely to cut first. And the program reviews three judicial elections, one each in Pennsylvania, Louisiana, and Texas where corporate contributions bought the result Big Business wanted.

It also has a 1999 interview with Justices Kennedy and Breyer opposing corporate money in such elections. Since Kennedy was the crucial deciding vote in favor of the Citizens United decision, their words drip with irony. They argue that corporate money will destroy public faith in the fairness of our legal system. In fact, most people when asked, find it very strange that the courts have given corporations so many of the same rights as a real person.

Moyers also makes the point that the Supremes did not have to decide Citizens United on grounds so broad that it greatly expanded the first amendment free speech rights of corporations from more than a hundred years of settled law. And the decision was only reached after very unusually reconsidering the case from an earlier hearing. All the justices currently on the court testified at their Senatorial appointment hearings that they were firm believers and adherents of precedent. Hypocrisy of a high order.

So where will public faith in the courts lie now? Not very high, I am afraid.