I almost didn't read this article before I realized it might become an innovation in textbook publishing that would benefit the student user link here link here. Macmillan, the publisher, has a program that allows the course teacher to modify the textbook to change the order in which material is presented and to alter the content, using software called DynamicBooks. "Students will be able to buy the e-books at dynamicbooks.com, in college bookstores and through CourseSmart, a joint venture among five textbook publishers that sells electronic textbooks. The DynamicBooks editions which can be reached online or downloaded can be read on laptops and the iPhone from Apple." Prices will be considerably less--in one case, a book whose print edition listed for $134.29 will sell for $48.76 in the DynamicBooks version.

One feature that is particularly appealing is that vintage texts can be easily updated, which would be especially important for science where new discoveries are frequent. Whether copyrighted authors will be quite so happy with this innovation is less clear. Since the texts can be downloaded, a second hand market might develop, although I would expect publishers to try to prevent it.

But if it takes off, it will benefit the student with lower prices--which have been a scandal. And it could benefit publishers by lowering their costs and get around the monopoly power of the patented ebook readers. This could also have differential impact on small publishers, if the software to update material is readily available. Authors may even end up liking it.

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.

Steve Lohr writes in the New York Times about a highly secretive company, Intellectual Ventures, that claims it is trying to create a market for patented inventions link here. It has been in existence for ten years, already is heavily capitalized at $5 billion and controls 30,000 patents, and seems to be dominated by other patent-owning companies--"strategic investors"--including Microsoft, Verizon, Intel, Nokia and Sony. It is big into lobbying and has a large staff of engineers and engineers as part of a staff of 650.

Nathan Myhrvold, former CTO of Microsoft, runs it and has written a long piece in the Harvard Business Review, most of which is behind a paywall link here. His complaint about patents in the current market place is that big companies rip off the inventors by not paying them and suing them into submission. He lobbies against large company backed legislation which would make it more difficult for inventors to collect damages.

It doesn't sound to me like Myhrvold has much interest in the poor inventors. Rather, he just seems to want their patents so he can make piles of money suing manufacturers. But then, what are all those manufacturers involved as strategic investors? A clever device to take a cut from both inventors and users?

Just asking ....

The steady drip of details about the financial crisis continues. PBS News Hour has Paul Solman interviewing an ex-bank regulator, William Black who now teaches at the University of Missouri link here. Points Black makes that are worth thinking about:

*Following the S & L collapse, more than 1000 executive insiders were convicted and jailed for fraud. No one has been charged in the current mess, much less convicted or jailed.

*The financial system began to crumble in 2007, when the FBI was already aware that mortgage fraud was rampant and was perpetrated because it was in the interest of the banks to make more and more loans.

*The banks got out of having to mark their bad loans to market by pressuring the Congress to tell the Financial Accounting Standards Board to change the rules or it would be put out of business. Currently, the do not have to recognize losses until the loans are taken off the bank's books.

*Fitch, the accounting firm, did a study of mortgage loans which concluded that the vast bulk of the mortgages were fraudulent, and was easily detected.

*The 19 largest banks are insolvent if their assets were marked to market. They can get away with it and pay enormous salaries and bonuses for now--but that will end with the next financial crisis.

I propose to submit the following text to USTR tomorrow night. If you have any further comments, that is the deadline for me to incorporate them.

Should you wish to join in support of this statement, I would suggest you file your own as a statement referring to mine. I would greatly appreciate your doing so. Follow the procedure suggested by Public Knowledge link here

RE: 2010 Special 301 Review Docket Number USTR-2010-0003

Jennifer Choe Groves Senior Director for Intellectual Property and Innovation and Chair of the Special 301 Committee Office of the United States Trade Representative 600 17th Street NW Washington, DC 20508 Filed electronically via Regulations.gov

Dear Ms. Groves:

I write, basing my comments on copyright, by referring to Section 8 of Article 1 of the Constitution which states: "To promote the Progress of Science and useful Arts, by securing for limited times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

Copyright has been repeatedly extended with doubtful justification. If the author sells the rights to future incomes, the present value of each year's future income from copyright declines rapidly, approaching zero. The buyer of those rights gets little inducement to increase his payment for them. Thus, beyond ten years, copyright is not an inducement to create and is no longer consistent with our Constitution.

Moreover, the existence of copyright makes the creation of newly inspired derivative works unattractive because of the risk of being sued, even if unsuccessful, given the costs of litigation.

Finally, legal suits over copyright are a huge cost to the economy, as is the continual cost of lobbying for more favorable legislation by the large holders of copyrights. This has only gotten worse in recent years, as the potential gains from resort to law increase. This is particularly true in cases where the law is unsettled, as so often happens when courts or legislation make small changes in the law and its interpretation.

The lawsuits are made increasingly expensive by pressure to get courts to change the interpretation of the law and by seeking trial in districts where the courts have been found increasingly responsive to plaintiffs.

This analysis has been derived independently by a group of 17 eminent economists voiced in an amicus curiae brief to the Supreme Court in Eldred v Ashcroft (http://cyber.law.harvard.edu/openlaw/eldredvashcroft/supct/amici/economists.pdf)

This brings me to the Anti-Counterfeiting Trade Agreement (ACTA). It is an anti-democratic outrage, not to have published the terms of the draft agreement and suggests to the skeptical that the USTR is engaged in a shady deal which will not stand the light of public disclosure and discussion. One must assume that we are trying to browbeat our trading partners into accepting terms that they are resisting rather than examining the pluses and minuses of such an agreement for each of the concerned parties.

Ultimately, it is a good thing if our laws and those of our trading partners are consistent. It is not a good thing however, to extend the term of copyright beyond, say, ten years, either to get consistency or to get a deal which is contrary to the broad interests of the American public or the clear meaning of the Constitution.

Sincerely,

John T Bennett

For real insight on how DC works, read this piece on Billy Tauzin link here. The ex-Congressman from Louisiana has been the best known lobbyist for the drug industry. He now seems to have been fired because he gave too many profits away to Obama in the cap on drug spending in the health reform bill. The companies are now wobbling in their promised support for the bill.

The longer this goes on and the larger the loss in potential company profits, the less likely any reform seems. Consider now that none of this would be happening if drugs weren't patented.

Readers are asked to submit suggestions on this draft for submission to USTR next Tuesday:

I base my comments on copyright, by referring to Section 8 of Article 1 of the Constitution which states: "To promote the Progress of Science and useful Arts, by securing for limited times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

Copyright has been repeatedly extended with doubtful justification. If the author sells the rights to future incomes, the present value of each year's future income from copyright declines rapidly, approaching zero. The buyer of those rights gets little inducement to increase his payment for them. Thus, beyond ten years, copyright is not an inducement to create.

Moreover, the existence of copyright makes the creation of newly inspired derivative works unattractive because of the risk of being sued, successfully or not, given the costs of litigation.

Finally, legal suits over copyright are a huge cost to the economy, as is the continual cost of lobbying for more favorable legislation by the large holders of copyrights. This has only gotten worse in recent years, as the potential gains from resort to law increases. This is particularly true in cases where the law is unsettled, as so often happens when courts or legislation make small changes in the law and its interpretation.

The lawsuits are made increasingly expensive by pressure to get courts to change the interpretation of the law and by seeking trial in districts where the courts have been found increasingly responsive to plaintiffs.

This brings me to the Anti-Counterfeiting Trade Agreement (ACTA). It is an anti-democratic outrage, not to have published the terms of the draft agreement and suggests to me that the USTR is engaged in a shady deal which will not stand the light of public disclosure and discussion. I expect better of the Obama administration, for which I voted, a choice I now question. I must assume that we are trying to browbeat our trading partners into accepting terms that they are resisting rather than examining the pluses and minuses of such an agreement.

Auction rate securities are again in the news, and they are still garbage, but some smell worse than others link here. Some actually have modest value but new ones are not being sold. What went wrong?

The first problem was that no one bothered to look at the underlying securities. When prospectuses were sought long after the market crashed, they were hard to find. But why bother, as the derivatives were repriced and could be rolled over in monthly auctions. They came with high ratings from S & P or Moody's or Fitch and they were apparently completely liquid but paid better than other short term securities.

Other problems were, according the New York Times:

"¶They were based on the assumption, endorsed by the bond rating agencies, that insurance regulators were requiring life insurers to retain too much capital.

¶Therefore, investors could take on a large part of the risk of the insurance with complete safety. That would be only the "excess" part, as calculated by the insurance company

¶The securities were sold as virtually risk-free cash equivalents, enabling the investor to get out, at par, once a month. Supposedly sophisticated investors sank more than $30 billion into them.

¶The securities were explained in complex prospectuses that almost nobody even obtained, let alone read.

¶They were guaranteed by bond insurers, like Ambac, further persuading people there was nothing to worry about."

Read the article for all the ugly details on this colossal fraud, arising from no one paying attention and no one taking responsibility. It implicitly makes the case for tough regulation. But the news doesn't hold out great hope we will get it.

Slashdot informs up that USTR will receive comments from anyone link here.

The most important feature of this is that we are invited to comment about the secret Anti-Counterfeiting Trade Agreement. That is the most important feature of this "opportunity" to comment--that we should comment on something whose content has been kept secret from the public.

That may not get us very far but there are substantial substantive objections that all readers of this blog should support and that belong on the public record.

Let's weigh in.

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