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?

Every once in a while or perhaps more often, the web comes up with something that is really kind of wonderful. Today we have the story of the Garfield Randomizer which takes panels from old Garfield comics and randomly plays them (h/t to Andrew Sullivan link here). Originally, the author posted the results but was told to take them down as they violated somebody's copyright link here. So he now lets you do it yourself by creating a program that randomizes the public collection of panels link here.

Fair use initially may in fact have been violated, depending on what a presiding judge thinks is copyrighted--the art, the characters, or the storyline. But doing it yourself seems to avoid the charge. In any case, what is not in question is that it has drawn a lot of favorable attention to Garfield comics. Google got more than 4,000 hits so far. As one blogger wrote, "We mock because we love. (At least, I do.)" You can't buy publicity like that. And copyright takes another hit, as it should.

PatentlyO reports that the Supreme Court has agreed to hear a case involving the "first sale doctrine of exhaustion", i.e. can a patent holder charge purchasers of a component that has already been licensed to an upstream producer link here. The case involves Korea's LG company which has patents that it licensed to Intel and is now trying to collect as well from purchasers of Intel products embodying the patent. This is an important case that has already drawn the attention of the Associated Press link here and Techdirt link here.

Jeffrey H. Birnbaum writes on the mushrooming of lobbying in response to the proposed law reforming patents link here. He reports that on one side are the tech companies in the self-described Coalition for Patent Fairness (including Intel, Cisco Systems, Apple, Oracle, Microsoft and the maker of the BlackBerry, as well as Verizon and Time Warner) and on the other are the drug companies. The Coalition supports the provision to "limit damages for patent infringements to the actual component in question and not the entire product" while the drug companies want big damages as under the current system in order to make it too expensive to be sued when the case is weak or they don't have the financial resources.

Birnbaum reports that the Coalition feels it is about to win. He fails to address how this affects the rest of the proposed changes in the law not covered in the story. They are more important overall than this provision but may get lost in the wheeling and dealing or sacrificed in the final draft link here. Too bad. This is a truly awful way to make law that affects the welfare of every American consumer in what they pay for purchases and what is available in the market place, i.e.innovation.

Julian Sanchez has a really interesting discussion of fashion copyrights link here. The Council of Fashion Designers of America "is pushing the Design Piracy Prohibition Act, which would create a special, limited three-year copyright in fashion designs, with penalties of $250,000 or $5 per copy for violations. The bill has been under consideration in the House since last year, and in August it was joined by a Senate version introduced by New York Democrat Chuck Schumer and eight cosponsors."

Sanchez goes on to say that the stakes for the high-end industry seem to have risen, as the time between first showing and the appearance of cheap knock-offs has shortened to the point that they appear in markets simultaneously. Up-scale mass marketers like Kohl and Target are involved. High-end tastes are beginning to spread throughout the market. As a result, competition is intensifying, creating the pressure for copyright.

However, having said that, it is unclear whether the high end retailers and designers are in fact damaged and thus whether there is any justification for these copyrights.

Moreover, the great problem will be to define what it is that is copyrighted and what then is a violation. How can you sue when the offense isn't clear, even though you can find a lawyer who will try.

In other words, when all is said and done, it sounds pretty dumb.

Nate Anderson reports that Microsoft has patented a new version of digital watermarks for music in a system that is undetectable and survives "the most common file manipulations" to a standard that meets the RIAA test. The watermark basically tells the viewer who originated the download so that DRM is no longer needed to protect copyrighted material, a modest improvement for buyers of music. If he passed it on, he violated the copyright and can be prosecuted link here.

As I read this story, I wondered whether watermarks could be used for other purposes involving restricted material. This suggest that it has great potential for the violation of privacy. For example, does it allow Big Brother to learn what you are watching or doing on the internet, or video or e-mail? That is the gist of David Lazarus' piece in the LATimes recounting how cable and phone companies which are sending out new privacy terms that would allow them to do just about whatever they wanted with their records of whom you write to or what you watch link here.

He reports that you can opt out of this invasion of privacy, but the means varies from company to company and you may have to do it in writing--it is up to the individual to act. Earlier this month, a federal judge shot down a section of the USA Patriot Act that allowed the government warrantless access to telecom companies' databases, but there is nothing in the privacy policy that would limit the company from giving the information to the government if it decided to, as the phone companies did earlier before the Patriot Act.

Lazarus seems to think that the information will be sold to companies to adjust their advertising, change their programing, or for other commercial purposes. He seems to have missed the possibility that the government might be a recipient.

Incidentally, Lazarus reports the data retention policies are generally far longer than the three-year rule followed by Google after a lot of protest.

Patent troll NTP is back at it again with a new suit against AT&T, Sprint Nextel, T-Mobile, and Verizon Wireless over the same patents that brought a $612.5 million settlement from BlackBerry maker Research In Motion link here and here. The USPTO has already ruled preliminarily that the patents are invalid but NTP has appealed, so the case goes on and NTP can even expand its suits if it can afford more lawyers. If, as in the case of RIM, this threatens a company's continued existence, it will pay up, even if it is quite sure that it will ultimately win its case. It is another example of justice delayed being justice denied and an indictment of a legal system which grants questionable patents and then allows their use to extort.

Business models change over time, as recent years' experience has proven. A new one may hopefully be coming to medical publishing. Reed Elsevier, a publisher of medical and scientific journals, is now allowing doctors access to some of its journal articles on the web, paid for by advertising link here. This is good news for the doctors, since they have been forced to pay high subscription prices for the journals, even when the research was based on government grants.

Competition hopefully will force other journal publishers to go the same route, driving down the cost of access. Guess who will benefit (ultimately the consumer?)

We don't often write about trademarks, but here is a case of some modest interest. An online video joint-venture fiddled around for some time and finally came up with the name, Hulu link here and here. It is a strange choice, as it conveys nothing to me. Then an online custom book publishing company called Lulu sued for trademark infringement because the name was too similar. Does that strike you as confusing? Still, strange things happen with IP. One conjecture is the companies will pursue the case for all the media attention it draws. In any case, another lawyers' delight.

"Google Files Patent Application for Mobile Payments" strikes me as bizarre link here. The first "mobile payment" was a piece of paper saying to your bank "Pay to the order of" and allowed you to write in the name of the recipient and give it to a messenger or send it through the mail (and hopefully still does, unless Google's patent stops that too, when and if it gets it). Does Western Union or whoever have a patent on a wire transfer?

Can patent applications get any sillier? Don't answer.