When is a comic book worth $3,600,000 more than its face value? Answer: When Walt Disney wants to buy it.

Today, Disney announced it had agreed to acquire Marvel Entertainment, Inc. for $4 billion. Marvel, which only a few years ago was mired in bankruptcy, owns the rights to a range of intellectual property including Spider-Man, The Fantastic Four, Iron Man, the X-Men and the Hulk. It is surely a valuable company. But $4 billion? According to the company's 2008 financial statements, the company ended the year with only $400 million in assets.

Why would Disney pay ten times that amount?

The answer is that financial accounting standards fail to assign any value to intangible information assets like copyrights and trademarks, which in this case represents the vast majority of the company's true worth. You will look in vain on Marvel's balance sheet to find anything assigned to the on-going value of over 5,000 trademarked characters that the company has in its vaults and which in recent years have made largely successful leaps into motion pictures. As Marvel CEO Ike Perlmutter said today, Marvel is "the most profitable print publishing business in the world."

Not exactly. The profits appear to be assigned to the print business, but only because the accounting industry steadfastly refuses to figure out how to price the information assets and assign value to them.

Why not? The answer, apparently, is that doing so is too hard. To add insult to information injury, once the acquisition is complete Disney will be able to report the $3.6 billion excess as an asset, "excess paid for Marvel," which is to say, all the IP. And even though that property is and will continue to appreciate in value, for tax purposes Disney will be allowed to depreciate it!

But plenty of physical assets are hard to value, too, and that hasn't stopped the industry from coming up with formula for doing so. The real reason seems to be that accountants just don't want to--or, more to the point, don't want to bring their profession into the 21st century. As the economy continues to move toward one in which most value is derived from information assets, that failing is making financial statements increasingly useless to investors as a source of information.

We know that information assets can be valued. Someone at Disney figured out a way, for one thing.

In Chapter 9 of "The Laws of Disruption," I write about the ridiculous increases in statutory fines for copyright violations that the entertainment world has forced into law over the last few decades, even as the costs of production, marketing and distribution of content decrease with the advent of electronic channels. In the one file-sharing lawsuit against an individual user that actually went to trial, the RIAA won a judgment of $220,000 against Jame Thomas-Rasset, who was found to have shared 24 songs on a file-sharing network. (The other defendants, including teenagers and grandparents, all settled out of court.)

The jury instructions were fatally flawed, however, and the judge granted Thomas-Rasset a new trial. This time, as Declan McCullagh of CNET reported a few weeks ago, the retrial resulted in a new calculation of "damages." The second time around, the jury awarded the RIAA almost $2 million for the same 24 songs! (The rather eclectic playlist, which Thomas-Rasset argued was not hers, is here.)

Thomas-Rasset moved again for a new trial, arguing that the fine is unconstitutionally high. Not so, said the Obama Justice Department, which filed a brief in support of the RIAA. Since the subsequent reposting of online files and the effect such infringement has on the legal market for copyrighted works is, in the DoJ's word, "unknowable," Congress sensibly developed default or "statutory" damages that the victims of consumers like Thomas-Rasset can use to calculate their losses and deter future miscreants. $2 million for 24 songs, on this view, is rational. The Bush DoJ made the same argument.

The Obama administration promised change, but the Justice Department, at least when it comes to copyright infringement, clearly didn't get the message. The media industries are still pursuing their suicidal jihad against customers, aided and abetted by the elected representatives they've bought and paid for.

Individual lawsuits have been a PR nightmare for the recording and film industries, which have stopped bringing them. And collecting anything close to $2 million from the defendant, as everyone involved knows, isn't going to happen. But for those who expected a new attitude toward copyright reform, here's at least one data point to suggest otherwise.

File under: Someday they'll be sorry they said that in print.

In the early days of e-commerce, when many of my audiences were deeply in the stage of the grief process known as "denial," executives in a variety of industries tried to wish away the revolutionary (though ultimately liberating) potential of the Internet to re-create stable, musty, inefficient old supply chains. I wish I had written down more of the odd deflections I used to hear, but they included classics such as "Our customers prefer to interact with us using traditional channels," (though no one who said this had ever asked the customers).

One of my favorites, usually a non-sequitur, was that "No one will ever buy a car on the Internet," meaning that e-commerce might be fine for things like software and books, but since the Internet was a digital channel, it had nothing to say to producers of physical goods. That is, since cars couldn't be delivered over the Internet, somehow no part of the transaction could take place there. This was a strange prediction, always made by people who didn't sell cars in the first place.

As we know, these days many if not the majority of car buyers in the U.S. do some or all of their research, negotiating, and ordering on-line. That is, people do buy cars on the Internet, and it turns out to be a very good way of buying them at that. Ten years later, I was pleased to see (see "GM, eBay to Test Online Car Sales," Wall Street Journal, Aug. 11, 2009) that one side-effect of the meltdown of the U.S. auto industry is a greater willingness to embrace the disruptive. In a new joint venture between eBay (which has long been in the car business) and GM, California shoppers can explore the available inventory of dealer vehicles and use eBay to negotiate a price.

Of course the people who said this would never happen have all moved on, and probably wouldn't admit they were ever so naive. Still, we know.

A fascinating article last week by CNET's Brooke Crothers on efforts by IBM to use carbon DNA molecules to extend Moore's Law. Readers of my books will remember that Moore's Law is the prediction by Intel founder Gordon Moore that improvements in semiconductor manufacturing technology translate to computer chips (the basic building blocks of computing applications) getting smaller, faster and cheaper all the time.

As the "smaller" part of the equation moves into the realm of nanotechnology, some researchers have worried that Moore's Law may reach its limit, largely because the cost of new fabrication facilities could escalate dramatically. IBM is experimenting with using the carbon molecules as a kind of scaffolding on the substrate, giving a template for carbon nanotubes to "self-assemble" on the surface. The attractiveness of this approach is that traditional semiconductor technologies could still be used.

I stand by my prediction--based largely on promises from those who know much better than I do--that Moore's Law will continue to drive the information economy at least for the duration of my working life, and maybe even a few generations after that.

I made a lot of people in the Linux community unhappy when I wrote in CIO Insight ( "Battle over Linux: When a Win May Not Be a Win," Sept., 2007 ) that the decision by federal judge Dale Kimball to grant partial summary judgment to Novell on SCO's claims of ownership of key UNIX copyrights hardly put the matter to rest. "While a favorable ruling from the trial judge certainly weighs in the negotiations," I wrote in 2007, "it is no more definitive than the first estimate you might get for a car repair or a kitchen remodel."

Last week, right on schedule in legal terms, the Tenth Circuit Court of Appeals reversed Kimball's ruling (see Stephen Shankland's column on CNET. The full decision can be found here ). The Court of Appeals, briefly, rejected Novell's claim that it never transferred UNIX copyrights to SCO and left for trial a determination of whether that transfer did or did not occur. The ownership of the UNIX copyrights is important, because SCO's claim that Linux developers are infringing on UNIX relies on SCO's being the owner of the code that Linux is claimed to infringe.

I gave no opinion on whether SCO should win, and I still don't. How this litigation will resolve or even how it should be resolved is impossible to predict even now, several years into the mess and with SCO still trying to come out of bankruptcy protection, which they entered shortly after Kimball's 2007 ruling. (The bankruptcy judge denied SCO's request a few weeks ago to allow it so sell its UNIX assets--which is to say, to sell the lawsuit, the only real asset the company has left.) Final resolution will turn in equal parts on the interpretations of some poorly-drafted contracts and on SCO's ability to find new funding sources to pursue its remaining claims.

I'm more interested in what this case says about the difficulty lay readers, bloggers and even journalists have in trying to understand the twists and turns of legal procedure. With notable exceptions including NPR's Nina Totenberg and ABC's Jan Crawford-Greenberg (a law school classmate), most journalists covering legal matters have no legal training, and regularly misunderstand the import of any given court decision. When Kimball ruled for Novell in 2007, for example, The Wall Street Journal declared it "a boon to the 'open source' software movement and to Linux." Now, boon has turned to bust, as it often does in complex, well-funded lawsuits between former business partners.

The litigation and its outcome are of crucial importance to open-source developers and users, and I'm not suggesting that non-lawyers stay out of the discussion, even about legal merits and legal interpretation. Just understand that no matter how strongly-worded a judge's opinion, or how unfortunate a loss may be to innocent third parties, legal process follows its own, often counter-intuitive rules.

I wrote extensively in Chapter 8 of The Laws of Disruption about the madness of prosecuting Lori Drew, a Missouri woman, for her participation in a cruel MySpace hoax that contributed to the suicide of a 13 year-old girl named Megan Meier. Drew's behavior aside, the decision by federal prosecutors to charge her under the Computer Fraud and Abuse Act was a cynical effort to appease an angry mob of bloggers and news media who wanted to see blood spilled. The judge, who for dubious reasons of his own allowed the case to go to the jury, signalled a few months ago that he was going to grant a defense motion to overturn the verdict, which he has has now done.

As the old legal adage goes, hard cases make bad law. Had the jury's verdict stood, federal prosecutors would have found themselves with the awesome power to treat any violation of the Terms of Service of any private website as a federal crime, limited only by the wise application of prosecutorial discretion, which the Drew case itself amply demonstrated to be a virtue best honored in the breach.

(Not to get into the details of messy facts, but most of the nasty behavior was perpetrated not by Drew but by an 18 year-old part-time employee of her home-based business, who received immunity for cooperating with the prosecution. Drew hadn't even been the one who clicked on the "I Agree" for the MySpace Terms of Service, as if anyone believes that doing so signals understanding let alone ability to comply. The jury foreperson, after the case, made clear that their chief objection to Drew was her failure to adequately parent her own 13 year-old daughter, the other mastermind behind the hoax. If only that were a crime...)

Drew's ultimate acquittal was never in serious doubt. But in the meantime, recognizing the lack of any real law she or her teenage co-conspirators had broken, the Missouri legislature weighed in with an idiotic anti-"cyberbulling" statute known of course as "Megan's Law," which is now being tested, as reported last week by CNET's Lance Whitney. The law criminalizes the use of the phone or Internet by someone 21 years old or over to cause emotional distress to someone 17 or under. Garden-variety bullying by one's peers and, one presumes, emotional distress inflicted by parents are still perfectly legal. In the test case, a 40 year-old woman is being charged for posting a fake personal ad on behalf of a teenage girl. The defendant faces up to four years in prison.

It doesn't take a genius or a crystal ball to see that Megan's Law will soon be declared unconstitutional on First Amendment grounds. Which the Missouri legislature undoubtedly knew. But passing stupid laws that appease angry mobs is easy, especially when hypocritical legislators can all rely on "activist" judges to overturn them.