The article states:
Josh Marwell, President, Sales for HarperCollins, told LJ that the 26 circulation limit was arrived at after considering a number of factors, including the average lifespan of a print book, and wear and tear on circulating copies.This is an incredibly terrible idea. I can't imagine what libraries will do when faced with having to repurchase their ebooks after they've been circulated only 26 times.
UPDATE: Here's another link to a story in the NYT about HC, in it you find out that Macmillan and Simon & Schuster don't even make their ebook titles available to libraries.