Competitive markets work not because producers capture the full social value of their output—they don’t—but because they permit producers to make enough money to cover their costs, including a reasonable return on fixed-cost investment. Even real property doesn’t give property owners the right to control social value. Various uses of property create uncompensated positive externalities, and we don’t see that as a problem or a reason people won’t efficiently invest in their property.

The goal of eliminating free riding is ill-suited to the unique characteristics of intellectual property. Treating intellectual property as “just like” real property is a mistake. We are better off with the traditional utilitarian explanation for intellectual property, because it at least attempts to strike a balance between control by inventors and creators and the baseline norm of competition.

—Professor Mark Lemley, Stanford, in the Texas Law Review, 2005