Thus to say that IP is important to small companies doing business with larger ones makes sense for industries with risky and expensive R&D, especially where development and commercialization/manufacturing can be modularized. In such cases, small firms need IP to license to gain access to the capabilities and resources of larger companies.

The economic structure of capital and risk intensive innovation is what Jim Delong writes about in his summer article. Such lessons apply less to ecommerce companies that leverage distributional and informal input mechanisms with almost zero development costs, and little inbound licensing.

It would not be quite right to generalize YouTube as an economic lesson for the non-importance of IP as much as an example of a company on one side of the spectrum where IP is less valuable. Thus painting YouTube as a universal form of innovation without IP is not right or wrong, but incomplete.

Another reason not to prop up YouTube too much is that it has mediocre profit if any, and only recently signed deals with content owners. Until now, YouTube has been an invention, with acquisition by Google YouTube can become an innovation with great market or technological impact. It’s the strategic future market that drove Google’s paying price past $1B. The majority of the price tag, however, probably comes from YouTube’s user base and name recognition. We should also consider what Google knows based on talks with YouTube that the rest of us do not- perhaps some resolution of copyright issues.