Patents, liege lords, copyrights, and droit du seigneur

The issue of intellectual property takes many guises: music and movie piracy/anti-piracy, generic drugs, the cost of AIDs medicine in poor countries, students lugging 50-pound backpacks full of obsolete textbooks, high tech patent wars and allegations of "patent trolls". As the economy is driven more and more by knowledge (and less by labor or hardware), these issues will become more crucial, widespread, and bitter.

No enduring solution will be found under anything resembling the current economy. Knowledge is as different from the material goods our economic rules are designed for as modern industry is different from medieval peasant farming. Maybe more different.
The difference is so obvious that it can be overlooked, so familiar that it can be forgotten: If I give you my car, I no longer have it. If I give you a copy of a DVD or CD, we both have it. Materials goods are inherently scarce and economics is about doling out that scarcity. Knowledge is inherently abundant and wants to spread and develop.
In our material-goods economy, we have two ways to treat knowledge. Both fail. One way is to use patents and copyrights to make knowledge as scarce, hard to reproduce, and expensive as material goods. This worked to some degree as long as knowledge was a small, peripheral part of the economy. It also helped that the most economically important knowledge was held within large organizations and largely kept outside of the marketplace.
But now that knowledge is the central force of the economy, crippling the spread and combination of knowledge means slowing down the economy. And as the Internet shifts economic activity from monolithic organizations (think IBM or the Soviet Union) into complex varying networks (think of the supply chains from China to Walmart's or Dell), it becomes necessary to share valued knowledge across organizations that are not permanently united.

When we don't treat knowledge like coal or iron or wood, we treat it like air. We just take what we want for free. This works great for the spread and combination of knowledge but it cripples the creation of knowledge. Musicians won't create music for free. Nor will biochemical researchers drag themselves to work. If you're not getting paid anyway, might as well go surf.

How can we both facilitate the spread and combination of knowledge and reward those who create it? Sorry, I don't know. Once I look the problem square in the eyes from an overall point of view, not from the view of one particular interested party, such as a patent holder or someone who wants to buy music without being ripped off by the music industry, I can not even imagine a workable solution.
Actually, I don't think it is even possible to know. Yet. We (that means the entire first world and probably the third world too) will have to evolve an entirely new level of social organization, as different from us now as we are from Europe in the Middle Ages. And it is not possible to see that kind of thing before it comes. The most one can do is peer slightly over the horizon.