Over at The Long Tail, Chris Anderson has a great post outlining the various models a business can employ to make money even when they find that their main product is being distributed for free.

The list comes from a 2004 paper by Hal Varian, Google’s chief economist. The paper starts with a great overview of the history of copyright, which is well worth the read.

One of the arguments advanced by the paper is that in the 18th and 19th centuries, while the US was still a “developing nation”, the American courts refused to recognize international copyrights. When, and only when, the US economy advanced to the point where it was in their best interests to see their copyrights respected overseas did they start to respect the copyrights of others.

The U.S. Copyright Act of 1790 was modeled on the Statute of Queen Anne, and offered a 14-year monopoly to American authors, along with a 14-year renewal. Note carefully the emphasis on “American.” Foreign authors’ works were not protected by the American law. In contrast, many other advanced countries such as Denmark, Prussia, England, France, and Belgium had laws respecting the rights of foreign authors. By 1850, only the US, Russia and the Ottoman Empire refused to recognize international copyright.
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The US was a developing country in the nineteenth century, and it was hardly surprising that it found it attractive to free ride on the intellectual products of other, more developed countries, such as Britain.

Considered in this light, copyright and patent infringement in China and the developing nations of the world today is a lot harder to condemn. 

Some Links:

Kevin Kelly gives a great rundown of ways to compete with free business models.

Here’s Anderson’s seminal piece in Wired, on why “free” is the way of the future.

And here’s a piece I wrote (for the now sadly defunct TQ Magazine) on why content providers stand as much to gain from piracy as they stand to lose.