Many aspects of intellectual property policy are based on neo-classical economic assumptions about the nature of information and the process of innovation. In particular the argument for stronger protection is based on the assumption that markets are highly competitive and that information is non-excludable from free-riding imitators. This article challenges this traditional approach, arguing that information economics should be used to analyse problems of intellectual properly policy. Recognition of a tacit-codified knowledge distinction, the embodiment of knowledge in information technology products, and the market effects of network externalities, will greatly assist policy-makers.