One of the more interesting concepts in all of this is that while the internet presents the possibility of a 'world' without government influence, any civil society, be it real or virtual, must agree to a set of protocols which defines how they interact with each other. Without some method of enforcing that protocol, however, all you're really doing is just shaking someone's hand and hoping that they're not crossing their fingers behind their back at the same time. You cannot have law without someone to enforce it and removing the enforcement removes the compulsion to follow the law. So you need some governing body in much the same way as small western towns needed a Sheriff to uphold the law.
In the example of IP, there is no penalty for stealing it on an unregulated net, but then again, there is also no penalty for so restricting its use that doing so won't have consequences. But it doesn't stop there, as any behavior that the producer finds offensive, from content you produce to criticisms you voice, may well see you banned from access to the software, anything else the producer wishes to restrict access to, and anything else produced by other producers who are aligned with that producer. It's kind of like dating, in that way: treat a woman wrong, and you can be certain that your eligible dating pool will be significantly reduced when she starts talking to her friends, who talk to their friends, etc.
While things haven't gotten quite that extreme (yet), there is a move by Microsoft towards shifting all their software online and restricting access to it to yearly license payers. While this might not have been a brilliant move a few years ago as the delays caused by working from remote software would have been intolerable, real-time online applications have improved dramatically since then and the idea of even running something as complex as Photoshop or even Maya is not outside of the realm of possibility today. It would take an incredible amount of time and money to set up, but the advantage to Microsoft or Adobe would be immense. No more 'First Sale' legal battles. No more 'cracked software.' The question is, will they charge the consumer a reasonable yearly fee or will they, in their position as ultimate gatekeeper, keep the same exorbitant prices? And who would stop them if they chose the latter? I'm reminded of the Cattle Barons of the old west here.
In the end, Lessig's research assistant, Harold Reeves has a point beyond even that given in Code 2.0, in that it is not only Microsoft's responsibility to build a fence and lock its doors to protect its material, but also to ensure that in the process of securing their IP that they don't end up cutting themselves off from the vast majority of their consumers like the crazy old cat lady who lives in the large house down the road, but is so paranoid that she hasn't left the house or talked to anyone in 20 years. Real World Law may have little meaning in the non-geographically distributed boundaries of the internet, but social law and the ostracism of those who refuse to 'play nice' still does as does commercial law and the fact that competition will inevitably produce a cheaper and more friendly product to compete with. So in the end, the big companies will shy away from over-control if for no other reason than cyberspace is just too large to compete with, so you don't really need some legal authority telling everyone what to do.
On the other hand, the whole point of this book is that we cannot reliably predict what the future holds for us technologically or socially. Even though Reeves might be right today, tomorrow might require an entirely different way of viewing the same problem. A bunch of extremely smart man in the 1700's couldn't possibly foresee anything even as wondrous as a telegraph line and how this would affect their new government 200 years down the road, no-one could have forseen the changes brought about by the internet 20 years ago and who would have guessed even 10 years ago that we'd all be carrying that same internet around in handheld phones more powerful than the entire Apollo space program. No one knows what technology is coming down the pike, how it will empower corporations or individuals, and how it will change the network structures and protocols of the future.
So I think Lessig is right. Even if most of our reality becomes virtual, even if our societal structure centers more around our virtual selves than our physical address, there will still need to be some form of regulatory entity to reinforce protocols and protect the ability of culture to spread without undo restriction. The question is: whose going to be the Sheriff, what authority will he wield and how is he going to enforce it? It might take an entirely new form of government to find out...