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Larry Lessig was on Colbert last night and it was a copyright smackdown. Stephen started the interview off demanding what Lessig means by “hybrid economy” in the title of his new book, Remix: Making Art and Commerce Thrive in the Hybrid Economy.

The phrase refers to an economy like Flickr: “a free-sharing economy and Flickr makes money on top of that,” Larry said. In other words, it’s like Colbert’s Green Screen Challenges, Stephen noted: “They do all the work and I get all the ad revenue.”

SC: What I don’t like about it is you say our copyright laws are turning our kids into criminals because they’re keeping kids from doing all the “remixing” they want. Isn’t that like saying arson laws are turning our kids into pyromaniacs? They’re breaking the law! You can’t just throw the law out the window.

LL: Totally failed war. Is that familiar to you? Totally failed war. Totally failed war.

SC: You’re saying we need a surge. A copyright surge.

LL: We tried the surge. For 10 years, we’ve fought this war. Artists have gotten no more money, businesses have not gotten more profit and our kids have been turned into criminals. 70 percent of our kids are sharing files on peer-to-peer networks. 70 percent.

Now the real ridiculousness of this is that the one institution that should be dealing with this cannot recognize – not one of them can recognize – the insanity …

SC: We’ve got real problems here. You want Congress to be thinking about Danger Mouse making the Gray Album.

LL: They have passed 24 laws to deal with this so-called problem.

SC: Have they worked?

LL: No, of course not!

SC: Then why are you worried? You got what you want and they got the illusion of action!

LL: I want a Congress that focuses on real issues, not these idiot issues that are not really causing any problems at all.

SC: Let’s get to the nut of this. What’s the difference between “remixing” and theft? If I walk out of Brooks Brothers with a handful of ties, I can’t just say I was remixing the patterns!

LL: The difference is when you’re remixing you’re creating something new.

SC: OK, so I could take this book right here and just change “Remix” to “MeMix” and change it to “Stephen Colbert”, and add some value and — I do a pretty good Snoopy. OK, my book, my book. You cool with that?

LL: OK, put this on Amazon you think you’ll get more or less?

SC: Much more.

LL: Bravo!

SC: Well, I’m benefitting from it so that’s OK. But nobody should take my work and do anything with it that is not approved. [To camera] Never, ever, ever, ever take anything of mine and remix it. For instance, I’ll be very angry and possibly litigious if anyone out there takes this interview right here and remix it with some great dance beat and then it starts showing up in clubs across America.

LL: Actually, we’re joint copyright owners. I’m totally OK with that.

SC: I do not give permission.

LL: I totally give permission.

SC: Too bad, too bad! You got a lawsuit on your hands, buddy.

LL: Copyright is joint. We’re in this together, Stephen.

SC: I want a divorce. I’m remixing this relationship. This is socialism. This is artistic socialism!

LL: Really?

SC: Have I exhausted you? You look tired.

LL: I am tired because this has nothing to do with copyright. You don’t get that, do you?

SC: I get it. I just don’t care.

LL: But that’s just the point. It’s the insanity of a system produced by our Congress where this is the regulation. And you ought to be concerned about that system, changing that system.

SC: Well, the system works for me. So welcome to the Mouth of Madness.

UPDATE