Who Owns the Charles River Bridge? Intellectual Property and Competition in the Software Industry
Author(s): Robert P. Merges
Abstract: Long, long ago, in an economy far away, decision makers responsible for maintaining the footings of commerce faced a troubling question: should entrenched property rights, manifested in a publicly chartered bridge franchise, be permitted to stand in the way of a new and better bridge, to compete directly with the established one? The sanctity of public charters collided with the imperative of technological progress. In a narrow legal sense, the Charles River Bridge case rejected the notion that a state-granted corporate charter conferred a perpetual exclusive franchise. But in a wider sense, the case delivered a sweeping endorsement of Jacksonian ideology: competition wins out — over established franchises, over old money, over political influence.
Some sectors of the digital economy are experiencing the powerful “winner takes all” influence of markets for “network goods.” For the “winning” firms in these markets, intellectual property law is necessary to preserve dominance. It is the legal construct that permits private ownership of the technological standards that underlie network markets. Microsoft’s copyright in its Windows operating system is a good example.
This essay inquires into the necessity of an updated Charles River Bridge principle for the digital era. It explores whether and when the modern state-granted exclusive franchise of intellectual property must yield to demands for competition and innovation. It also speculates about the need for an expansive doctrine borrowed from trademark law — “technological genericide,” which truncates a property right when the asset it covers becomes a technological standard essential to a significant slice of commerce. The essay recognizes that intellectual property is not quite the same as a state charter, and also that “takings” law is a far more binding restraint now than in Jacksonian times. It thus concludes with some thoughts about the potential for compensating intellectual property rights owners whose previously protected works have “gone generic.”
Keywords: intellectual property, competition