The Economics of Intellectual Property Protection for Software: The Proper Role for Copyright

This paper provides an economic analysis of the proper role of copyright protection for computer software. We begin by identifying key economic conditions in the software market. Besides its public good characteristics, software generates network externalities through increased sales of programs and through production of complementary hardware and software. Assignment of intellectual property rights should be limited to take full advantage of the efficiencies available in this market. First, we demonstrate that copyright protection of de facto standards should not be granted to the original developer of a software package. Next, we argue that software interface specifications also should not be copyrightable since it would permit extension of market power to complementary software and to later improvements. Finally, we favor reverse engineering for the purpose of achieving interoperability since it enables firms to efficiently design compatible programs and to guard against unwarranted abuse of copyright protection. We discuss recent case law consistent with these principles, including the "merger doctrine" that denies protection whenever a product is the (nearly) unique expression of uncopyrightable idea.