David G. Post
American Lawyer, "Plugging In," June 1998
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An ancient Iranian parable tells of the shepherd boy who is called before the King and told to tend the King's sheep herd, in return for which he will receive a solid gold piece. The boy demurs, and, pointing to a nearby chessboard, asks instead that the King pay him a single (and almost valueless) shekel for his troubles on the first day, 2 shekels the next, 4 the next, and so on until the 64 squares on the chessboard are filled. The King readily agrees -- and, of course, recognizes his error as he turns over the entire wealth of the Kingdom long before reaching the end of the board.

The moral of the story is that systems that grow exponentially become very interesting very quickly. I thought of this story recently when I read in the Commerce Department's "The Emerging Digital Economy," (April 1998, available at http://www.ecommerce.gov/emerging.htm) that the total volume of traffic on the Internet continues to double every 100 days. Think about this for a moment; whereas it took us from the dawn of history until today to reach the point where 500 or so terrabytes of data travel over the Internet backbone each month, the same volume of data will be added to the system before the October 1998 American Lawyer hits the streets.
 

This helps set the stakes in the "browser wars," the competition now taking place in the marketplace -- and, increasingly, in federal courtrooms, legislative assemblies, and the press -- over who will control the interface between our personal computers and the Internet in the year 2000 and beyond. Whoever controls this market -- whoever manages to get even a small piece of this market -- is going to come away very happy.
 

Nothing wrong with that, except that there are reasons to think the competition will not be a fair fight. The problem, of course, is that Microsoft Corporation begins with a substantial head start -- its dominant position in the market for computer operating systems. Will Microsoft find a way to leverage its dominant market position in the operating system market into a similarly dominant position in the browser market?
 

This is, according to the Department of Justice and a bevy of critics, precisely what Microsoft is up to. Justice has charged that Microsoft, by requiring resellers of computer equipment to install its browser (Internet Explorer) with every installed copy of its new operating system (Windows '98), is violating the terms of a 1995 Consent Decree, which prohibited just this kind of illegal tying arrangement by forbidding Microsoft to "enter into any license agreement [for its operating system] . . . conditioned upon the licensing of any other product." (italics added)
 

The Consent Decree, however, also provided that this provision "shall not be construed to prohibit Microsoft from developing integrated products" -- and therein lies the rub. Microsoft asserts that it is not selling an operating system and "another product," but rather a new kind of operating system, one that incorporates and integrates browser functions into the operating system itself. District Judge Thomas Jackson didn't buy it; in granting the government a preliminary injunction against Microsoft's bundling practices (US v. Microsoft, 980 F. Supp. 537, now on appeal in the DC Circuit), he held that Windows and Internet Explorer are indeed "separate products," because of the "separate marketing practices and independent consumer demand that exists for the two products." Microsoft, he wrote, may not condition the licensing of its operating system on the agreement to license another product "that enjoys substantial independent consumer demand."
 

It seems like a straightforward enough application of traditional antitrust principles; Windows and Internet Explorer certainly are "separate products" at the moment, in the sense that separate markets for the two products currently exist. But note how this analysis necessarily freezes the market in place: because there are separate markets for operating systems and browsers today, they must remain separate products into the indefinite future, for we will deem any attempt to merge the two markets together to be unlawful. That's an awfully strange approach to take under the best of circumstances; in a technology marketplace in which markets and products are in a state of constant flux, it seems downright bizarre. What makes us so sure that the current definition of the market is a particularly good one? How do we know that consumers wouldn't be substantially better off with a truly integrated operating system/browser? As a consumer myself, I surely would like to see what the engineers can come up with here; would an "integrated browser" allow me, say, to search my hard disk using one of the powerful search engines that I use for searching the Internet? Would such integration allow me to organize the information out on the Internet in my own idiosyncratic fashion, into folders and directories of my own choosing? And what about an operating system that had other integrated functions that now exist as separate applications (word processing, or voice recognition, or graphics); do we really want to say that they are forever outside the pale? Developments like these just might fundamentally alter our relationships with our computers and this ocean of information now available at the click of a mouse -- because they do not now exist, do we really want to say that they should not exist in the future?
 

This is precisely the sort of thing that has (and should have) many people nervous about the inability of the law to keep up with a dynamic marketplace; if there is a better example of the dangers of the lag between fast-moving and forward-looking technological change, and slow-moving and backward-looking legal reasoning, I am not aware of it. One doesn't have to be a Microsoft partisan to be a little uncomfortable about having the Justice Department, or the courts; defining the proper scope of this market. And one doesn't have to be a free market ideologue to suggest that the best outcome here (if we could somehow reach it) would be one in which consumers had a choice among a variety of operating systems, different "flavors" of Windows from among which to choose, each, perhaps, with different now-separate functions integrated within them, because only the marketplace itself can determine whether (and by how much) a truly integrated browser-operating system would represent an improvement over current systems. The problem, then, is how, given Microsoft's current monopoly position, we can get there from here?
 

If antitrust law cannot get us there, perhaps there are other tools in our legal arsenal that can. If we are looking for a place to find some outside-the-box answers to this problem, intellectual property law is clearly a good place to search. After all, Microsoft's control of the operating system market, and the inability of other suppliers to enter this market with competing products, derive, ultimately, from the copyright protection that we have granted to the Windows code. Without copyright, there's no monopolization problem because without copyright there's no monopoly.
 

This might be a good time to ask ourselves: why do we grant copyright protection to works like Windows in the first place? The answer, of course, is that without such protection, the Bill Gates' of the world would have no incentive to create, or to continue to invest in, valuable works of authorship like Windows in the first place. Copyright protection creates markets for intangible intellectual creations, markets that would not exist and could not form if anyone could freely appropriate the labor of others simply by reproducing the works in question.
 

This is undoubtedly a substantial social benefit, and is the foundation for all of our intellectual property regimes. But it hardly explains why we continue to grant copyright protection to works like Windows '95 after they have achieved dominant market positions. Would the incentives for would-be creators be materially lessened under a rule that says that copyright cannot be asserted once a market-dominating position has been obtained? One can hardly imagine the programmers leaving work early because they're told that at some point in the future, if and when their product attains complete penetration in the market and they have (presumably) reaped a substantial reward, their copyright protection may be taken away.
 

And while the social benefits of protection are less substantial for market-dominating works, the social costs of protecting such works increase. Unlike the more "typical" artistic creations for which copyright was designed, protecting utilitarian works like computer programs can be inordinately costly, because with such works functional compatibility with pre-existing works may be an absolute requirement for other innovative products to make their way to market (as is the case with any browser one might try to distribute in a world dominated by Windows machines); granting copyright protection to such works gives the copyright owner (Microsoft, in this case) the ability to prevent others from making such compatible products. Copyright protection for these works thus operates not to bring markets into existence but to prevent them from existing. Intellectual property law is always seeking a balance between these two opposed forces, and I would suggest the usual balance (and therefore the usual rationale for protection) may be completely out of whack in the instant case, and that it may be time to re-think the application of traditional copyright protection in this context.
 

Might we then consider a rule that would strip copyright protection from otherwise copyrightable works (like Windows '95) if and when they come to dominate these functionally-defined markets? To be sure, we would be pushing the envelope of copyright doctrine -- though I take some comfort in the fact that two recent courts of appeal decisions (Sega v. Accolade, 977 F.2d 1510 (CA9 1993) and Lotus v. Borland 49 F.3d 807 (CA1 1995)) have flirted with this idea in varying degrees. Such a rule is hardly a quick fix for the problem at hand, for many difficult questions undoubtedly remain; how would "market domination" be defined in this context? Would such a rule constitute a "taking" of private property requiring compensation from the public fisc? All are reasonable counterpoints. But unlike the antitrust approach now being followed, the copyright strategy holds out the promise of allowing competition to define the market itself, allowing competitors to bring a vast complement of resources to bear on designing new versions of this operating system, a broad spectrum of new products with new integrated functionality integrated. Microsoft's own new version of the operating system (Windows '98), with its integrated browser functions, may well prevail in that competition, and if so we can all sleep a little easier knowing that it did so on the merits, and not merely because consumers were forced to take it.