1. Start up an instance of Confluence that uses wiki markup (e.g. version 3.5)
2. Add a link containing the ^ character to a page, e.g. http://example.com&version=v^1.0 - you'll need to insert this link through the link macro or via wiki markup (cannot simply paste the link in the rich text view)
3. Upgrade the instance of Confluence to a version using storage format (i.e. 4.0+)
You'll find that the link you added is now rendered as plain text (and not recognised to be a link)
It's unclear whether this is actually a bug. As noted by Paul C, the old RFC explicitly disallows the ^ symbol, and the updated RFC doesn't include the character in either the reserved or unreserved sets of characters.
However, we should consider the impact of this behaviour for customers who are upgrading large instances that contain many links of this kind