GPL antitrust suit dismissed

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Lee Hollaar

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Dec 14, 2005, 12:14:46 PM12/14/05
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There has been some mention in this newsgroup in the past about the
antitrust suit in Indiana regarding the GPL (Daniel Wallace v. Free
Software Foundation, Inc.).

On November 28, 2005, Judge Tinder of the United States District
Court for the Southern District of Indiana dismissed the suit,
because Wallace did not show a recognized antitrust injury.

Wallace has twenty days from the entry of the order to file an
amended complaint alleging an antitrust injury, or the dismissal
will be with prejudice. (That means it can't be filed again.)

But the judge rejected a number of the arguments of the Free Software
Foundation, including that the nature of the GPL providing free
access to software programs, subject to some limitations, necessarily
aids competition.

The decision is at:
http://www.internetcases.com/library/cases/2005-11-28_wallace_v_fsf.pdf

Alexander Terekhov

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Dec 14, 2005, 12:28:24 PM12/14/05
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Lee Hollaar wrote:
[...]
> http://www.internetcases.com/library/cases/2005-11-28_wallace_v_fsf.pdf

http://messages.yahoo.com/bbs?action=m&board=1600684464&tid=cald&mid=324675&sid=1600684464

----
Pacer shows Wallace filed an amended complaint Nov 30 at 10:48 AM.

COMPLAINT
The Defendant FREE SOFTWARE FOUNDATION INC. has conspired with
commercial distributors such as INTERNATIONAL BUSINESS MACHINES
CORPORATION, RED HAT INC. and NOVELL INC. and other individuals
to pool and cross license their copyrighted intellectual property
in a predatory price fixing scheme for computer programs that are
collectively known as the Linux (or GNU/Linux) operating system.
The Defendant has used a predatory price fixing agreement known
as the GNU GENERAL PUBLIC LICENSE to pool and cross license their
intellectual property with others to develop, distribute and
leverage the Linux operating system to provide computing services
for consumers.

INJURY
The Defendant's pooling and cross licensing of intellectual
property with the described predatory price fixing scheme is
foreclosing competition in the market for computer operating
systems. Said predatory price fixing scheme prevents Plaintiff
Daniel Wallace from marketing his own computer operating system
as a competitor.

REQUEST FOR RELIEF
The Plaintiff respectfully requests the Court grant equitable
relief in the form of an injunction prohibiting the development
and distribution of the Linux operating system under the GNU
GENERAL PUBLIC LICENSE by the defendant FREE SOFTWARE
FOUNDATION INC.

Wallace is obviously relying on United States v. New Wrinkle,
Inc., 342 U.S. 371:

"When cross-licensing or pooling arrangements are mechanisms
to accomplish naked price fixing or market division, they are
subject to challenge under the per se rule. See United States
v. New Wrinkle, Inc., 342 U.S. 371 (1952) (price fixing)";
Antitrust Guidelines for the Licensing of Intellectual Property,
U.S. Department of Justice and the Federal Trade Commission (1995).

and

"Predatory pricing may be defined as pricing below an appropriate
measure of cost for the purpose of eliminating competitors in the
short run and reducing competition in the long run. It is a
practice [479 U.S. 104, 118] that harms both competitors and
competition. In contrast to price cutting aimed simply at
increasing market share, predatory pricing has as its aim the
elimination of competition. Predatory pricing is thus a practice
"inimical to the purposes of [the antitrust] laws," Brunswick,
429 U.S., at 488, and one capable of inflicting antitrust injury.";
CARGILL, INC. v. MONFORT OF COLORADO, INC., 479 U.S. 104 (1986).

He didn't raise these issues before so the District Court didn't
consider them.
----

All hail BSD saviour of the free software. ;-)

regards,
alexander.

Lee Hollaar

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Dec 14, 2005, 12:49:43 PM12/14/05
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In article <43A05638...@web.de> tere...@web.de writes:
>INJURY
>The Defendant's pooling and cross licensing of intellectual
>property with the described predatory price fixing scheme is
>foreclosing competition in the market for computer operating
>systems. Said predatory price fixing scheme prevents Plaintiff
>Daniel Wallace from marketing his own computer operating system
>as a competitor.

If that's what he said in the amended complaint, it likely won't get
very far, in light of the Court's decision:
Instead, Mr. Wallace's alleged injury relates only to his personal
inability or unwillingness to enter into the software market
because his efforts might not be rewarded financially. This
injury constitutes harm to Mr. Wallace as a competitor, not harm
to consumers specifically, or harm to competition in general.
This is exactly the type of injury Brunswick forecloses.

Alexander Terekhov

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Dec 14, 2005, 2:03:45 PM12/14/05
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AFAICS, Wallace is pressing the argument of predatory pricing. To
me, it seems consistent with http://www.rdantitrustlaw.info/shaky.pdf
"More generally, competitors may never be heard to complain of
artificially low prices unless they are predatory, because it is only
predatorily low prices that threaten injury to competition.94 94) Id.
at 339–40. The Court’s discussion was consistent with the Brunswick
dictum on predatory pricing. See Brunswick, 429 U.S. at 489 n.14
(where there is true predation (not just uncomfortably aggressive
price cutting), a competitor’s lost profits do count as antitrust
injury, even though the predatory practice temporarily benefits
consumers)."

regards,
alexander.

Bruce Lewis

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Dec 14, 2005, 2:37:48 PM12/14/05
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hol...@antitrust.cs.utah.edu (Lee Hollaar) writes:

> But the judge rejected a number of the arguments of the Free Software
> Foundation, including that the nature of the GPL providing free
> access to software programs, subject to some limitations, necessarily
> aids competition.

To be fair, the judge did not say the FSF's assertion about aiding
competition was wrong. He only said that it could be argued against,
and thus wasn't grounds for dismissal. The plaintiff "adequately
alleged" anticompetitive practice, but certainly didn't prove it.

I wonder how much quicker the suit would have been dismissed if he had
written "to fix the price of copyrights" instead of "to fix the price of
intellectual property." How many software copyrights have you bought
this year? Do you do much comparison shopping?

If a piece of intellectual property is a copyright, a patent, a
trademark or a trade secret, then the allegation doesn't make sense.
There's little market for software copyrights; the market is mainly for
copies.

Josh Dougherty

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Dec 16, 2005, 10:21:06 PM12/16/05
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"Bruce Lewis" <brl...@yahoo.com> wrote in message
news:nm9y82n...@mass-toolpike.mit.edu...

The Intellectual Property is a clever and elusive species Bruce. It's one
thing, then another, then another, then it disappears and reappears
somewhere else under a new name. Only men of the most swift feet and keen
instincts can keep up with or capture the Intellectual Property.

Five more years of training Grasshopper.


Josh Dougherty

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Dec 16, 2005, 10:31:52 PM12/16/05
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"Alexander Terekhov" <tere...@web.de> wrote in message
news:43A05638...@web.de...

> INJURY
> The Defendant's pooling and cross licensing of intellectual
> property with the described predatory price fixing scheme is
> foreclosing competition in the market for computer operating
> systems. Said predatory price fixing scheme prevents Plaintiff
> Daniel Wallace from marketing his own computer operating system
> as a competitor.
>

> "Predatory pricing may be defined as pricing below an appropriate
> measure of cost for the purpose of eliminating competitors in the
> short run and reducing competition in the long run. It is a
> practice [479 U.S. 104, 118] that harms both competitors and
> competition. In contrast to price cutting aimed simply at
> increasing market share, predatory pricing has as its aim the
> elimination of competition. Predatory pricing is thus a practice
> "inimical to the purposes of [the antitrust] laws," Brunswick,
> 429 U.S., at 488, and one capable of inflicting antitrust injury.";
> CARGILL, INC. v. MONFORT OF COLORADO, INC., 479 U.S. 104 (1986).

Copyrights and patents are legal monopolies, flat out. So their whole
purpse is to foreclose competition and price fix.


CJohn Zammit

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Dec 17, 2005, 12:29:45 AM12/17/05
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"Josh Dougherty" <jdoc1...@comcast.net> wrote in message
news:X8SdnVYDKq8...@comcast.com...

>
> Copyrights and patents are legal monopolies, flat out. So their whole
> purpse is to foreclose competition and price fix.
>
>
That's quite a sweeping statement! And flat out wrong!


Josh Dougherty

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Dec 17, 2005, 12:50:16 AM12/17/05
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"CJohn Zammit" <cjohnz@==NOSpam==cogeco.ca> wrote in message
news:enNof.8058$eo....@read1.cgocable.net...

Yeah.

> And flat out wrong!

How so?


Tim Jackson

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Dec 17, 2005, 3:10:57 AM12/17/05
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On Sat, 17 Dec 2005 00:50:16 -0500, Josh Dougherty wrote...

The purpose of copyright and patents is to promote progress and
innovation. This is recognised by the Federal Trade Commission, the
body which is resposible for ensuring fair competion in the USA.

For example, the FTC says that, provided a proper balance is ensured,
"both competition in markets and patents for inventors can work together
to foster innovation." See http://www.ftc.gov/opa/2003/10/cpreport.htm

From the executive summary of the report to which that page links:

[quote]
Like competition policy, patent policy serves to benefit the public.
[...]
Competition and patents are not inherently in conflict. Patent and
antitrust law "are actually complementary, as both are aimed at
encouraging innovation, industry, and competition." Patent law plays an
important role in the property rights regime essential to a well-
functioning competitive economy. For example, firms may compete to
obtain the property rights that patents convey. Patents do not
necessarily confer monopoly power on their holders, and most business
conduct with respect to patents does not unreasonably restrain or serve
to monopolize markets. Even when a patent does confer monopoly power,
that alone does not create an antitrust violation. Antitrust law
recognizes that a patent’s creation of monopoly power can be necessary
to achieve a greater gain for consumers.
[end quote]

--
Tim Jackson
ne...@timjackson.plus.invalid
(Change '.invalid' to '.com' to reply direct)
Absurd patents: visit http://www.patent.freeserve.co.uk

Josh Dougherty

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Dec 17, 2005, 4:53:10 AM12/17/05
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"Tim Jackson" <ne...@timjackson.plus.invalid> wrote in message
news:MPG.1e0dd7c1a...@text.usenet.plus.net...

>
> On Sat, 17 Dec 2005 00:50:16 -0500, Josh Dougherty wrote...
> >
> > "CJohn Zammit" <cjohnz@==NOSpam==cogeco.ca> wrote in message
> > news:enNof.8058$eo....@read1.cgocable.net...
> > > "Josh Dougherty" <jdoc1...@comcast.net> wrote in message
> > > news:X8SdnVYDKq8...@comcast.com...
> > > >
> > > > Copyrights and patents are legal monopolies, flat out. So their
whole
> > > > purpse is to foreclose competition and price fix.
> > > >
> > > >
> > > That's quite a sweeping statement!
> >
> > Yeah.
> >
> > > And flat out wrong!
> >
> > How so?
>
> The purpose of copyright and patents is to promote progress and
> innovation. This is recognised by the Federal Trade Commission, the
> body which is resposible for ensuring fair competion in the USA.

Ok, so you think my use of the word "purpose" is semantically incorrect.
What you describe is its stated, or alleged, purpose. How about if I call
it its "means" instead, what it actually does, irregardless of its alleged
purpose. Its means are the creation of monopoly rights, the right to
forclose competition and fix price in the market for the "intellectual
property". Point being that saying a copyright holder is guilty of
foreclosing competition or fixing the price of their intellectual property,
is like saying they are a copyright holder. I found this complaint rather
ironic.

> For example, the FTC says that, provided a proper balance is ensured,
> "both competition in markets and patents for inventors can work together
> to foster innovation." See http://www.ftc.gov/opa/2003/10/cpreport.htm

The only reason they need to claim this and write this polemic to attempt to
support the claim is because the logic of patents is the opposite of market
competition, and this person is editorializing about why she thinks they can
work together, despite being diametrically opposed.

> From the executive summary of the report to which that page links:
>
> [quote]
> Like competition policy, patent policy serves to benefit the public.
> [...]
> Competition and patents are not inherently in conflict. Patent and
> antitrust law "are actually complementary, as both are aimed at
> encouraging innovation, industry, and competition." Patent law plays an
> important role in the property rights regime essential to a well-
> functioning competitive economy. For example, firms may compete to
> obtain the property rights that patents convey. Patents do not
> necessarily confer monopoly power on their holders, and most business
> conduct with respect to patents does not unreasonably restrain or serve
> to monopolize markets. Even when a patent does confer monopoly power,
> that alone does not create an antitrust violation. Antitrust law
> recognizes that a patent’s creation of monopoly power can be necessary
> to achieve a greater gain for consumers.
> [end quote]

This is just an editorial really, a position paper. Not much added
regarding my claim imo, but I'll offer a couple criticisms. It's false when
it asserts that patents do not covey monopoly power, that's exactly what
they do. It tries to provide some support for the assertion, but the
support gives it away. We discover it just does not "*unreasonably*
monopolize markets" in their view. IOW, it is a monopoly, but one they
think is good, not 'unreasonable', and therefore it's not a monopoly. This
is a form of circular reasoning.

1) What's a monopoly power? Unreasonable restraint of markets.
2) What level of restraint is unreasonable restraint? Whatever I feel is
unreasonable.

Put these together. It means a monopoly is whatever they feel like saying
it is, or isn't, based on whether they like it or not. If they like that
monopoly power and think it's an overall good, it's rhetorically not a
monopoly power for the purpose of this editorial, and vice versa.


Alexander Terekhov

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Dec 17, 2005, 11:06:21 AM12/17/05
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Josh Dougherty wrote: ...

Wallace's GPL antitrust suit is about conspiracy. No one can conspire
with oneself. Having a monopoly is perfectly legal, but abusing it is
not.

regards,
alexander.

CJohn Zammit

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Dec 17, 2005, 11:29:00 AM12/17/05
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"Josh Dougherty" <jdoc1...@comcast.net> wrote in message
news:2o6dndq2MMS...@comcast.com...

Josh, a patent or a copyright does not prevent anyone else from creating
new, unique work within its field.
I suggest that you visit the Canadian Intellectual Property Office
("CIPO")'s website, at:
http://cipo.gc.ca
for a clear explaination of what intellectual-property-protection is all
about.


Alexander Terekhov

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Dec 17, 2005, 11:45:14 AM12/17/05
to

Bruce Lewis wrote:
[...]

> There's little market for software copyrights

What do you think (most) programmers under employment contracts are paid
for over here in Europe?

regards,
alexander.

Ben Pfaff

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Dec 17, 2005, 12:02:16 PM12/17/05
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Alexander Terekhov <tere...@web.de> writes:

> Bruce Lewis wrote:
> [...]
>> There's little market for software copyrights
>
> What do you think (most) programmers under employment contracts are paid
> for over here in Europe?

I've seen claims that most programmers develop in-house software,
not software for external sale. I'd judge that the role of
copyright in software used only within a company is less
important than that for software sold commercially.
--
Ben Pfaff
email: b...@cs.stanford.edu
web: http://benpfaff.org

Alexander Terekhov

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Dec 17, 2005, 12:58:14 PM12/17/05
to

Well, regarding pre-fixing, consider that the FSF is on record
citing "LucasArts Entertainment Company vs. Humongous Entertainment
Company against licensee who claimed that license provision
regulating resale prices for derivative works violated the Sherman
Act)."

Here's what I've found.

----
In the intellectual property context, however, one federal court held
that the Cartwright Act did not prohibit, under the per se rule or
otherwise, a provision in a software licensing agreement which
prohibited the licensee from selling the licensed program at less than
a certain price to anyone other than the licensor. LucasArts
Entertainment Co. v. Humongous Entertainment Co., 870 F. Supp. 285
(N.D. Cal. 1993). The court relied on a federal decision, United
States v. General Electric, 272 U.S. 476 (1926), which held that
patent owners had the power to restrict prices at which licensees
sold. Although the General Electric case has not been overruled, its
continuing validity is questionable, as the United States Supreme
Court has twice split four to four on whether to overrule it and the
federal enforcement authorities decline to follow it.
----

And

----
The GE ruling on price-fixing has been heavily qualified but never
overruled. Any deviation from the GE-Westinghouse single-
manufacturing-licensee paradigm is virtually certain to be held
an antitrust violation (and therefore misuse as well). Thus, cross-
licenses with price restrictions are illegal. So, too, are licenses to
more than one licensee, which, in effect, put together a price-fixing
combination among licensees. The Supreme Court has twice divided 4-4
on whether to overrule GE. United States v. Line Material Co., 333
U.S. 287 (1948); United States v. Huck Mfg. Co., 382 U.S. 197 (1965).
The Antitrust Division has for years searched for a vehicle to
overturn GE but has never succeeded in getting a candidate to hold
still long enough to grab it. See ABA, Antitrust Law Developments
3d 822 & nn. 167-68.
----

I gather that Wallace might be DOJ's secret agent. ;-)

regards,
alexander.

Josh Dougherty

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Dec 17, 2005, 5:13:51 PM12/17/05
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"CJohn Zammit" <cjohnz@==NOSpam==cogeco.ca> wrote in message
news:h1Xof.8069$eo....@read1.cgocable.net...

> "Josh Dougherty" <jdoc1...@comcast.net> wrote in message
> news:2o6dndq2MMS...@comcast.com...
> >
> > "CJohn Zammit" <cjohnz@==NOSpam==cogeco.ca> wrote in message
> > news:enNof.8058$eo....@read1.cgocable.net...
> >> "Josh Dougherty" <jdoc1...@comcast.net> wrote in message
> >> news:X8SdnVYDKq8...@comcast.com...
> >> >
> >> > Copyrights and patents are legal monopolies, flat out. So their
whole
> >> > purpse is to foreclose competition and price fix.
> >> >
> >> >
> >> That's quite a sweeping statement!
> >
> > Yeah.
> >
> >> And flat out wrong!
> >
> > How so?
> >
> >
>
> Josh, a patent or a copyright does not prevent anyone else from creating
> new, unique work within its field.

Yeah, it prevents them from creating the patented thing and competing in the
market for it.

> I suggest that you visit the Canadian Intellectual Property Office
> ("CIPO")'s website, at:
> http://cipo.gc.ca
> for a clear explaination of what intellectual-property-protection is all
> about.

I already know what it's about.


Josh Dougherty

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Dec 17, 2005, 5:15:47 PM12/17/05
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"Alexander Terekhov" <tere...@web.de> wrote in message
news:43A4377D...@web.de...

>
> Josh Dougherty wrote: ...
>
> Wallace's GPL antitrust suit is about conspiracy. No one can conspire
> with oneself. Having a monopoly is perfectly legal, but abusing it is
> not.

But having a monopoly is not legal in the case he cited to support his
claim. It is legal with patents or copyrights. That's the point.


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