Open source withstands antitrust scrutiny

The U.S. Court of Appeals for the Seventh Circuit has issued an opinion in which Judge Easterbrook declares, “[t]he GPL and open-source have nothing to fear from the antitrust laws.” The case is called Wallace v. IBM., No. 06-2454. [Download a copy of the opinion.] Internet Cases covered the lower court’s decision from last December here.

Plaintiff Wallace filed an antitrust suit against IBM, Red Hat and Novell, arguing that those companies had conspired to eliminate competition in the operating system market by making Linux available at an “unbeatable” price (free) under the General Public License (“GPL”). The U.S. District Court for the Southern District of Indiana dismissed the case, finding the plaintiff had suffered no antitrust injury. The Seventh Circuit affirmed.

“Although antitrust law serves the interests of consumers rather than producers, the Supreme Court has permitted producers to initiate predatory-pricing litigation,” Judge Easterbrook wrote in the November 9 decision. “This does not assist Wallace, however, because his legal theory is faulty substantively.”

Perhaps most significantly, Wallace had not contended that software available under the GPL would lead to mononpoly prices in the future. The court observed the anomalous thinking behind any conclusion that it would, “when the GPL keeps price low forever and precludes the reduction of output that is essential to monopoly.”

And the opinion provided a number of modern day examples to dispel any thoughts of a GPL monopoly, by observing the market domination of proprietary operating systems like Windows, OS X and Solaris even when Linux is available for free. It also obseverd, quite astutely, that Photoshop is preferred in the market to Gimp, and Lexis and Westlaw are preferred to free legal sources such as the court’s own website.

Calling the defendants “conspirators” in violation of the Sherman Act didn’t advance the plaintiff’s case either. Instead of being a restraint on trade, the court held that the GPL serves to foster creativity, by enabling the free distribution and building of new derivative works.

Wallace v. IBM, No. 06-2454 (7th Cir., November 9, 2006).