David Kastrup wrote: [...] > [Appeal claim] > > This is going to be cute. The problem with an appeal is that Wallace > does not merely have to get it right this time: he has to prove that > he got it right last time around, and the court just failed to notice. > > It would take considerable skill to make a case that has a chance to > even survive into trial. But proving that the previous attempt > already was sufficient would seem like an impossibly hard problem even > for somebody with a legal clue.
--------- IN THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT DANIEL WALLACE, Appeal from the United Plaintiff-Appellant, States District Court for the Southern District No. 06-2454 v. of Indiana, Indianapolis Division INTERNATIONAL BUSINESS MACHINES CORPORATION, RED HAT INC, and No. 05 C 678 NOVELL, INC., Defendants-Appellees. Richard L. Young, Judge SUBMISSION Plaintiff-appellant Daniel Wallace appears pro se and pursuant to Fed. R. App. P. 31 and Cir. R. 31. submits fifteen bound copies [H.I.] of the BRIEF AND REQUIRED SHORT APPENDIX OF PLAINTIFFAPPELLANT and one digital version on CD-ROM. ___________________________________ Dated: June 14, 2006 Daniel Wallace, pro se P.O. Box 572 New Palestine, IN 46163 (317) 861 6415 CERTIFICATE OF SERVICE The undersigned plaintiff-appellant Daniel Wallace, pro se, hereby certifies that I caused two copies of the foregoing opening brief with included required short appendix and one digital copy to be served by first-class certified mail, postage prepaid, on each of the following counsel: Michael H. Gottschlich BARNES & THORNBURG LLP 11 South Meridian Street Indianapolis, IN 46204 (317) 231-7834 Curtis W. McCauley ICE MILLER LLP One American Square Suite 3100 Indianapolis, IN 46282 (317) 236-2388 ___________________________________ Dated: June 14, 2006 Daniel Wallace, pro se P.O. Box 572 New Palestine, IN 46163 (317) 861 6415 --------- --------- No. 06-2454 ______________________________ UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT _______________ DANIEL WALLACE, Plaintiff-Appellant, v. INTERNATIONAL BUSINESS MACHINES CORPORATION, RED HAT INC., and NOVELL, INC., Defendants-Appellees. ______________________________ Appeal From The United States District Court For The Southern District of Indiana, Indianapolis Division Case No. 05-C-0678 The Honorable Judge Richard L. Young ______________________________ BRIEF AND REQUIRED SHORT APPENDIX OF PLAINTIFF-APPELLANT, DANIEL WALLACE ______________________________ Daniel Wallace, Pro Se P.O. Box 572 New Palestine, IN 46163 (317) 861-6415 i TABLE OF CONTENTS TABLE OF CONTENTS .......................................................................... i TABLE OF AUTHORITIES ..................................................................... ii JURISDICTIONAL STATEMENT ............................................................ 1 STATEMENT OF THE ISSUES .............................................................. 1 STATEMENT OF THE CASE ................................................................. 1 STATEMENT OF FACTS ....................................................................... 2 SUMMARY OF THE ARGUMENT ........................................................... 4 STANDARD OF REVIEW ....................................................................... 4 ARGUMENT ......................................................................................... 5 Elements of the Claim ................................................................. 5 I. Contract, Combination or Conspiracy ............................. 6 II. Unreasonable Restraint of Trade in a Relevant Market ........................................................................... 7 III. Accompanying Injury .................................................... 8 CONCLUSION .................................................................................... 11 CERTIFICATE OF COMPLIANCE WITH F.R.A.P. RULE 32(a)(7) ............ 12 ii TABLE OF CONTENTS (continued) CIRCUIT RULE 31(e)(1) CERTIFICATION ............................................. 13 PROOF OF SERVICE .......................................................................... 14 CIRCUIT RULE 30(d) STATEMENT ...................................................... 15 REQUIRED SHORT APPENDIX ........................................................... 16 TABLE OF AUTHORITIES Cases American Ad Management, Inc. v. General Telephone Co. of California, 190 F.3d 1051 (9th Cir.1999) ......................................... 10 Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990) ............ 9 Brunswick Corp. v. Pueblo Bowl-O -Mat, Inc., 429 U.S. 477 (1977) ......... 9 Cargill Inc. v. Monfort of Colorado, Inc., 479 U.S. 104 (1986) .............. 5, 9 Cler v. Ill. Educ. Assn, 423 F.3d 726 (7th Cir. 2005) ............................. 5 Denny's Marina, Inc. v. Renfro Prods., Inc., 8 F.3d 1217 (7th Cir. 1993) ...................................................................................... 5 EEOC V. Waffle House, Inc., 534 U.S. 279 (2002) .................................. 7 Generac Corp. v. Caterpillar, Inc., 172 F.3d 971 (7th Cir. 1999) ............. 8 In re: Aimster Copyright Litigation, 334 F.3d 643 (7th Cir. 2003) ............ 6 Kirksey v. R. J. Reynolds Tobacco Co., 168 F.3d 1039 (7th Cir. 1999) ...................................................................................... 5 iii McCoy v. Mitsuboshi Cutlery, Inc., 67 F.3d 917 (Fed. Cir. 1995) ............. 6 TABLE OF AUTHORITIES (continued) Matsushita Elec. Industrial Co. v. Zenith Radio, 475 US 574 (1986] ........................................................................................... 10, 11 MCI Communications v. AT&T, 708 F.2d 1081 (7th Cir. 1983) .............. 11 MCM Partners, Inc. v. Andrews-Bartlett & Assocs., 62 F.3d 967 (7th Cir. 1995) ...................................................................................... 5 ProCD Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996).......................... 7 Small v. Chao, 398 F.3d 894, 897 (7th Cir. 2005)................................... 4 Stevens v. Umsted, 131 F.3d 697 (7th Cir.1997) ..................................... 2 United States v. New Wrinkle Inc., 342 U.S. 371 (1952) ......................... 7 United States v. United States Gypsum Co., 333 U.S. 364 (1948) ....... 6, 7 United States v. Line Material Co., 333 U.S. 287 (1948) ......................... 7 Zinermom v. Burch, 494 U.S. 113 (1990) ............................................... 5 Statutes 15 U.S.C. §1 (Sherman Act §1) ........................................................ 5, 10 15 U.S.C. §26 (Clayton Act §16) .................................................... 1, 2, 5 17 U.S.C. §101 (Definitions) ................................................................. 3 17 U.S.C. §301(a) (Preemption) ............................................................. 7 28 U.S.C. §1291 (Final decisions) ......................................................... 1 28 U.S.C. §1331 (Federal question) ....................................................... 1 Other Authorities Antitrust in the New Economy, (Nov. 2000) U. Chicago Law iv & Economics, Olin Working Paper No. 106 ......................................... 10 TABLE OF AUTHORITIES (continued) Fed.R.Civ.P. 8(a)(2) ............................................................................... 5 Fed.R.Civ.P. 12(b)(6) ......................................................................... 1, 2 1 JURISDICTIONAL STATEMENT Plaintiff Daniel Wallace appeals from a final order of the United States District Court for the Southern District of Indiana, Indianapolis Division, the Honorable Richard L. Young presiding. The district court had jurisdiction under 28 U.S.C. §1331 (Federal question) and 15 U.S.C. §26 (Clayton Act §16). The basis for this Courts jurisdiction is 28 U.S.C. §1291 (Final decisions of district courts). The district courts final judgment was entered on May 16, 2006. Appellants notice of appeal was timely filed on May 19, 2006. Plaintiff-appellant waives request for oral argument. STATEMENT OF THE ISSUES The issue on appeal is whether the district court erroneously dismissed plaintiffs Second Amended Complaint pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief may be granted. STATEMENT OF THE CASE Pro se plaintiff Daniel Wallace filed the original complaint in this matter on May 9, 2005. A second amended complaint was filed in December 2005. The claim alleged an agreement among the defendants 2 IBM Corp., Red Hat Inc., Novell Inc. and others to utilize a copyright and patent license known as the GNU General Public License to price fix computer software at predatory levels. Wallace requested injunctive relief pursuant to 15 U.S.C §26 (Clayton Act §16). Defendants IBM et al. filed a joint motion to dismiss the claim under Fed.R.Civ.P. 12(b)(6). The motion was fully briefed and Judge Young granted judgment against Wallace on May 16, 2006. STATEMENT OF FACTS For the past ten years a software copyright and patent license has been circulated by way of the Internet.1 Titled the GNU General Public License (GPL) (Ex A (GPL)) it has been utilized to publicly regulate pooled and cross-licensed computer software, including the GNU/Linux (Linux) operating system. The GPL license was intentionally designed to remove the intellectual property contained in computer software from the realm of competition. Literally thousands of independent software developers worldwide including the defendant-appellees (IBM et al.) have used the GPL and the Internet to collaborate while authoring evolving copyrighted derivative and collective works, including the Linux computer operating system. 1 These facts are set out in conformance with the rule applied in Stevens v. Umsted, 131 F.3d 697, 705 (7th Cir.1997) allowing a plaintiff to plead additional consistent facts in an appeal from an order granting a Rule 12(b)(6) motion to dismiss. 3 The intellectual property in computer programs2 developed under the GPL is known as free software. Conversely, software that is licensed at a profit for the use of its intellectual property is known as proprietary software. The GPL contains a recursive term stating You must cause any work . . . to be licensed as a whole at no charge to all third parties under the terms of this License (Ex A (GPL)§2(b) at 2) that binds all future developers that contribute modifications to the software. The goal of free software developers is to generate a pool of intellectual property free from commercial exploitation. Those developers of computer software who agree to license their derivative or collective contributions at no charge are allowed to distribute the intellectual property accumulated under the GPL license. Free software is distributed at the consumer level through independent, competing retail brand names by many commercial entities including IBM et al. The pooled intellectual property in the Linux operating system is licensed to consumers fixed at no charge and any lost profits are then recouped through ancillary Linux markets such as proprietary licensed middleware, computer hardware, information technology consulting and software support services. Commercial distributors of GPL licensed software target 2 A ''computer program'' is a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result. 17 U.S.C. §101 Definitions. 4 independent developers of computer software that rely on licensing fees from their proprietary software. Proprietary developers are excluded from the pool of GPL licensed software and thus are faced with competition from a vast pool of cross-licensed software price fixed at no charge. The effect of licensing free software in a targeted market is to foreclose that particular market segment to commercial exploitation by proprietary developers and thus eliminate them from competition. With proprietary operating systems driven from the market (the IBM Corp. is the largest computer technology company in the world), IBM et al. can recoup profits in their ancillary markets that are tailored to complement the free Linux operating system. Plaintiff Daniel Wallace (Wallace) is a physicist and computer programmer seeking to market his own computer operating system under a proprietary business model. Wallace brought this suit in federal district court claiming antitrust injury from predatory pricing. SUMMARY OF THE ARGUMENT The district court erred when it granted IBM et al.s motion to dismiss pursuant to Rule Fed.R.Civ.P. 12(b)(6) because substantial case law exists which suggests that Wallace can prevail on the merits of his claim. STANDARD OF REVIEW Review of a district courts grant of a motion to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6) is de novo. Small v. Chao, 398 5 F.3d 894, 897 (7th Cir. 2005). The court accepts as true all well-pleaded allegations in the complaint and draws all reasonable inferences in the plaintiffs favor. Cler v. Ill. Educ. Assn, 423 F.3d 726, 729 (7th Cir. 2005). Any written instrument attached to the complaint is considered a part of the complaint. Zinermon v. Burch, 494 U.S. 113, 118 (1990). ARGUMENT Elements of the Claim The Seventh Circuit has characterized the pleading standard in the federal courts under Fed.R.Civ.P. 8(a)(2): All that's required to state a claim in a complaint filed in federal court is a short statement in plain, that is ordinary, nonlegalistic English, of the legal claim. . . .The Courts keep reminding plaintiffs that they don't have to file long complaints, don't have to plead facts, don't have to plead legal theories. Kirksey v. R.J. Reynolds Tobacco Co., 168 F.3d 1039 (7th Cir. 1999). A claim under 15 U.S.C. §26 based on a violation of 15 U.S.C. §1 must allege three elements: (1) a contract, combination, or conspiracy; (2) a resultant unreasonable restraint of trade in the relevant market; and (3) an accompanying injury. Denny's Marina, Inc. v. Renfro Prods., Inc., 8 F.3d 1217, 1220 (7th Cir. 1993); MCM Partners, Inc. v. Andrews- Bartlett & Assocs., 62 F.3d 967, fn 7 (7th Cir. 1995). For claims brought under the Clayton Act §16, the accompanying injury requirement was further refined by the Supreme Court in Cargill Inc. v. Monfort of Colorado Inc., 479 U.S. 104, 113 (1986) ([u]nder 16, a private plaintiff must allege threatened loss or damage of the type the 6 antitrust laws were designed to prevent and that flows from that which makes defendants' acts unlawful ). I. Contract, Combination, or Conspiracy An intellectual property license is a contract. In re: Aimster Copyright Litigation, 334 F.3d 643, 644 (7th Cir. 2003) (If a breach of contract (and a copyright license is just a type of contract) . . . ); see also McCoy v. Mitsuboshi Cutlery, Inc., 67 F.3d 917, 920 (Fed. Cir. 1995) (Whether express or implied, a license is a contract governed by ordinary principles of state contract law .) An industry-wide license such as the GPL may establish a prima facie case of conspiracy in violation of the Sherman Act §1. See U. S. v. U. S. Gypsum Co. 333 U.S. 364, 389 (1948). The GPL is a contract to make a contract . a recursive metacontract. Although the GPLs recursive term (Ex A (GPL), §2(b) at 2] that purports to require all future third parties to use the same license terms is both contractually unenforceable 3 and preempted by 17 U.S.C. §3014, these matters of law do not invalidate its role under antitrust analysis. Wallaces Second Amended Complaint alleges: 3 It goes without saying that a contract cannot bind a nonparty. EEOC V. Waffle House, Inc., 534 U.S. 279, 294 (2002). 4 The term binding all third parties in future works creates a right against the world which subjects it to preemption. See ProCD Inc. v. Zeidenberg, 86 F.3d 1447, 1454 (7th Cir. 1996). 7 The Defendants have used a predatory price-fixing agreement known as the GNU GENERAL PUBLIC LICENSE to pool and cross license their intellectual property to develop, distribute and leverage the Linux operating system to provide computing services for consumers. The preceding facts and prevailing law clearly establish that Wallace has alleged that a combination of businesses have conspired by utilizing an express contractual agreement ((Ex A (GPL)]. II. Unreasonable Restraint of Trade in a Relevant Market The stated purpose of the GPL license is to pool intellectual property. ([t]he distribution of the whole must be on the terms of this License, whose permissions for other licensees extend to the entire whole, and thus to each and every part regardless of who wrote it.) (Ex A (GPL) at 3)). Case law holds that where pooling or cross licensing agreements5 are price-fixing arrangements, they will be subject to the per se rule, United States v. New Wrinkle Inc., 342 U.S. 371, 377 (1952) (citing United States v. United States Gypsum Co., 333 U.S. 364 (1948) and United States v. Line Material Co., 333 U.S. 287 (1948)). The Linux operating system is distributed at the consumer level through various independent distribution channels. The individual defendants IBM Corp., Red Hat Inc. and Novell Inc. would be competitors in the market for computer operating systems absent the use of the GPL license. 5 The GPL is a true cross-license among the owners of intellectual property and is thus easily distinguished from a blanket license, where multiple independent works such as musical recordings are licensed to a third party for vending efficiency. 8 The GPL fixes the license fee non-negotiably at no charge (Ex A (GPL) §2(b) at 2). This fixes both the maximum (ceiling) and minimum (floor) price limits at zero (no charge). This includes all software patent fees ([W]e have made it clear that any patent must be licensed for everyone's free use or not licensed at all.) (Ex A (GPL) at 1). Even if the collective software were viewed as being distributed in a vertical agreement it would still be a per se violation. See Generac Corp. v. Caterpillar, Inc., 172 F.3d 971, 977 (7th Cir. 1999) (Unlike horizontal agreements, vertical agreements are per se illegal under Sherman Act sec. 1 only if they impose minimum price restraints.) Wallaces Second Amended Complaint alleges: The Defendants have used a predatory price-fixing agreement known as the GNU GENERAL PUBLIC LICENSE to pool and cross license their intellectual property to develop, distribute and leverage the Linux operating system to provide computing services for consumers. Wallace has certainly alleged that the defendants have engaged in an unreasonable restraint of trade in the relevant market of computer operating systems. III. Accompanying Injury Supreme Court case law holds that predatory pricing may inflict antitrust injury on competitors (Predatory pricing . . . is a practice that harms both competitors and competition.) (Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 118 (1986)); ([i]n the context of pricing 9 practices, only predatory pricing has the requisite anticompetitive effect) (Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 339 (1990)). The district court ruled, Antitrust laws are for the protection of competition, not competitors. Brunswick Corp. v. Pueblo Bowl-o-Mat, Inc., 429 U.S. 477, 488 (1977) (ENTRY ON DEFENDANTS MOTIONS TO DISMISS at 3) but the Supreme Court clarified the Brunswick language in Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 353 (1990): The "antitrust laws were enacted for `the protection of competition, not competitors.'" Ante, at 338 (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962)). This proposition - which is often used as a test of whether a violation of law occurred - cannot be read to deny all remedial actions by competitors. When competitors are injured by illicit agreements among their rivals rather than by the free play of market forces, the antitrust laws protect competitors precisely for the purpose of protecting competition. The Ninth Circuit addressed competitor status in American Ad Management, Inc. v. General Telephone Co. of California, 190 F.3d 1051, 1058 (9th Cir.1999): Further, it is not the status as a consumer or competitor that confers antitrust standing, but the relationship between the defendant's alleged unlawful conduct and the resulting harm to the plaintiff. See Amaral, 102 F.3d at 1508 ("Losses a competitor suffers as a result of predatory pricing is a form of antitrust injury because `predatory pricing has the requisite anticompetitive effect' against competitors.") (quoting ARCO, 495 U.S. at 339)). The leading Supreme Court case on predatory pricing under §1 of the Sherman Act is Matsushita Elec. Industrial Co. v. Zenith Radio, 475 US 574 (1986). (This is a Sherman Act 1 case . . .) (fn 8). Predatory pricing was defined in Matsushita. ([(i)] pricing below the level necessary 10 to sell their products, or (ii) pricing below some appropriate measure of cost.) (fn 9). Judge Richard Posner has acknowledged the heavy fixed costs involved with the production of intellectual property: Intellectual property is characterized by heavy fixed costs relative to marginal costs. It is often very expensive to create, but once it is created the cost of making additional copies is low, dramatically so in the case of software, where it is only a slight overstatement to speak of marginal cost as zero. Antitrust in the New Economy, (Nov. 2000) U. Chicago Law & Economics, 1, 3, The Seventh Circuit examined a host of cost measures and found pricing below long run incremental cost (LRIC) as one appropriate indicator of predatory pricing. MCI Communications v. AT&T, 708 F.2d 1081, fn 59 (7th Cir. 1983). Regardless of whether the measure of cost is LRIC or some other appropriate formula, a final price of no charge leads to the absurd conclusion that the heavy fixed costs for developing intellectual property in computer programs are non-existent. The Supreme Court held that it might be that only direct evidence (Matsushita at fn 9) is sufficient to demonstrate below-cost pricing. A contract term fixing licensing fees at no charge is certainly direct evidence of pricing below long run incremental cost. Wallace in his Second Amended Complaint alleged: 11 The Defendants' 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. Wallace has certainly alleged an injury of the type the antitrust laws were designed to prevent and that flows from that which makes defendants acts unlawful. CONCLUSION For the reasons above stated, the Court should reverse the order dismissing plaintiff Daniel Wallaces complaint and remand for further proceedings. Respectfully submitted, ___________________________________ Daniel Wallace, Pro Se P.O. Box 572 New Palestine, IN 46163 317-861-6415 Dated: June 14, 2006 12 CERTIFICATE OF COMPLIANCE WITH F.R.A.P. 32(a)(7) Pursuant to F.R.A.P. 32(a)(7)(C), the undersigned hereby certifies that the foregoing opening brief of plaintiff-appellant Daniel Wallace, pro se, complies with the type-volume limitation in F.R.A.P. 32(a)(7)(B)(i) because it contains less than 3500 words, excluding the parts of the brief exempted by F.R.A.P. 32(a)(7)(B)(iii). ___________________________________ Dated: June 14, 2006 Daniel Wallace, pro se 3874 S. Redbird Trail New Palestine, IN 46163 (317) 861 6415 13 CIRCUIT RULE 31(e)(1) CERTIFICATION The undersigned plaintiff-appellant Daniel Wallace, pro se, hereby certifies that I have filed on CD-ROM pursuant to Circuit Rule 31(e), a digital version of the foregoing brief and all of the appendix items that are available in non-scanned PDF format. _____________________________________ Dated: June 14, 2006 Daniel Wallace, pro se 3874 S. Redbird Trail New Palestine, IN 46163 (317) 861 6415 14 CERTIFICATE OF SERVICE The undersigned plaintiff-appellant Daniel Wallace, pro se, hereby certifies that I caused two copies of the foregoing opening brief with included required short appendix to be served by first-class certified mail, postage prepaid, on the following counsel: Michael H. Gottschlich BARNES & THORNBURG LLP 11 South Meridian Street Indianapolis, IN 46204 (317) 231-7834 Curtis W. McCauley ICE MILLER LLP One American Square Suite 3100 Indianapolis, IN 46282 (317) 236-2388 ____________________________________ Dated: June 14, 2006 Daniel Wallace, pro se 3874 S. Redbird Trail New Palestine, IN 46163 (317) 861 6415 15 CIRCUIT RULE 30(d) STATEMENT Pursuant to Circuit Rule 30(d), plaintiff-appellant Daniel Wallace, pro se, certifies that all materials required by Circuit Rules 30(a) and (b) are included in the appendices. ___________________________________ Dated: June 14, 2006 Daniel Wallace, pro se 3874 S. Redbird Trail New Palestine, IN 46163 (317) 861 6415 16 REQUIRED SHORT APPENDIX TABLE OF CONTENTS OF REQUIRED SHORT APPENDIX ENTRY ON DEFENDANTS MOTIONS TO DISMISS entered on May 16, 2006 ............................................................ Doc. 59 FINAL JUDGEMENT entered on May 16, 2006 ............................ Doc. 60 SECOND AMENDED COMPLAINT ............................................... Doc. 48 GNU GENERAL PUBLIC LICENSE .............................................. Doc. 26 regards, alexander. _______________________________________________ gnu-misc-discuss mailing list gnu-misc-discuss@gnu.org http://lists.gnu.org/mailman/listinfo/gnu-misc-discuss