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Re: relicensing from MIT to LGPL

From: Alexander Terekhov
Subject: Re: relicensing from MIT to LGPL
Date: Fri, 12 May 2006 17:23:05 +0200

Rui Miguel Silva Seabra wrote:
> You just repeated my full quote 

Bzzt. *Your* full quote was this:

        **Plaintiff's mischaracterization** of the GPL in his Response
        has no bearing on the resolution of the pending Motion to
        Dismiss because the Court can examine the GPL itself. "[T]o
        the extent that the terms of an attached contract conflict with
        the allegations of the complaint, the contract controls."
        Centers v. Centennial Mortg., Inc., 398 F.3d 930, 933 (7th Cir.
        **Contrary to Plaintiff**, the GPL is indisputably a **vertical
        agreement** between the licensee and the licensor of the
        underlying software, **as the Court has already held** in
        granting the FSF's prior motion to dismiss:

"Plaintiff's mischaracterization" (in FSF words) is about Wallace's 
claim of *horizontal* conspiracy among competitors (such as RedHat and 
Novell) in restraint of trade (pooling and cross-licensing of below 
cost predatory priced IP) subject to the per se rule.***) 

The FSF didn't dispute that the GPL is a contract. The FSF even told the 
court that "the contract controls".


***) (this case is
still pending)

Per Se Pooling Analysis

Pooling and cross-licensing agreements by the owners of patents and
copyrights that restrain competition through price fixing schemes have
been condemned by the Supreme Court as a per se violation of the Sherman

“The power of this type of combination to inflict the kind of public
injury which the Sherman Act condemns renders it illegal per se. . .
That would be no more permissible than a contract between a copyright
owner and one who has no copyright, or a contract between two copyright
owners or patentees, to restrain the competitive distribution of the
copyrighted or patented articles in the open market” ; UNITED STATES v.
MASONITE CORPORATION, 316 U.S. 265 (1942) [emphasis added].

It is important to note that the MASONITE ruling explicitly uses the
term “copyright owners or patentees” in describing the licensing
relationship. Thus “ownership” status may be relevant to the analysis of
whether a licensing relationship between corporate entities is vertical,
horizontal or some mixture of the two relationships in the product
distribution chain.

The Supreme Court reaffirmed its condemnation of pooling and cross-
licensing of intellectual property for the restraint of competition in 
UNITED STATES v. NEW WRINKLE, INC., 342 U.S. 371 (1952). The holding in 
NEW WRINKLE, INC. guides the Federal Trade Commission’s civil 
enforcement policy:

"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).

The GPL is an egregious and pernicious misuse of copyright that rises to
the level of an antitrust violation. The GPL requires control of all
licensees’ software patent rights as well as source code copyrights:

“Finally, any free program is threatened constantly by software patents.
We wish to avoid the danger that redistributors of a free program will
individually obtain patent licenses, in effect making the program
proprietary. To prevent this, we have made it clear that any patent must
be licensed for everyone's free use or not licensed at all.”; GPL
Preamble; [emphasis added ] (see also the GPL sec. 7 ).

The preceding quotation clearly expresses the anti-competitive nature of
the GPL contract. Judge Richard Posner of the Seventh Circuit has
recognized the potential for copyright misuse to rise to the level of an
antitrust violation:

“The doctrine of misuse “prevents copyright holders from leveraging
their limited monopoly to allow them control of areas outside the
monopoly.” A&M Records, Inc. v.Napster, Inc., 239 F.3d 1004, 1026-27
(9th Cir. 2001); see Alcatel USA, Inc. v. DGI Technologies, Inc., 166
F.3d 772, 792-95 (5th Cir. 1999); Practice Management Information Corp.
v. American Medical Ass’n, 121 F.3d 516, 520-21 (1997), amended, 133
F.3d 1140 (9th Cir. 1998); DSC Communications Corp. v. DGI Technologies,
Inc., 81 F.3d 597, 601-02 (5th Cir.1996); Lasercomb America, Inc. v.
Reynolds, 911 F.2d 970, 976-79 (4th Cir. 1990).”; ASSESSMENT
TECHNOLOGIES OF WI, LLC v. WIREDATA, INC., 350 F.3d 640 (7th. Cir.

Alternative Vertical Analysis

In the alternative, if the GPL license is viewed simply as distributing
a collective work in a vertical agreement, a 1990 Supreme Court ruling
condemns such vertical agreements as unlawful if used to establish
prices at predatory levels:

“Although a vertical, maximum-price-fixing agreement is unlawful under 1
of the Sherman Act, it does not cause a competitor antitrust injury
unless it results in predatory pricing. 8 Antitrust injury does not
arise for purposes of 4 of the Clayton Act, see n. 1, supra, until a
private party is adversely affected by an anticompetitive aspect of the
defendant's conduct, see Brunswick, 429 U.S., at 487 ; in the context of
pricing practices, only predatory pricing has the requisite
anticompetitive effect. 9 See Areeda & Turner, Predatory Pricing and
Related [495 U.S. 328, 340] Practices Under Section 2 of the Sherman
Act, 88 Harv. L. Rev. 697, 697-699 (1975); McGee, Predatory Pricing
Revisited, 23 J. Law & Econ. 289, 292-294 (1980).”; ATLANTIC RICHFIELD
CO. v. USA PETROLEUM CO., 495 U.S. 328 (1990) [emphasis added].

In 1997 in State Oil Co. v. Khan, the Supreme Court, while using a rule
of reason analysis, held that the primary purpose of the antitrust laws
is to protect competition and that predatory pricing levels threaten

“Our analysis is also guided by our general view that the primary
purpose of the antitrust laws is to protect interbrand competition. See,
e.g., Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S.
717, 726 (1988). “Low prices,” we have explained, “benefit consumers
regardless of how those prices are set, and so long as they are above
predatory levels, they do not threaten competition.” ARCO, supra, at
340.”; State Oil Co. v. Khan, 522 US 3 (1997). [emphasis added].

Seventh Circuit Precedent

The defendants cite to Generac Corp. v. Caterpillar, Inc., 172 F.3d 971
(7th Cir. 1999) for authority that the GPL is a vertical agreement:
“See Generac Corp. v.Caterpillar Inc., 172 F.3d 971, 977 (7th Cir 1999)
(holding that the licensing of intellectual property rights created a
vertical relationship for antitrust analysis, even if the licensee and
licensor were competitors in other contexts); Defendants Brief at 8.

In Generac Corp. the Seventh Circuit went on to rule:
“Unlike horizontal agreements, vertical agreements are per se illegal
under Sherman Act sec. 1 only if they impose minimum price restraints.”
[emphasis added]

The alleged contractual agreement (the GPL) used by the defendants
explicitly requires a single, uniform licensing fee be charged for use
of the distributed intellectual property:
“b) You must cause any work that you distribute or publish, that in
whole or in part contains or is derived from the Program or any part
thereof, to be licensed as a whole at no charge to all third parties
under the terms of this License.” GPL sec. 2(b) [emphasis added].

This uniform pricing requirement fixes simultaneously and
non-negotiably, both the minimum (floor) and maximum (ceiling) prices
for all parties. This type of uniform minimum price fixing scheme in a
vertical agreement thus constitutes a per se violation of sec. 1.

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