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Re: EASTERBROOK's "quick look" on the GPL and Wallace's claim

From: Alexander Terekhov
Subject: Re: EASTERBROOK's "quick look" on the GPL and Wallace's claim
Date: Thu, 09 Nov 2006 22:07:34 +0100

"When you're before Easterbrook, you know he'll understand the issues, 
will ask astute questions and will make an intellectually honest 
ruling," said Michele Rocawich, a Chicago attorney who has argued 
before him and reads his opinions."

Are there multiple Easterbrooks in the 7th?

"Easterbrook earned the second-highest ranking in a 2003 study that 
sought to quantify the quality of federal judges' work by, among 
other things, counting citations to their work and measuring how 
fast they produced opinions. Easterbrook's fellow 7th Circuit judge, 
Richard Posner, ranked No. 1."

EASTERBROOK, Circuit Judge wrote:
> Wallace does not contend that software available for
> free under the GPL will lead to monopoly prices in the
> future. How could it, when the GPL keeps price low forever

Well, copyright is not forever. At least yet. But that's ok. Now,

> and precludes the reduction of output that is essential
> to monopoly? “[I]f a manufacturer cannot make itself
> better off by injuring consumers through lower output and
> higher prices, there is no role for antitrust law to play.”

Judge Tinder: "Anticompetitive effect has been described as a 
reduction of output, increase in price, or deterioration in 
quality of goods and services. Generac Corp. v. Caterpillar 
Inc., 172 F.3d 971, 978 (7th Cir. 1999); Wilk v. Am. Med. Ass’n, 
895 F.2d 352, 360-62 (7th Cir. 1990) (impeding consumers’ free 
choice is an anticompetitive effect); Les Shockley Racing, Inc. 
v. Nat’l Hot Rod Ass’n, 884 F.2d 504, 508-09 (9th Cir. 1989) 
(in a market that “is both narrow and discrete and the market 
participants are few,” the loss of a competitor may result in 
an anticompetitive effect if there is an effect on price or
availability, the allocation of resources, or the opportunities 
for market entry).

The GPL allows free access to software programs, subject to some 
limitations. This does not mean that the GPL necessarily aids 
competition as contemplated by the Sherman Act, as FSF contends. 
Instead, it could be argued that by making software available to 
consumers free of charge through a licensing agreement, the GPL 
results in “reduction in output . . . [and] deterioration in 
quality,” United States v. Brown Univ., 5 F.3d 658, 668 (3d Cir. 
1993), which could be harmful to consumers. By making certain
software programs available to users at no charge, the GPL may 
be discouraging developers from creating new and better programs 
because they will not receive compensation for their work, 
thereby reducing the number of quality programs available to 
users. This may be considered anticompetitive effect, and it 
certainly can be inferred from what Mr. Wallace alleges in his 
Third Amended Complaint. Therefore, this court finds that the 
Third Amended Complaint states a claim for violation of Section 
1 of the Sherman Act, under the rule of reason doctrine. "

> Software that is not maintained and improved eventually
> becomes obsolete, and the lack of reward may reduce
> the resources devoted to maintenance and improvement
> of Linux and other open-source projects. If that occurs,
> however, then proprietary software will enter or gain
> market share. People willingly pay for quality software even
> when they can get free (but imperfect) substitutes. Open

Wallace: "Not only competitors are harmed by the GPL scheme. 
Consumers lose because a lack of competition removes not just 
product choice but without competitive reward the incentive to 
improve product quality disappears."

> Nor does it help to call the GPL “price fixing.” Although
> it sets a price of zero, agreements to set maximum prices
> usually assist consumers and therefore are evaluated under
> the Rule of Reason. See State Oil Co. v. Khan, 522 U.S. 3
> (1997). Intellectual property can be used without being used
> up; the marginal cost of an additional user is zero (costs of
> media and paper to one side), so once a piece of intellectual
> property exists the efficient price of an extra copy is zero,
> for that is where price equals marginal cost. Copyright and
> patent laws give authors a right to charge more, so that
> they can recover their fixed costs (and thus promote
> innovation), but they do not require authors to charge more.
> No more does antitrust law require higher prices. Linux
> and other open-source projects have been able to cover their
> fixed costs through donations of time; as long as that
> remains true, it would reduce efficiency and consumers’
> welfare to force the authors to levy a charge on each new
> user.

Donations. Of Time. And that is "intellectually honest" ruling? 

Only if he was drunken.

Wallace: "When we analyze case (ii) “pricing below some 
appropriate measure of cost” we see that a maximum price of zero 
for the intellectual property in computer programs leads to an 
absurd result. In addition to the intrinsic value ordained by Art. 
I, §8, cl. 8 of the Constitution, the cost of creation of 
intellectual property in computer programs entails the development 
costs of skilled programmers, new computer hardware, 
communications costs and administrative overhead. Commercial 
computer programs are not developed in a zero cost vacuum -- that 
is an absurd proposition. A maximum price of zero is below any 
reasonable definition of “appropriate measure of cost” concerning 
development and innovation of intellectual property assets."


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