i TABLE OF CONTENTS TABLE OF CONTENTS .......................................................................... i TABLE OF AUTHORITIES ..................................................................... ii ARGUMENT ......................................................................................... 1 ANTITRUST INJURY..................................................................... 1 UNREASONABLE RESTRAINT...................................................... 3 ESTOPPEL................................................................................... 6 CONCLUSION ...................................................................................... 8 CERTIFICATE OF COMPLIANCE WITH F.R.A.P. RULE 32(a)(7) ............ 10 CERTIFICATE OF SERVICE................................................................. 11 SUPPLEMENTAL APPENDIX................................................................ 12 ii TABLE OF AUTHORITIES Cases 324 Liquor v. Duffy, 479 U.S. 335 (1987) ............................................... 6 Assessment Technologies of WI, LLC v. Wiredata. Inc., 350 F.3d 640 (7th Cir. 2003) ...................................................................................... 7 Broadcast Music, Inc. v. CBS, 441 U.S. 1 (1979) .................................... 5 Broadcast Music, Inc. v. CBS, 441 U.S. 1 (1979) .................................... 5 Brooke Group LTD. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) ................................................................................................ 2,3 California Liquor Dealers v. Midcal Aluminum, 445 U.S. 97 (1980) .......... 6 Cargill Inc. v. Monfort of Colorado, Inc., 479 U.S. 104 (1986) .................. 1 Eastman Kodak v. Image Technical Servs., 504 U.S. 451 (1992) ............. 2 EEOC V. Waffle House, Inc., 534 U.S. 279, (2002) ................................ 4 Frederiksen v. City of Lockport, 384 F.3d 437 (7th Cir. 2004) ................ 8 Israel Travel Advisory Service, Inc. v. Israel Identity Tours, Inc., 61 F.3d 1250 (7th Cir. 1995) ............................................................................. 2 LePage's Inc. v. 3M Co., 324 F.3d 141 (3d Cir. 2003)) ............................. 3 Matsushita Elec. Industrial Co. v. Zenith Radio, 475 US 574 (1986] .................................................................................................. 3 ProCD Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996)) ........................ 4 Spectrum Sports v. McQuillan, 506 U.S. 447 (1993) ............................... 1 United States v. New Wrinkle , Inc., 342 U.S. 371 (1952) ...................... 3 United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 226 n.59 (1940) ................................................................................................ 2,6 iii United States v. TOPCO Associates, 405 U.S. 596 (1972) ....................... 6 Zenith Radio Corp. v. Hazeltine Research, 401 U.S. 321 ......................... 7 Statutes 15 U.S.C. §1 (Sherman Act §1) ..................................................... 1,2,3,6 15 U.S.C. §2 (Sherman Act §2) ........................................................... 1,2 15 U.S.C. §15 (Clayton Act §4) ........................................................... 1,2 15 U.S.C. §26 (Clayton Act §16) ........................................................ 1,2 Other Authorities F.R.Civ.P. 12 ........................................................................................ 8 1 ARGUMENT Defendant-appelles IBM et al. raise claims asserting lack of antitrust injury, lack of unreasonable restraint in trade and further claim collateral estoppel. Antitrust injury It should first be noted that the nature of the antitrust injuries recognized under §16 of the Clayton Act is broader than injuries addressed under Clayton §4. For example, 4 requires a plaintiff to show actual injury, but 16 requires a showing only of "threatened" loss or damage; similarly, 4 requires a showing of injury to "business or property," cf. Hawaii v. Standard Oil Co., 405 U.S. 251 (1972), while 16 contains no such limitation. . . Although these differences do affect the nature of the injury cognizable under each section, the lower courts, including the courts below, have found that under both 16 and 4 the plaintiff must still allege an injury of the type the antitrust laws were designed to prevent.; Cargill Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 111 (1986). Wallace has filed for relief under the Clayton Act §16 for violations of Sherman §1 where the threshold for standing is a showing of future threatened loss or damage and not actual injury. IBM et al.s resolute attempts [IBM Brief at pp. 10-11] to mischaracterize this case as a Sherman Act §2 monopolization claim involving §4 treble damages cannot succeed. This case is a conspiracy claim requesting equitable relief. In the past, the Supreme Court has noted, (M]oreover, single firm activity is unlike concerted activity covered by §1, which inherently is fraught with anticompetitive risk. Copperweld, 467 U. S., at 767-769 2 (Spectrum Sports v. McQuillan, 506 U.S. 447) (1993)) as well as "[T]he crime under Section 1 is legally distinct from that under Section 2 . . . though the two sections overlap in the sense that a monopoly . . . is a species of restraint of trade under Section 1." (United States v. Socony- Vacuum Oil Co., 310 U.S. 150, 226 n.59 (1940)). Market power is not an essential element to a claim of price fixing under Sherman §1. Some antitrust offenses do not depend on proof of market power. Price fixing and market allocation, for example, are illegal per se whether or not the firms have any hope of success. Palmer v. BRG of Georgia, Inc., 498 U.S. 46 (1990); FTC v. Superior Court Trial Lawyers, 493 U.S. 411 (1990); Blackburn v. Sweeney, 53 F.3d 825 (7th Cir. 1995); Israel Travel Advisory Service, Inc. v. Israel Identity Tours, Inc., 61 F.3d 1250, 1256 (7th Cir. 1995) The Supreme Court emphasized the Robinson-Patman Act and Sherman §2 monopolization claims under Clayton §4 when considering predatory claims in Brooke Group LTD. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993). Accordingly, whether the claim alleges predatory pricing under 2 of the Sherman Act or primary-line price discrimination under the Robinson- Patman Act, two prerequisites to recovery remain the same. . . "Low prices benefit consumers regardless of how those prices are set, and so long as they are above predatory levels, they do not threaten competition. . . .; Brooke at 223, 224. There is no rigid Brooke Group Ltd rule for establishing antitrust injury under the Sherman Act §1 and Clayton §16. (Legal presumptions that rest on formalistic distinctions, rather than actual market realities, are generally disfavored in antitrust law. This Court has preferred to resolve antitrust claims on a case-by-case basis, focusing on the 3 particular facts disclosed by the record. ) (Eastman Kodak v. Image Technical Servs., 504 U.S. 451, 467 (1992)). A Sherman §1 predatory pricing claim entails pricing products below an appropriate measure of cost in a targeted market for the purpose of eliminating competition. Some plausible strategy is required to recoup those below cost losses. See Matsushita Elec. Industrial Co. v. Zenith Radio, 475 US 574 (1986). Unlike the claim in Brooke Group Ltd, this §1 action alleges the sharing of the cost of intellectual property development among thousands of individual authors. The pooled software is subsequently distributed at no charge. Commercial firms such as IBM et al. then recoup those vastly diluted development costs in ancillary markets through bundling and mixed bundling of complimentary products and services. Bundling or mixed bundling of complimentary products is certainly a plausible strategy to recoup profits lost in a targeted market. See LePage's Inc. v. 3M Co., 324 F.3d 141 (3d Cir. 2003). The antitrust injury that results from the distribution of an immense and continuously growing pool of intellectual property price fixed at no charge is obvious -- an entry barrier that any new for profit developer of intellectual property can never hope to breach. Unreasonable restraint IBM et al. cite to United States v. New Wrinkle , Inc., 342 U.S. 371 (1952) and claim the GPL, however, does not seek to extend intellectual 4 property rights beyond those conferred by Congress. [IBM Brief at 15, ¶2] but the GPL does attempt to extend the copyright monopoly. An original licensor who offers his copyrighted intellectual property under GPL terms demands that everyone accepting his offer must license their exclusive intellectual property under identical terms. (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) [Ex A (GPL)§2(b) at 2]. The condition under the terms of this license is recursive and requires all future third parties ad infinitum to use the same license terms. ([T]he intent is to exercise the right to control the distribution of derivative or collective works based on the Program.) [Ex A (GPL)§2]. By definition a third party is a stranger to a contract. (It goes without saying that a contract cannot bind a nonparty.) (EEOC V. Waffle House, Inc., 534 U.S. 279, 294 (2002)). The contract term that purports to control (without privity) the distribution rights of all all third parties to their own exclusive contributions in derivative and collective works creates a right against the world ? that is, in essence, a new copyright regulation. (A copyright is a right against the world. Contracts, by contrast, generally affect only their parties; strangers may do as they please, so contracts do not create "exclusive rights.") (ProCD Inc. v. Zeidenberg, 86 F.3d 1447, 1454 (7th Cir. 1996)). 5 IBM et al. state [IBM Brief at 15, ¶1] The ownership interests contributors to software licensed under the GPL might have in their modifications are seriously limited, given that any distribution of those modifications must be done under the terms of the GPL. This statement constitutes a mea culpa with respect to the extension of intellectual property rights beyond those conferred by Congress [see IBM Brief at 15, ¶2]. The contractual extension of control to the copyrights of all third parties who accept the GPL offer is an egregious misuse of copyright that may rise to the level of an antitrust violation. ([W]e left open the question whether copyright misuse, unless it rises to the level of an antitrust violation. . .) (Assessment Technologies of WI, LLC v. Wiredata. Inc., 350 F.3d 640 (7th Cir. 2003)). The GPL purports to extend its intellectual property control to all third parties software patents as well as copyrights. (Finally, any free program is threatened constantly by software patents. . . To prevent this, we 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]. The blanket license IBM et al. refers to in Broadcast Music, Inc. v. CBS, 441 U.S. 1 (1979) [IBM Brief at 14, ¶2] involved licensing multiple copyrights to a third party for vending efficiency, which is a profit maximizing function. In the case of the GPL license there can be no 6 competitive purpose for distributing a immense pool of intellectual property price fixed at no charge except to destroy competition. The GPL fixes license fees at every level of the product distribution chain (manufacture, wholesale and retail). This is equivalent to industry wide resale price maintenance. See California Liquor Dealers v. Midcal Aluminum, 445 U.S. 97 (1980), 324 Liquor v. Duffy, 479 U.S. 335 (1987). IBM et al. extoll consumer benefits [IBM Brief at 9, ¶1] flowing from the GPL license but that is no defense to naked price fixing. (The effectiveness of price-fixing agreements is dependent upon many factors, . . . Whatever economic justification particular price-fixing agreements may be thought to have, the law does not permit an inquiry into their reasonableness.) (United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 226 n.59 (1940)). See also ([T]he Court has consistently rejected the notion that naked restraints of trade are to be tolerated because they are well intended or because they are allegedly developed to increase competition.) (United States v. TOPCO Associates, 405 U.S. 596, 610 (1972)). Estoppel Wallace requested injunctive relief under §16 of the Clayton Act for threatened harm in violation of the Sherman Act §1 conspiracy statute. In a continuing conspiracy, individual coconspirators perform different roles based upon different acts but remain liable for acts committed by all (Pinkerton Doctrine) and multiple causes of action may 7 accrue. (In the context of a continuing conspiracy to violate the antitrust laws, such as the conspiracy in the instant case, this has usually been understood to mean that each time a plaintiff is injured by an act of the defendants a cause of action accrues to him to recover the damages caused by that act. . . ) (Zenith Radio Corp. v. Hazeltine Research, 401 U.S. 321, 338). The fact that a single coconspirator such as the Free Software Foundation, Inc. was found not liable in one proceeding involving a continuing conspiracy, where there are multiple alleged coconspirators, does not bar the possibility that two or more remaining coconspirators could be found liable in a separate cause of action based upon different future acts. The Zenith holding is especially cogent in the present case in view of the allegation of thousands of coconspirators. IBM et al.s "estoppel" argument was never made to or addressed by the district court and, therefore, should not be made for the first time in this Court. By raising the doctrine of estoppel for the first time on appeal at this stage of the proceedings, Wallace was prevented from adequately preparing the record and arguments in this appeal The parties to this suit (Wallace v. IBM et al.) and the prior suit (Wallace v. Free Software Foundation, Inc)., met in pre-trial conference [Wallace v. IBM et al. Supp. App. dkt. #44] on August 18, 2005. Matters were discussed at pre-trial conference concerning Wallace v. Free 8 Software Foundation, Inc. in conjunction with Wallace v. IBM et al. concerning joinder that would have barred claims of estoppel. ENTRY FOR AUGUST 18, 2005 MAGISTRATE JUDGE V. SUE SHIELDS Plaintiff appears in person and defendants appear by counsel for pretrial conference. Conference held and concluded during which the companion case, Wallace v. Free Software Foundation, Inc., 1:05-cv- 618-JDT-TAB is discussed in conjunction with this case. Order to follow. Judge Young ordered the agreements implemented on November 28, 2005 [Wallace v. IBM et al. Supp. App. dkt. #47]. Entry Concerning Selected Matters The court, having considered the above action and the matters which are pending, makes the following rulings: 1. With respect to the status conference conducted on August 18, 2005, the parties shall proceed as directed and agreed at that conference. The agreement at that pretrial conference concerning joinder of the defendants in the two separate cases would be fatal to the present claim of estoppel. To allow IBM et al. to raise estoppel on appeal for the first time in lieu of first arguing to the district court would inflict a manifest injustice upon Wallace. The final judgment in Wallace v. Free Software Foundation, Inc. constitutes a void judgment under Seventh Circuit precedent. Judge Tinder granted dismissal [Red Hat and Novells Supp. App. at 12] pursuant to F.R.Civ.P. Rule 12(b)(6) for failure to state a claim upon which relief can be granted although the reason given was lack of antitrust injury (lack of standing). In the Seventh Circuit, since the 9 decision in Frederiksen v. City of Lockport, 384 F.3d 437 at 438 (7th Cir. 2004), issues of standing are required to be dismissed pursuant to F.R.Civ.P. Rule 12(b)(1) for lack of subject matter-jurisdiction. 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 10 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 reply 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 3000 words. ___________________________________ Daniel Wallace, pro se P.O. Box 572 New Palestine, IN 46163 (317) 861 6415 11 CERTIFICATE OF SERVICE The undersigned plaintiff-appellant Daniel Wallace, pro se, hereby certifies that I caused two copies of the foregoing reply brief with supplemental appendix to be served by first-class certified mail, postage prepaid, on the following counsel of record: 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 ___________________________________ Daniel Wallace, pro se P.O. Box 572 New Palestine, IN 46163 (317) 861 6415 Dated: ___________________________ 12 SUPPLEMENTAL APPENDIX TABLE OF CONTENTS OF SUPPLEMENTAL APPENDIX ENTRY FOR AUGUST 18, 2005 MAGISTRATE JUDGE V. SUE SHIELDS........................................................... Dkt. #44 Entry Concerning Selected Matters............................................ Dkt. #47
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