[Ossf] Wallace v. FSF - Wallace Loses, Must Pay Costs

[Tzu-Chiang Liou]

Wallace v. FSF - Wallace Loses, Must Pay Costs

Monday, March 20 2006 @ 09:26 PM EST

I thought you'd be interested in knowing that the Wallace v. FSF case
has been dismissed, with Mr. Wallace ordered to pay the Free Software
Foundation's costs. Mr. Wallace's fourth Amended Complaint was dismissed
and the Free Software Foundation's Motion to Dismiss was granted. It's
the Order that tells Wallace to pay the Free Software Foundation's
costs. Judges do that when they'd like you to learn a good lesson. It's
a signal you shouldn't have brought the case in the first place.
Honestly, pro se lawsuits tend to be disasters. If you can't find a
lawyer willing to represent you, it usually means you don't have a case.

When you read the judge's decisions, you will be able to count all the
mistakes the plaintiff made. I won't itemize, because I decided from the
beginning not to educate Mr. Wallace and it feels kind of cruel, but the
judge highlights a couple of them -- that despite the judge clearly
telling him where his previous complaint was lacking, he didn't fix it.
As the judge explains, if you are granted an opportunity to fix a
complaint and you fail to do so, the court isn't under any obligation to
let you try, try again. In this case, he had five tries.

When you have no legal training, you are bound to make mistakes. People
think that because the law is in English, that they get it. I keep
explaining that it's English up to a point, but it's really code --
words in the law don't always have exactly the same meaning as the same
word in normal use. Then there are all the procedural rules that you
won't know. Like not attaching the GPL to your proposed complaint,
unless you want the give the judge the opportunity to consider it when
making his ruling, thus handing him an easy way to toss your case.

Do you know how hard it is to get a complaint tossed out? The judge
himself explains the standard of review:

When ruling on a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), the court must accept as true the factual allegations
contained in the complaint, as well as the inferences reasonably drawn
therefrom. A dismissal is appropriate only if the plaintiff can
establish no set of facts, even if hypothesized, consistent with the
allegations of the complaint that would entitle him or her to relief....
Moreover, the court must examine only the complaint, and not the merits
of the lawsuit.
And he still got thrown out, with everything weighted on his side. Not
only thrown out, he's not allowed to amend again. Here are the reasons
you can be told you can't amend: "a court may deny leave to amend for
undue delay, bad faith, dilatory motive, prejudice, or futility." Take
your pick as to which one applies. They're all awful. But the judge
cites futility. The lesson? It's one thing to write "legal" nonsense on
a message board; it's entirely different to present that nonsense in a
court of law. Nothing stops you if you just must, but you'll end up
losing and probably paying costs to boot. Costs are not the same thing
as lawyers' fees, by the way. If you really make a judge mad, you'll end
up paying those too.

So, the end result is, the GPL went to court, and the judge not only
upheld it, he said this:

[T]he GPL encourages, rather than discourages, free competition and the
distribution of computer operating systems, the benefits of which
directly pass to consumers. These benefits include lower prices, better
access and more innovation.
I'm sure that was not Mr. Wallace's intention, to strenghten the GPL.
But he did.

So, what do you think? Will we still have to listen to nonsense about
the GPL not being a real license? That it's never been tested in court?
That it undermines the marketplace? That it's unfair competition?

All that SCO FUD was answered in a little courtroom in Indiana today.

***************************

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

_____________________

DANIEL WALLACE,

Plaintiff,

v.

FREE SOFTWARE FOUNDATION, INC.,

Defendant.

___________________

1:05-cv-0618-JDT-TAB

ENTRY GRANTING REASSERTED MOTION TO DISMISS (Docket No. 34)1

___________________

On November 30, 2005, Plaintiff Daniel Wallace filed pro se his Fourth
Amended Complaint, in which he seeks injunctive relief to remedy alleged
violations of Section 1 of the Sherman Act, 15 U.S.C. § 1. Two days
earlier, in its Entry Granting Motion to Dismiss the Complaint
(“Entry”), the court had dismissed the previous iteration of Mr.
Wallace’s complaint, and granted him leave to amend the complaint to
cure its deficiencies. The Fourth Amended Complaint purportedly cures
those deficiencies, and again seeks to enjoin “the restraint of trade by
way of a licensing scheme to fix the prices of computer software
products” allegedly perpetuated by Defendant Free Software Foundation,
Inc. (“FSF”). (Fourth Am. Compl. 1.)

On December 29, 2005, FSF moved to dismiss the Fourth Amended Complaint,
arguing that it fails to state a claim upon which relief can be granted
under Federal Rule

of Civil Procedure 12(b)(6). Mr. Wallace responded to the motion on
January 3, 2006, with a reply brief being filed on January 24, 2006. The
motion to dismiss therefore is fully briefed and ripe for determination.
I. PLAINTIFF’S FOURTH AMENDED COMPLAINT

The allegations raised for the first time in the Fourth Amended
Complaint are set forth below. Rather than repeat its previous summation
of the remaining allegations, the court instead refers the parties to
its November 28, 2005 Entry.

Mr. Wallace now contends that FSF has conspired with International
Business Machines Corporation, Red Hat Inc., Novell Inc. and other
individuals to “pool and cross license their copyrighted intellectual
property in a predatory price fixing scheme.” (Fourth Am. Compl. 2-3.)
He contends that the scheme is carried out through a “predatory price
fixing agreement . . . to pool and cross license . . . intellectual
property with others” (id. 3) known as the GNU General Public License
(“GPL”).

Mr. Wallace adds a section in the Fourth Amended Complaint entitled
“INJURY,” in which he states that the predatory price fixing scheme is
“foreclosing competition in the market for computer operating systems.”
(Id.) Specifically, it “prevents Plaintiff Daniel Wallace from marketing
his own computer operating system as a competitor.” (Id.)

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II. MOTION TO DISMISS
In its Reasserted Motion to Dismiss, FSF requests that the court dismiss
the Fourth Amended Complaint for failure to state a claim upon which
relief can be granted under Federal Rule of Civil Procedure 12(b)(6).
FSF contends that the complaint fails to address the deficiencies
identified by the court in its November 28, 2005 Entry, including that
the “injury allegedly suffered by Plaintiff is not one that the
antitrust laws were meant to address.” (Mot. Dismiss 5.) Furthermore,
FSF argues that Mr. Wallace lacks standing to bring the Fourth Amended
Complaint because he does not allege “any facts to show that in fact he
is prepared to enter the market for providing computer operating
systems.” (Id. (citations omitted).) FSF requests not only that the
court dismiss the Fourth Amended Complaint, but also that it deny Mr.
Wallace leave to further amend the complaint.

Mr. Wallace responds that his Fourth Amended Complaint adequately sets
forth the three material elements of his claim under § 1 the Sherman
Act. He states that he has alleged 1) that the GPL constitutes a
“contract, combination or conspiracy” (Resp. 2); 2) that the GPL creates
an unreasonable restraint of trade (id. 6); and 3) that the GPL has
caused him injury (id.10). As a result, Mr. Wallace contends that he has
“directly or inferentially alleged that the defendant has used an
express contractual agreement to conspire with named co-conspirators and
engage in an unreasonable restraint of trade by fixing prices at
predatory levels.” (Id. 13-14.)

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A. Standard of Review
When ruling on a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), the court must accept as true the factual allegations
contained in the complaint, as well as the inferences reasonably drawn
therefrom. Forseth v. Vill. of Sussex, 199 F.3d 363, 368 (7th Cir.
2000); Baxter by Baxter v. Vigo County Sch. Corp., 26 F.3d 728, 730 (7th
Cir. 1994). A dismissal is appropriate only if the plaintiff can
establish no set of facts, even if hypothesized, consistent with the
allegations of the complaint that would entitle him or her to relief.
See Sanjuan v. Am. Bd. of Psychiatry & Neurology, Inc., 40 F.3d 247, 251
(7th Cir. 1994). Moreover, the court must examine only the complaint,
and not the merits of the lawsuit. See Autry v. Nw. Premium Servs.,
Inc., 144 F.3d 1037, 1039 (7th Cir. 1998).

B. The Plaintiff Again Has Not Alleged An Antitrust Injury.

In its November 28, 2005 Entry, the court pointed to a fatal flaw in Mr.
Wallace’s Third Amended Complaint — he did not allege an antitrust
injury upon which his claim under Section 1 of the Sherman Act could
move forward. (Entry 11.) The court noted that in order to assert a
Section 1 claim, a plaintiff must allege that he or she suffered “injury
of the type the antitrust laws were intended to prevent and that flows
from that which makes defendants’ act unlawful.” Brunswick Corp. v.
Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 486 (1977). This generally means
an anticompetitive effect. Id. at 489. The court found that Mr.
Wallace’s purported injury, that he was “threaten[ed] from entering into
the market with his own computer operating system” (Third Am. Compl. 3),

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was not of the sort that antitrust laws were intended to prevent, and
dismissed his complaint with leave to amend. (Entry 11.)
Mr. Wallace has amended the complaint to add more detailed allegations
relating to his injury. He now asserts that the GPL is “foreclosing
competition in the market for computer operating systems.” (Fourth Am.
Compl. 3.) Specifically, it “prevents Plaintiff Daniel Wallace from
marketing his own computer operating system as a competitor.” (Id.) Mr.
Wallace argues that this amendment saves his complaint from dismissal.
The court disagrees. The injury set forth in the Fourth Amended
Complaint, which the court acknowledges is subtly different than that
alleged in the previous complaint, still suffers from the same infirmity
identified in the court’s November 28, 2005 Entry — it does not state an
injury cognizable under antitrust laws.

First, while Mr. Wallace contends that the GPL is “foreclosing
competition in the market for computer operating systems” (id.), his
problem appears to be that GPL generates too much competition, free of
charge. The court’s understanding from the GPL itself2 is that it is a
software licensing agreement through which the GNU/Linux operating
system may be licensed and distributed to individual users so long as
those users “cause any work that [they] 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 3.) The GPL

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purportedly functions to “guarantee [users’] freedom to share and change
free software.” (GPL Preamble.) As alleged, the GPL in no way forecloses
other operating systems from entering the market. Instead, it merely
acts as a means by which certain software may be copied, modified and
redistributed without violating the software’s copyright protection. As
such, the GPL encourages, rather than discourages, free competition and
the distribution of computer operating systems, the benefits of which
directly pass to consumers. These benefits include lower prices, better
access and more innovation. See Jason B. Wacha, Taking the Case: Is the
GPL Enforceable, 21 Santa Clara Computer & High Tech L.J. 451, 487
(2005). And the Sherman Act “was enacted to assure customers the
benefits of price competition, and . . . prior cases have emphasized the
controlling interest in protecting the economic freedom of participants
in the relevant market.” Assoc.’d Gen. Contractors v. Cal. State Council
of Carpenters, 459 U.S. 519, 528 (1983). Therefore, the court finds that
the Fourth Amended Complaint does not adequately set forth an injury to
competition as a whole.
The allegation in the Fourth Amended Complaint that the GPL is
foreclosing Mr. Wallace from entering into the market for operating
systems also is not a cognizable antitrust injury. The court understands
Mr. Wallace’s argument that the GPL may be preventing him from marketing
his own operating system, and, for the purposes of the instant motion,
accepts that allegation as true. However, while this may be significant
enough from Mr. Wallace’s perspective, a plaintiff must prove not only
an injury to him or herself, but to the market as well, Martin v. Am.
Kennel Club, Inc., 697 F. Supp. 997, 1003 (N.D. Ill. 1988), which Mr.
Wallace has failed to do. As the court stated in its

6

November 28, 2005 Entry, reduced opportunity as a competitor does not
necessarily equate to an antitrust injury as recognized by the courts.
Brunswick, 429 U.S. at 488. Indeed, injury in fact is “a different
beast” than antitrust injury. Prof’l Sports Ltd. P’ship v. Nat’l
Basketball Assoc., 961 F.2d 667, 669 (7th Cir. 1992). And “whenever the
plaintiff and consumers have divergent rather than congruent interests,
there is a potential problem in finding ‘antitrust injury’. . . . When
the plaintiff is a poor champion of consumers, a court must be
especially careful not to grant relief that may undercut the proper
functions of antitrust.” Ball Mem’l Hosp., Inc. v. Mutual Hosp. Ins.,
Inc., 784 F.2d 1325, 1334 (7th Cir. 1986).
Mr. Wallace has not alleged that anyone interfered with his freedom to
compete in computer software market by creating his own operating
system, one perhaps with features different from, or in addition to,
that of the GNU/Linux operating system. Indeed, Mr. Wallace has that
ability, regardless of whether the GPL is in force or not.

For these reasons, the court finds that Mr. Wallace’s Fourth Amended
Complaint does not adequately allege an antitrust injury upon which his
Section 1 claim may move forward. 3 The complaint therefore must be
dismissed.

7

C. The Plaintiff is Denied Leave to Further Amend the Complaint.
FSF requests that the court deny Mr. Wallace leave to further amend his
complaint, arguing that any fifth or subsequent amendment would be
futile, particularly given Mr. Wallace’s failure to state a claim thus
far. Even though Federal Rule of Civil Procedure 15(a) provides that
“leave shall be freely given when justice so requires,” a court may deny
leave to amend for undue delay, bad faith, dilatory motive, prejudice,
or futility. See Foman v. Davis, 371 U.S. 178, 182 (1962); Arazie v.
Mullane, 2 F.3d 1456, 1464 (7th Cir. 1993). The opportunity to amend a
complaint is futile if “the complaint, as amended, would fail to state a
claim upon which relief could be granted.” Glassman v. Computervision
Corp., 90 F.3d 617, 623 (1st Cir. 1996)). This standard is the same
standard of legal sufficiency that applies under Rule 12(b)(6). Id at 623.

In this case, Mr. Wallace has had five opportunities to state a claim
under Rule 12(b)(6). And the court twice has determined that he failed
to do so. The court’s November 28, 2005 Entry even specifically
highlighted Mr. Wallace’s failure to allege an antitrust injury, but Mr.
Wallace’s subsequent complaint did not adequately address that failure.
In such a situation, where Mr. Wallace has failed to remedy a deficiency
expressly noted by the court, he should not, and will not, be granted
leave to further amend his complaint. See Shanahan v. Chicago, 82 F.3d
776, 781 (7th Cir. 1996) (a district court need not permit a plaintiff
to amend a complaint if the amended complaint suffers from the same
defects as the original complaint).

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III. CONCLUSION
For the reasons stated above, the court finds that Mr. Wallace has
failed to allege an antitrust injury such that his claim under Section 1
of the Sherman Act may move forward. The court therefore GRANTS the
Reasserted Motion to Dismiss (Docket No. 34), filed December 29, 2005.
Mr. Wallace is DENIED leave to further amend his complaint.

An appropriate judgment will be entered.

ALL OF WHICH IS ENTERED this 20th day of March 2006.

___[signature]____
John Daniel Tinder, Judge
United States District Court

Electronic copies to:

Curtis W. McCauley
Ice Miller
[email]

Philip A. Whistler
Ice Miller
[email]

Copy mailed to:

Daniel Wallace
[address]


1 This Entry is a matter of public record and will be made available on
the court’s web site. However, the discussion contained herein is not
sufficiently novel to justify commercial publication.

2 The court may refer to the GPL in deciding the motion to dismiss
because Mr. Wallace referred to it in his Fourth Amended Complaint. See
Venture Assoc’s. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th
Cir. 1993).

3 FSF also argues that Mr. Wallace has not alleged that he is actually
prepared to enter computer operating systems market. In light of the
court’s ruling on the antitrust injury issue, it is unnecessary to
address whether this contention is correct.

9

***************************
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

_____________________

DANIEL WALLACE,

Plaintiff,

v.

FREE SOFTWARE FOUNDATION, INC.,

Defendant.

___________________

1:05-cv-0618-JDT-TAB

JUDGMENT

___________________

The court, having decided that the Reasserted Motion to Dismiss should
be granted, now therefore ORDERS, ADJUDGES AND DECREES that the Fourth
Amended Complaint is DISMISSED and that judgment is entered in favor of
the Defendant and against the Plaintiff. Costs shall be allowed the
Defendant.

ALL OF WHICH IS ORDERED this 20th day of March 2006.

_________________
John Daniel Tinder, Judge
United States District Court

Laura A. Briggs, Clerk
By Evelyn A. Hollins, Deputy Clerk
United States District Court

-- 
TzuChiang Liou, Project Manager
OSSF Supports Software Freedom  http://www.openfoundry.org
Institute of Information Science, Academia Sinica, Taiwan
E-mail: tcliou at iis.sinica.edu.tw
MSN: tcliou at msn.com
GTalk: tcliou at gmail.com
TEL:+886-2-2788-3799 ext.1404
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