Re: Hey Terekhov: Wallace lost. Who'd guess.... ;)

[Alexander Terekhov]

David Kastrup wrote:
[...]
> > That's all bullshit. The FSF simply managed to fool Judge Tinder
> > that Wallace lacks standing.  Tinder recorgnized that "Plaintiff’s
> > Third Amended Complaint States a Claim Upon Which Relief can be
> > Granted" and that "Plaintiff’s Allegations Sufficiently Set Forth a
> > Violation of the Rule of Reason", but he was fooled by FSF's "even
> > if it were possible for Plaintiff to allege some harm to competition
> > in the abstract, Plaintiff has not alleged antitrust injury to
> > himself, and thus lacks standing."
> 
> You have an interesting notion of "fooled".  

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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 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 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:

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.”
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regards,
alexander.