Wallace case FAQ for dummies v1.5

[Alexander Terekhov]

(This is regular posting. Acknowledgments: aim_here2002, Linonut.)


Q: Bzzzzt. What the fuck ... !?

A: The context is property. Intangible intellectual property (rights
granted under IP license). IP goods. Property in short.


Q: Bzzzzt, but according to RMS, "intellectual property... is a mirage,
which appears to have a coherent existence only because the term
suggests it does." So bzzzzt, what the fuck ... !?

A: Well, well, well. But according to one FTC commissioner (and an
antitrust attorney), it is not quite a mirage. "One fundamental question
in this area is whether intellectual property is like other property for
purposes of antitrust analysis. In considering this question, it seems
to me that we should keep in mind some obvious principles. First,
intellectual property is property, that is to say, it belongs to someone
who has the right to exclude others from using it without his or her
consent. Second, intellectual property has attributes that distinguish
it from personal property and real property -- that is why we have a
different word for it. For example, the enforcement of an owner's
exclusive right to use physical property may be accomplished more
easily, as a practical matter, than enforcement of an exclusive
intellectual property right. Antitrust enforcers should certainly remain
open to considering new ideas about how the rights associated with
intellectual property can and should be distinguished from the ownership
of tangible property in the analysis of antitrust liability. But for
now, it seems fair to say that for antitrust purposes, intellectual
property is generally treated like other forms of property."


Q: What price restrictions?

A: Property price restrictions.


Q: What 'price'? Define 'price'.

A: Cost to obtain EXISTING property on buyer's side. Price is fixed 
at zero in the case of property locked in the GNU GPL pool (e.g. 
Guh-NÜ-slash-Linux, the GPL part of it).


Q: Bzzzzt, but "marginal cost" ... so what the fuck ... !?

A: The good being distributed under the GPL is Intellectual Property
(rights under copyright and patent laws). The cost of creation of that
good is not zero. As for "marginal cost"... "Professor John Duffy of GW
Law School has published "The Marginal Cost Controversy in Intellectual
Property" in the Winter 2004 issue of the University of Chicago Law
Review. (Available through WestLaw with a credit card.) It is a useful
piece. A common refrain of the copyleft is that the marginal cost of a
digital copy of an intellectual product is zero, so, therefore,
"economics teaches us" that it should be priced at zero. This is a
fallacy, as discussed in Marginalized, akin to the logic of the ancient
paradox that proves that Achilles can never catch the tortoise." (Go
google it.)


Q: A GPL coder is not compensated?

A: That plus administration overhead, etc. Cost required to create NEW
property (GPL derivative works, additions to GPL collective works) on
seller's side. The GPL fixes the price below cost. Wallace is claiming
antitrust injury from predatory pricing (pricing below cost) and says
that the whole scheme is in violation of Sherman Act 1.


Q: Okay, but how about explaining who Wallace is, who he's suing, what
gives him the right to sue? (question from aim_here2002)

A: Please visit <www.terekhov.de/Wallace-case.htm>. This is "de novo"
review.


Q: What if Wallace loses on appeal as well? 

A: Then you might enjoy Wallace Reloaded (so to speak) featuring
Schwarzenegger, I suppose. "The California Unfair Practices Act, Bus. &
Prof. Code § 17043, prohibits selling a product below its cost for the
purpose of injuring competitors or destroying competition. Bus. & Prof.
Code § 17044 prohibits selling products as "loss leaders," which § 17030
defines as selling below cost for the purpose of inducing the purchase
of other merchandise, misleading or deceiving purchasers, or diverting
business from competitors. Cost is statutorily defined for production as
including "the cost of raw materials, labor and all overhead expenses of
the producer." Bus. & Prof. § 17026." This might enlighten you: "GNU
will remove operating system software from the realm of competition. You
will not be able to get an edge in this area, but neither will your
competitors be able to get an edge over you. You and they will compete
in other areas, while benefiting mutually in this one. If your business
is selling an operating system, you will not like GNU, but that's tough
on you. If your business is something else, GNU can save you from being
pushed into the expensive business of selling operating systems."
(www.gnu.org/gnu/manifesto.html)


Q: Okay, what if the GPL falls as Wallace claims?

A: Uh oh. To begin with, it will set the [L]GPL'd code free (will make
it available for appropriation by Microsoft, etc.). Certain types of
unlawful licensing arrangements (such as antitrust violations) are
deemed misuse and render rights under patent and/or copyright
unenforceable in court of law until the misuse is purged (and since it's
pretty much impossible to purge the [L]GPL'd stuff from the net... you
got it). Another rather interesting aspect is that if the GPL falls as
Wallace claims, everyone (because of the Pinkerton Doctrine) who
contributed GPL'd code that was used in commerce against a proprietary
competitor will be subject to 15 USC 15: "(a) Amount of recovery;
prejudgment interest  Except as provided in subsection (b) of this
section, any person who shall be injured in his business or property by
reason of anything forbidden in the antitrust laws may sue therefor in
any district court of the United States in the district in which the
defendant resides or is found or has an agent, without respect to the
amount in controversy, and shall recover threefold the damages by him
sustained, and the cost of suit, including a reasonable attorney’s fee.
The court may award under this section, pursuant to a motion by such
person promptly made, simple interest on actual damages for the period
beginning on the date of service of such person’s pleading setting forth
a claim under the antitrust laws and ending on the date of judgment, or
for any shorter period therein, if the court finds that the award of
such interest for such period is just in the circumstances. In
determining whether an award of interest under this section for any
period is just in the circumstances, the court shall ...". The GPL is a
price-fixing (not monopolizing) claim. IBM, Red Hat etc. will owe
Microsoft (for the last four years) for treble damages for the server
market share that GNU/Linux has held (as Windows substitute... as for
proprietary Unices... recall that "GNU is Not Unix"... <chuckles>). So 
it appears that, unfortunately, making money wise, Gates & Co. have 
been one step ahead of IBM ever since MS-DOS. 

regards,
alexander.