Wallace v. International Business Machines Corp.
Wallace v. International Business Machines Corp. (467 F.3d 1104, 7th Cir. 2006) represents a significant ruling in the realm of free software development. The Seventh Circuit Court of Appeals determined that the GNU General Public License (GPL) does not breach federal antitrust regulations.
Daniel Wallace, an American plaintiff, initiated legal action against the Free Software Foundation (FSF), accusing them of price fixing. Subsequently, he filed lawsuits against IBM, Novell, and Red Hat, contending that the availability of free Linux software impeded his capacity to generate revenue from his proprietary operating system.
FSF lawsuit
On April 28, 2005, Wallace commenced litigation against the FSF in the U.S. District Court for the Southern District of Indiana, asserting that the GPL’s mandate for free distribution of licensed software constituted price fixing. The case was dismissed without prejudice in November 2005. After submitting several amended complaints, Wallace's final amended complaint was dismissed on March 20, 2006, by Judge John Daniel Tinder, who also ordered Wallace to cover FSF’s legal expenses.
The Court concluded that Wallace did not establish an antitrust injury impacting the marketplace, explaining:
- [T]he GPL promotes open competition and facilitates the free distribution of operating systems, which benefits consumers through reduced costs, enhanced accessibility, and greater innovation.
This judgment reinforced that the Sherman Act is designed to safeguard economic liberty and competitive pricing while endorsing creators' ability to distribute their work without charge.
IBM, Novell, and Red Hat lawsuit
In 2006, Daniel Wallace brought an antitrust claim against IBM, Novell, and Red Hat, alleging collusive price fixing connected to their distribution of the Linux operating system and open-source software.
On May 16, 2006, Judge Richard L. Young dismissed the lawsuit with prejudice due to fundamental defects in Wallace’s allegations and ruled that allowing further amendments would be pointless.
Wallace appealed to the Seventh Circuit, where a three-judge panel chaired by Frank Easterbrook reviewed the case de novo. The appeal was rejected because of numerous shortcomings in the complaint.