## Facts

- Daniel Wallace, acting pro se, sought to sell a proprietary operating system that would compete with Linux, either by creating a derivative work or developing a new system.
- IBM, Red Hat, and Novell distributed and/or supported Linux, which is licensed under the GNU General Public License (GPL).
- The GPL permits copying and creation of derivative works but requires that derivative works be distributed under the same license terms, preventing distributors of derivatives from charging for the software itself.
- Wallace alleged defendants conspired to restrain trade by distributing Linux and GPL-licensed derivatives at a zero price, which he characterized as price-fixing that excluded higher-priced competitors.
- The district court dismissed for failure to state a claim, concluding Wallace alleged no antitrust injury and therefore lacked standing; Wallace appealed.

## Issues

1. Whether distributing software under the GPL at a price of zero, and requiring derivative works to remain free, constitutes unlawful price-fixing or an unreasonable restraint of trade under the Sherman Act.
2. Whether a would-be producer alleging inability to profit because rivals distribute free software has pleaded antitrust injury sufficient for antitrust standing.

## Decision

- The Seventh Circuit affirmed the dismissal for failure to state a claim.
- The court held Wallace did not plead antitrust injury because he alleged harm from low prices to himself, not harm to competition or consumers.
- The court rejected the theory that the GPL’s terms constitute an anticompetitive conspiracy or per se unlawful price-fixing.
- The court treated the GPL as a copyright licensing arrangement that increases availability and can yield consumer benefits (including lower prices and greater dissemination).

## Legal Principles

- Antitrust standing requires “antitrust injury”: harm of the type the antitrust laws prevent, typically reflected in injury to the competitive process and consumers (e.g., higher prices, reduced output, reduced innovation), not merely a competitor’s reduced ability to earn profits.
- Low or zero prices are ordinarily consistent with competition; absent plausible allegations of exclusionary conduct leading to market power and later supracompetitive pricing (including a realistic prospect of recoupment), below-cost or free distribution does not state a Sherman Act claim.
- A copyright license that permits copying and derivative works, while requiring downstream distribution under the same terms, is not itself a cartel-like agreement; acceptance of shared license terms, without anticompetitive effects, does not establish an actionable restraint of trade.

## Conclusion

The Seventh Circuit held that GPL-based distribution of Linux at no charge does not, without additional allegations of consumer harm or exclusionary conduct leading to market power, violate federal antitrust law, and that a producer’s inability to compete with free software is not an antitrust injury conferring standing.


Wallace v. Int'l Bus. Machs. Corp., 467 F.3d 1104 (7th Cir. 2006)