Free Freehand Corp. v. Adobe Systems Inc.
852 F. Supp. 2d 1171
N.D. Cal.2012Background
- Antitrust case arising from Adobe’s 2005 acquisition of FreeHand, a competitor to Illustrator, and alleged post-merger anticompetitive conduct.
- Plaintiffs allege Adobe increased Illustrator prices and reduced FreeHand development, effectively removing FreeHand from the market.
- Free FreeHand is a nonprofit with 5,500 design professionals; Palmer is a member who owned FreeHand and purchased Illustrator.
- FTC consent order in 1994 divested FreeHand from Adobe and prohibited acquiring FreeHand for 10 years; Adobe later acquired FreeHand via Macromedia in 2005.
- Plaintiffs define two markets: Mac OS and Windows OS professional vector graphic software; Adobe allegedly held global/national monopoly power in these markets.
- Plaintiffs claim monopolization through post-merger acts: supracompetitive pricing, ceasing FreeHand development, bundling Illustrator, and not releasing FreeHand’s source code.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Adequacy of §2 monopolization claim | Plaintiffs allege monopoly power and willful maintenance via anticompetitive conduct. | Adobe contends acts are lawful unilateral business decisions. | Plaintiffs plausibly plead willful acquisition/maintenance and antitrust injury. |
| Timeliness of §2 claim under continuing violation | Continued post-merger acts caused new injury; thus timely. | Continuing violation doctrine does not apply to mergers. | Continuing violation timely for §2; denial of dismissal. |
| Timeliness of §7 Clayton Act claim under new use exception | Post-merger use of FreeHand changed and injured plaintiffs. | New use exception not applicable here. | New use exception applies; §7 claim timely. |
| Cartwright Act claim viability | Monopoly maintenance could implicate California Cartwright Act. | Cartwright does not reach unilateral conduct; intra-California law. | Cartwright Act claim dismissed with leave to amend. |
Key Cases Cited
- City of Mishawaka v. American Electric Power Co., 616 F.2d 976 (7th Cir.1980) (antitrust analysis of anticompetitive acts in aggregate)
- City of Anaheim v. S. Cal. Edison Co., 955 F.2d 1373 (9th Cir.1992) (aggregate conduct analysis in monopoly cases)
- Glen Holly Entm’t, Inc. v. Tektronix, Inc., 352 F.3d 367 (9th Cir.2003) (limits of unilateral product decisions in antitrust)
- In re Live Concert Antitrust Litig., 247 F.R.D. 98 (C.D. Cal.2007) (example of predatory pricing and post-viability harm})