Automattic & Matt Mullenweg Fail To Dismiss WP Engine Antitrust Claims via @sejournal, @martinibuster

The judge in the WP Engine federal antitrust lawsuit ruled on motions to dismiss filed by Automattic, WooCommerce, and Matt Mullenweg, handing both WP Engine and the defendants significant victories and losses.

WP Engine won on most claims the defendants tried to dismiss, including its antitrust claims, but lost its claim that Automattic’s threats and computer interference amounted to illegal computer extortion. WP Engine failed to eliminate any counterclaim counts filed against it by the defendants; all seven survived at least in part.

What WP Engine Gained

U.S. District Judge Araceli Martínez-Olguín gave WP Engine favorable rulings in six parts of the motions to dismiss.

Antitrust claims survived Interference claims against WooCommerce survived Unfair competition claim against WooCommerce survived Trademark non-infringement claim against WooCommerce survived WP Engine won a partial dismissal of the defendants’ false-advertising counterclaim WP Engine won a partial dismissal of several trademark counterclaims

Antitrust Claims

The judge ruled in WP Engine’s favor by keeping alive all four antitrust claims that the defendants had challenged, including monopolization, attempted monopolization, and the two illegal tying claims.

Monopolization And Attempted Monopolization Claims

WP Engine’s claims of monopolization and attempted monopolization allege that Automattic and Mullenweg used control over the WordPress ecosystem to gain or maintain market power, restrict competitors, raise costs, and reduce competition. The judge found WP Engine had alleged enough market power, competitive harm, and anticompetitive conduct for those claims to continue.

Two Illegal Tying Claims

The two illegal tying claims that survived the motions to dismiss allege that the defendants used control over access to WordPress.org to pressure users not to affiliate with WP Engine. One claim is under federal antitrust law and the other under California law. The judge found WP Engine had plausibly alleged this kind of negative tying, so both claims survived.

Three Claims Against WooCommerce

WP Engine’s three claims against WooCommerce also survived:

Interference Claims
WP Engine alleged that WooCommerce had interfered with its existing and prospective business relationships, and the judge found that WP Engine had alleged enough specific conduct for those claims to continue. Unfair Competition Claim
The allegations that WooCommerce engaged in unfair business conduct are related to the same underlying interference claims, so the judge allowed the unfair competition claim to proceed as well. Trademark Non-Infringement Claim
WooCommerce argued that WP Engine’s claim that its conduct does not infringe WooCommerce’s trademarks is redundant, but the judge declined to dismiss the claim.

WooCommerce argued that WP Engine had grouped it together with the other defendants without identifying conduct that was specific to WooCommerce. The judge rejected that argument, pointing to a trademark-related letter sent by counsel representing WooCommerce and Automattic as well as an instance in which a WooCommerce employee solicited a WP Engine customer after WP Engine was blocked from accessing WordPress.org.

The judge concluded:

“These allegations do not, then, as WooCommerce contends, fail to “‘differentiate allegations against multiple defendants.'” “

Automattic’s Counterclaims (Mostly) Survive

The defendants had a big win because the judge allowed all seven of their counterclaims to survive at least in part. The claims accuse WP Engine of trademark infringement and dilution, misleading use of WordPress-related branding, false advertising, and unfair competition. The judge declined to dismiss them because many of WP Engine’s challenges could not be resolved at the motion-to-dismiss stage.

The judge explained:

“Whether the counterclaims are barred by laches, nominative fair use, or because the WordPress Marks were not famous, are factual issues not suitable for resolution at this stage.

…WP Engine’s resort to the statute of limitations as a basis for dismissal is also unavailing.”

The seven counterclaims that survive at least in partial form are:

Count 1: Federal trademark infringement Count 2: Federal unfair competition, false designation of origin, and false advertising Count 3: Common law trademark infringement Count 4: Federal trademark dilution Count 5: California trademark dilution Count 6: Unfair competition under California’s UCL Count 7: Common law unfair competition

WP Engine Gratified With Outcome So Far

A spokesperson for WP Engine shared this official statement:

“We are gratified by this important ruling allowing our antitrust claims to proceed, finding that we have sufficiently alleged market power, anticompetitive conduct, and market-wide harm to competition – not just harm to WP Engine.

At its core, this case is about how Automattic and Matt Mullenweg abused their power over the WordPress ecosystem to punish a competitor, suppress competition, increase costs, decrease quality, and undermine the open ecosystem that millions of customers and businesses rely on. We look forward to proving our many claims.”

Featured Image by Shutterstock/taif ahmed