Automattic founder Matt Mullenweg called WP Engine "a cancer to WordPress."
Automattic founder and WordPress co-author Matt Mullenweg in San Francisco on July 24, 2013.
Automattic Inc. and its founder have been sued by a WordPress hosting company that alleges an extortion scheme to extract payments for use of the trademark for the open source WordPress software. Hosting firm WP Engine sued Automattic and founder Matt Mullenweg in a complaint filed yesterday in US District Court for the Northern District of California.
"This is a case about abuse of power, extortion, and greed," the lawsuit said. "The misconduct at issue here is all the more shocking because it occurred in an unexpected place—the WordPress open source software community built on promises of the freedom to build, run, change, and redistribute without barriers or constraints, for all."
The lawsuit alleged that "over the last two weeks, Defendants have been carrying out a scheme to ban WPE from the WordPress community unless it agreed to pay tens of millions of dollars to Automattic for a purported trademark license that WPE does not even need."
The complaint says that Mullenweg blocked WP Engine "from updating the WordPress plugins that it publishes through wordpress.org," and "withdrew login credentials for individual employees at WPE, preventing them from logging into their personal accounts to access other wordpress.org resources, including the community Slack channels which are used to coordinate contributions to WordPress Core, the Trac system which allows contributors to propose work to do on WordPress, and the SubVersion system that manages code contributions."
The lawsuit makes accusations, including libel, slander, and attempted extortion, and demands a jury trial. The lawsuit was filed along with an exhibit that shows Automattic's demand for payment. A September 23 letter to WP Engine from Automattic's legal team suggests "a mere 8% royalty" on WP Engine's roughly $400 million in annual revenue, or about $32 million.
"WP Engine's unauthorized use of our Client's trademarks... has enabled WP Engine to unfairly compete with our Client, leading to WP Engine's unjust enrichment," Automattic alleged in the letter.
Mullenweg: WP Engine “a cancer to WordPress”
Mullenweg co-authored the WordPress software first released in 2003 and founded Automattic in 2005. Automattic operates the WordPress-based publishing platform WordPress.com. Meanwhile, the nonprofit WordPress Foundation, also founded by Mullenweg, says it works "to ensure free access, in perpetuity, to the software projects we support."
Last month, Mullenweg wrote a blog post alleging that WP Engine is "a cancer to WordPress" and that it provides "something that they've chopped up, hacked, butchered to look like WordPress, but actually they're giving you a cheap knock-off and charging you more for it."
Mullenweg criticized WP Engine's decision to disable the WordPress revision management system. WP Engine's "branding, marketing, advertising, and entire promise to customers is that they're giving you WordPress, but they're not," Mullenweg wrote. "And they're profiting off of the confusion. WP Engine needs a trademark license to continue their business."
In another blog post and a speech at a WordPress conference, Mullenweg alleged that WP Engine doesn't contribute much to the open source project. He also pointed to WP Engine's funding from private equity firm Silver Lake, writing that "Silver Lake doesn't give a dang about your Open Source ideals. It just wants a return on capital."
WP Engine alleges broken promises
WP Engine's lawsuit points to promises made by Mullenweg and Automattic nearly 15 years ago. "In 2010, in response to mounting public concern, the WordPress source code and trademarks were placed into the nonprofit WordPress Foundation (which Mullenweg created), with Mullenweg and Automattic making sweeping promises of open access for all," the lawsuit said.
Mullenweg wrote at the time that "Automattic has transferred the WordPress trademark to the WordPress Foundation, the nonprofit dedicated to promoting and ensuring access to WordPress and related open source projects in perpetuity. This means that the most central piece of WordPress's identity, its name, is now fully independent from any company."
WP Engine alleges that Automattic and Mullenweg did not disclose "that while they were publicly touting their purported good deed of moving this intellectual property away from a private company, and into the safe hands of a nonprofit, Defendants in fact had quietly transferred irrevocable, exclusive, royalty-free rights in the WordPress trademarks right back to Automattic that very same day in 2010. This meant that far from being 'independent of any company' as Defendants had promised, control over the WordPress trademarks effectively never left Automattic's hands."
WP Engine accuses the defendants of "misusing these trademarks for their own financial gain and to the detriment of the community members." WP Engine said it was founded in 2010 and relied on the promises made by Automattic and Mullenweg. "WPE is a true champion of WordPress, devoting its entire business to WordPress over other similar open source platforms," the lawsuit said.
Firm defends “fair use” of WordPress trademark
The defendants' demand that WP Engine pay tens of millions of dollars for a trademark license "came without warning" and "gave WPE less than 48 hours to either agree to pay them off or face the consequences of being banned and publicly smeared," according to the lawsuit. WP Engine pointed to Mullenweg's "cancer" remark and other actions, writing:
When WPE did not capitulate, Defendants carried out their threats, unleashing a self-described "nuclear" war against WPE. That war involved defaming WPE in public presentations, directly sending disparaging and inflammatory messages into WPE customers' software and through the Internet, threatening WPE's CEO and one of its board members, publicly encouraging WPE's customers to take their business to Automattic's competing service providers (for a discounted fee, no less), and ultimately blocking WPE and its customers from accessing the wordpress.org portal and wordpress.org servers. By blocking access to wordpress.org, Defendants have prevented WPE from accessing a host of functionality typically available to the WordPress community on wordpress.org.
During calls on September 17 and 19, "Automattic CFO Mark Davies told a WPE board member that Automattic would 'go to war' if WPE did not agree to pay its competitor Automattic a significant percentage of WPE's gross revenues—tens of millions of dollars—on an ongoing basis," the lawsuit said. WP Engine says it doesn't need a license to use the WordPress trademark "and had no reasonable expectation that Automattic had a right to demand money for use of a trademark owned by the separate nonprofit WordPress Foundation."
"WPE's nominative uses of those marks to refer to the open-source software platform and plugin used for its clients' websites are fair uses under settled trademark law, and they are consistent with WordPress' own guidelines and the practices of nearly all businesses in this space," the lawsuit said.
Automattic alleged “widespread unlicensed use”
Exhibit A in the lawsuit includes a letter to WP Engine CEO Heather Brunner from a trademark lawyer representing Automattic and a subsidiary, WooCommerce, which makes a plugin for WordPress.
"As you know, our Client owns all intellectual property rights globally in and to the world-famous WOOCOMMERCE and WOO trademarks; and the exclusive commercial rights from the WordPress Foundation to use, enforce, and sublicense the world-famous WORDPRESS trademark, among others, and all other associated intellectual property rights," the letter said.
The letter alleged that "your blatant and widespread unlicensed use of our Client's trademarks has infringed our Client's rights and confused consumers into believing, falsely, that WP Engine is authorized, endorsed, or sponsored by, or otherwise affiliated or associated with, our Client." It also alleged that "WP Engine's entire business model is predicated on using our Client's trademarks... to mislead consumers into believing there is an association between WP Engine and Automattic."
The letter threatened a lawsuit, saying that Automattic "is entitled to file civil litigation to obtain an injunction and an award of actual damages, a disgorgement of your profits, and our Client's costs and fees." The letter demands an accounting of WP Engine's profits, saying that "even a mere 8% royalty on WP Engine's $400+ million in annual revenue equates to more than $32 million in annual lost licensing revenue for our Client."
WP Engine's lawsuit asks the court for a "judgment declaring that Plaintiff does not infringe or dilute any enforceable, valid trademark rights owned by the Defendants." It also seeks compensatory and punitive damages.
We contacted Automattic about the lawsuit today and will update this article if it provides a response.
Jon is a Senior IT Reporter for Ars Technica. He covers the telecom industry, Federal Communications Commission rulemakings, broadband consumer affairs, court cases, and government regulation of the tech industry.
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