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Software Illustrators Draw Up Complaint Against Adobe

Posted  May 5, 2011

Adobe Systems Inc. has been hit with an antitrust class action in federal court by Free FreeHand Corp., a non-profit group, and graphic design professionals and consumer users of FreeHand, the vector-graphic illustration software product acquired by Adobe several years ago.

The complaint in Free FreeHand Corp. et al. v. Adobe Systems Inc., 5:11-cv-02174 (N.D. Cal.), alleges monopolization in violation of the Sherman Act § 2 as well as violations of California’s antitrust statute, the Cartwright Act, and the State’s broad-sweeping Unfair Competition Law.  The complaint also seeks relief under Washington’s antitrust and unfair competition statutes.

The complaint alleges that when Adobe bought Macromedia Inc. in 2005 and acquired the FreeHand software, it did so to monopolize the market for vector-graphic illustration software by eliminating competition for its own software product, Illustrator, the chief competition for FreeHand in the professional graphic software market.

Plaintiffs allege that Adobe has a 100% share of Mac users and an 80% share of Windows users in the relevant market.  The complaint excludes so-called “hobbyist” level vector-graphic illustration software from the alleged market, such as Serif DrawPlus, Xara X, Draw well, Photoline, Inkscape, Lineform, Sketsa SVG editor, Zeusdraw, Easy draw, and Intaglio.  The complaint also excludes computer-aided design programs, bitmap graphic illustration and page layout software from the alleged market.

Adobe likely will challenge the market definition vigorously as that threshold issue could determine whether Adobe is found to have market power. 

Free Freehand alleges that Adobe monopolized the market by acquiring the competing software, then raising the price of Illustrator and at the same time failing to update FreeHand.  It also alleges that Adobe tried to eliminate FreeHand from the market completely by announcing that it would stop developing FreeHand in 2007 and by publishing documents detailing how consumers can migrate from FreeHand to Illustrator.

The complaint, however, may be vulnerable to an argument by Adobe that the claims are barred by the applicable four-year statutes of limitations.  If the complaint survives a motion to dismiss, Adobe is also likely to argue that the plaintiffs’ claims encroach on its product design decisions which were undertaken for legitimate and procompetitive reasons. 

In addition to seeking damages for purported overcharges, the complaint seeks a divestiture of Freehand source code to turn it into an open-source competitor of Illustrator.

Adobe won antitrust clearance from U.S. regulators in 2005 for the acquisition of Macromedia Inc., the developers of FreeHand, which cleared the way for the $3 billion deal.  Approval came after U.S. Justice Department officials issued a second request to take a closer look at the design and vector-graphics illustration products at issue in the complaint.

Tagged in: Antitrust Litigation, Monopolization,