WPEngine sues Automattic and Mullenweg for extortion and trademark misuse

In a shocking turn of events within the WordPress community, WPEngine, Inc. (WPE) has filed a lawsuit against Automattic Inc. and its CEO Matthew Charles Mullenweg in the United States District Court for the Northern District of California. The complaint, filed on October 2, 2024, alleges attempted extortion, interference with business relationships, and misuse of WordPress trademarks, among other claims.

WPEngine, founded in 2010, is a managed WordPress hosting provider that has been a significant player in the WordPress ecosystem for over a decade. The company has invested hundreds of millions of dollars in its platform and claims to have contributed substantially to the WordPress community through various initiatives and open-source projects.

Automattic, founded by Mullenweg in 2005, is the company behind WordPress.com and has long been associated with the development of the open-source WordPress software. Mullenweg is also a co-founder of the WordPress project and has been a central figure in its growth and development.

Key allegations

The lawsuit, filed under Case No. 3:24-cv-06917, outlines several serious allegations against Automattic and Mullenweg:

1. Attempted Extortion: WPE claims that in mid-September 2024, Automattic and Mullenweg demanded tens of millions of dollars annually for a trademark license that WPE argues it does not need. When WPE refused, the defendants allegedly threatened to wage "war" against the company.
2. Interference with Business Relationships: The complaint alleges that following WPE's refusal to pay, the defendants engaged in actions designed to harm WPE's business, including making false and disparaging statements about the company and encouraging WPE's customers to breach their contracts.
3. Blocking Access to WordPress.org: WPE claims that Mullenweg, who allegedly controls wordpress.org personally rather than through the non-profit WordPress Foundation, blocked WPE's access to critical wordpress.org resources, including the ability to update plugins and access support forums.
4. Trademark Misuse: The lawsuit argues that Automattic is attempting to leverage trademark law for anticompetitive purposes, despite WPE's longstanding use of WordPress-related terms in a manner consistent with trademark law and industry practice.
5. Computer Fraud and Abuse Act Violations: WPE alleges that the defendants' actions in blocking access to wordpress.org systems violate federal law.

Revelations about WordPress Foundation

One of the more startling allegations in the complaint relates to the WordPress Foundation, a non-profit organization created by Mullenweg in 2010. WPE claims that while Mullenweg publicly announced the transfer of WordPress trademarks to the Foundation, he simultaneously arranged for Automattic to receive an exclusive, royalty-free license to these trademarks. This arrangement was allegedly not disclosed in the Foundation's tax filings or to the public.

Demands and sought relief

WPE is seeking several forms of relief from the court:

1. Declaratory judgments of non-infringement and non-dilution regarding its use of WordPress-related trademarks
2. Injunctive relief to prevent further interference with its business
3. Compensatory and punitive damages
4. Attorneys' fees and costs

Reactions and ongoing developments

The WordPress community has reacted with a mix of shock, concern, and confusion. Some developers and business owners have expressed worry about the potential implications for their own use of WordPress-related terms and access to community resources.

In an interview following the initial events, Mullenweg acknowledged that some of his actions may have been too hasty and agreed that a more gradual approach to addressing concerns might have been more appropriate. He expressed a willingness to handle future disputes in a manner that causes less immediate damage to the community.

Broader implications for Open Source

This conflict raises important questions about the balance between commercial interests and community governance in successful open-source projects. It highlights the potential tensions that can arise when a project becomes as commercially significant as WordPress, which powers a substantial portion of the web.

The situation also underscores the importance of clear communication and transparency in open-source communities, especially when it comes to trademark usage and licensing agreements.

Looking forward

As the legal proceedings continue, the WordPress community is watching closely to see how this dispute will be resolved. The outcome could have far-reaching consequences for how open-source projects manage their trademarks and relationships with commercial entities built around their software.

Both Automattic and WPE have expressed a desire to resolve the conflict, but as of the filing date, no settlement had been reached. The case is expected to be closely watched by the tech industry, open-source advocates, and legal experts specializing in intellectual property and software licensing.

This lawsuit marks a significant moment in the history of WordPress and could reshape understandings of trademark use in open-source ecosystems and the balance between commercial interests and community governance in successful open-source projects.

Timeline of key events

• Mid-September 2024: Automattic allegedly demands tens of millions of dollars from WPE for trademark licensing
• September 20, 2024: Mullenweg gives keynote address at WordCamp US, making allegedly disparaging statements about WPE
• September 24, 2024: WPE's access to wordpress.org resources allegedly blocked
• October 2, 2024: WPE files lawsuit against Automattic and Mullenweg

Organizational structure of Automattic and WordPress entities

The lawsuit has brought to light the complex organizational structure of various WordPress-related entities. According to Mullenweg's statements in the interview, the structure is more intricate than many in the community previously understood:

WordPress Foundation

• Established as a non-profit organization in 2010.
• Recognized by the IRS as a 501(c)(3) public charity.
• Primary purpose is education, not WordPress code development.
• Holds the WordPress trademark.
• Has a board of three members, including Mullenweg.
• Received only $23,000 in donations last year, primarily used for audits, lawyers, and grants to coding education initiatives.

Automattic

• For-profit company founded by Mullenweg in 2005.
• Operates wordpress.com and other services like Tumblr, PocketCast, and WooCommerce.
• Has an exclusive, royalty-free, perpetual, irrevocable, worldwide, sublicensable license to use the WordPress trademark commercially.
• This license was granted by the WordPress Foundation when the trademark was transferred to the Foundation.

WordPress.org

• Contrary to common belief, wordpress.org is not owned or operated by the WordPress Foundation.
• Personally owned and controlled by Mullenweg.
• Hosts the open-source WordPress software, plugins, themes, and community resources.
• Provides update servers, forums, and other essential services for the WordPress ecosystem.

WordPress Community Support (PBC)

• A for-profit subsidiary of the WordPress Foundation.
• Created to manage WordCamp events and handle sponsorships.
• Operates on a break-even basis, with about $5 million in annual revenue.
• Formed to comply with non-profit regulations and allow for more flexible sponsorship arrangements.

Trademark Licensing and Control

• The WordPress Foundation owns the trademark but has licensed it exclusively to Automattic for commercial use.
• Automattic can sublicense the trademark to others for a fee.
• The Foundation could theoretically revoke Automattic's license if two of the three board members decide Automattic is not a good steward of the trademark.

Mullenweg's Role and Control

• Mullenweg is a director of the WordPress Foundation.
• He is the CEO and a major shareholder of Automattic, controlling 84% of voting shares through proxy agreements.
• Personally owns and controls wordpress.org.

This structure reveals a complex interplay between non-profit and for-profit entities, with Mullenweg playing central roles in each. The arrangement allows for commercial exploitation of the WordPress brand while theoretically maintaining some separation between the open-source project and profit-driven activities.

However, this structure has also led to confusion and controversy, particularly regarding the control and use of the WordPress trademark. The lawsuit filed by WPEngine brings these complexities to the forefront, challenging the way the trademark has been licensed and enforced.

Key Facts

• Filed on October 2, 2024, in the U.S. District Court for the Northern District of California
• Case No. 3:24-cv-06917
• Plaintiff: WPEngine, Inc.
• Defendants: Automattic Inc. and Matthew Charles Mullenweg
• Key claims: Attempted extortion, interference with business relationships, Computer Fraud and Abuse Act violations, trademark misuse
• Seeking declaratory judgments, injunctive relief, damages, and attorneys' fees
• Alleges undisclosed exclusive trademark licensing arrangement between WordPress Foundation and Automattic
• Claims Mullenweg personally controls wordpress.org, not the non-profit WordPress Foundation
• Highlights potential broader implications for the WordPress community and open-source software governance