NextFin News - In a significant escalation of the legal battle over the WordPress ecosystem, WP Engine filed a third amended complaint on February 12, 2026, alleging that Automattic and its CEO, Matt Mullenweg, orchestrated a strategic campaign to extract royalty fees from at least ten major hosting competitors. The filing, submitted in the U.S. District Court for the Northern District of California, claims that Automattic intended to use its control over the WordPress trademark as a "stick" to force industry-wide compliance with new financial demands. According to TechCrunch, the discovery process revealed internal communications where Mullenweg described the aggressive strategy as a "nuclear war" against those who refused to pay a proposed 8% gross revenue royalty.
The updated lawsuit provides a detailed look at how Automattic allegedly sought to leverage its position. Beyond the ten targeted competitors, the filing notes that Newfold Digital—the parent company of Bluehost and HostGator—is already paying for trademark usage, while negotiations with other unnamed providers are ongoing. Perhaps most damaging is the allegation that Mullenweg personally contacted the CEO of payment processor Stripe to pressure them into terminating their contract with WP Engine. This move, occurring after the initial litigation began in late 2024, suggests a multi-pronged effort to cripple WP Engine’s operational capacity through financial de-platforming.
From a financial analysis perspective, the 8% royalty demand appears to be less about standard licensing and more about aggressive rent-seeking. WP Engine argues that the rate was chosen arbitrarily based on Mullenweg’s public estimation that the company could afford a $32 million annual payment while remaining cash-flow positive. This "ability to pay" model deviates sharply from traditional intellectual property valuation frameworks, which typically rely on market comparables or the specific value added by the trademark. By targeting the top ten hosting providers, Automattic is effectively attempting to implement a private tax on the infrastructure of the open-source web, which currently powers over 40% of all websites.
The implications for the broader tech industry are profound. For decades, the WordPress project thrived on a delicate balance between the non-profit WordPress Foundation and the commercial interests of Automattic. However, the current U.S. administration under U.S. President Trump has emphasized deregulation and the protection of proprietary interests, which may create a complex legal backdrop for this dispute. If Automattic succeeds in establishing that it has the unilateral right to gatekeep the WordPress brand for commercial hosting, it could set a precedent that allows other open-source stewards to monetize community-built ecosystems retroactively. This would likely lead to a fragmentation of the market as hosting providers seek to "fork" the software to avoid licensing fees.
Furthermore, the attempt to involve third-party financial institutions like Stripe introduces a new layer of systemic risk. If software founders can successfully weaponize payment gateways against competitors during trademark disputes, the cost of doing business in the SaaS and hosting sectors will rise significantly due to increased insurance and legal contingencies. Industry data suggests that the managed WordPress hosting market is worth billions; a forced 8% revenue shift across the top ten players would represent a massive capital transfer from infrastructure providers to a single entity, potentially stifling innovation in site performance and security.
Looking forward, the resolution of this case will likely hinge on the legal distinction between the WordPress open-source software and the WordPress trademark. While Mullenweg has long maintained that he is protecting the integrity of the brand, the "carrot and stick" rhetoric revealed in these filings suggests a shift toward a monopolistic enforcement strategy. As the court reviews these new allegations of tortious interference and unfair competition, the hosting industry may see a wave of consolidation or a mass migration to alternative CMS platforms. For now, the "nuclear war" in the WordPress community shows no signs of a ceasefire, and the financial stakes for the open web have never been higher.
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