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Apple Requests a Protective Order After a Psystar Email Shows Up on Charles Nesson's Blog
Thursday, September 03 2009 @ 12:45 AM EDT

Apple has filed a Reply to Psystar's Supplemental Briefing and Motion to Compel -- that's on Psystar's alleged need for more financial info on Apple's profits. Or more exactly, it seeks to file one and asks the court for permission, on the basis that Psystar raised new arguments in its Supplemental Brief. And Apple has included its own cross-motion for a protective order. Apple doesn't trust Psystar to keep confidential matters from the public, and it presents evidence that Psystar's lawyer has been communicating about the case to Professor Charles Nesson of Harvard, who represented Joel Tenenbaum. One email from Psystar CEO Rudy Pedraza to Psystar lawyer K.D. Camara has ended up on Nesson's blog, for all the world to read. So much for Psystar's representation that Apple's concern about confidentiality is unnecessary.

First, here are the filings:

09/02/2009 - 116 - ORDER GRANTING REQUEST FOR AN ORDER PERMITTING FILING UNDER SEAL OF EXHIBIT B TO DECLARATION OF TYLER GEE by Judge Alsup [re 101 Motion to Seal Document]. (whalc1, COURT STAFF) (Filed on 9/2/2009) (Entered: 09/02/2009)

09/02/2009 - 118 - MOTION for Leave to File APPLE INC.'S REPLY TO PSYSTAR CORPORATION'S SUPPLEMENTAL BRIEFING ON THE RELEVANCE OF TOPIC 3 TESTIMONY, DEFENDANT'S MOTION TO COMPEL AND PLAINTIFF'S CROSS-MOTION FOR A PROTECTIVE ORDER filed by Apple Inc.. (Attachments: # 1 Exhibit 1 to Miscellaneous Administrative Request, # 2 Proposed Order Granting Administrative Request, # 3 Affidavit Decl. of Mehrnaz Boroumand Smith In Support of Miscellaneous Administrative Request, # 4 Exhibit 1 to Decl. of Mehrnaz Boroumand Smith In Support of Administrative Request, # 5 Exhibit 2 to Decl. of Mehrnaz Boroumand Smith In Support of Administrative Request, # 6 Exhibit 3 to Decl. of Mehrnaz Boroumand Smith In Support of Administrative Request, # 7 Exhibit 4 to Decl. of Mehrnaz Boroumand Smith In Support of Administrative Request, # 8 Exhibit 5 to Decl. of Mehrnaz Boroumand Smith In Support of Administrative Request)(Gilliland, James) (Filed on 9/2/2009) (Entered: 09/02/2009)

And if you visit Professor Charles Nesson's blog, here's what you will find:
morning mail - honored to see my teaching take hold
Published July 23rd, 2009

From: K.A.D. Camara
Date: Thu, Jul 23, 2009 at 1:13 PM
To: rudy at psystar.com, Charles Nesson

Rudy:

I like very much the idea of conducting this litigation publicly. I think as we go along over the next month, we should start explaining the dispositive motions arguments to the world — first sale and 117 non-infringement, nominative use of trademarks, preemption, and copyright misuse. We have the advantage of a press corps that’s already engaged and that enjoys diving into legal arguments.

I also like the circus idea. We need to make sure that our circus day doesn’t vary in any material way from how we do business ordinarily, other than that lots of people plus Apple are also roaming around the office. Our people will be asked about this in depos.

As for scheduling, we’re negotiating dates with Apple right now and should be able to pin down a final schedule in the next couple of days. As you can imagine, they’re nitpicking over who exactly we get to depose and in what order. A nice follow-up post might be the roster of Apple people being deposed — we can invite the world to send us questions.

I’m cc’ing Charlie Nesson on this, who I told about the case, who likes our side and story, and who is expert in public litigation.

Kiwi

On Thu, Jul 23, 2009 at 11:27 AM, Rudy Pedraza wrote:

Kiwi,

Hope all is well. Yesterday my staff forwarded you and CeCe a link to the blog we intend to launch now with our next newsletter; when you get a chance please let me know if the content is acceptable. We particularly wanted CeCe’s input on how we presented the change of counsel but keeping it light, upbeat and funny if possible (re: Cowboy quip).

I’ve also been thinking about the upcoming visit from Apple during depo week (which in my opinion is akin to letting Terrorists visit the Pentagon). Although the idea makes me uneasy, I figure that if we let them in, we might as well have an *event* for the public the same day showcasing our products and letting customers touch and feel them first hand. How do you feel about that? The theme of the day would be something like “The circus comes to town”, with everyone knowing Apple was also coming and at the same time making the public aware of how ridiculous Apple is behaving. Of course the key to pulling this off is planning, so we would need to get the visit date nailed down ASAP to ensure we get good media coverage.

Best regards,

–Rudy

They want public litigation, a "circus", no less, and clearly there have been some communications between Nesson and Camara, for Nesson to "like" their "side" and "story". The feel of Rudy's email, to me, is that he's having fun trashing Apple in the press. I believe that will come back to haunt him in court. Litigation is no game.

Here's what Psystar solemnly told the court in the document [PDF] Apple now is replying to, Psystar's COURT ORDERED SUPPLEMENTAL BRIEFING ON THE RELEVANCE OF TOPIC 3 TESTIMONY, DEFENDANT'S MOTION TO COMPEL AND PLAINTIFF'S CROSS-MOTION FOR A PROTECTIVE ORDER:

VII. Apple's Allegations that Psystar Will Breach the Protective Order Are Improper and False

Apple also attempts to shield relevant evidence in its possession with an unsupported appeal to confidentiality and privacy. Whatever legitimate privacy concerns exist for Apple are adequately addressed by the protective order in place in this case. One of the main purposes of that protective order was to allow for the production of information such as profit margins without unnecessary cost or loss of time to the parties or the court.

Under the current protective order Apple can designate information as “highly confidential.” This restricts access to an extremely limited set of individuals. Apple agreed to this arrangement at the beginning of the case.

However, because the protective order still requires the release of relevant evidence, Apple now suggests that Psystar may in the future improperly disclose highly confidential information without authority. Psystar has not violated the protective order and will not violate the protective order in the future. Apple's information is adequately protected. The proposed motion for the protective order is a thinly veiled device to weaken Psystar's case by manipulation of the discovery process.

Adequately protected? Improper and false? After reading Professor's Nesson's blog, Apple feels it needs further protection, and it asks for it. I suspect it will get it.

This is the post-SCO world, my friends, where people sue for publicity. And if it hurts a successful company for no particularly good reason, so what? What does Psystar have to lose? Ah, but notice Apple still lists Psystar and DOES 1-10 as defendants. That means there is, in their view, someone behind this crazy lawsuit, someone who is willing to fund a circus. That indicates this isn't just fun and games. Someone thinks, I gather, there is money at the end of the game.

As for Psystar's discovery request, Apple points out that Psystar doesn't need the financial information it seeks about Apple's profit margins. I gather Apple thinks Psystar is asking for that so as to try to prove that Apple's profit margins are too high, hence evidence of market dominance, trying to buttress Psystar's copyright misuse allegation, and in connection with Apple's trademark infringement claims. But Apple points out that high profits don't prove anything like that:

Now Psystar contends that if it were able to show that Apple's product-line profit margins were high, it would be able to establish evidence of misuse. That is wrong. Even if Psystar could allege that Apple's profit margins were high, this would not show any unlawful extension of Apple's copyrights; at most those margins would show that Apple's computers are in high demand, or are efficiently produced, or both.
Aside from that not proving anything of the kind, Apple tells the court what it is asking for in connection with its trademark claim is an injunction -- precisely because money can't make it whole, even if Psystar had any:
Apple's brand has become synonymous with innovative, high quality, fully-integrated products and is one of the most famous brands in the world. Psystar's illegal acts have tarnished that brand, and threaten further tarnishment, an injury for which Apple cannot be compensated monetarily.
Injunctions are appropriate particularly in situations like this one, where the defendant is inclined to continue its infringing behavior, Apple writes. The damage to Apple's reputation and brand if Psystar is permitted to continue is difficult to calculate in specific dollars and cents, and that is exactly what makes an injunction appropriate as relief, not money. So if anybody's financials are pertinent, it's Psystar's, not Apple's, because whatever they are making on their Mac OSX knock off computers, it's money taken from Apple, as Apple sees it.

As for Psystar's claim that it has not violated the protective order, Apple's says it has, and here are the details:

Since filing its Supplemental Brief last week, Apple discovered that Psystar and its counsel have communicated the details of this case to individuals not bound by the protective order and thereby to the public at large. See Ex. A (print out from blog containing Psystar's attorney-client communications) (http://blogs.law.harvard.edu/nesson/ 2009/07/23/morning-mail-honored-to-see-my-teaching-take-hold/).4 In addition to waiving the protections of attorney-client privilege as to the subject matters discussed, Psystar's lead counsel, Kiwi Camara, wrote, "I like very much the idea of conducting this litigation publicly." Indeed, it was Mr. Camara who suggested that Psystar post the schedule of Apple executives' depositions and solicit deposition questions from the public. See Ex. A ("A nice follow-up post might be the roster of Apple people being deposed we can invite the world to send us questions."). As noted in Apple's Supplemental Briefing, in this same posting on Psystar's website, Psystar told readers "to [b]ear in mind that we might not be able to release the answers to said [deposition] questions until the conclusion of this litigation (re: Apple's Super Secret Protective Order) . . . ." Given the actions of Psystar and its counsel, and their waiver of the confidentiality of Psystar's own privileged communications in an effort to drum up publicity, Apple's fear of disclosing its highly confidential information is genuine and well-founded.

4 In an email exchange with his client discussing case strategy, Mr. Camara reports discussing this case with a Prof. Charles Nesson of Harvard Law School, whom he describes as an "expert in public litigation," and to whom he simultaneously sent otherwise privileged information.

Nesson is not bound by any protective order, and that is what makes it so distressing to Apple. What else might he post on his blog? Remember when Nesson represented Joel Tenenbaum, there was a great deal of "public litigation", so to speak? Not that Tenenbaum benefited in any way from it that I could see. But Apple's point is rather clearly made.

Obviously, I have dedicated years of my life to helping the public understand the legal process. And I've lost sleep staying up typing away, to make sure everyone has access not just to the PDFs from the court, but plain text, so everyone, including those who rely on readers, can share in this knowledge and so that court documents can be searched by keywords. But I have always carefully preserved all confidential materials as confidential. And I think the damage that results from "outing" information that a party wants kept confidential can be that it undermines the very system that is supposed to bring justice to a wronged party. If you fear all your private information will be outed, who will dare to sue anyone? In this case, we already have seen Apple choosing to drop one claim if necessary to avoid discovery that it fears the other side will not respect and keep from the public.

And here's the text of Apple's Reply, which is attached as an exhibit to its request to file this:

********************************

EXHIBIT 1
TO
MISCELLANEOUS ADMINISTRATIVE REQUEST
FOR AN ORDER PERMITTING APPLE TO FILE APPLE
INC.’S REPLY

TOWNSEND AND TOWNSEND AND CREW LLP
JAMES G. GILLILAND, JR. (State Bar No. 107988)
MEHRNAZ BOROUMAND SMITH (State Bar No. 197271)
MEGAN M. CHUNG (State Bar No. 232044)
JEB B. OBLAK (State Bar No. 241384)
[address, phone, fax, email)

Attorneys for Plaintiff and Counterdefendant
APPLE INC.

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION

APPLE INC., a California corporation,

Plaintiff,

v.

PSYSTAR CORPORATION, a Florida
corporation, and DOES 1-10, inclusive,

Defendants.

Case No. CV 08-03251 WHA

APPLE INC.’S REPLY TO PSYSTAR
CORPORATION’S SUPPLEMENTAL
BRIEFING ON THE RELEVANCE OF
TOPIC 3 TESTIMONY, DEFENDANT’S
MOTION TO COMPEL AND
PLAINTIFF’S CROSS-MOTION FOR A
PROTECTIVE ORDER

____________________
AND RELATED COUNTERCLAIMS

I. INTRODUCTION

Psystar Corporation ("Psystar") contends for the first time in its supplemental briefing that Apple's product line profit margins are relevant to Apple's trademark infringement claim, the injunctive relief that Apple is seeking and to Psystar's copyright misuse counterclaim. Despite Psystar's assertions to the contrary, product line profits margins are not relevant to any of the claims or defenses in this case. Moreover, Psystar and its counsel have affirmatively stated their intent to involve "the public" in this litigation, and have even chosen to disclose otherwise privileged information. Thus, Apple's concerns about protecting the confidentiality of its most sensitive financial information are well-founded.

II. APPLE'S PROFIT MARGINS ARE NOT RELEVANT TO ITS TRADEMARK
INFRINGEMENT CLAIMS

Psystar's argument that Apple has not declared what remedy it seeks for Psystar's trademark infringement is disingenuous at best. Apple informed Psystar through its damages expert report that it intends to seek only injunctive relief for its trademark infringement claims. On August 21, 2009 almost a week before Psystar filed its supplemental briefing Apple served Psystar with the Report of Matthew R. Lynde, Ph.D. which outlined the harm to Apple caused by Psystar's illegal activities. In that report, Dr. Lynde clearly sets forth the damages being sought by Apple for its various causes of action, including its trademark infringement claim. Specifically Dr. Lynde opined that Psystar's trademark infringement has caused irreparable harm to Apple's brand, business model and reputation. He also explained the difficulty of quantifying such harm and opined that unless Psystar is enjoined from continuing its illegal acts, Apple will continue to be harmed. See August 21, 2009 Expert Report of Matthew Lynde ("Lynde Report") at 25-42. Psystar's feigned ignorance regarding Apple's election of injunctive relief as the remedy for Psystar's trademark infringement is just another attempt to seek profit margin information to which it is not entitled.

-1-

III. APPLE'S PROFIT MARGINS ARE NOT RELEVANT TO THE INJUNCTIVE
RELIEF IT SEEKS

Apple seeks permanent injunctive relief halting Psystar's unlawful conduct. Psystar's assertion that Apple's profit margins are relevant to determining whether injunctive relief is appropriate is undermined by the same legal authorities Psystar cites for that proposition. In its brief, Psystar relies on Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 518 F. Supp. 2d 1197 (C.D. Cal. 2007) ("Grokster") for the assertion that injunctive relief is not automatically granted after a finding of copyright infringement. Id. (citing eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 126 S. Ct. 1837, 1839, 164 L. Ed. 2d 641 (2006)).1 Importantly, the Grokster court also noted that although "irreparable harm may not be presumed[,] [i]n run-of-the-mill copyright litigation, such proof should not be difficult to establish." Grokster, 518 F. Supp. 2d. at 1215 (citing 6 William F. Patry, Patry on Copyrights, § 22:74). Thus, Apple will be entitled to injunctive relief upon proof that Psystar's ongoing infringements will result in irreparable injury that is unquantifiable and thus cannot be remedied by the payment of monetary damages. Grokster, 518 F. Supp. 2d at 1215. Specifically, Apple will show injury to Apple's brand, goodwill, and business reputation none of which can be quantified. See MySpace, Inc. v. Wallace, 498 F. Supp. 2d. 1293, 1305 (C.D. Cal. 2007) ("Harm to business goodwill and reputation is unquantifiable and considered irreparable."). In addition, Apple also will prove that Psystar's unrestrained conduct induces others to infringe Apple's copyrights and circumvent Apple's protection measures in violation of the Digital Millennium Copyright Act ("DMCA"). Because the irreparable harm analysis necessarily extends beyond monetary harm, Apple's profit margins simply are not relevant to determining the propriety of injunctive relief.

-2-

Trying to establish the relevance of Apple's profit margins to irreparable injury, Psystar relies on case law that actually contradicts its argument. In z4 Tech., Inc, v. Microsoft Corp., 434 F. Supp. 2d 437 (E.D. Tex 2006) (cited in Psystar Supplemental Brief at p. 15), the court denied an injunction since plaintiff's injury could be remedied through payment of a reasonable royalty under terms consistent with the terms plaintiff was willing to offer any party wishing to incorporate plaintiff's technology into its product. Id. at 440. Here, Apple does not license Mac OS X for use by any third party on any non-Apple hardware. Apple designs its hardware and Mac OS X software to create a seamless customer experience. Apple's entire business model is focused on enhancing the experience of customer who buy and use tightly integrated products. Apple's development teams have integrated the software and hardware features in Apple computers in order to provide consumers with intuitive, efficient and high quality products. Running Mac OS X on hardware that is not integrated with Apple's operating system will wholly undermine this user experience and result in significant customer dissatisfaction, which in turn tarnishes Apple's brand. Lynde Report, supra, at 25-42. Consequently, there is no reasonable royalty that could even begin to remedy the harm caused to Apple by Psystar's illegal conduct. See SimplexGrinnell LP v. Integrated Sys. & Power, Inc., 2009 U.S. Dist. LEXIS 30657, at *65 (S.D.N.Y. March 31, 2009); see also Silverstein v. Penguin Putnam, Inc., 368 F.3d 77, 84 (2d Cir. 2004) ("In the copyright realm, it has been said that an injunction should be granted if denial would amount to a forced license to use the creative works of another.").

Similarly, DFW Metro Line Services v. Southwestern Bell Telephone Co., 901 F.2d 1267 (5th Cir. 1990), is inapposite. In DFW, the Court held that damage to plaintiff's goodwill could be compensated monetarily because plaintiff had existed for only a year and a half. Id. at 1269 (noting that plaintiff "has not shown, nor even argued, that special circumstances in this case would make money damages inadequate"); see also GTE Card Services Inc. v. AT&T Corp., 1997 WL 74712, 3 (N.D. Tex. 1997) ("[t]he lost goodwill of a business operated over a short period of time is usually compensable in money damages") (emphasis added). First, neither DFW nor GTE Card Services spoke to the relevance of profit margins for calculating lost good will. Second, Apple has been in business and building its goodwill, brand and reputation for over thirty years.

-3-

Apple's brand has become synonymous with innovative, high quality, fully-integrated products and is one of the most famous brands in the world.2 Psystar's illegal acts have tarnished that brand, and threaten further tarnishment, an injury for which Apple cannot be compensated monetarily. See Lynde Report at 24, 33-35. As neither DFW nor GTE Card Services asserted that profit margins are relevant to calculating good will and because Apple is completely different from the nascent businesses at issue in those cases, neither of these cases provides support for Psystar's argument.

Psystar also cites to Smith v. Sprint Communications Co., 1996 WL 1058204 (N.D. Cal. Sept. 13, 1996). This case is on point although not for the proposition for which Psystar cites it. Rather, Smith cuts against the very argument that Psystar makes and holds that "a claim for injunctive relief does not require the Court to calculate damages." Id. at 4. Instead, the Court only determines whether damages alone would leave some injury un-redressed. Id. Psystar also miscites Lauratex Textile Corp. v. Allton Knitting Mills Inc., 519 F. Supp. 730, 732 (S.D.N.Y. 1981), claiming it stands for the proposition that a permanent injunction "is appropriate where money damages would not suffice." See Psystar Supplemental Brief at 17. Contrary to Psystar's assertions, the court in Lauratex issued an injunction based on the high likelihood that the infringer would continue infringing. Id. at 733. While the court used the defendant's gross profits as a yardstick for the appropriateness of statutory damages, nothing in Lauratex or any other case makes Apple's profit margins relevant to the adequacy of damages or the need for an injunction. See id. (awarding plaintiff statutory damages of $40,000 where defendant had gross profits of $5,177 and holding that "[i]t is possible . . . to compute defendants' [gross profits] from the evidence presented at trial and use that as an approximate measure of plaintiff's damages").

Finally, Psystar's assertion that Apple's lost profits must be used in a balance of hardships analysis also fails. Where there is a likelihood of future infringement the balance of hardships shifts further in favor of plaintiff. Grokster, 518 F. Supp. 2d at 1222. In contrast, Psystar's infringing business model "has no separate legitimate business purpose" and thus enjoining the

-4-

sale of infringing products should be given no weight. Id. at 1220. Again, data showing Apple's profit margins is not relevant to determining whether the Court should issue a permanent injunction to stop Psystar's conduct.

IV. APPLE'S PROFIT MARGINS ARE NOT RELEVANT TO PSYSTAR'S BASELESS
COPYRIGHT MISUSE CLAIM

To prove copyright misuse -- which it cannot -- Psystar must show that Apple limits its operating system software to Apple-labeled hardware in a manner that prohibits competition. See Lasercomb Am., Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990) (finding copyright misuse where license agreement limited licensee from competing with licensor for 99 years); Practice Mgmt. Info. Corp. v. Am. Med. Ass'n., 121 F.3d 516, 520-521 (9th Cir. 1997) (holding that copyright misuse occurred where licensor conditioned license to copyrighted material on an agreement not to purchase competitor's products and to exclusively use licensor's code).

Yet Apple has done nothing to prevent others, including Psystar, from developing their own operating system software or making computers. Nor is there anything in Apple's Software License Agreement that prohibits Mac OS X licensees or Mac owners from purchasing any other brand of computer running, for example, Windows or Linux operating systems. Indeed, Apple has no quarrel with Psystar selling computers in competition with Apple that run other operating systems. Apple's complaint arises from the fact that Psystar has not developed its own operating system (or even tried). Rather, free-riding on the hundreds of millions of dollars Apple has expended in research and development, and knowingly violating Apple's Software License Agreement, Psystar has taken Apple's Mac OS X operating system, made unauthorized copies of, and modifications to, it, and is distributing that software on untested and unapproved hardware.

Psystar has the burden to prove that Apple is engaging in unlawful, anticompetitive behavior, yet it has neither submitted an expert report on this matter,3 nor provided any evidence beyond the unsupported allegations in its cross-complaint asserting misuse. Indeed, when asked the basis for its counterclaim, five days before the close of discovery, Psystar provided no support whatsoever, saying only, "Psystar responds by incorporating its live counterclaim pleading ...."

-5-

See Psystar's Response to Apple's Interrogatory Re: Copyright Misuse on August 17, 2009. In fact, the deposition testimony of all of Apple's witnesses shows there is no basis for Psystar's claim of copyright misuse. Rather, it is Apple's pro-competitive focus on creating integrated computers that run seamlessly for its customers not any anticompetitive motive that drives its requirement that Mac OS X run only on Apple tested and approved hardware.

Now Psystar contends that if it were able to show that Apple's product-line profit margins were high, it would be able to establish evidence of misuse. That is wrong. Even if Psystar could allege that Apple's profit margins were high, this would not show any unlawful extension of Apple's copyrights; at most those margins would show that Apple's computers are in high demand, or are efficiently produced, or both. The mere fact that a company makes a profit on its products, even if it is allegedly high, does not allow an inference of market power, Apple, Inc. v. Psystar Corp., 586 F. Supp. 2d 1190, 1198-99 (N.D. Cal. 2008), or anticompetitive conduct, and certainly does not provide any support for an inference that it has misused its intellectual property rights. See High Tech. Careers v. San Jose Mercury News, 1995 WL 115480, *3 (N.D. Cal. March 14, 1995) (finding that many courts have disparaged the evidentiary value of high profits to indicate anticompetitive activity and stating that "high profits may be indicative of a variety of factors other than a monopoly power, such as an extraordinary market, operating efficiency, or high-quality management"); see also In Re IBM Peripheral EDP Devices, Etc, 481 F. Supp. 965, 981 (N.D. Cal. 1979) ("the inference that a defendant that enjoys healthy profits only does so because of an unhealthy market structure is not a strong one"); Forsyth v. Humana, Inc., 827 F. Supp. 1498, 1511 (D. Nev. 1993) ("proof of excessive profits ... may be misleading and subject to several interpretations"). Apple's product-line profit margins are simply not relevant to Psystar's copyright misuse claim.

V. APPLE'S FEAR OF DISCLOSING HIGHLY CONFIDENTIAL INFORMATION
TO PSYSTAR IS WELL-FOUNDED

Since filing its Supplemental Brief last week, Apple discovered that Psystar and its counsel have communicated the details of this case to individuals not bound by the protective order and thereby to the public at large. See Ex. A (print out from blog containing Psystar's attorney-client

-6-

communications) (http://blogs.law.harvard.edu/nesson/2009/07/23/morning-mail-honored-to-see- my-teaching-take-hold/).4 In addition to waiving the protections of attorney-client privilege as to the subject matters discussed, Psystar's lead counsel, Kiwi Camara, wrote, "I like very much the idea of conducting this litigation publicly." Indeed, it was Mr. Camara who suggested that Psystar post the schedule of Apple executives' depositions and solicit deposition questions from the public. See Ex. A ("A nice follow-up post might be the roster of Apple people being deposed we can invite the world to send us questions."). As noted in Apple's Supplemental Briefing, in this same posting on Psystar's website, Psystar told readers "to [b]ear in mind that we might not be able to release the answers to said [deposition] questions until the conclusion of this litigation (re: Apple's Super Secret Protective Order) . . . ." Given the actions of Psystar and its counsel, and their waiver of the confidentiality of Psystar's own privileged communications in an effort to drum up publicity, Apple's fear of disclosing its highly confidential information is genuine and well-founded.

VI. CONCLUSION

As shown above and in Apple's Supplemental Briefing, Apple's profit margins are not relevant to any of the claims or defenses in this case and, therefore, Apple should not be obliged to disclose that information to Psystar.

DATED: September 2, 2009

Respectfully submitted,

TOWNSEND AND TOWNSEND AND CREW LLP

By: /s/ James G. Gilliland, Jr.
JAMES G. GILLILAND, JR.

Attorneys for Plaintiff and Counterdefendant
APPLE INC.

-7-

1 Psystar disregards Apple's claim for injunctive relief based on Apple's trademark infringement claims and the fact that in determining injunctive relief post eBay in trademark cases, the Ninth Circuit has not adopted the four-part test for injunctions set out in eBay. See Abercrombie & Fitch Co. v. Moose Creek, Inc., 486 F.3d 629 (9th Cir. 2007). And California district courts have continued to apply the pre-eBay presumption of irreparable harm upon a finding of trademark infringement. See, e.g., Sinhdarella, Inc. v. Vu, 2008 WL 410246, at **2, 7 (N.D. Cal. Feb. 12, 2008) (the possibility that defendant would not be able to pay monetary damages "in combination with the likelihood of confusion analyzed above qualifies as irreparable harm").

2 Indeed, BusinessWeek Magazine has named Apple the "World's Most Innovative Company" for several years running and several independent research organization specializing in branding have ranked the Apple brand among the 50 most valuable brands. See Lynde Report at 32-33.

3 The deadline for Psystar to serve any affirmative expert reports was August 21, 2009.

4 In an email exchange with his client discussing case strategy, Mr. Camara reports discussing this case with a Prof. Charles Nesson of Harvard Law School, whom he describes as an "expert in public litigation," and to whom he simultaneously sent otherwise privileged information.

-8-


  


Apple Requests a Protective Order After a Psystar Email Shows Up on Charles Nesson's Blog | 333 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections thread
Authored by: hardmath on Thursday, September 03 2009 @ 01:07 AM EDT
Please indicate the nature of the correction in the subject line.

Thanks!


---
"Mail-order schools lure fledgling code jockeys with promises of big bucks and
excitement. But a new survey finds hirings are rare." Computerworld, 12/11/95

[ Reply to This | # ]

Newspicks discussion
Authored by: hardmath on Thursday, September 03 2009 @ 01:09 AM EDT
Include the title of the newspick in your subject line, please.

Thanks!


---
"Mail-order schools lure fledgling code jockeys with promises of big bucks and
excitement. But a new survey finds hirings are rare." Computerworld, 12/11/95

[ Reply to This | # ]

Off-topic items
Authored by: hardmath on Thursday, September 03 2009 @ 01:11 AM EDT
Clickable links preferred.

Thanks!


---
"Mail-order schools lure fledgling code jockeys with promises of big bucks and
excitement. But a new survey finds hirings are rare." Computerworld, 12/11/95

[ Reply to This | # ]

Professor Charles Nesson -- Great!
Authored by: Crocodile_Dundee on Thursday, September 03 2009 @ 01:19 AM EDT
Great for Apple that is. If his series of gaffs at his last attempt at helping
someone out is any indication...

Impressively bad decision by psycho^h^h^hstar.

---
---
That's not a law suit. *THIS* is a law suit!

[ Reply to This | # ]

Psystar wants to be as famous as SCO?
Authored by: Anonymous on Thursday, September 03 2009 @ 01:38 AM EDT

Does Psystar think that any publicity is good publicity, to get themselves well
known, to attract new business? Did that work
for SCO?

[ Reply to This | # ]

What Did Pystar Do?
Authored by: Anonymous on Thursday, September 03 2009 @ 01:46 AM EDT
Its starting to seem like we have picked a horse in this race. Commoditizing the
hardware is good for consumers (e.g. me) because it makes things affordable. As
I see it, the argument against Pystar hardware from the Apple community
basically boils down to "Apple could do something henky in the future to
make Pystar hardware break." It seems to me that we should be using this
bully pulpit to make sure Apple never tries such a thing.

It also seems to me that using an off the shelf third party OS (i.e. OSX) is
entirely legal. What has Pystar done, exactly, to violate Apple's copyrights?
What other infractions is Pystar guilty of that I am not aware of?

~J

P.S. A password reset feature would be nice.

[ Reply to This | # ]

Is this justice being seen to be done?
Authored by: Anonymous on Thursday, September 03 2009 @ 02:14 AM EDT
Excuse my non-lawyer's ignorance, but what was privileged in that
email CCed to Neeson?

[ Reply to This | # ]

Excuse me?
Authored by: Anonymous on Thursday, September 03 2009 @ 02:19 AM EDT

One email from Psystar CEO Rudy Pedraza to Psystar lawyer K.D. Camara has ended up on Nesson's blog, for all the world to read. So much for Psystar's representation that Apple's concern about confidentiality is unnecessary.

No confidential information about Apple is in this email.

So your smear against Psystar is entirely unwarranted and takes Groklaw to a new low point.

Just for the record, I have no connection to Psystar or Apple, and have been an enthusiastic reader of Groklaw for several years as it covered the SCO lawsuits. But this recent nastiness towards Psystar really turns me off.

[ Reply to This | # ]

The Lynde Report
Authored by: Anonymous on Thursday, September 03 2009 @ 03:11 AM EDT
> On August 21, 2009 almost a week before Psystar filed its
> supplemental briefing Apple served Psystar with the Report
> of Matthew R. Lynde, Ph.D. which outlined the harm to Apple
> caused by Psystar's illegal activities.

I guess that will eventually be filed as a document in this case?
My eyes could be failing, but I didn't see it yet on the GL Timeline.
Like most expert reports it will be a curate's egg, with
"Dr. Lynde clearly sets forth the damages ..." and
"Specifically Dr. Lynde opined that Psystar's trademark infringement
"has caused ... "

But I'm an expert report junkie. I like sifting thru them looking for gems.
And I know the harm Apple has done to our systems with its at times
whimsical change of technical standards.

[ Reply to This | # ]

Well, hello!
Authored by: Anonymous on Thursday, September 03 2009 @ 03:24 AM EDT
"We have the advantage of a press corps that’s already engaged and that
enjoys diving into legal arguments."

Why PJ, I do believe he's talking about you!

That might explain the flood of astroturfing on these Psystar threads, mightn't
it...

[ Reply to This | # ]

    maybe we should avoid some psystar coverage or members only?
    Authored by: designerfx on Thursday, September 03 2009 @ 08:24 AM EDT
    I think the psystar situation is heating up, but what I see from PJ's
    perspective, logically, and emotionally seem to be separate altogether. It
    concerns me that I don't feel that psystar is 100% at fault here nor do I feel
    that apple is in the wrong here, and the whole situation just seems super-fishy
    on *both* sides honestly.

    So maybe we should make psystar stuff members only? Just a thought.

    [ Reply to This | # ]

    Frustration with Apple
    Authored by: Anonymous on Thursday, September 03 2009 @ 09:58 AM EDT
    I think part of the reason some people are enjoying Psystar's battle with Apple
    (which seems to be leaning clearly in Apple's favor, by the way) is that they
    are frustrated with Apple over other issues. For example, Apple's decision to
    remove support for PPC systems (some only 3 years old) in Snow Leopard is
    arguably something they didn't have to do, especially without any warning. So
    Apple has made some real enemies over time, going back to their cancellation of
    the Apple ][, their switch from 680x0 to PPC, their switch from PPC to Intel,
    and now their dumping of support for PPC without any warning. We should have no
    illusions about Apple's corporate goodness -- if they were as big as Microsoft
    they would likely engage in similar behavior.

    Long live FOSS.

    s

    [ Reply to This | # ]

    Publicity
    Authored by: Anonymous on Thursday, September 03 2009 @ 11:11 AM EDT

    They want public litigation, a "circus", no less...

    And is flooding a site like Groklaw with astroturfers part of the PR war?

    [ Reply to This | # ]

    Flawed Logic
    Authored by: sproggit on Thursday, September 03 2009 @ 11:46 AM EDT
    I'm quite proud of the fact that I first learned to write software using the BBC
    Microcomputer and then the Acorn Archimedes. Both of these machines [ like so
    many others that were produced in the 1980s ] incorporated Operating Systems
    code in PROM (Programmable Read-Only Memory) chips that were either soldered or
    socket-plugged onto the motherboard of the machines.

    Upgrading the OS required the replacement of physical memory chips. Did anyone
    accuse Acorn, or Sinclair, or Atari or Commodore of illegally linking hardware
    and operating systems? No. The reason was the simple and rhetorical question:
    "Look, do you want this computer to work, or not?"

    In fact, if you think about the history of computing in general, we might not be
    far from the truth if we observed that separating hardware design from OS design
    has only been possible in the second half of the time that 'personal computing'
    has been available to us.

    The irony is that at one level I'd like to see innovation like this drive down
    the overall cost of computing. It's just that in this case it does look as
    though Psystar are not respecting the work of others, or their legal rights to
    that work.

    Shame, really.

    [ Reply to This | # ]

    • Flawed Logic - Authored by: Anonymous on Thursday, September 03 2009 @ 12:58 PM EDT
    • Innovation?!? - Authored by: Anonymous on Thursday, September 03 2009 @ 08:06 PM EDT
    Protective Order question
    Authored by: DodgeRules on Thursday, September 03 2009 @ 12:34 PM EDT
    Can the Judge order that Apple must turn over the info to Mr X, Mr Y, and Mr Z and tell Misters X, Y and Z that if this info gets into the public they will be sent to jail for a determined length of time for defying the Protective Order?

    As someone else has stated, I believe that both sides are not "angels". But then again, very few companies are. They all have skeletons in their closets and discovery allows each to look for them that pertain to the matter at hand. If this info requested is needed to look for those skeletons and help their case, it should be provided, but it also needs to be, in this case, kept confidential.

    I don't particularly like Apple, but they have the right to have certain info kept confidential, and for that I can understand their concern. I don't know enough about Psystar to either like them or dislike them, but they need to be told by the Judge that these documents WILL be kept confidential and they and their lawyers will be held PERSONALLY liable if the Protective Order is broken.
    In this case, we already have seen Apple choosing to drop one claim if necessary to avoid discovery that it fears the other side will not respect and keep from the public.
    If this is the case, I wonder if there are any skeletons that may be hiding in that discovery that Apple is afraid to disclose.

    [ Reply to This | # ]

    • Protective Order question - Authored by: Anonymous on Thursday, September 03 2009 @ 01:08 PM EDT
    • Protective Order question - Authored by: Anonymous on Thursday, September 03 2009 @ 02:02 PM EDT
      • Duh - Authored by: kenryan on Thursday, September 03 2009 @ 02:43 PM EDT
        • Duh - Authored by: Anonymous on Thursday, September 03 2009 @ 03:31 PM EDT
          • Duh - Authored by: DodgeRules on Thursday, September 03 2009 @ 03:38 PM EDT
            • Duh - Authored by: Wol on Friday, September 04 2009 @ 03:51 AM EDT
              • Duh - Authored by: lukep on Friday, September 04 2009 @ 04:08 AM EDT
          • Duh - Authored by: kenryan on Thursday, September 03 2009 @ 04:31 PM EDT
          • Duh - Authored by: greywolf on Friday, September 04 2009 @ 02:51 AM EDT
            • Duh - Authored by: DodgeRules on Friday, September 04 2009 @ 10:17 AM EDT
              • Duh - Authored by: Wol on Friday, September 04 2009 @ 10:44 AM EDT
                • Duh - Authored by: lukep on Friday, September 04 2009 @ 06:45 PM EDT
    • Or maybe just common sense - Authored by: Anonymous on Thursday, September 03 2009 @ 10:20 PM EDT
    Similarities between Amdahl and Psystar?
    Authored by: Anonymous on Thursday, September 03 2009 @ 02:38 PM EDT
    Sorry if this has been brought up before, but there are some similarities between Amdahl and Psystar. Amdahl created machines which were capable of running IBM's premiere mainframe operating system on Amdahl hardware due to an anti-trust settlement between the US DOJ and IBM. I don't believe IBM was ever found to be a monopoly, legally, but the settlement allowed Amdahl to sell hardware and install an IBM sold operating system on top of it. Seems quite similar to what Psystar is trying to do here with Apple. I know it's been discussed what Psystar's strategy with the monopoly claims are, but I wonder if any of you have considered that there was a precedent with strong similarities. From Wikipedia:
    For the next quarter century Amdahl and IBM competed aggressively against one another in the high-end server market, with Amdahl grabbing as much as 24% marketshare. Amdahl owed some of its success to antitrust settlements between IBM and the U.S. Department of Justice, which assured that Amdahl's customers could license IBM's mainframe software under reasonable terms.
    Any thoughts?

    [ Reply to This | # ]

    I think a useful posting on Groklaw would be...
    Authored by: Anonymous on Thursday, September 03 2009 @ 04:07 PM EDT
    ...a discussion of the proprietary of EULAs, and what the permissible scope of
    such agreeements OUGHT to be.

    It's one thing to discuss the law as it stands. In the US, the circuits are
    somewhat divided, though the 9th Circuit (wherein lies Apple) tends to support
    EULAs as valid. Other circuits differ. Commenters from many other countries
    have claimed that EULAs are categorically invalid there--as I live in the US, I
    can't comment intelligently on the law elsewhere.

    To be perfectly clear, by "EULA" I mean a (purported) license
    agreement between a software publisher and an end user which is not consummated
    until after the sale of a software product (often over-the-counter by a retailer
    who is not privy to the agreement), and which seeks to impose conditions on the
    use of the purchased software. Under this definition, the GPL and most other
    free software licenses are not EULAs, as they only restrict copying and
    redistribution as opposed to use.

    So--I'm asking everybody here, and I'd LOVE it if PJ were to chime in here:

    1) Assuming EULAs are valid, what restrictions should be permissible, and what
    restrictions void?

    * Waiver of first sale
    * Limitations as to the scope of use ("you may only install Software on an
    Apple-branded computer", "you are limited to X inbound network
    connections", "you may only prepare 3 distinct tax returns, and may
    not use this software for commercial tax prepration", "you may only
    use this software if you are a student", "you may only use this disk
    to upgrade a prior version of software", etc.).
    * Limitations on commentary or criticism of the software
    * Limitations on reverse-engineering

    2) How ought the answer to #1 change if the vendor has a monopoly in some
    relevant market--how should EULAs intersect with anti-trust law? Should Apple
    be able to get away with EULA language that MS cannot?

    3) Why shouldn't EULAs apply to other media besides computer programs--digital
    multimedia, analog multimedia, printed material, etc? As a hypothetical
    example, should William Patry, the author of the treatise "Patry on
    Copyright", be permitted to publish a "student edition" of his
    work at a lower price-point--containing the same text as the "full
    edition" but not licensed for use in a professional law practice? Assume
    both are sold over-the-counter (or net) by a disinterested bookseller.

    4) Should use of a software program (or other copyrighted work) outside the
    scope of an EULA constitute copyright infringement, breach of contract, or some
    other theory of damages?

    5) How should the DMCA intersect with EULAs? What of protection mechanisms
    designed only to enforce EULA terms as opposed to enforcing rights under
    copyright law?

    6) What significance, if any, should be attached to the act of clicking "I
    agree" when the installer runs? If the installer can be subverted--either
    by tampering with the software, or having a third party (or a child legally
    incapable of entering into a contract) press the button on the mouse--is there
    still a valid license?

    Pystar is probably a bad case for exploring EULAs, as what they are doing is
    probably invalid even if there is no EULA (the First Sale Doctrine probably
    doesn't permit installation of retail-purchased Mac OS onto computers which are
    then re-sold). But many uses of EULAs are flagrantly obnoxious, and can be used
    for things like vendor lock-in, price discrimination, and suppression of
    criticism. Other uses may well be valid--Apple probably has a legitimate
    argument that it intends its upgrade disks to be "replacement parts"
    as opposed to standalone products; and use of retail channels to distribute
    upgrades is a useful practice that probably not be eliminated by absolutist
    positions of "I bought it, I can do what I want with it".

    So people--what ought to be permissible, if anything, in an EULA?

    [ Reply to This | # ]

    I think the good judge needs to give Psystar another fine!
    Authored by: Anonymous on Thursday, September 03 2009 @ 04:08 PM EDT
    I believe the good judge needs to give Psystar another fine and their lawyer a
    good butt kicking.

    Perhaps a $50,000 fine will be in order for violating his order and a sanction
    for
    his lawyer.

    I wonder if Apple can continue to dig up problems like this and keep Psystar and

    its lawyer in trouble.

    [ Reply to This | # ]

    Questions about Nesson's motives
    Authored by: Anonymous on Thursday, September 03 2009 @ 06:12 PM EDT
    IANAL and I was wondering if:

    1) Nesson wants to get involved in an effort to get coypright law modified, and
    then turn around and use the verdict as part of an appeal to the Tenenbaum case
    (would this even be possible, though?)

    2) is it possible for the judge, based on Nesson's questionable activities in
    the lead up to the Tenenbaum, to prohibit Psystar et al from even talking to
    Nesson?

    [ Reply to This | # ]

    Has the circus come to town, already?
    Authored by: Ian Al on Friday, September 04 2009 @ 04:38 AM EDT
    I see clowns and hear elephants trumpeting. It's so hard to concentrate on the
    case... err... cases... err... case with all this commotion. I even see the
    sideshow shysters.

    The circus is all about emotions and feelings with the crowd being stirred to a
    frenzy by the show.

    It's about as appropriate here as AC/DC at a classical concert.

    No, I don't care to know that AC/DC do classical concerts.

    I'll be glad when the circus leaves town.

    ---
    Regards
    Ian Al

    Linux: Viri can't hear you in free space.

    [ Reply to This | # ]

    Perhaps Apple should subpoena Professor nesson
    Authored by: Anonymous on Friday, September 04 2009 @ 04:06 PM EDT
    Apple stated that disclosing things to Professor Nesson has already voided any
    Psystar lawyer-client confidentiality about anything that they disclosed to the
    Professor since he is a third party. Perhaps Apple should subpoena Professor
    Nesson, and depose him about everything that Psystar has disclosed to him, and
    demand production of any and all emails from Psystar and/or their attorneys to
    the Professor, including all future emails that they may send him through the
    end of the litigation, including any appeals.

    [ Reply to This | # ]

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