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Apple Accuses Psystar of Destroying Evidence; and in AutoZone, the 24th Hearing is Cancelled
Thursday, August 13 2009 @ 11:16 PM EDT

Apple has filed a letter brief with the court, accusing Psystar of destroying evidence. I can't tell you much more than that, because the letter is heavily redacted, and most of the exhibits are sealed altogether. But those of you who followed the SCO v. IBM case will remember that spoliation, which is the legal word for destroying evidence, is a very serious matter. This is about Apple's DMCA claim, because one clear sentence reads:
Defendant, Psystar Corporation, has destroyed relevant evidence that it was legally required to preserve. Specifically, Psystar has overwritten -- i.e., erased -- infringing versions of the software code used on computers sold to its customers.
Apple goes on to state that it "contends and can prove" that Psystar violated the DMCA and infringed copyrights "by modifying Apple's Mac OS X software" and then installing it on non-Apple computers. When Apple deposed the Psystar CEO, Rodolfo Pedraza, it says, it did so to find out what method the company used to circumvent Apple's "technological protection measures", and that's how it found out about the erasures of prior versions of Psystar's software. This happened just before Psystar filed for bankruptcy.

Apple asks that the court issue an order requiring Psystar to produce all master copies of its code, and if it can't, it requests sanctions. One possibility is that Apple can win a default judgment on liability as a sanction. A slightly lesser sanction might be what's called an inference adverse to Psystar on the copyright and DMCA claims, not to mention Psystar having to pay Apple's attorneys' fees and costs of having to file this motion. Like I say, spoliation is serious, depending on how it happened and how important the evidence was, and Psystar's prior attorneys, Carr & Ferrell, know it, as you can see in the spoliation motion [PDF] they filed in the Burst v. Microsoft case.

There is incremental progress in the SCO v. AutoZone case, too, and if any of you were thinking of going on the 24th, cancel your plans. The judge has cancelled the hearing, since AutoZone does not object to SCO filing an amended complaint.

Here's the Apple v. Psystar filing:

08/13/2009 - 89 - Letter Brief re 85 Letter Brief ,, Dated August 10, 2009, Public Version (correcting Docket #85) filed by Apple Inc.. (Attachments: # 1 Exhibit A, # 2 Exhibit (s) B-G (Filed Under Seal))(Related document(s) 85 ) (Gilliland, James) (Filed on 8/13/2009) (Entered: 08/13/2009)

Here's the public, redacted version of the letter brief:
90 - Filed & Entered: 08/14/2009
Letter Brief
Docket Text: Letter Brief re [85] Letter Brief,, Letter Brief (Redacted Public Version) filed by Apple Inc.. (Attachments: # (1) Exhibit Ex. A, # (2) Exhibit Exs. B-G (Filed Under Seal))(Related document(s)[85]) (Chung, Megan) (Filed on 8/14/2009)
And here's AutoZone's docket notation:

08/13/2009 - 105 - MINUTE ORDER IN CHAMBERS of the Honorable Judge Robert C. Jones, on 8/13/2009. Upon review of the papers and pleadings on file herein regarding Plaintiff's Motion to Amend/Correct Complaint, IT IS HEREBY ORDERED that Plaintiff's 99 Motion to Amend/Correct Complaint is GRANTED.

IT IS FURTHER ORDERED that Plaintiff shall file its 1st Amended Complaint.

IT IS FURTHER ORDERED that the hearing, currently scheduled for August 24, 2009 at 9:00 a.m., shall be VACATED. (Copies have been distributed pursuant to the NEF - TKH) (Entered: 08/13/2009)

Spoliation

Exhibit A to Apple's letter brief is a list of things Apple wanted from Psystar, including:

Please produce all DOCUMENTS and COMMUNICATIONS that RELATE TO any program, software or source code YOU used to install MAC OS X on PSYSTAR PRODUCTS, including but not limited to flow chars and/or pseudo code showing installation of MAC OS X.

If YOU have used or use a MASTER COPY, please produce one copy of each MASTER COPY that has been used or will be used.

That's part of what's gone walkabout, according to Apple. So what's spoliation all about? And what could it mean in this case?

Here's a Report and Recommendation Regarding Spoliation Motions [PDF] in a case in Utah I highlighted back in 2006, Adams v. Gateway, where the magistrate judge, the Hon. David Nuffer, explains spoliation in detail, the three ways it comes into play, and what the purpose of sanctions is, so if you've forgotten about all that, you can review. I have the report as text, at the end of the article here, but it's a report for the 10th Circuit, not California, which is where Apple is suing, so the case law part of the report isn't relevant for Apple. It's likely to be at least similar.

The short version is this: if you deliberately or carelessly destroy evidence, you ruin the other side's right to litigate, or defend against litigation, and rob them of the ability to prove their case, and so the court, if it's proven, can level the playing field to compensate for the loss of evidence by punishing whoever did it.

Evidentiary inference is one possible sanction, and it just means the court, the judge or the jury, will infer that whatever was deliberately destroyed was unfavorable to the person or entity that destroyed it. If it actually wasn't, you can imagine how mad you'd be at yourself if you destroyed it stupidly.

Another sanction can be dismissing your action, or part of it. Or, if you are the innocent plaintiff, you could get a judgment by default, which is what Apple is asking for.

But, here, it's actually worse than just normal spoliation. If you read the letter, you saw that Apple mentions that Psystar's evidence destruction violates a discovery order by this judge on top of the usual. That's like pushing the nuke button. The judge gets a lot more choices in such a case, including contempt powers. As Judge Nuffer's report puts it:

Fed. R. Civ. P. 37(b)(2) enumerates an illustrative variety of sanctions, including an order that certain facts be taken as true, that the disobedient party be barred from taking certain positions, that pleadings be stricken, and that default judgment be entered, as well as invoking contempt powers. The Rule also specifies that the court "shall require the party failing to obey the order or the attorney advising that party or both to pay the reasonable expenses, including attorney's fees," and has expansive powers to make "such orders . . . as are just."
"As are just", as determined by a judge whose order has been defied ... well, I don't want it to ever be me doing that, that's all I can tell you. And Psystar can't run back to bankruptcy at the moment for any protection, I don't think. So hopefully, for its sake, it will be able to find the missing software.

But lesser sanctions are possible too. It's up to the judge to consider any mitigating factors and to choose the least awful remedy that will level the playing field again. That could just be a warning not to do it again, but in this situation, I doubt it would be that mild, since Apple's DMCA claim depends on this evidence.

In short, Psystar has been accused of something rather serious, maybe game changing. And it has just changed attorneys, which is never the greatest time for something game changing to happen. We have yet to hear Psystar's side of the spoliation story, though, so anything is possible. Psystar's announcement of the new lawyer included this unintentionally ironic detail:

“Psystar has always been more a Cowboy than a Hippie,” the company said. “Now we’ve changed lawyers to better reflect who we are. Everyone here values openness. And that’s how we’re going to fight Apple: in public.”
Lordy, not another cowboy. Cowboy Darl was only just bucked off of his bronco, if that is the proper lingo. I'm not sure I can take any more cowboys.

Well, we'll see how open Psystar turn out to be with this allegedly missing software. They continued that statement, in a Gizmodo article by John Hermann with my all-time favorite Psystar headline, Psystar Sobers Up, Lawyers Up, Prepares to Die Go to Court:

We have nothing to hide. We buy hundreds of copies of OS X legally, from retailers like Amazon and Apple itself. We're probably one of Apple's biggest customers. Then we install these copies of OS X, along with kernel extensions that we wrote in-house, on computers that we buy and build. Then we resell the package to people like you. That's it.
Nothing to hide any more, Apple is saying, because Psystar destroyed all the incriminating bits. I expect there will be a hearing on this, pardners. So stay saddled up.

Update: Indeed, there is a hearing already set:

The Court is in receipt of plaintiff’s August 10, 2009, letter and hereby SETS a further meet-and-confer for 9:30 A.M. ON AUGUST 20, 2009, in the Court’s jury room on the 19th floor of the federal courthouse in San Francisco. Any unresolved issue(s) will be heard by the Court at noon on the same day. Defendant’s response is due by 9:00 a.m. on August 19, 2009. Please note that only counsel who participates in the further meet-and-confer may argue at the hearing.
That last means they can't send a cheaper associate to handle the meet and confer prior to the hearing, and then send in the big guns just for the hearing. The meet and confer is to try to resolve things, so only a few items are left for the hearing, and this judge, I gather, wants the same lawyer to handle both. I would take that as a signal, if I were a party, that he wanted me to take the meet and confer process seriously.

Here's the filing:

08/12/2009 - 87 - ORDER SETTING HEARING RE PLAINTIFF'S DISCOVERY DISPUTE [re 85 Letter Brief, filed by Apple Inc.]. Signed by Judge William Alsup on 8/11/2009. (whasec, COURT STAFF) (Filed on 8/12/2009) (Entered: 08/12/2009)

Here's Apple's letter brief, and Exhibit A, as text, the exhibit being all the requests in discovery it is highlighting as unfulfilled:

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

[Townsend letterhead]

August 10, 2009

Via Electronic Filing

Honorable William Alsup
United States District Court
[address]

Re: Apple Inc. v. Psystar Corp., Case No. C 08-03251 WHA

Dear Judge Alsup:

Defendant, Psystar Corporation, has destroyed relevant evidence that it was legally required to preserve. Specifically, Psystar has overwritten – i.e., erased – infringing versions of the software code used on computers sold to its customers. [redacted] Psystar’s failure to preserve and produce this clearly relevant evidence violates both the Federal Rules and this Court’s Supplemental Order governing discovery.

I. Background

In this lawsuit, Apple contends and can prove that Psystar has violated the DMCA and infringed Apple’s copyrights by modifying Apple’s Mac OS X software, which is designed to be used solely on Apple computers, and by installing Mac OS X on non-Apple computers. In November 2008, Apple served discovery seeking the source and executable software code that Psystar uses to cause Mac OS X to run on non-Apple computers. (See RFP Nos. 3, 5, 8-11, 13, 15, 19, 46, 47, 55, 56 and IROG Nos. 7-8, language reproduced as Ex. A.) In March 2009, Apple deposed Psystar’s 30(b)(6) designee, CEO Rodolfo Pedraza, to discover how Psystar circumvented technological protection measures in Mac OS X and installed it on Psystar computers (Topic 1). Apple also inspected Psystar’s source code and deposed Roberto Pedraza (Psystar’s co-founder) and Psystar’s technical “consultant,” [redacted]. This discovery revealed that Psystar has erased prior versions of its software that Apple’s experts independently have found on defendant’s computers. Apple sent a letter identifying this spoliation issue and other deficiencies in Psystar’s document production (Ex. B), but before the parties could meet and confer Psystar filed for bankruptcy. On July 23, 2009, shortly after the bankruptcy stay was lifted, the parties finally met and conferred on these issues.

II. Psystar’s Destruction of, and Failure to Produce, Key Technical Documents

Since April, 2008, Psystar has sold various different non-Apple computers that run Mac OS X. Over time Psystar has created different versions of the software 1 it installs on these computers that allow them to run Mac OS X. [redacted]

_________

1 In discovery, Apple sought production of Psystar’s source code, software or programs used to run or update Mac OS X (RFP Nos. 3, 10, 13, 15, 46, 47 and 55-56) and documents relating to any modifications made to or reverse engineering of Mac OS X to enable Mac OS X on Psystar computers (RFP Nos. 8-11, 13). (See Ex. A.)


[townsend letterhead] Hon. William Alsup
August 10, 2009
Page 2

Psystar contends it was under no obligation to preserve source code modifications 2 even though the Federal Rules specifically require litigants to preserve relevant evidence and this Court’s Supplemental Order specifically required Psystar to take “affirmative steps as are necessary to preserve evidence.” Supp. Order, ¶4; see also Sensonics, Inc. v. Aerosonic Corp., 81 F.3d 1566, 1575 (Fed. Cir. 1996) (“uncompromising duty to preserve relevant records”). This duty required Psystar to stop overwriting code. Computer Assoc. Int’l., Inc. v. Am. Fundware, Inc., 133 F.R.D. 166 (D. Colo. 1990) (duty to stop ongoing erasures of source code arose, at the latest, when a copyright infringement action was filed). Moreover, as stated in the October 30, 2008 Joint Case Management Statement, Psystar’s principals were put on notice of this duty to preserve and a document preservation notice was sent out to Psystar’s employees. Yet, as admitted by Mr. Pedraza, Psystar has not complied with its obligations and instead has destroyed evidence of its willful infringement. Below are specific examples discovered to date by Apple of code that has been erased:

[redacted]

__________

2 Interestingly, Psystar just implemented a software version control system – over a year after this lawsuit was instituted and months after Apple’s meet and confer letter on spoliation.

3 When asked why, Psystar’s counsel stated that Psystar’s email and customer support software (SupportSuite) randomly “deletes or loses” emails. While counsel says that Psystar has contacted SupportSuite regarding this issue, Psystar has yet to find any emails or chat messages showing such contact with that vendor. Psystar also has not provided evidence of, and Apple is unaware of, any other steps taken by Psystar to halt the deletion of relevant emails by Psystar’s email system. Moreover, Psystar did not inform the Court of this email deletion at the two CMCs in this case or at the last motion to compel hearing where Psystar’s emails and attachments were at issue.

4 The findings of Apple’s technical expert will be detailed in his August 21, 2009 opening expert report or can be submitted by declaration under seal should the Court so require.

5 Psystar has produced one version of the bootloader and just last week provided its July 2009 bootloader. However, Psystar has not produced the other bootloaders it previously used on its computers.


[townsend letterhead] Hon. William Alsup
August 10, 2009
Page 3

[redacted]

III. Relief Sought

Apple requests that the Court order Psystar to produce the code for [redacted], and all master copies that Psystar has used. If Psystar does not or cannot produce these documents, Apple requests that the Court issue an order: (1) requiring Psystar – under the penalty of perjury – to admit that it has destroyed documents and (2) making a factual finding that prior versions of Psystar’s software included [redacted] and were destroyed by Psystar. Additionally, Apple requests that the Court sanction Psystar for its discovery misconduct. Federal courts have the inherent authority to impose sanctions for destruction of evidence and bad faith conduct. Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991); Unigard Sec. Ins. Co. v. Lakewood Eng. & Mfg. Corp., 982 F.2d 363, 365 (9th Cir. 1992); Leon v. IDX Syst. Corp., 464 F.3d 951, 958-61 (9th Cir. 2006) (striking claims where computer files were intentionally deleted); Computer Assoc., 133 F.R.D. at 170 (entering default judgment on liability in a copyright action where defendant overwrote source code upon each revision). If Psystar does not produce all prior versions of its code, then Apple respectfully requests that the Court exercise its inherent authority by granting Apple an inference adverse to Psystar on its copyright and DMCA claims and by awarding Apple its fees and costs associated with bringing this motion or as the Court otherwise sees fit.

Very truly yours,

/s/ James G. Gilliland, Jr.
James G. Gilliland, Jr.
Counsel for Apple Inc.

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

EXHIBIT A

TO LETTER BRIEF DATED AUGUST 7, 2009


RFP No. Plaintiff's Requests for Production
3Please produce all DOCUMENTS and COMMUNICATIONS that RELATE TO any program, software or source code YOU used to install MAC OS X on PSYSTAR PRODUCTS, including but not limited to flow chars and/or pseudo code showing installation of MAC OS X.
5 If YOU have used or use a MASTER COPY, please produce one copy of each MASTER COPY that has been used or will be used.
8 Please produce all DOCUMENTS that RELATE TO any modifications to MAC OS X made or used by PSYSTAR.
9 Please produce all DOCUMENTS and COMMUNICATIONS that RELATE TO any modifications by PSYSTAR to open source code used in MAC OS X.
10 Please produce all DOCUMENTS and COMMUNICATIONS that RELATE TO any APPLE SOFTWARE or any modification to APPLE SOFTWARE used, included or found on PSYSTAR PRODUCTS.
11 Please produce all DOCUMENTS and COMMUNICATIONS that RELATE TO testing or reverse engineering of MAC OS X or APPLE COMPUTERS performed by PSYSTAR or a THIRD PARTY.
12 Please produce all DOCUMENTS that RELATE TO APPLE SOFTWARE, including but not limited to COMMUNICATIONS with THIRD PARTIES.
13 Please produce all DOCUMENTS and COMMUNICATIONS that RELATE TO a THIRD PARTY's programs or software that allow installation of MAC OS X on computers other than APPLE COMPUTERS.
15 Please produce all DOCUMENTS and COMMUNICATIONS that RELATE TO the "OpenComputing Leopard Restore Disk" and "Psystar Open Computer Restore Disk," including all restore forms or acknowledgements of sale directed to PSYSTAR from its customers, all source code used to create the "Restore Disk," instructions on how to use the "Restore Disk," and any pseudo code or flow charts RELATED TO the "Restore Disk."
19 Please produce all DOCUMENTS and COMMUNICATIONS that RELATE TO source code or programs from Netkas, other programmers or hackers from OS X 86.
46 Please produce one copy of each version of PC EFI, dsmos.kext and other kernel extensions that PSYSTAR has used or uses to install MAC OS X on YOUR products.
47 Please produce all DOCUMENTS and COMMUNICATIONS that RELATE TO the source of firmware, PC EFI, dsmos.kext and other kernel extensions that YOU have used to install MAC OS X on YOUR products.
55 Please produce all DOCUMENTS and COMMUNICATIONS that RELATE TO software updates to MAC OS X and/or APPLE's Software Update utility.
56 Please produce all DOCUMENTS and COMMUNICATIONS that RELATE TO YOUR provision of software updates on PSYSTAR PRODUCTS.

ROG No. Plaintiff's Interrogatories:Defendant's Response:
7Describe in detail the steps or processes YOU have undertaken to install MAC OS X on PSYSTAR PRODUCTS, including but not limited to IDENTIFYING (a) each PERSON who participated in or was involved with the installation process and (b) each software used. ....Psystar Corporation will further make the source code for its technology in accordance with the Protective Order of March 2, 2009. (From Second Supplemental Response)
8 Describe how PSYSTAR installs or runs MAC OS X software on the PSYSTAR PRODUCTS and IDENTIFY all software or firmware used to do so. Psystar refers to its response to Interrogatory No 7 including its offer to make available its source code in accordance with the Protective Order of March 2, 2009. (From Second Supplemental Response)


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