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Psystar's New Strategy: the Florida Complaint, as text - Updated
Sunday, August 30 2009 @ 08:43 PM EDT

I think I've figured out Psystar's new strategy from reading carefully its new Florida complaint [PDF] against Apple.

There's a morphed antitrust claim, yes a new one, and a new defense. Overall, the Florida strategy seems to be an attempt to keep Psystar in business, a new business using only Snow Leopard, if California grants Apple's request for a permanent injunction. Psystar is viewing any such injunction as covering only Leopard, not Snow Leopard.

I'll show you what I mean, bit by bit. It's complex, and I view this complaint as more sophisticated than the one in California.

Where to begin? How about the new antitrust allegation?

First Major Shift: A New Way to Call Apple a Monopoly by Redefining the Market:

Psystar now claims that Apple has a monopoly in "the market for premium personal computers":

Apple violated §2 of the Sherman Act, 15 U.S.C. §2, by monopolizing and attempting to monopolize the market for premium personal computers, that is, personal computers priced above $1,000.
Is Psystar selling computers in that market? Or hasn't its entire point been that it will sell you cheaper hardware than Apple? Ah! That's the old strategy. This is the new, matching some legal needs, I gather. It looks to me like they are altering their business model to match the new attempt to sue Apple in Florida with antitrust claims.

Psystar in California claimed Apple was "destroying competition in the Mac OS Capable Computer Hardware Systems market," but the court there disagreed and ruled Apple wasn't a monopoly and wasn't guilty of improper tying. Psystar wants another bite of that antitrust apple. So now, Psystar claims Apple is a monopoly in a new market, the "premium personal computer market".

That means their business has to change, and they have to sell premium computers, not cheapo hardware, even to have standing to sue on that claim. This complaint indeed claims that Psystar sells "superior hardware" compared to Apple. When this saga began, Psystar was advertising OpenMacs for $399. But guess what the latest press release tells us? Psystar's prices are going up, into what it has defined as the premium market, computers selling for $1,000 or more. And Psystar says now in the complaint that it sells "superior personal computers at substantially lower prices".

I consider that impossible, since Apple designs the software and hardware to smoothly work together, and Psystar can't equal that, I don't think. That's why I bought Apple products, actually, precisely because I wanted them both, and I wanted Apple support for the combo. I was sick of all the problems with PCs and so I wanted the Apple combo, so I could escape, knowing as I did that they were designed to work well together, and I did escape. Apple products do "just work". It's been the most flawlessly simple hardware and software to use I ever owned, bar none. I don't still buy it, unless Psystar pushes me over the edge, because I prefer the freedom of FOSS, but the quality is real. The new Psystar prices are as follows:

The Rebel 19" ships with a 19" monitor, 2.33 GHz Intel Quad Core processor and 500 GB hard drive. With more processing power, a larger hard drive and a superior graphics card than the iMac 20", the Rebel still comes in at a more affordable price at $899, a savings of $300 as compared to Apple's hardware. Unlike Apple's computers, which can be difficult and cumbersome to upgrade hardware, Psystar machines allow for easy expandability.

Even the higher end iMac 24" cannot compete with Rebel 22" , which ships with a 3.0 GHz Intel Quad Core processor. Using benchmarking software, the Rebel 22" out performs the pricier Mac on a number of levels from Integer processing to memory bandwidth tests, with a 66% better overall score and at $1299, the Rebel 22" comes in at $900 less than the $2199 iMac 24".

Psystar still offers a version that undercuts Apple's price, as you see, and they even highlight it. But now they are offering products for over $1,000 too. So. New strategy, new prices. They are building their business to suit the lawsuit, I gather.

But I notice Psystar still claims that it's trying to sell to people Apple doesn't have any interest in selling to. But then how is it a competitor? My brain can't wrap around that. It's a shift in strategy. That would necessitate raising their prices to qualify as a competitor of Apple's. Because if Psystar is not in any way harmed by Apple's alleged "monopoly" because they aren't in the same market, what standing does Psystar have to even sue? That'd be more like the hopeless antiGPL Daniel Wallace v. FSF case, where he wasn't in competition with GPL code, so his antitrust case was thrown out.

Psystar just put on its website an official company statement that includes this bit:

It is our goal at Psystar to offer a great product (OS X) to people who are not included in Apple’s target market. Steve Jobs has even said, “There are some customers which we choose not to serve.” Some people simply cannot afford an Apple computer. Others would like to see better performance from their machines with hardware configurations that Apple does not provide. Our Psystar machines were developed to fill niches that a larger corporation like Apple doesn’t serve.
See? Either they are in the same market, or they are not. They can't have it both ways, although I think they intend to try, and if they are not, they are like Dan Wallace. That's a new company statement, by the way, not one from the past, contemporaneous with the complaint in Florida.

When Apple first sued Psystar, Psystar's owners, the Pedrazas, talked to Free Republic, and it was reported that they told them this:

They said they believed their clones offered an ideal package: faster, more powerful and less expensive than brand-name alternatives.
If so, they were not competing in the same premium market, as I read it. Suddenly they offer premium computers. Can you start up a new business just so you can sue someone? We'll find out.

And another question: did Psystar always plan on competing directly with Apple in the premium market, once its lawsuit prevailed, as in plaintiffs' daydreams they always do? If so, that raises a serious question: who is behind this litigation? Who is funding it? How odd that they overnight have products to sell at the higher end, just in time for legal needs in Florida. At least I find it very odd.

So that's the first major strategy shift I see.

[Update: The Houston Chronicle's Loren Steffy interviewed Rudy Pedraza, and the Sept. 3rd article confirms my point that Psystar is still trying to reach a different market than Apple:

Pedraza said he was surprised that Apple sued his company. He and his brother started Psystar because they like the Mac operating software and wanted to offer it to customers who couldn't afford Apple's machines.

“We want to bring that software to everyone,” he said. “This is a battle about competition.”

Well, only if he wrote his own software to compete with Apple. That would be competition, and Apple would have no problem with it. Pedraza wants to bring Apple software to everyone, but it's Apple's software, not Psystar's, and Apple doesn't want him to do that. Who wins, class? Note that the article also says the new law firm charges a flat rate, and it only gets paid if it wins, which might explain all the effort going into this. It's a new law firm, opening in February, the article says, and new law firms naturally wants more business. - End update.]

Second Major Shift: They Now Claim They Only Access Open Source Code:

Another major shift is where Psystar now claims that it isn't guilty of DMCA violations, because what it is accessing is just the BSD open source code Apple uses:

7. Like Windows, Mac OS X is an operating system that allows a computer to function and to run applications like word processors, Internet browsers, and the like. Unlike Windows, Mac OS X is based on a variety of open source (i.e., publicly available) pieces of computer software, including the Mach microkernel developed at Carnegie Mellon University and the so-called Berkeley Software Distribution (BSD), a variant of UNIX. Apple has continued to release parts of Mac OS X as open source, as it is required to do because of its decision to incorporate open-source software. Apple calls these open-source releases Darwin. A critical difference between Mac OS X and Windows is that Mac OS X is built on a foundation of open-source software not developed by Apple and in which Apple cannot and does not claim any exclusive rights.

8. The Psystar computers that run Mac OS X Snow Leopard are able to do so by running software, written by Psystar, that interfaces with the open-source portion of Mac OS X Snow Leopard. The manner in which Psystar computers run Mac OS X Snow Leopard is entirely different from the manner in which Psystar computers run Mac OS X Leopard. Both the technical details of Apple's attempt to tie Mac OS X to Macintoshes and the computer software that Psystar uses to enable Mac OS X to run on Psystar computers changed with the release of Snow Leopard. Accordingly, the factual and technical issues in this case are entirely different from those at issue in the California litigation, which is limited to Psystar computers that run Mac OS X Leopard.

If that is true, it's a very clever shift. It may not always have been true, but even if Psystar is shut down from selling Leopard, it will then presumably stay in business selling Snow Leopard only, at least until the Florida case is resolved, which could be years away. Of course, if the owners of the copyrighted BSD code, should they not be Apple, show up and join Apple, that would turn the tables nicely. Also, it feels peculiar, in that Snow Leopard is reportedly just an upgrade:
That would be in sync with Apple's marketing of Snow Leopard as a performance and stability upgrade -- not an update that adds a slew of visible changes -- one of the reasons why Apple priced Snow Leopard at $29 for a single license, $49 for a five-license Family Pack. Online retailer Amazon.com, in fact, has already lowered Snow Leopard's prices to $25 for one license, $43.99 for the Family Pack.
That seems to conflict with Psystar's description, that it's totally different. I remember what Psystar used to say:
Apple can't tell an applications developer that it can't make a piece of Mac-compatible software. They can't forbid Mac users from writing blogs critical of Apple. And they can't tell us not to write kernel extensions that turn the computers we buy into Mac-compatible hardware.
Now it's a smoother line. This is a much more sophisticated approach than the first complaint. So that is the second major shift in strategy I see in this new complaint, which was filed on August 27, 2009 and given the docket number 09-22535CIV-HOEVELER.

Third Major Shift: Emphasis on First-Sale:

The third major shift is the baldness and emphasis on their claim of first-sale rights:

16. Psystar seeks first a declaration that is activities with respect to Mac OS X Snow Leopard do not constitute copyright infringement. Psystar intends to purchase every copy of Mac OS X Snow Leopard that it resells with its computers, as has been its practice with prior versions of Mac OS X. It purchases these copies both directly from Apple and through resellers like Amazon and Best Buy. The Copyright Act expressly permits Psystar to take steps necessary to run Mac OS X Snow Leopard on its computers, even if these steps require making incidental copies of Mac OS X Snow Leopard. See 17 U.S.C. §117(a). The Copyright Act also expressly permits Psystar to resell the particular copies of Mac OS X Snow Leopard that it has lawfully purchased. See 17 U.S.C. §109 (the first-sale doctrine). Psystar's customers are then permitted by §1117 to again make copies necessary to run Mac OS X Snow Leopard on their Psystar computers. Together, §§ 109 and 117 render Psystar's actions with respect to Mac OS X Snow Leopard not copyright infringement.
We'll see. Maybe they researched case law in Florida and see it's better than in the Ninth Circuit for first sale defenses. Here are the cases they cite: Technical Resource Services, Inc. v. Dornier Medical Systems, Inc., 134 F.3d 1458, 1464-65 (11th Cir. 1998); Omega Environmental, Inc. v. Gilbarco, Inc., 127 F.3d 1157, 1169 (9th Cir. 1997); and Morris Comm. Corp. v. PGA Tour, Inc., 364 F.3d 1288, 1293-94 (11th Cir. 2004) (citing United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966)).

The problem I continue to see is that Psystar is a business, not an end user, and the last hop on the chain they propose seems the most wobbly. What gives Psystar customers the right to run the software contrary to the license? Psystar either, for that matter? That's the question, really, isn't it? It's not like a book you get from somebody on eBay. There's no license on a book, no restrictions on reading it. So first sale of a book doesn't raise this issue. But software isn't a book. And Psystar isn't an end user, selling an object it bought and then decided it no longer wants. It's a business. Can I start up a business where I buy in bulk from a publisher, and then sell the books, unread, never intending to use them myself, under the first-sale umbrella, for less than the publisher does, even though they are not actually second-hand books? How about if I change the name of the book and the publisher on the cover of the book? Now is it still OK? It seems like a business twisting what the law intended to protect end users, frankly, and I can't see it working out for Psystar.

Fourth: The EULA is not enforceable:

And the next prong of the new strategy is one that would destroy the software market as we know it, that the EULA is not enforceable:

19. Psystar further seeks a declaration that the "license agreement" that accompanies Mac OS X Snow Leopard is not enforceable insofar as it purports to prevent owners of copies of Mac OS X Snow Leopard from running that software on their own non-Macintosh computers -- and, in particular, on Psystar's computers. To the extent that the license agreement purports to make copyright infringement that which is not copyright infringement under federal law or purports to forbid as a matter of contract law that which is expressly permitted by federal copyright law, state law that permits enforcement of the license agreement is in conflict with federal law and is therefore preempted.
All proprietary EULAs add on restrictions beyond copyright law. It's what they are designed to do, unlike the GPL, which gives you *more* rights. It would utterly put Microsoft out of business if any court granted such a declaration as Psystar seeks, I guess. Who would that benefit? Some foreign government that wants the US economy to tank, I suppose. But wait, there is a loophole for distinguishing EULAs from EULAs:
20. Moreover, Psystar seeks a declaration that the license agreement is unenforceable for lack of privity and lack of consideration. The license agreement is accessible only after a user purchases a shrinkwrapped copy of Mac OS X Snow Leopard. And the license expressly states that it may be returned only according to the terms of the reseller -- for example, Amazon or Best Buy. These resellers often include return terms that forbid the return of unwrapped software. Putting these terms together, a purchaser of Mac OS X Snow Leopard has no opportunity to see the license agreement before losing the ability to undo the sale by returning his or her copy of Snow Leopard. Although shrinkwrap license agreements may be enforceable in other contexts, the particular facts of Apple's shrinkwrap agreement for Mac OS X render it unenforceable against Psystar or Pystar's customers.
See? Psystar has no intention of claiming *all* EULAs are unenforceable, so those of you dreaming that this was their goal need to stop this exact minute. The lack of privity and lack of consideration are also claims antiGPL netkooks have been claiming make the GPL unenforceable, by the way, for years. What a coincidence. But Microsoft EULA's can continue, I gather, as far as Psystar is concerned; only Apple has no rights against Psystar's violations. How convenient.

It's not even factually true that you can't see the license until you open the software and install it. Read it for yourself on Apple's website. They're all there, and that's not a new Apple page. It's been there for years. Here's the current Snow Leopard license [PDF]. See? They say you can sue over a ham sandwich, but no one thought anyone really would. This claim, to me, falls into the ham sandwich category. It's what you might call a frivolous claim, in my book, since it's obviously not true, and it wouldn't take much for Psystar's legal team to find that page. I'm just a paralegal, and I found it in less than one minute on Google. And here's Leopard's license, if you would like to compare. Here's what you get in the box, and how to upgrade. Yes, you can upgrade by violating the EULA on Tiger, but it's the honor system that you won't. I won't. I believe in honor, quaint as it may sound, and I appreciate that Apple does too, unlike Microsoft, who spies on you and makes you prove your authenticity up to your eyeballs. Here's Apple's return policy and the refund terms, which include this relevant piece:

Sales to End Users Only

The Apple Store sells and ships products to end user customers only. You may not purchase for resale. Apple reserves the right to refuse or cancel your order if Apple suspects you are purchasing for resale.

No doubt that explains the Psystar yearning to deep six the EULA. It says it buys Snow Leopard from the Apple Store. Oops. You can return boxed software to Apple if you don't like the license, with certain limitations. Like you can't install the software, keep the installation, and pretend you don't like the license. Don't break the seal if you want to return it, and they say you can read the terms before you open, and don't download, if you think you might not like the terms, before you read them. Duh.

Anyway, the copyright preemption claim, I believe, is primarily an anti Open Source move. If you recall, SCO tried a similar claim that the GPL preempts copyright law and was therefore unconstitutional in the SCO v. IBM case. Eben Moglen called it a frivolous claim, writing that such a claim would invalidate the Apache license, the BSD license, and most FOSS licenses, including Microsoft's Shared Source licenses. But what if that is exactly the goal? SCO later dropped it as a separate claim, but it continues to argue that the GPL is preempted by the Copyright Act. That is yet to be ruled on in the SCO v. IBM case, stayed by the SCO bankruptcy. Don't you find it strange that both cases argue the same way, with the same apparent goal?

It's the oddest complaint I've ever seen in another respect. Well. SCO's was plenty odd too, now that I think of it. But Psystar is actually claiming damages from Apple, claiming that Apple's "misrepresenations" that you can only run their code on their hardware harmed Psystar:

25. These violations of the federal antitrust acts have damaged and will damage Psystar in its business and property because they deny Psystar business that otherwise would go to Psystar by creating doubt about the legality of Psystar computers running Mac OS X Snow Leopard. The items of damage to Psystar include damage to Psystar's business reputation and to the reputation of its products and sales lost that could have been made absent Apple's attempts to restrict Mac OS X Snow Leopard to Macintoshes.
Apple, of course, would say it's precisely the opposite, that Psystar is damaging its business and reputation. And they aren't misrepresentations at the moment, given that no court has ruled that this EULA's terms are not enforceable. So where do damages come into this? In the list of relief sought, though, Psystar asks for this:
a. money damages for lost sales and injury to Psystar's business reputation and to the reputation of its personal computer products
Psystar's business reputation? That's a bit like a mistress filing against a man's wife for damages because the wife interfered with the mistress's happiness and good name. Who got here first? Who has first claim to this code?

Psystar didn't even have a fixed address when this all began. Remember the The Guardian's effort to find Psystar?

The Psystar site talks a lot. OK. The site was registered in 2000, according to whois, but what's odd is that searches on Google and on Live.com don't turn up anything about the company before this week. Zip. Zero. Nada.

I called the Miami Chamber of Commerces and its Better Business Bureau. They've never heard of it.

And they kept moving to new addresses. So it's a bit much to talk about damage to its business reputation.

So, major shifts in legal strategy and a new business model that just happens to match the new lawsuit.

Psystar is like the shifting sands of the desert. What they do and what they say they do keeps changing. When I see that in litigation, the hair stands up on my neck, frankly. If you are doing nothing wrong, after all, why change anything? And let's face it, if changes are made just to be able to sue, it speaks to motive. Apple has to send lawyers to Florida to handle that case now, in addition to the one in California, so the harassment level goes up. Coincidence? I do expect Apple to at least try to get the two cases consolidated in California, for that very reason.

Here's the complaint as text:

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

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
FORT LAUDERDALE DIVISION

PSYSTAR CORPORATION,

Plaintiff,

v.

APPLE INC.,

Defendant.

___________

Case No. 09-cv-______
Jury Demanded

___________

ORIGINAL COMPLAINT

1. Psystar is a Florida corporation with its headquarters and principal place of business at [address]. Psystar assembles and sells personal computers in the United States and abroad. Its products include the Open(3), Open(Q), Open(7), and OpenPro, and the all-in-one Rebel Series, which includes the Rebel 19" and the Rebel 22". Psystar's computers are capable of running a variety of operating systems, including Microsoft Windows, many variants of Linux, and Mac OS X. This dispute is over Psystar's right to continue selling computers running Mac OS X -- and, in particular, to sell computers running the newly released successor to Mac OS X Leopard, Mac OS X Snow Leopard.

2. Psystar computers outperform comparable Macintoshes sold by Apple, in large part because of the superior hardware that Psystar sells. Using Geekbench benchmarks, the Rebel 19" outperformed the iMac 20" and the Rebel 22" outperformed the iMac 24" on every metric. According to Jason D. O'Grady of ZDNet: "In short, the Psystar pretty much trounces the closest price Mac available from Apple." According to Rich Brown of CNET: "The Psystar's hardware advantage translates to some impressive

1

performance wins." Psystar competes with Apple by selling superior personal computers at substantially lower prices.

3. Apple is a California corporation with its headquarters and principal place of business at [address]. Apple developed the Mac OS X operating system, the current model of which is called Mac OS X Leopard. Apple has announced that it views Psystar's assembling and selling personal computers running Mac OS X Leopard as illegal. Apple has sued Psystar in the United States District Court for the Northern District of California alleging that Psystar's use of Mac OS X Leopard is illegal. Apple seeks a permanent injunction shutting down Psystar's business.

4. Apple has announced that it will release Mac OS X Snow Leopard as a successor to Mac OS X Leopard on Friday, August 28, 2009. Psystar believes that it is legally entitled to resell copies of Mac OS X Snow Leopard on Psystar computers, but is confident, based on the ongoing litigation with Apple over Mac OS X Leopard, that Apple will view Psystar's decision to sell computers running Mac OS X Snow Leopard as illegal. Counsel for Apple has also so stated. Accordingly, Psystar brings this action to seek a declaratory judgment that it may sell and continue to sell computers running Mac OS X Snow Leopard, provided, of course, that Psystar continues to purchase copies of Mac OS X Snow Leopard from Apple and others, like Amazon and Best Buy, who resell Apple's products.

5. Psystar further brings this action to seek an injunction, and damages pending the issuance of such an injunction, for Apple's anticompetitive attempts to tie Mac OS X Snow Leopard to its Macintosh line of computers (sometimes referred to as "Apple-branded hardware"). Apple is the only company in the world that integrates

2

operating system and hardware development. Although it sells copies of Mac OS X Snow Leopard separately from its Macintoshes -- the line of computers that includes the Mac Mini, the iMac, the MacBook, the MacBook Pro, the MacBook Air, and the Mac Pro -- it purports to limit the use of these copies of Mac OS X Snow Leopard to Macintoshes. It does this both technically, by computer code that attempts to verify that Mac OS X Snow Leopard is running on a Macintosh, and through the "license agreement" that is associated with Mac OS X Snow Leopard.

6. By tying its operating system to Apple-branded hardware, Apple restrains trade in personal computers that run Mac OS X, collects monopoly rents on its Macintoshes, and monopolizes the market for "premium computers." Apple's share of revenue in the market for premium computers -- computers priced at over $1,000 -- is currently 91%. Apple's conduct violates the Clayton and Sherman Acts in that Apple is monopolizing the market for premium computers, illegally integrating across the markets for hardware and operating systems for use in personal computers, entering into illegal exclusive-dealing agreements that prevent buyers of Mac OS X from buying their hardware from competitors like Psystar, illegal tying Mac OS X to Macintoshes and thereby substantially decreasing competition in the market for hardware for premium personal computers, and entering into license agreements and, upon information and belief, reseller agreements that restrain trade in that they require that Mac OS X be run only on Apple-branded hardware.

7. Like Windows, Mac OS X is an operating system that allows a computer to function and to run applications like word processors, Internet browsers, and the like. Unlike Windows, Mac OS X is based on a variety of open source (i.e., publicly available)

3

pieces of computer software, including the Mach microkernel developed at Carnegie Mellon University and the so-called Berkeley Software Distribution (BSD), a variant of UNIX. Apple has continued to release parts of Mac OS X as open source, as it is required to do because of its decision to incorporate open-source software. Apple calls these open-source releases Darwin. A critical difference between Mac OS X and Windows is that Mac OS X is built on a foundation of open-source software not developed by Apple and in which Apple cannot and does not claim any exclusive rights.

8. The Psystar computers that run Mac OS X Snow Leopard are able to do so by running software, written by Psystar, that interfaces with the open-source portion of Mac OS X Snow Leopard. The manner in which Psystar computers run Mac OS X Snow Leopard is entirely different from the manner in which Psystar computers run Mac OS X Leopard. Both the technical details of Apple's attempt to tie Mac OS X to Macintoshes and the computer software that Psystar uses to enable Mac OS X to run on Psystar computers changed with the release of Snow Leopard. Accordingly, the factual and technical issues in this case are entirely different from those at issue in the California litigation, which is limited to Psystar computers that run Mac OS X Leopard.

II. JURISDICTION AND VENUE

9. This Court has subject-matter jurisdiction pursuant to 28 U.S.C. §§ 1331 (federal question), 1332 (diversity), and 1338 (copyrights and trademarks). This case arises under the Clayton Antitrust Act, the Sherman Antitrust Act, the Lanham Act, and the Copyright Act. This Court therefore has subject-matter jurisdiction under §1331. This case is between citizens of different States -- Psystar is a citizen of Florida and

4

Apple is a citizen of California -- and involves more than $75,000 in controversy. This Court therefore has subject-matter jurisdiction under §1332.

10. This Court has both general and specific personal jurisdiction over Defendant Apple Inc. This Court has general jurisdiction over Apple because Apple has engaged in pervasive and intentional business contacts in this District, including but not limited to advertising and selling copies of Mac OS X, Macintosh computers, iPods, iPhones, and other products in this District both through physical Apple Stores and through the online Apple Store. Some of these sales were sales to Psystar. This Court has specific jurisdiction over Apple because the unlawful actions here alleged affect Psystar's business in this District, were targeted at those who sell Macintosh OS X on non-Apple hardware (a group that principally includes Psystar), and, upon information and belief, were in many instances specifically targeted at Psystar itself.

11. Venue is proper in this Court under 28 U.S.C. §1391 because Apple resides in this district as reside is defined in §1391(c), that is, because Apple's contacts with this District, as described in the preceding paragraph, are sufficient to give rise to personal jurisdiction over Apple in this District were this District a State. Each of the contacts described in the preceding paragraph also satisfy the requirements for jurisdiction of Florida courts contained in Fla. Stat. Ann. § 48.193.

12. Apple may be served through its registered agent for service of process in Florida, CT Corporation System, [address]. Apple's headquarters and principal place of business are at [address].

5

III. THE CALIFORNIA LITIGATION

13. This case raises a wholly separate set of issues wholly those in Apple Inc. v. Psystar Corp., No. 3:08-cv-3251-WHA, in the United States District Court for the Northern District of California, because that case is limited to Psystar computers running Mac OS X Leopard. This case concerns the successor to Mac OS X Leopard, Mac OS X Snow Leopard. Both the technical mechanisms used by Apple to tie Mac OS X Snow Leopard to run on Psystar computers are new and different and not within the scope of the California litigation. Moreover, fact discovery in the California litigation has closed, the deadline for amendments to pleadings has passed, and that litigation is proceeding expeditiously to trial on January 11, 2010; any attempt to pursue these claims in that forum would inevitably and unnecessarily delay trial.

IV. CAUSES OF ACTION

A. Declaratory Judgment Act
14. Psystar is subject to the threat of a coercive action filed by Apple with respect to Snow Leopard parallel to the action that Apple has filed in California with respect to Leopard. In particular, Psystar stands threatened by a lawsuit by Apple alleging at least that Psystar's selling computers that run Mac OS X Snow Leopard constitutes copyright infringement in violation of the Copyright Act, circumvention of a technological access-control mechanism in violation of the Digital Millenium Copyright Act, and a breach of the "license agreement" that Apple contends governs the relationship between it and those who buy copies of Mac OS X Snow Leopard. Psystar also stands threatened with potential claims for contributory copyright infringement and inducing

6

copyright infringement, inducing breach of contract, trademark infringement and dilution, trade-dress infringement, and unfair competition -- all claims that Apple has asserted with respect to Leopard in the California litigation.

15. A large part of Psystar's business is selling computers that run Mac OS X. Psystar expects to sell substantial numbers of computers running Mac OS X Snow Leopard following Snow Leopard's release on Friday. Psystar seeks to clarify for its own benefit and for the benefit of its customers the application of federal law to its computers running Mac OS X Snow Leopard. A declaration by this Court of the legal rights of Apple and Psystar with respect to Psystar computers running Mac OS X Snow Leopard would clarify, to put it bluntly, the legality of Psystar's business -- and would remove the substantial negative effect on Psystar's business of continued uncertainty and legal wrangling between Apple and Psystar. In particular, Psystar seeks declarations on the following topics.

16. Psystar seeks first a declaration that is activities with respect to Mac OS X Snow Leopard do not constitute copyright infringement. Psystar intends to purchase every copyof Mac OS X Snow Leopard that it resells with its computers, as has been its practice with prior versions of Mac OS X. It purchases these copies both directly from Apple and through resellers like Amazon and Best Buy. The Copyright Act expressly permits Psystar to take steps necessary to run Mac OS X Snow Leopard on its computers, even if these steps require making incidental copies of Mac OS X Snow Leopard. See 17 U.S.C. §117(a). The Copyright Act also expressly permits Psystar to resell the particular copies of Mac OS X Snow Leopard that it has lawfully purchased. See 17 U.S.C. §109 (the first-sale doctrine). Psystar's customers are then permitted by §1117 to again make

7

copies necessary to run Mac OS X Snow Leopard on their Psystar computers. Together, §§ 109 and 117 render Psystar's actions with respect to Mac OS X Snow Leopard not copyright infringement.

17. Psystar further seeks a declaration that its actions do not constitute a violation of the anti-circumvention provisions of the Digital Millenium Copyright Act. See 17 U.S.C. § 1201. Psystar does not gain access to Apple's copyrighted work -- the code for Mac OS X Snow Leopard -- at any point during the operation of its computers. Psystar merely allows Mac OS X Snow Leopard to run in the ordinary fashion, while providing software of its own to make Mac OS X Snow Leopard compatible with its hardware. Moreover, Psystar's acts fall within §1201(f), which permits circumvention for purposes of achieving interoperability between a copyrighted computer program and other programs. Any circumvention by Psystar is solely for the purpose of making Psystar's software (which allows Mac OS X Snow Leopard to run on Psystar computers) interoperable with Mac OS X Snow Leopard.

18. Psystar's position with respect to Mac OS X Snow Leopard is analogous to that of a person developing a software application to run on top of Mac OS X Snow Leopard. Just as Microsoft writes Word to run with Mac OS X and Google writes its web browser Chrome to run with Mac OS X, Psystar writes its software to run with Mac OS X Snow Leopard. In fact, the part of Mac OS X Snow Leopard that Psystar interacts with is within the open-source portion of Mac OS X and makes use of features of Mac OS X Snow Leopard designed to allow software developers to extend Mac OS X Snow Leopard to work with different hardware. Admittedly, Apple hopes that this hardware be peripherals such as video cameras or USB memory sticks, but nothing in the technology

8

of Mac OS X Snow Leopard prevents use of the same facilities to extend Mac OS X Snow Leopard for use on non-Apple personal computers.

19. Psystar further seeks a declaration that the "license agreement" that accompanies Mac OS X Snow Leopard is not enforceable insofar as it purports to prevent owners of copies of Mac OS X Snow Leopard from running that software on their own non-Macintosh computers -- and, in particular, on Psystar's computers. To the extent that the license agreement purports to make copyright infringement that which is not copyright infringement under federal law or purports to forbid as a matter of contract law that which is expressly permitted by federal copyright law, state law that permits enforcement of the license agreement is in conflict with federal law and is therefore preempted.

20. Moreover, Psystar seeks a declaration that the license agreement is unenforceable for lack of privity and lack of consideration. The license agreement is accessible only after a user purchases a shrinkwrapped copy of Mac OS X Snow Leopard. And the license expressly states that it may be returned only according to the terms of the reseller -- for example, Amazon or Best Buy. These resellers often include return terms that forbid the return of unwrapped software. Putting these terms together, a purchaser of Mac OS X Snow Leopard has no opportunity to see the license agreement before losing the ability to undo the sale by returning his or her copy of Snow Leopard. Although shrinkwrap license agreements may be enforceable in other contexts, the particular facts of Apple's shrinkwrap agreement for Mac OS X render it unenforceable against Psystar or Pystar's customers.

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B. Federal Antitrust Acts
21. Apple violated §1 of the Sherman Act, 15 U.S.C. § 1, by tying and attempting to tie Mac OS X Snow Leopard to Macintosh computers -- that is, by requiring those who want access to Mac OS X Snow Leopard to also buy a Macintosh computer on which to run Mac OS X Snow Leopard. See Technical Resource Services, Inc. v. Dornier Medical Systems, Inc., 134 F.3d 1458, 1464-65 (11th Cir. 1998) (collecting cases). The software license agreement that accompanies Mac OS X Snow Leopard constitutes a contract in restraint of trade. It further constitutes an illegal exclusive-dealing arrangement under §3 of the Clayton Act, 15 U.S.C. § 14, because it purports to condition sales of Mac OS X Snow Leopard on an agreement that the purchaser will not deal with those who compete with Apple in selling personal computers, a group that includes Psystar. See, e.g., Omega Environmental, Inc. v. Gilbarco, Inc., 127 F.3d 1157, 1169 (9th Cir. 1997).

22. Apple violated §2 of the Sherman Act, 15 U.S.C. §2, by monopolizing and attempting to monopolize the market for premium personal computers, that is, personal computers priced above $1,000. The elements of a monopolization claim are "(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." Morris Comm. Corp. v. PGA Tour, Inc., 364 F.3d 1288, 1293-94 (11th Cir. 2004) (citing United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966)).

23. Apple has the power to control prices and exclude competition from the market for premium personal computers because it has the exclusive right to Mac OS X

10

Snow Leopard and uses that right to prevent competitors such as Psystar from selling competing personal computers that run Mac OS X Snow Leopard. Apple's Macintoshes have a 91% revenue market share in the market for premium personal computers. Apple willfully acquired this market power by abusing its copyright monopoly in Mac OS X. Although Apple properly has a monopoly in those aspects of mac OS X that are original works of authorship and that are therefore copyrightable, Apple is not entitled to extend its monopoly over Mac OS X Snow Leopard -- a piece of software -- to the quite different market for the computers on which Mac OS X Snow Leopard can run.

24. These violations of the federal antitrust acts affected interstate commerce because Apple ties Mac OS X Snow Leopard to Macintoshes and attempts to enforce this tying arrangement in every state. In particular, Apple has attempted to prevent Psystar from selling computers running Mac OS X Snow Leopard not only in Florida, but in every state.

25. These violations of the federal antitrust acts have damaged and will damage Psystar in its business and property because they deny Psystar business that otherwise would go to Psystar by creating doubt about the legality of Psystar computers running Mac OS X Snow Leopard. The items of damage to Psystar include damage to Psystar's business reputation and to the reputation of its products and sales lost that could have been made absent Apple's attempts to restrict Mac OS X Snow Leopard to Macintoshes.

C. Lanham Act
26. Apple represents that only Macintoshes can legally run Mac OS X Snow Leopard. This representation is false. Apple's misrepresentation harms Psystar

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business because it creates the false impression that it is illegal for Psystar to make and sell computers that run legally purchased copies of Mac OS X Snow Leopard. Apple's misrepresentations about its exclusive right to run Mac OS X Snow Leopard violate the Lanham Act, 15 U.S.C. § 1125(a), which prohibits false or misleading descriptions or representations of fact that misrepresent the nature of the speaker's or another's goods, services, or commercial activities. Here, Apple's misrepresentation both misrepresents that Apple is the exclusive legal seller of personal computers that run Mac OS X Snow Leopard and misrepresents that Psystar has no right to sell personal computers that run Mac OS X Snow Leopard.

27. Apple's misrepresentations about the legality of running Mac OS X Snow Leopard on non-Apple computers appear throughout Apple's advertising and promotional materials. The license agreement that accompanies Mac OS X Snow Leopard represents that Mac OS X Snow Leopard can only be run on Apple-branded hardware and, specifically, that it is not to be run on non-Apple hardware. Apple describes its operating system as an operating system for Macintosh computers, using the "Macintosh" brand name, which refers to computers made by Apple. Apple describes its operating system as an operating system for Macintosh computers, using the "Macintosh" brand name, which refers to computers made by Apple. Apple describes its operating system as integrated with the hardware it sells, as though it could not operate on hardware sold by others. And Apple in its court filings has made its claim that Mac OS X Snow Leopard can be legally run only on Macintoshes.

V. JURY DEMAND

28. Psystar demands trial by jury on all claims, defenses, and other issues in this case.

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VI. PRAYER FOR RELIEF

29. Psystar respectfully prays for relief as follows:

a. money damages for lost sales and injury to Psystar's business reputation and to the reputation of its personal computer products;

b. attorneys' fees for bringing this action;

c. treble damages;

d. a declaration of the legal rights of the parties including those items identified in Part IV(A) of this complaint;

f. an injunction requiring Apple to cease tying Mac OS X Snow Leopard to its Macintosh personal computers; and

f. any other relief to which Psystar may be entitled in law or equity.

Dated: August 26, 2009.

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Respectfully submitted,

signature
K.A.D. Camara (not admitted to S.D. Fla.)
[email]
CAMARA & SIBLEY LLP
Texas Bar No. 24062646 / Mass. Bar No. 661087
[address, phone, fax]

signature
Alex D. Weisberg
Florida Bar Number: 0566551
[email]
Aaron D. Radbil
Florida Bar Number: 0047117
[email]
WEISBERG & MEYERS LLC
[address, phone, fax]

Attorneys for Plaintiff Psystar Corporation

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[Civil Cover Sheet]

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