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Psystar Argues Its Florida Case Should Stay There - Updated
Saturday, September 19 2009 @ 02:07 PM EDT

Psystar has filed its Memorandum in Opposition [PDF] to Apple's Motion to Dismiss or Enjoin Prosecution of the Florida action Psystar recently initiated.

Psystar claims that the California case cannot possibly include Snow Leopard because "put simply and starkly -- neither Snow Leopard nor the Psystar computers that run Snow Leopard existed when it was filed." Also, Psystar claims that Snow Leopard cannot be included in the California action because Apple had not registered a copyright for Snow Leopard at the time it filed its California complaint. If Apple wants the two cases joined, Psystar argues, or wants to make arguments about preclusion on the antitrust claims, it should go to Florida and file a motion there:

It is within this Court’s power to enjoin prosecution of a suit in a different federal forum. But this should be done only when the second suit involves the same claims, the same facts, and the same parties to such a degree that, in this Court’s discretion, it would be a waste of the federal judiciary’s resources to have the cases proceed in parallel. An injunction barring Psystar from prosecuting the Florida case would be appropriate if that case were simply a mirror image of this case, raising the same legal questions on the same evidence. But the Florida case is nothing like that. The Florida case concerns a new Apple product, Snow Leopard; a new series of Psystar products, including both computers running Snow Leopard and dongles permitting end users to run their own copies of Snow Leopard on their own non-Psystar computers; a new virtualization technology developed by Psystar; a new license for Snow Leopard with at least four major differences from the Leopard license affecting everything from choice of law to the enforceability of the license to whether the first-sale doctrine and § 117 apply; and entirely new market definitions for the antitrust claims.
Emphasis added. So Psystar is selling USB sticks so you can run Apple virtually on whatever computer you already have? What's the real deal here? Non-Psystar computers? I thought they just told us they were entering the high-end hardware market with Snow Leopard. It's so hard to keep up, when everything Psystar keeps changing.

Well. OK. USB sticks. The question is whether the Psystar code on the sticks is legal, but my other question is why would anyone buy that? How badly do people want to buy Mac OS X Snow Leopard plus the Psystar USB stick plus hardware not designed to work specifically with Snow Leopard when the owner of the copyright says you are infringing? What's the point? Why *not* just buy a Mac? Ain't nothing like the real thing, the song says, and it's true. It doesn't seem a very tempting business proposition, more a legal workaround. And if what you are selling is now a virtualization USB stick, what happened to Psystar's first sale argument?

Here are the filings:

09/18/2009 - 139 - MOTION File Document Under Seal filed by Psystar Corporation. (Camara, Kiwi) (Filed on 9/18/2009) (Entered: 09/18/2009)

09/18/2009 - 140 - MOTION File Document Under Seal filed by Psystar Corporation. (Camara, Kiwi) (Filed on 9/18/2009) (Entered: 09/18/2009)

09/18/2009 - 141 - Memorandum in Opposition re 138 MOTION to Dismiss OR ENJOIN PROSECUTION OF THE RECENTLY-FILED FLORIDA ACTION AND TO RE-OPEN DISCOVERY FOR LIMITED PURPOSES filed byPsystar Corporation. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F) (Camara, Kiwi) (Filed on 9/18/2009) (Entered: 09/18/2009)

[ Update: Psystar has now filed "additional" and/or "corrected" exhibits to this memorandum in opposition, all totally redacted. I have no idea which ones they intend to "correct" that way, if they mean any of the above. I'll try to find out. Meanwhile, here are the filings:

09/19/2009 - 142 - EXHIBITS re 141 Memorandum in Opposition, (Corrected Copies) filed byPsystar Corporation. (Attachments: # 1 Additional Exhibit, # 2 Additional Exhibit)(Related document(s) 141 ) (Camara, Kiwi) (Filed on 9/19/2009) (Entered: 09/19/2009)

- End Update.]

Here's how Psystar makes its argument about copyrights and why Apple should not be allowed to include Snow Leopard in the California action:

Apple’s amended complaint further cannot be construed to extend to Snow Leopard because Apple had not registered any copyright in Snow Leopard before filing the complaint and, in fact, has not registered its copyright in Snow Leopard as of a search conducted on September 14. See Amended Complaint at ¶ 26 (listing copyright registrations); Ex. F (Affidavit of Jane Dryer re: search at copyright office). Copyright registration is a prerequisite to any action for infringement. 17 U.S.C. § 411(a) (“no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title”); Kodadek v. MTV Networks, Inc., 152 F.3d 1209, 1211 (9th Cir. 1998). When a plaintiff files an infringement action based on an unregistered copyright, the appropriate remedy is dismissal of the action. See Jefferson Airplane v. Berkeley Systems Inc., 886 F. Supp. 713, 714–17 (N.D. Cal. 1994). At a minimum, the plaintiff must file an amended complaint alleging the registration, see Zito v. Steeplechase Films, Inc., 267 F. Supp. 2d 1022, 1025 (N.D. Cal. 2003) — something that Apple has not even sought to do and that it should not be permitted to do at this late hour.
Of course, as the end of the argument admits when saying Apple should at least have to file an amended complaint, sometimes courts do let you do exactly that. I simply can't imagine any court denying Apple a chance to do that, under these circumstances. And here's why else I think the copyright argument should fail. First, Snow Leopard is an upgrade, dependent on Leopard to even run, I've read. Anyway, Apple already told the court that in its California complaint, it asked for an injunction against Psystar putting *any* Apple software on *any* non-Apple hardware. That seems to cover any new products as well as all the old ones, not just Leopard. And the law doesn't require you to file for a copyright before you release a product. If Apple didn't mention Snow Leopard by name and attach a copyright registration at the time it filed its complaint, it's obviously because it wasn't released yet. Courts don't generally allow you to play gotcha if your intent is infringement. Clearly, Apple intended all its copyrighted works to run on only Apple hardware, and that's the basis for the litigation.

Plus, while it is true you have to register a copyright to go for an infringement action, it's a bit more complicated. After all, you do already have the copyright, whether you register or not, and the courts don't treat that like chopped liver. The advantages to registering include what kind of damages you can ask for, statutory -- like the RIAA -- or whether you have to prove actual damages, which is harder, and also if you register first you can ask for your attorneys' fees. As for damages, how much money do you think Apple expects to get from this turnip at this point? I've never heard you can't ask for an injunction if you haven't registered. And it is possible that Apple registered a draft prior to publication of Snow Leopard. Here's a FAQ where the US Copyright Office explains how it all works, including these words from its linked paper, Copyright Registration [PDF]:

Copyright Registration

In general, copyright registration is a legal formality intended to make a public record of the basic facts of a particular copy right. However, registration is not a condition of copyright protection. Even though registration is not a requirement for protection, the copyright law provides several inducements or advantages to encourage copyright owners to make registration.

Among these advantages are that "if registration is made within three months after publication of the work or prior to an infringement of the work, statutory damages and attorney's fees will be available to the copyright owner in court actions. Otherwise, only an award of actual damages and profits is available to the copyright owner." So, while I'm not a lawyer, it seems to say that if you have three months to register a new work, Apple still has time to file. If Psystar quickly infringed before they could do it, does that make it home free for Psystar? I can't imagine a court so ruling. But that seems to be what they are arguing. Here's the actual statute that I think applies:
§ 412. Registration as prerequisite to certain remedies for infringement

In any action under this title, other than an action brought for a violation of the rights of the author under section 106A(a), an action for infringement of the copyright of a work that has been preregistered under section 408(f) before the commencement of the infringement and that has an effective date of registration not later than the earlier of 3 months after the first publication of the work or 1 month after the copyright owner has learned of the infringement, or an action instituted under section 411(b), no award of statutory damages or of attorney’s fees, as provided by sections 504 and 505, shall be made for —

(1) any infringement of copyright in an unpublished work commenced before the effective date of its registration; or

(2) any infringement of copyright commenced after first publication of the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work.

I've marked the pertinent parts. It reads to me that Apple had a month from learning of the infringement to file or 3 months after first publication. Doesn't it read that way to you? I wonder why Psystar would even raise it as an issue. But it's possible I'm missing something. The referenced 106(a) is worth reading. It's about the right to attribution and integrity (visual art), and if I were Apple, I'd use it too, these parts, if only I could:
A) to prevent any intentional distortion, mutilation, or other modification of that work which would be prejudicial to his or her honor or reputation, and any intentional distortion, mutilation, or modification of that work is a violation of that right, and

(B) to prevent any destruction of a work of recognized stature, and any intentional or grossly negligent destruction of that work is a violation of that right.

That's the very heart of what is offensive about Psystar's actions, to me. I know it doesn't apply, but it feels like it should.

Psystar argues that discovery is over in California, so it's too late to go into Snow Leopard issues. But there are many reasons why that is unlikely to be accepted. The first is that Apple has asked for a reopening of discovery to allow limited discovery about what code Psystar is using to get Snow Leopard to run on non-Apple computers.

Also, Apple has accused Psystar in its motion of being ... well, to put it kindly, lacking in forthrightness in discovery:

Psystar deliberately concealed its intention to run Snow Leopard on its computers despite being relevant to Apple’s claims and responsive to many of Apple’s discovery requests.
In other words, if Psystar misled Apple into thinking it was *not* going to sell Snow Leopard, then did it anyway, how much is the court going to like the argument that the copyrights didn't get registered on time, even if it were so? Or that it's too late for discovery about Snow Leopard? If Psystar tried to snooker Apple, why would a court reward that?

And remember that Psystar has already been sanctioned $5,000 essentially for Psystar's CEO not being truthful at a deposition. There's water under this bridge that might incline a judge to believe Apple over Psystar, frankly. From AppleInsider drizzle's transcript of the hearing excerpt, beginning with Apple's attorney:

MS. BOROUMAND SMITH: Sure. So back in March, we had a 30(b)(6) deposition of Psystar’s CEO, Rudy Pedraza. At that deposition, we asked him whether he knew what the dsmos kernel extension was, whether Psystar used the dsmos kernal extension –

THE COURT REPORTER: Slow down just a little for me.

MS. BOROUMAND SMITH: I’m sorry. And similarly, we asked him about the Apple decrypt kernel extension and whether or not Psystar used that kernel extension: The answers to all of those questions were “no.” We then –

THE COURT: Stop just a second.


THE COURT: That’s totally false, isn’t it?

MR. CAMARA: Well –

THE COURT: I mean, sounds totally false based on what I’m hearing today that that testimony was just false.

MR. CAMARA: Well, here’s what happened. They – the people at Psystar — well, I won’t defend that, Your Honor, I think those answers were false.

THE COURT: All right.

MR. CAMARA: Coming from a 30(b)(6) deponent.

THE COURT: All right.

MR. CAMARA: Robert Pedraza at the business was in charge of this, but, certainly, Rudy Pedraza should have had that information at the 30(b)(6) deposition.

But lawyers have to say something. That is what they are paid to do, to present the client's best case, and this filing is exactly that, even if you know it will fail in the end. As you can see, though, lawyers are not supposed to help a client to lie to the court, and you see in this excerpt that Psystar's lawyer wouldn't go as far as the client, and that's what a good lawyer does, refuse to defend a lie to the court. However, the same lawyer, according to Apple, when asked if Psystar was planning to sell Snow Leopard refused to answer the question. Now they are selling it. If Psystar planned to sell and simply danced around the questions, they are probably now in very deep do-do. But here's Psystar's argument, so you can see both sides for yourself:
Apple controlled the schedule for the release of Snow Leopard. Apple elected not to take steps to add Snow Leopard to this case by seeking a late pleadings amendment. Apple elected not to raise the issue of Snow Leopard’s impending release and its effect on the time needed for discovery at the post-stay status conference, by motion to extend the time for discovery, or at a status conference requested for that purpose. By contrast, the release of Snow Leopard was a surprise event for Psystar. Psystar did not know when Snow Leopard would be released until Apple’s public announcement of a release date. And Psystar developed its new technology — selective virtualization — in the days preceding and the week following the release of Snow Leopard. It is simply incorrect to suggest that Psystar withheld any information or code during the discovery period that might have induced Apple to seek a pleadings amendment sooner. And it would have taken no great oracular capacity to predict that upon the release of Snow Leopard, Psystar would have taken steps to get Snow Leopard running on Psystar systems. Psystar has never been opaque about its intention to continue on in its business.
Please excuse my cynicism, but isn't more likely that the new lawyer, being also a computer guy, figured out this strategy when he hopped on board? I mean, they maybe didn't know the date of the release, but they certainly knew Snow Leopard was next, and yet later in the document, Psystar says, "This is because all parties understood that Mac OS X Snow Leopard was not included in this case." Maybe because Psystar led them to think so? Anyway, Psystar holds the position that Apple was the one stonewalling about Snow Leopard, imagining that Psystar wouldn't be able to bypass its security (um, I find that hard to believe, personally, since all DRM gets bypassed if folks don't care about the law). Now, if Apple wishes to consolidate the two cases, it has to file in Florida to do so, Psystar argues. This is starting to sound like SCO hanging its star on a particular judge at the appellate level.

Here's the one Psystar argument that does seem to me to have legs:

B. Snow Leopard License v. Leopard License

Snow Leopard has a different “software license agreement” than Leopard. The different agreements create legal differences not only for Apple’s breach-of-contract claims, but also for Apple’s copyright-infringement and DMCA anti-circumvention claims. The Snow Leopard license, see Ex. D, differs from the Leopard license, see Ex. E, in several relevant respects.

Of course, one Psystar issue is first sale, whether Apple is selling or licensing. Another is whether you can get your money back:
Enforceability of the license agreement.

The Snow Leopard license agreement, unlike the Leopard agreement, states that returns of the software are governed by Apple’s online return policy, and not by the return policies of individual retailers like Amazon or Best Buy.

Psystar claims that Leopard's license doesn't give you the same level of return rights, so if they are different in those terms, the cases should be separate. The next difference Psystar raises is a difference in the terms of the licenses regarding decryption and reverse engineering. Snow Leopard's is more strict. And then the choice of law clauses are different. So Psystar sums up:
In short, the differences between the license agreement that applies to Snow Leopard and the agreement that applies to Leopard make this case and the Florida case quite different legally.
This is at least a rational argument, and it's possible a judge would agree.

And Psystar explains the difference in how it gets non-Apple hardware to run Leopard versus Snow Leopard:

C. Virtualization v. Hook Function

The method by which Psystar computers run Mac OS X is completely different for Snow Leopard than it was for Leopard. For Leopard, Psystar computers invoked a particular Apple function [redacted] to cause Mac OS X to [redacted] function properly. This was accomplished through the Psystar-written kernel extension OpenCojones.kext. For Snow Leopard, Psystar uses new code to instead virtualize (that is, simulate) parts of the system management chip (SMC) to “convince” Mac OS X that it is running on Apple hardware. Virtualization like this is the backbone of a large part of the modern computing industry; indeed, it is how Apple’s Macintosh computers are able to run Windows and Windows applications. See, e.g., techonology/virtualization.html (description of virtualization from the leading company in the field, VMware). As this brief description makes clear, the Psystar technology in the Florida case is entirely different from the Psystar technology at issue here.

If you want to run an operating system by virtualization, why do you need Psystar? Maybe some of you can explain that. But the real question is, is the code Psystar has written legal? Indeed, look at the next description of the USB sticks Psystar is selling:
D. New Psystar Devices

One of the issues to be litigated in the Florida case is the legality of Psystar’s “dongles” (an industry term in wide use). Psystar’s dongles are USB sticks containing virtualization software that allow end users to run Mac OS X on computers of their choice, not just computers purchased from Psystar. The end user would buy a dongle from Psystar and a copy of Mac OS X from Apple or a reseller like Amazon or Best Buy and would then be able to run that copy of Mac OS X on their personal non-Apple computer. Psystar has worked out a design for a dongle that it intends to test, manufacture, and sell in the near future, possibly depending on the progress made in the Florida action. The dongle, of course, would be an entirely new product that is different in kind from the Psystar computer systems at issue in this action.

See what I mean? Doesn't it look like Psystar knows that the California case is lost, and so it came up with a virtualization strategy and hopes to get a new start in Florida selling you virtualization USB sticks? Of course, the question remains, as Psystar itself admits, is the code on those sticks legal?

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