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Apple and Psystar File Dueling Motions for Summary Judgment - Why This Case Matters
Monday, October 12 2009 @ 12:17 PM EDT

Both Apple and Psystar have filed motions for summary judgment. I get the sense that both would like to wrap up the California litigation, and move on to Snow Leopard in Florida, Psystar especially, obviously. Both argue the first-sale doctrine issues. Before we get to the filings, I want to show you why I think this case, and other first-sale cases like Vernor v. Autodesk, matter to FOSS, and why I hope the Autodesk ruling [PDF] is appealed and overturned.

Psystar, in its motion, mentions the Declaration of Raymond Nimmer [PDF] filed in support of Autodesk and against Vernor in that recent case. By all means read it in its entirety, but let me show you why this case and the Autodesk ruling is, in my view, poison for FOSS. Mr. Nimmer absolutely understands it.

The filings, first:

10/08/2009 - 178 - MOTION to Seal Portions of Apple Inc.'s Motion For Summary Judgment, Portions of Lynde Declaration, Kelly Declaration and Certain Exhibits to Chung Declaration filed by Apple Inc.. (Attachments: # 1 Affidavit J. Jeb B. Oblak, # 2 Proposed Order)(Gilliland, James) (Filed on 10/8/2009) (Entered: 10/08/2009)

10/08/2009 - 179 - MOTION Motion to Seal Motion for Summary Judgment filed by Psystar Corporation. (Camara, Kiwi) (Filed on 10/8/2009) (Entered: 10/08/2009)

10/08/2009 - 180 - NOTICE by Apple Inc. NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT ON COPYRIGHT INFRINGEMENT, DMCA VIOLATIONS AND PSYSTAR'S AFFIRMATIVE DEFENSES (Gilliland, James) (Filed on 10/8/2009) (Entered: 10/08/2009)

10/08/2009 - 181 - MOTION for Summary Judgment ON COPYRIGHT INFRINGEMENT, DMCA VIOLATIONS AND PSYSTAR'S AFFIRMATIVE DEFENSES filed by Apple Inc.. Motion Hearing set for 11/12/2009 08:00 AM in Courtroom 9, 19th Floor, San Francisco. (Attachments: # 1 Affidavit Confidential Kelly Declaration, # 2 Affidavit Lynde Declaration, # 3 Proposed Order)(Gilliland, James) (Filed on 10/8/2009) (Entered: 10/08/2009)

10/08/2009 - 182 - MOTION for Summary Judgment filed by Psystar Corporation. Motion Hearing set for 11/12/2009 01:00 PM in Courtroom 12, 19th Floor, San Francisco. (Attachments: # 1 Notice of Motion, # 2 Exhibit A, # 3 Exhibit B, # 4 Exhibit C, # 5 Exhibit D, # 6 Exhibit E, # 7 Exhibit F, # 8 Exhibit G, # 9 Exhibit H, # 10 Exhibit I, # 11 Exhibit J, # 12 Proposed Order)(Camara, Kiwi) (Filed on 10/8/2009) (Entered: 10/08/2009)

10/08/2009 - 183 - Declaration of Megan C. Chung in Support of 180 Notice (Other) [DECLARATION OF MEGAN M. CHUNG IN SUPPORT OF APPLE INC.'S MOTION FOR SUMMARY JUDGMENT ON COPYRIGHT INFRINGEMENT, DMCA VIOLATIONS AND PSYSTARS AFFIRMATIVE DEFENSES] filed byApple Inc.. (Attachments: # 1 Exhibit (s) 1-2, # 2 Exhibit (s) 3-16 (under seal), # 3 Exhibit (s) 17-22, # 4 Exhibit 23 (under seal), # 5 Exhibit (s) 24-36, # 6 Exhibit (s) 37-40, # 7 Exhibit 41 (under seal), # 8 Exhibit (s) 42-49, # 9 Exhibit (s) 50-61, # 10 Exhibit (s) 62-64 (under seal), # 11 Exhibit (s) 65-68, # 12 Exhibit 69 (under seal))(Related document(s) 180 ) (Chung, Megan) (Filed on 10/8/2009) (Entered: 10/08/2009)

10/09/2009 - 184 - Declaration of Kent Radford in Support of 182 MOTION for Summary Judgment filed by Psystar Corporation. (Related document(s) 182 ) (Camara, Kiwi) (Filed on 10/9/2009) (Entered: 10/09/2009)

Note that almost all the Psystar exhibits are redacted totally. Only the two EULAs are readable, and we've seen them before.

Back to Nimmer's Declaration, let's look at paragraph 20:

20. Software licenses apply to billions of dollars of commerce. The entire software industry reflects this, including those parts of the industry that distribute "free" or "open-source" software and rely on terms that limit the licensee's right to redistribute the copyrighted work. Indeed, while a ruling that a delivery of a copy of software is a sale of the copy would seriously injure the software industry, it would also eviscerate open-source software which, for many companies, involves delivery of copies subject to restrictions that allow its redistribution only under stated conditions.
This is what I saw from the beginning, that this is an attack on the GPL and on FOSS, using Apple as a smokescreen, I suspected, hoping that the FOSS community wouldn't see what was happening until it was too late. Funny that it's Mr. Nimmer, a traditional copyright expert, who groks the impact, and not the EFF, but there it is. I have believed from day one that Psystar's real goal is to undermine or destroy Open Source licenses, particularly the GPL. That was SCO's goal too. SCO foundered, and so now there is another attempt, using first-sale.

Apple believes first-sale doesn't apply:

Nor is there any genuine factual dispute that, in order to make these illicit copies run on its computers, Psystar modifies Mac OS X, circumvents Apple’s security protections and distributes the circumvention technology to Psystar’s customers. Because it cannot dispute these facts, Psystar attempts to justify its conduct by relying on the doctrines of “copyright misuse,” “first sale” and “essential steps.” Psystar’s arguments are contrary to established law and have been squarely rejected by the courts. At base, Psystar insists that it has a right, without Apple’s permission, to engage in the wholesale copying, alteration and commercial distribution of Apple’s copyrighted software in order to compete with Apple. Psystar is free to compete with Apple – as do scores of other companies – by developing its own operating system, by using open source code or by licensing a system available from other vendors. But Psystar is not free to copy, modify and distribute Apple’s software in violation of the copyright laws and Apple’s software license.

The fundamental protections guaranteed by the laws protecting copyright have been central to the success of the software industry. Without these protections, companies could not justify the massive investments of time and money required to create and improve products that have transformed the world. Psystar’s arguments, if accepted, would vitiate those protections. Persons would be free to disable security technology and make unlimited copies of software for distribution and sale in contravention of license terms. Authors of software could no longer control the alteration of their creations; once a single copy of the software is licensed, the consumer would be free to modify and distribute the work without regard to restrictions imposed by the author. This is not the law.

I think you can see why this would affect the GPL too. Apple argues that to use first-sale as a defense, you must be the owner, not just a licensee. But even if Psystar could get rid of the CD, that isn't all Psystar does:
The first sale doctrine codified at Section 109 of the Act allows only the “owner” of a “particular copy” of a copyrighted work to “dispose of the possession of that copy.” 17 U.S.C. § 109(a). Psystar’s invocation of the first sale doctrine is therefore flawed for at least three reasons.

First, as discussed above, when Psystar purchases an upgrade DVD of Mac OS X, it is a licensee subject to significant restrictions, not an owner, of a copy of Mac OS X. Under Section 109, only owners of copyrighted material are entitled to dispose of the particular copy they have purchased. Because Psystar is a licensee, not an owner, of its copy of Mac OS X, it is not entitled to sell or otherwise dispose of that copy under the first sale doctrine, but instead must comply with the terms of the SLA....

Second, even if Psystar were permitted to assert the first sale doctrine – and it is not – the right to transfer a copyrighted work under the first sale doctrine “applies only to the particular copy” of the copyrighted work which the owner purchased “and nothing else.” Mirage Edition, 856 F.2d at 1344 (first sale doctrine did not apply to the defendant’s sale of prints that the defendant removed from a book it purchased and then framed and resold). At most, Psystar could claim that it is entitled to resell the retail copy of the Mac OS X DVD that it purchased. That is not what Psystar does. Instead, it uses that DVD to make unauthorized, modified copies of Mac OS X that it installs on computers and distributes to its customers. Every subsequent copy that Psystar made and installed on a Psystar computer is not covered under the first sale doctrine. Id. Psystar can no more rely on Section 109(a) to protect its commercial distribution of infringing copies of Mac OS X than could a bootlegger who made photocopies of a book it purchased and sold those copies commercially.

Psystar argues that it is not a licensee. It relies on wording in the Leopard EULA to claim Apple *sold* Leopard rather than licensing it:

To the contrary, Apple’s agreement expressly states that the purchaser owns the copy: “You own the media on which the Apple software is recorded.”
I must not be on Psystar's wave length, because to me that means you can use the CD like a cup holder, or give it to your mom for her to install on her computer, if she agrees to the license terms too, and you remove it from your laptop first. Psystar says it's not infringing, since it owns the copy, and it buys from Apple and from Apple resellers like BestBuy and Amazon. But I went to check, and I don't see BestBuy on the list of Apple-authorized resellers. I wonder if that would make a difference? There was a recent case in New York on first-sale, Pearson v. Liu, that makes me wonder about that. The case involved a publisher who had two editions of textbooks, a US edition and a cheaper edition published outside the US. Some small-time internet entrepreneurs, as the ruling calls them bought the cheap version overseas and then sold them from a website in the US to students looking for a bargain. They claimed first-sale rights to do what they were doing, but the court reasoned that first sale doesn't apply to copies manufactured abroad. After all, the court wrote, copyright owners have total rights over how a product enters the market, and it has the right to grant exclusive distribution rights.

There's another point that struck me, reading the ruling. The reason first-sale seems fair to everyone in general is because copyright owners have complete control over how a product is brought to market originally, because they can control exclusively distribution rights. But after a sale, publishers can't control the next hop in a sale:

Section 106(3) grants the owner of a U.S. copyright, "[s}ubject to sections 107 through 122," the exclusive right "to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending...." In contrast to the core copyright rights of reproduction and adaptation, the distribution right is a right to control use.... It primarily protects a copyright owner's ability to control the terms on which her work enters the market by providing a remedy against persons who distribute copies of her work without permission. See 2 Melville B. Nimmer & David Nimmer, Nimmer on Copyright Section 8.12[A], at 8-154 (2008) ("Nimmer"). Thus, although the language of Section 106(3) seemingly gives a copyright owner unlimited control over commercial transactions involving copies of her work, it has long been recognized that the principal effect of the distribution right is to give a copyright holder "a right to control the work's publication." Id. ....

This limitation on scope of the distribution right, known as the first-sale doctrine, is codified in Section 109(a) of the Act. The doctrine originates in Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908), a case decided under the Copyright Act of 1891....

The Supreme Court rejected the publisher's argument, holding that "[t]he purchaser of a book, once sold by authority of the owner of the copyright, may sell it again, although he could not publish a new edition of it." Id. at 350. As the Court explained, a copyright owner who purposefully transfers ownership of a copy of her work chooses the terms on which the work enters the market. See Bobbs-Merrill, 210 U.S. at 351; see also Platt & Munk Co. v. Republic Graphics, Incs., 315 F.2d 847, 854 (2d Cir. 1963). The purpose of the distribution right thus having been satisfied, "the policy favoring a copyright monopoly for authors gives way to the policy opposing restraints of trade and restraints on alienation." 2 Nimmer Section 8.121[A], at 8-155. Accordingly, the Court ruled that the publisher's right to "vend" copies of its work did not encompass the right to control the terms of subsequent sales. Bobbs-Merrill, 210 U.S. at 351.

It can sell or license. If it chooses to license, there is no first sale rights, because you have to hold title to your copy of the work, and a licensee doesn't hold title:
If a copyright owner wishes to control future sales, she can lease or rent copies of her work rather than selling them.
That is precisely what Apple says it was doing with Leopard. Psystar is, in essence, denying Apple the right to make that choice, as I view it. Psystar justifies its conduct, claiming there's a legal mistake in the wording of the Leopard EULA, which transforms the transaction into a sale, not a license, among other defenses, meaning I guess that it knew what Apple meant but thought it had found a loophole:
Apple sold the copies of OS X Leopard that Psystar installed on its computers and resold to its customers. The OS X Leopard “software license agreement” (herein after “EULA”) states: “You own the media on which the Apple Software is recorded.” And § 101 of the Copyright Act defines copies to mean that media, namely, the DVD on which OS X Leopard is recorded. 17 U.S.C. § 101 (“'Copies’ are material objects . . . .”). Because Apple, according to the terms of its own software license agreement, sold the material objects on which OS X Leopard was fixed, it sold — not merely licensed — copies of OS X Leopard. Each time that Psystar bought a DVD containing OS X Leopard, Psystar became the owner of a copy of OS X Leopard....

Under § 109, Psystar is permitted to take the copies of OS X Leopard that it purchased and resell these copies to the buyers of Psystar computers. At each stage in its business process, Psystar falls within §§ 109 and 117: in installing OS X Leopard, Psystar is within § 117 because installation is necessary to the use of OS X Leopard on Psystar’s computers; in selling OS X Leopard packaged with its computers, Psystar is within § 109; and in using a Psystar computer running OS X Leopard, Psystar’s customers are in turn within § 117, since they, too, become owners of a copy of OS X Leopard.

Like Psystar didn't know Apple meant that you could own the CD, which is what Apple meant by media, and can use it as a cup holder, or give it to your mom as long as you remove the software from your computer first and she agrees to the license also, because you own that CD, but I think it's safe to say that Psystar had to know Apple didn't mean you own the copyrighted work burned on the CD or that the restrictions in the license were just there for decoration and have no legal meaning. Software isn't a book. So selling it on isn't the same thing in effect. It's too easy to copy a CD. And as you see with Psytar, it's very easy to be taken advantage of.

For sure, Apple didn't mean you could take the software and go into business in competition with Apple. The EULA clearly says that it's a license, subject to restrictive terms on what you can do with the software, so I take it that Psystar saw what it viewed as a legal terminology mistake, and decided to take advantage of it, which makes it a bit smarmy to me.

As for those of you who hope this case will stand for freedom for code, not so, freedom lovers. Psystar is not wearing your colors. Psystar argues that a finding for Psystar won't impact the industry much:

Apple could have avoided §§ 109 and 117 by licensing copies of OS X Leopard instead of selling them; in fact, in the Snow Leopard license agreement, Apple removed the language stating that “you own the media on which the Apple Software is recorded.” We are not arguing that the author of a computer program must sell copies of that program, with the consequence that purchasers may do what Psystar has done here; we are arguing only that Apple, for whatever reason, perhaps acting on incomplete legal advice, chose to sell copies of its program, OS X Leopard, and that Apple should be held to this decision. Had Apple acted carefully, it would have licensed OS X Leopard subject to the condition that it not be used on non-Apple hardware. A judgment for Psystar here will have no lasting effect on the industry (or even on Apple) because anyone can avoid what Apple has here done by licensing copies instead of selling them.
Well, that's what Apple thought it was doing, and by my reading, it was. Nor do I believe those legal scholars, the Pedrazas, noticed that legal terminology on their own.

And as for the DMCA claim, it should be tossed out, Psystar reasons, because it's not a DMCA violation to bypass if your purpose isn't infringement, and if Leopard was sold, not licensed, there's no infringement.

Ta da! Fancy lawyer dancing. Twirl, pivot, bow.

You don't find EULAs on a sold book. That's what Bobbs-Merrill stands for, that you can't sell a book with a restriction as to how much you must charge anyone if you sell the book after you read it. Leopard has a EULA that clearly says it's a license and it includes restrictions on use. So who is the wise guy in this picture? Sometimes fancy dancing works, of course. That's why lawyers do it.

You'll notice each side presents many, many cases. That usually means that there is no clear line in the sand for the facts of the case. And indeed, first-sale is an area where courts in different districts don't yet even agree. And so the parties present the strongest arguments they can, when there is no obvious answer, with as many almost on target cases to buttress the best ones.

In my experience, if the answer is obvious, after you research it fully you'll have maybe 5 or 6 solid cases, and not many against you to try to distinguish. Here, we have the parties citing so many of them that it suggests that the judge has to really draw a line in the sand somewhere that is as close to a bright line as he can find or just draw one for the first time, if the facts are unusual enough that no one has brought that exact fact pattern to a court before.

Some of the cases, to me, don't even apply. There's a big difference between software that you develop or write specially for one customer and software sold in boxes on Amazon. But Psystar cites Krause v. Titleserv, which was about the former, as if it applied to Psystar. Read the description for yourself, and you'll see why it left me scratching my head. It's a case about software developed just for one company. You use whatever you can find, and if the judge doesn't notice the weaknesses, so what, eh? Or it's certainly possible I'm just missing something.

Yes, Psystar cites Vernor. I knew they would, although the facts are a bit different, as far as I am concerned. Of course, I also think Vernor will be appealed and overturned (using some of the arguments in this Autodesk brief [PDF]), but here's one thing Psystar says about it:

The Vernor court believed that the Ninth Circuit’s decision in Wise was in conflict with three later Ninth Circuit decisions, Wall Data, MAI, and Triad, but that, in the face of such a conflict, it was bound by Wise. See Vernor, 2009 WL 3187613 at *11 (“The court must follow the oldest precedent among conflicting opinions from three-judge Ninth Circuit panels. United States v. Rodriguez-Lara, 421 F.3d 932, 943 (9th Cir. 2005).”). This is certainly true: to the extent Apple relies on Wall Data, MAI, or Triad to reach a different result than under Vernor, Wise, and SoftMan, this violates the rule in Rodriguez-Lara that the oldest panel decision of the Ninth Circuit controls.
Here's what my geeky brain finds wrong with that: when there is new technology, it takes a while for judges to figure it out. Take the Internet. It's not actually tubes, y'all. And so the first case that deals with new technology, in my experience, *never* gets it quite right. One of the main reasons I started Groklaw was because I saw a lot of incredibly clueless, technically clueless, decisions, and I believed it was because the tech wasn't clear to folks making the decisions. My hope was that if lawyers and judges understood the tech better, they'd reach better legal decisions in cases about technology.

[ Update: Here's an example, as PDF, a ruling from the same judge but in the Microsoft WGA litigation, saying that IP addresses aren't personally identifiable information, because you have to contact the ISP to know who the person is, despite Microsoft's own glossary listing IP addresses as personally identifiable information.]

But if the rule instead is you must follow the oldest precedent, right or wrong, when there are conflicting rulings in cases about technology, rather than choosing the one that finally gets it right, Groklaw is certainly wasting a lot of time and effort trying to explain the tech.

Nah. We're not wasting our time. We started talking about software patents and arguing that software is math and so should not be patentable, back in 2003, I think, and here there are amicus briefs before the Supreme Court making that argument. I don't mean we were alone in that, but we were certainly mocked plenty when I first started, and now it's more mainstream. Education is never a waste.

You know why I think the Vernor ruling is not the right outcome in addition? It would make it impossible for software vendors, proprietary ones, to be in the software business. And it would be very annoying for all of us. It's one thing to get a movie print to review and have to return it. It's quite another if we all have to turn in our old Windows 98SE CDs when we are done with them. Can you imagine? But that is the argument, that perpetual possession means you own it and first-sale means you can do whatever you wish, no matter what the license says.

So if Vernor and Psystar prevail, that is what has to happen next, that vendors require us to return old CDs when we are done with them, and that's, frankly, ridiculous. What? You think the vendors will just sigh and let you win? Seriously. If you want freedom, switch to FOSS, and not the sell-out variety, either. Let proprietary companies be who they are, to the max, and choose something better for yourself.

I won't thank anybody for making those companies more paranoid than they already are about copying. Apple has always been known for treating customers in a respectful way. You don't have to type in long strings of letters and numbers to prove you have a legitimate copy, the way you do with Windows, and there is nobody cutting you off if you don't pass. It's been on the honor system, a system Psytar is trying, in my estimation, to ruin or at least is ruining.

I believe the Vernor decision will be appealed and that it will not stand. I'm just a paralegal, of course, and here's a lawyer who disagrees with me and thinks the Vernor decision is a "breath of fresh air". All that says to me is that most cases don't agree with that ruling. I wonder if he's considered the impact on Open Source, if copyright owners can't restrict what you can do with their software?

If Apple ends up like Microsoft, annoying you with demands for proof of purchase until you want to switch to GNU/Linux, that's fine with me in an important way, but it's also sad that there was no honor shown in return to a company willing to treat customers like honorable adults. The more you try to force a proprietary company to open up, the more they'll fight to close down and exercise control. It's just human nature. And prices for software will go up, if the vendors know folks like Psystar can get away with what they are doing. Nimmer again:

27. Software licenses reflect a rich diversity of conditions and permitted uses. The diversity allows the software industry to efficiently and on a cost effective basis distribute products that reflect market demand in a much more precise way than would result if only sales of copies of the software could be used to effect distribution.

28. Licenses thus create significant advantages for vendors and for licensees. The terms of the license define the product, and the price paid reflects that product. A licensee that acquires a limited license pays less for that license than for a broader license.

29. A ruling that would limit the effect of the license to the immediate parties would both ignore the property rights (copyright) involved and increase costs to consumers because it would force consumers to pay prices based on uses that consumers would not ordinarily desire to purchase, such as the right to resell a copy or to use it for business purposes.

He's saying you and I, who don't want to be Psystar, will have to pay for the losses to Apple of Psystar doing what they do, if they win, and buying Apple software will cost you a lot, lot more than it now does. It would also be the end of the GPL.

I think Psystar knows the court won't do that to the marketplace, and that's why it tries to argue that the impact of a ruling in Psystar's favor won't affect anyone else much. But it really will. And not in a good way.

Nimmer says one more thing that directly contradicts Psystar:

22. No company that I have represented or seen engaged in negotiations for a commercial transaction has ever argued to a software distributor that, simply because the software was to be delivered on a disk, the transaction should be a sale of a copy.
Nimmer wrote his declaration to support Autodesk. He could have written it in support of Apple.

Let's start with Apple's Motion and Memorandum in support, followed by Psystar's -- sorry for the length, but if I separate them, it's harder to follow along, I think:

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

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)
J. JEB B. OBLAK (State Bar No. 241384)
[address, phone, fax, email]

O’MELVENY & MYERS LLP
GEORGE RILEY (State Bar No. 118304)
[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.,

Plaintiff,

v.

PSYSTAR CORPORATION, a Florida
corporation,

Defendant.

__________________

AND RELATED COUNTERCLAIMS.

Case No. 08-3251 WHA

NOTICE OF MOTION AND MOTION
FOR SUMMARY JUDGMENT ON
COPYRIGHT INFRINGEMENT, DMCA
VIOLATIONS AND PSYSTAR’S
AFFIRMATIVE DEFENSES

Hearing Date: November 12, 2009
Hearing Time: 8:00 a.m.
Courtroom: 9
Judge: Hon. William Alsup

Trial Date: January 11, 2010

PLEASE TAKE NOTICE that on November 12, 2009, at 8:00 a.m., or as soon thereafter as the matter can be heard, in the courtroom of the Honorable William Alsup, located at 450 Golden Gate Avenue, Courtroom 9, San Francisco, California 94102, plaintiff and counterdefendant, Apple Inc. (“Apple”) will, and hereby does, move for an order granting partial summary judgment that defendant and counterclaimant Psystar Corporation (“Psystar”) has infringed Apple’s copyrights and violated the Digital Millennium Copyright Act. Apple further seeks an order granting summary judgment dismissing Psystar’s Eleventh and Thirty-Seventh Affirmative Defenses for First Sale/Exhaustion of Copyright and Copyright Misuse and Psystar’s First and Second Counterclaims seeking a Declaration of Unenforceability for Copyright Misuse (EULA) and Copyright Misuse (DMCA).

DATED: October 8, 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.

1

CERTIFICATE OF SERVICE

[See PDF]

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

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)
J. JEB B. OBLAK (State Bar No. 241384)
[address, phone, fax, email]

O’MELVENY & MYERS LLP
GEORGE RILEY (State Bar No. 118304)
[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.,

Plaintiff,

v.

PSYSTAR CORPORATION, a Florida
corporation,

Defendant.

__________________

AND RELATED COUNTERCLAIMS.

Case No. 08-3251 WHA

APPLE INC.'S MOTION
FOR SUMMARY JUDGMENT ON
COPYRIGHT INFRINGEMENT, DMCA
VIOLATIONS AND PSYSTAR’S
AFFIRMATIVE DEFENSES

Hearing Date: November 12, 2009
Hearing Time: 8:00 a.m.
Courtroom: 9
Judge: Hon. William Alsup

Trial Date: January 11, 2010

REDACTED
PUBLIC VERSION

TABLE OF CONTENTS

Page

I. INTRODUCTION........................................................1

II. FACTUAL BACKGROUND...............................................................2

A. Apple And Its Integrated Products...............................................................2

B. Apple’s Software License Agreement.......................................................4

C. Apple’s Registered Copyrights In Mac OS X.....................................................5

D. Apple’s Protection Technology......................................................5

E. Psystar And Its Copying And Distribution Of Mac OS X..................................7

F. Psystar’s Modification Of Mac OS X................................................9

G. Psystar Disables Apple’s Technological Protection Measures........10

III. APPLE IS ENTITLED TO SUMMARY JUDGMENT ON ITS
COPYRIGHT AND DMCA CLAIMS................................................11

IV. THE UNDISPUTED EVIDENCE ESTABLISHES PSYSTAR’S LIABILITY FOR VIOLATING THE COPYRIGHT ACT............................12

A. Governing Copyright Law Principles.....................................12

B. Psystar Infringes Apple’s Exclusive Right To Copy Mac OS X........13

C. Psystar Infringes Apple’s Exclusive Right To Create
Derivative Works Of Mac OS X.............................................13

D. Psystar Infringes Apple’s Exclusive Right To Distribute Mac
OS X............................................................15

E. Psystar Is Also Liable For Contributory Infringement........................15

F. Psystar’s Copyright Misuse Counterclaims And Defense Fail
As A Matter Of Law..............................................................16

G. Section 117’s “Essential Steps” Defense Does Not Immunize
Psystar’s Unlawful Copying, Modification And Distribution
Of Mac OS X.....................................................19

H. The First Sale Doctrine Does Not Apply To Psystar’s Copying
And Modification Of Mac OS X.........................................21

V. UNDISPUTED FACTS ESTABLISH PSYSTAR’S LIABILITY
UNDER THE DMCA’S ANTI-CIRCUMVENTION AND ANTI-
TRAFFICKING PROVISIONS..........................................22

-i-

TABLE OF CONTENTS
(continued)

Page

A. Psystar Violates The Anti-Circumvention Provisions Of
Section 1201(a)(1)...................................................23

B. Psystar Violates The Anti-Trafficking Provisions Of Sections
1201(a)(2) And 1201(b) Of The DMCA.................................................24

C. Section 1201(f)’s “Reverse Engineering” Exception Has No
Application Here....................................................25

VI. CONCLUSION...........................................................28

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TABLE OF AUTHORITIES

Page

Cases

321 Studios v. Metro Goldwyn Mayer Studios, Inc.,
307 F. Supp. 2d 1085 (N.D. Cal. 2004)...........................................................22, 23

A&M Records, Inc. v. Napster, Inc.,
239 F.3d 1004 (9th Cir. 2001).............................................................13

Adobe Sys. Inc. v. One Stop Micro, Inc.,
84 F. Supp. 2d 1086 (N.D. Cal. 2000).............................................................21

Adobe Sys. Inc. v. Stargate Software, Inc.,
216 F. Supp. 2d 1051 (N.D. Cal. 2002)...........................................................21

Altera Corp v. Clear Logic, Inc.,
424 F.3d 1079 (9th Cir. 2005)..........................................................16

Apple Computer, Inc. v. Formula Int’l., Inc.,
562 F. Supp. 775 (C.D. Cal. 1984), aff’d 725 F.2d 521 (9th Cir. 1984).................................20

Apple Computer, Inc. v. Formula Int’l, Inc.,
594 F. Supp. 617 (C.D. Cal. 1984)........................................................19, 20, 21

Apple Inc. v. Psystar Corp.,
2009 WL 3112080 (N.D. Cal. Sept. 23, 2009)..........................................................16

Apple Inc. v. Psystar Corp.,
586 F. Supp. 2d 1190 (N.D. Cal. 2008).........................................................17

Bell Atl. Bus. Sys. Servs., Inc. v. Hitachi Data Sys. Corp.,
1995 WL 836331 (N.D. Cal. Dec. 14, 1995)................................................17

Cable/Home Commc’n Corp. v. Network Prods., Inc.,
902 F.2d 829 (11th Cir. 1990).............................................15

Celotex Corp. v. Catrett,
477 U.S. 317, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986)..........................................11, 12

Davidson & Assoc., Inc. v. Internet Gateway, Inc.,
334 F. Supp. 2d 1164 (E.D. Mo. 2004)..........................................................27

Davidson & Assocs. v. Jung,
422 F.3d 630 (8th Cir. 2005).........................................................22, 26, 27

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TABLE OF AUTHORITIES
(continued)

Page

Dun & Bradstreet Software Services, Inc. v. Grace Consulting, Inc.,
307 F.3d 197 (3d Cir. 2002)..............................................................14

Expediters Intern. of Washington, Inc. v. Direct Line Cargo Mgmt. Servs., Inc.,
995 F. Supp. 468 (D.N.J. 1998)........................................20

In re Adbox, Inc.,
488 F.3d 836 (9th Cir. 2007)..........................................19, 25

Jarvis v. K2 Inc.,
486 F.3d 526 (9th Cir. 2007)..................................................................14

Jorst v. D’Ambrosio Bros. Inv. Co.,
2001 WL 969039 (N.D. Cal. Aug. 13, 2001)..............................................................19

Ledo Fin. Corp. v. Summers,
122 F.3d 825 (9th Cir. 1997)............................................................25

MAI Systems Corp. v. Peak Computer, Inc.,
991 F.2d 511 (9th Cir. 1993)............................................................13, 16, 20, 21

MDY Indus., LLC v. Blizzard Entm’t, Inc.,
2008 WL 2757357 (D. Ariz. Jul. 14, 2008).....................................................16, 20

Metro-Goldwyn-Mayer Studios, Inc. v. Grokster Ltd.,
454 F. Supp. 2d 966 (C.D. Cal. 2006)...................................................15, 18

Metro-Goldwyn-Mayer Studios Inc. v. Grokster Ltd.,
545 U.S. 913, 125 S. Ct. 2764, 162 L. Ed. 2d 781 (2005).............15

Microsoft Corp. v. BEC Computer Co., Inc.,
818 F. Supp. 1313 (C.D. Cal. 1992)......................................................18

Midway Mfg. Co. v. Artic Int’l, Inc.,
704 F.2d 1009 (7th Cir. 1983).....................................................14

Midway Mfg. Co. v. Strohon,
564 F. Supp. 741 (N.D. Ill. 1983).......................................................14

Mirage Editions, Inc. v. Albuquerque A.R.T. Co.,
856 F.2d 1341 (9th Cir. 1988)....................................................14, 22

Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc.,
210 F.3d 1099 (9th Cir. 2000)..........................................12

Novell, Inc. v. Unicom Sales, Inc.,
-iv- 2004 WL 1839117 (N.D. Cal. 2004).......................21

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TABLE OF AUTHORITIES
(continued)

Page

Ortiz-Gonzalez v. Fonovisa,
277 F.3d 59 (1st Cir. 2002).....................................................15

RealNetworks, Inc. v. DVD Copy Control Ass’n,
__ F. Supp. 2d ___, 2009 WL 2475338 (N.D. Cal. Aug. 11, 2009).................................22, 23

S.O.S., Inc. v. Payday, Inc.,
886 F.2d 1081 (9th Cir. 1989)....................................................13

Satterfield v. Simon & Schuster, Inc.,
569 F.3d 946 (9th Cir. 2009)...................................................11

Serv. & Training, Inc. v. Data Gen. Corp.,
963 F.2d 680 (4th Cir. 1992)...................................................17

Soremekun v. Thrifty Payless, Inc.,
509 F.3d 978 (9th Cir. 2007)...................................................12

Sully v. Ayers,
2008 WL 2128171 (N.D. Cal. May 20, 2008)...................................................12

Triad Sys. Corp. v. Southeastern Exp. Co.,
No. C 92 1539-FMS, 1994 WL 446049 (N.D. Cal. Mar. 18, 1994).................................18, 20

U.S. v. Elcom Ltd.,
203 F. Supp. 2d 1111 (N.D. Cal. 2002)...................................................22

Universal City Studios, Inc. v. Corley,
273 F.3d 429 (2d Cir. 2001)...................................................22, 23

Universal City Studios v. Reimerdes,
111 F. Supp. 2d. 294 (S.D.N.Y. 2000)...................................................23, 24, 27

Wall Data Inc. v. L.A. County Sheriff’s Dept.,
447 F.3d 769 (9th Cir. 2006)........................................................20

STATUTES

17 U.S.C. § 101.....................................................13

17 U.S.C. § 106.................................................................13, 16

17 U.S.C. §§ 106(1), (2), (3).................................................................12, 15

17 U.S.C. § 109....................................................................21

17 U.S.C. § 109(a).................................................................21, 22

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TABLE OF AUTHORITIES
(continued)

Page

17 U.S.C. § 117..................................................................19, 20, 21

17 U.S.C. § 117(b)...............................................................20

17 U.S.C. § 501, et seq..................................................................2, 4, 5, 28

17 U.S.C. § 1201(a)(1)(A)......................................................22, 23, 24

17 U.S.C. §§ 1201(a)(2).............................................24, 25

17 U.S.C. § 1201(a)(3)(A)............................................23

17 U.S.C. § 1201(a)(3)(B)...........................................23

17 U.S.C. § 1201(b)(1)................................................22

17 U.S.C. § 1201(f)...........................................25, 26, 27

17 U.S.C. § 1201(f)(1)(3)..........................26

17 U.S.C. § 1201(f)(4)................................................26

17 U.S.C. § 1202.....................................................24

OTHER AUTHORITIES

Fed. R. Civ. P. 8(c).....................................19

Fed. R. Civ. P. 56........................................11

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I. INTRODUCTION

Through efforts spanning more than a decade and investments totaling hundreds of millions of dollars, Apple Inc. (“Apple”) has developed its proprietary Mac OS® X operating system. By the terms of its license agreements with customers and through technological protection measures in its software, Apple restricts the use of Mac OS X to Apple computers. Psystar Corporation (“Psystar”) makes and sells computers containing pirated copies of Mac OS X that Psystar has altered to circumvent Apple’s technological protection measures. In so doing, Psystar seeks to appropriate Apple’s enormous investment in Mac OS X and trade on Apple’s hard-won reputation for excellent, highly reliable products. By this motion, Apple seeks partial summary judgment that Psystar has infringed Apple’s copyrights and violated the Digital Millennium Copyright Act (“DMCA”).

There is no genuine factual dispute that Psystar makes unauthorized copies of Mac OS X and then installs those copies on computers its sells to the public. Nor is there any genuine factual dispute that, in order to make these illicit copies run on its computers, Psystar modifies Mac OS X, circumvents Apple’s security protections and distributes the circumvention technology to Psystar’s customers. Because it cannot dispute these facts, Psystar attempts to justify its conduct by relying on the doctrines of “copyright misuse,” “first sale” and “essential steps.” Psystar’s arguments are contrary to established law and have been squarely rejected by the courts.

At base, Psystar insists that it has a right, without Apple’s permission, to engage in the wholesale copying, alteration and commercial distribution of Apple’s copyrighted software in order to compete with Apple. Psystar is free to compete with Apple – as do scores of other companies – by developing its own operating system, by using open source code or by licensing a system available from other vendors. But Psystar is not free to copy, modify and distribute Apple’s software in violation of the copyright laws and Apple’s software license.

The fundamental protections guaranteed by the laws protecting copyright have been central to the success of the software industry. Without these protections, companies could not justify the massive investments of time and money required to create and improve products that have transformed the world. Psystar’s arguments, if accepted, would vitiate those protections. Persons

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would be free to disable security technology and make unlimited copies of software for distribution and sale in contravention of license terms. Authors of software could no longer control the alteration of their creations; once a single copy of the software is licensed, the consumer would be free to modify and distribute the work without regard to restrictions imposed by the author. This is not the law.

The material facts are not in dispute. Psystar deliberately copies and modifies Mac OS X without Apple’s permission and in violation of the laws protecting copyright. Accordingly, the Court should grant partial summary judgment on Apple’s First and Second Claims for Copyright Infringement and Contributory and Induced Copyright Infringement under 17 U.S.C. § 501, et seq. and Third Claim for Violating the Digital Millennium Copyright Act, 17 U.S.C. § 1201, et seq. The Court should also grant partial summary judgment dismissing Psystar’s Eleventh and ThirtySeventh Affirmative Defenses for First Sale/Exhaustion of Copyright and Copyright Misuse and Psystar’s First and Second Counterclaims seeking a Declaration of Unenforceability for Copyright Misuse (EULA) and Declaration of Unenforceability for Copyright Misuse (DMCA).

II. FACTUAL BACKGROUND

A. Apple And Its Integrated Products

A pioneer of the personal computer revolution, Apple launched its famous Macintosh® (or “Mac®”) computer in 1984. 1 Today the Mac line of personal computers includes the Mac Pro®, iMac®, Mac® mini, MacBook®, MacBook Pro and MacBook Air®. 2 Apple’s business strategy focuses on its unique ability to design and develop fully integrated products combining Apple’s own operating system, hardware, application software and services. 3 The Mac exemplifies the qualities consumers have come to expect from Apple; it is a seamlessly integrated, easy-to-use, highly-reliable personal computer. 4

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In 2001, Apple launched Mac OS X, the tenth generation of the Mac operating system. 5 This revolutionary operating system, which was the result of hundreds of millions of dollars in research and development expenditures, offers extraordinary capabilities, speed and stability. 6 On October 26, 2007, Apple released version 10.5 of Mac OS X, known as Leopard®, which has been described as “visually stunning,” “powerful, polished and carefully conceived,” and “elegant.” 7

Consistent with Apple’s approach to developing integrated products, all Mac computers are sold with Mac OS X preinstalled, and Apple’s license agreements strictly limit the use of Mac OS X to Apple computers. 8 Apple separately licenses Mac OS X in a retail packaged DVD to enable Apple’s customers to upgrade their Mac computers to the latest version of the operating system. 9 Apple’s licensed Mac OS X upgrades come in a shrink-wrapped box containing a DVD, installation instructions, license agreement, and service and warranty information. 10 By restricting the use of Mac OS X to Apple computers, Apple ensures that Mac OS X will operate optimally and provide consumers with the highest quality computing experience and technical support. 11 Apple’s approach has been met with great success. Consumer Reports has ranked Apple’s customer support the best in the nation for both desktop and laptop computers, and Business Week named Apple the most innovative company in the world for the last two years. 12

Restricting software to use on particular hardware is common. Companies such as IBM, Research in Motion (makers of Blackberry devices), Nintendo, Sony and Microsoft (for its Xbox game system) have all used integrated product business models – the software is designed for, and

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only licensed for use on, specific hardware made by that company. 13 For example, the license agreement for Amazon’s “Kindle,” an electronic book reader, states: “You may use the Device Software only on the Device.” 14

B. Apple’s Software License Agreement

Apple licenses Mac OS X, both on Mac computers and upgrade DVDs, pursuant to a Software License Agreement (“SLA”) that states Mac OS X is “licensed, not sold to [the user] by Apple Inc. [ ] for use only under the terms of th[e] License ....” 15 The SLA specifies “Permitted License Uses and Restrictions”:
2. Permitted License Uses and Restrictions.

A. Single Use. This license allows you to install, use and run one (1) copy of the Apple Software on a single Apple-labeled computer at a time. You agree not to install, use, or run the Apple Software on any non-Apple-labeled computer or enable another to do so.

* * *

C. You may make one copy of the Apple Software (excluding the Boot ROM code and other Apple firmware that is embedded or otherwise contained in Apple-labeled hardware) in machine-readable form for backup purposes only....Apple Boot ROM code and firmware is provided only for use on Apple-labeled hardware and you may not copy, modify or redistribute the Apple Boot ROM code or firmware, or any portions thereof....

* * *

F. Except as and only to the extent permitted by applicable licensing terms governing use of the Open-Sourced Components, or by applicable law, you may not copy, decompile, reverse engineer, disassemble, modify, or create derivative works of the Apple Software or any part thereof.

Id. ¶ 2. The SLA also restricts redistribution of and modifications to the software except under limited circumstances and for limited purposes:
3. Transfer. You may not rent, lease, lend, redistribute or sublicense the Apple Software. Subject to the restrictions set forth below, you may, however, make a one-time permanent transfer of all of your license rights to the Apple Software (in its original form as provided

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by Apple) to another party, provided that: (a) the transfer must include all of the Apple Software, including all its component parts (excluding Apple Boot ROM code and firmware), original media, printed materials and this License; (b) you do not retain any copies of the Apple Software, full or partial, including copies stored on a computer or other storage device; and (c) the party receiving the Apple Software reads and agrees to accept the terms and conditions of this License. You may not rent, lease, lend, redistribute, sublicense or transfer any Apple Software that has been modified or replaced under Section 2D above....
Id. ¶ 3. The SLA terminates immediately if a licensee fails to comply with its terms:
5. Termination. This License is effective until terminated. Your rights under this License will terminate automatically without notice from Apple if you fail to comply with any term(s) of this License. Upon the termination of this License, you shall cease all use of the Apple Software and destroy all copies, full or partial, of the Apple Software.
Id. ¶ 5. A version of the SLA is included with every Mac OS X upgrade DVD from Apple. 16 Users installing Mac OS X must agree to an electronic version of the SLA when it appears on the screen during installation. 17

C. Apple’s Registered Copyrights In Mac OS X

Apple protects its rights in Mac OS X by filing registrations with the Copyright Office. Mac OS X, Mac OS X version 10.5, components of Mac OS X, and other Apple software and firmware are each original works of authorship created by Apple constituting copyrightable subject matter. Apple is the owner of, among others, United States copyright registrations TX5401-457 (Mac OS X); TX6-849-489 (Mac OS X Leopard Version 10.5); and TX6-336-643 (Don’t Steal Mac OS). 18 The effective date of these Apple copyright registrations predates the commencement of Psystar’s infringement. 19

D. Apple’s Protection Technology

Consistent with the license terms for Mac OS X, Apple employs technology in its software

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to ensure that Mac OS X will run only on Apple computers. 20 Apple has implemented a type of “lock-and-key” technological protection measure that prevents a user from installing Mac OS X on a non-Apple computer. 21 Psystar acknowledges this security mechanism and has [redacted]

[redacted]

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E. Psystar And Its Copying And Distribution Of Mac OS X

In April 2008, Psystar, a Florida corporation, began making its OpenMac (now Open Computer) and OpenPro computers from standard, off-the-shelf computer components. 30 Psystar has never expended any resources to develop its own operating system. 31 Instead, since a genuine release of Mac OS X “Leopard is not MADE to run on the Open Computer,” Psystar “force[s] it” to run on Psystar hardware. 32 Psystar then sells its computers with unauthorized copies of Mac OS X on the Internet. 33 Psystar advertises that the “Open Computer is a PC that works just like a Mac with Apple’s latest operating system OS X 10.5 a.k.a. Leopard” and that the OpenPro is ready to run “right out of the box” with “Mac OS X Leopard 10.5 preinstalled.” 34 Even though Psystar undeniably distributes Mac OS X on its computers, Psystar admits that it does not have a license from Apple to distribute Mac OS X to its customers. 35

[redacted]

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REDACTED

[redacted]

-8-

[redacted]

[redacted]

F. Psystar’s Modification Of Mac OS X

As discussed above, Mac OS X will not run on Psystar computers unless it is modified. 43 To enable the software to run on non-Apple computers, Psystar alters Mac OS X in ways that violate the SLA’s prohibition on modifying the software. 44 [redacted]

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[redacted]

[redacted]

G. Psystar Disables Apple’s Technological Protection Measures

[redacted]

[redacted]

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[redacted]

In August 2008, Psystar began distributing a “restore disc” that includes a circumvention kext that allows Mac OS X to be installed on non-Apple hardware in violation of the SLA. 59 Psystar provides instructions and assistance with the restore disc to help its customers install Mac OS X on Psystar computers. 60

III. APPLE IS ENTITLED TO SUMMARY JUDGMENT ON ITS COPYRIGHT AND
DMCA CLAIMS

“Summary judgment is appropriate when no genuine and disputed issues of material fact remain, and when, viewing the evidence most favorably to the nonmoving party the movant is clearly entitled to prevail as a matter of law.” Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 949 (9th Cir. 2009) (citing Fed. R. Civ. P. 56). For those issues on which Apple bears the burden of proof at trial, it must make a prima facie showing in support of its position. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The burden then shifts to

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Psystar to produce facts controverting Apple’s position. Celotex, 477 U.S. at 324.

As demonstrated below, Apple is entitled to summary judgment on its claims under the Copyright Act and the Digital Millennium Copyright Act (“DMCA”) as a matter of law. 61 The undisputed facts establish that Psystar makes unauthorized copies of Mac OS X, modifies the software to circumvent Apple’s technological protection measures and enable Mac OS X to run on Psystar’s computers, and commercially distributes the modified software to the public.

The facts further show that Psystar violates the anti-circumvention and anti-trafficking provisions of the DMCA by disabling Apple’s security technology and distributing the resulting copies, together with the circumvention technology, to the public.

Psystar does not – and cannot – dispute that it has reproduced, modified and distributed Apple’s copyrighted software without Apple’s permission. Instead, Psystar has pleaded certain affirmative defenses and indicated its intent to rely on others that allegedly absolve it of liability. Psystar bears the burden of proof on its affirmative defenses and Apple need only “point[] out that there is an absence of evidence to support the nonmoving party’s case.” Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). To survive summary judgment on its defenses, Psystar must set forth specific facts and evidence “to carry its ultimate burden of persuasion at trial.” Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1106 (9th Cir. 2000); see also Sully v. Ayers, 2008 WL 2128171, at *5 (N.D. Cal. May 20, 2008) (Alsup, J.). Psystar cannot meet this burden.

IV. THE UNDISPUTED EVIDENCE ESTABLISHES PSYSTAR’S LIABILITY FOR
VIOLATING THE COPYRIGHT ACT

A. Governing Copyright Law Principles

Section 106 of the Copyright Act grants the owner of a copyright certain exclusive rights with respect to the copyrighted work, including the exclusive right to reproduce the work, to prepare derivative works based on the work, and to distribute copies of the work to the public. 17

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U.S.C. §§ 106(1), (2), (3). To establish direct infringement, a copyright plaintiff must show (1) the plaintiff’s ownership of the copyright; and (2) that the alleged infringer has violated at least one of the exclusive rights granted under Section 106. See A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1013 (9th Cir. 2001). Apple owns the copyright in the works at issue and, as discussed below, the undisputed facts establish that Psystar has violated at least one of the rights granted to Apple under Section 106. 62

B. Psystar Infringes Apple’s Exclusive Right To Copy Mac OS X

Psystar makes three types of unauthorized copies of Mac OS X in the course of building its computers, as described in section II.E above. Each copy violates Apple’s exclusive right under Section 106 to reproduce its own copyrighted work and is therefore sufficient to establish Psystar’s liability for copyright infringement. See, e.g., MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511, 518-19 (9th Cir. 1993) (copying to RAM alone constitutes infringement). Apple’s SLA plainly prohibits any copying other than “on a single Apple-labeled computer at a time” and further provides clearly that it “does not allow the Apple Software to exist on more than one computer at a time....” 63 See S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1087 (9th Cir. 1989) (“licensee infringes the owner’s copyright if its use exceeds the scope of its license”). Psystar (twice) agrees to these license terms each time it opens and installs a copy of Mac OS X. Yet Psystar violates these and other provisions of the SLA when copying Mac OS X onto the imaging station, and when making multiple copies of the software and installing the copies onto non-Apple “Psystar” computers. Each time a Psystar computer is turned on, Psystar creates additional infringing copies of Mac OS X in RAM.

C. Psystar Infringes Apple’s Exclusive Right To Create Derivative Works Of
Mac OS X

Psystar’s replacement of certain original files in Mac OS X with unauthorized software code infringes Apple’s exclusive right under the Act to create derivative works. See 17 U.S.C. § 101 (a derivative work can consist of “editorial revisions, annotations, elaborations, or other

-13-

modifications” to an original work of authorship); Jarvis v. K2 Inc., 486 F.3d 526, 531-32 (9th Cir. 2007); Mirage Editions, Inc. v. Albuquerque A.R.T. Co., 856 F.2d 1341, 1343-44 (9th Cir. 1988). Modifications need not be grand or sweeping to cause a work to be derivative – even modest changes to an original work of authorship can infringe the derivative work right. See generally Midway Mfg. Co. v. Artic Int’l, Inc., 704 F.2d 1009 (7th Cir. 1983). Therefore, deletions, modifications, and additions to software code can result in an infringing derivative work of the original copyrighted software. In Dun & Bradstreet Software Services, Inc. v. Grace Consulting, Inc, 307 F.3d 197 (3d Cir. 2002), for example, defendant Grace Consulting provided maintenance services to customers who purchased and had a license to use the plaintiff’s “Millennium” financial software. Grace Consulting made an unauthorized copy of a licensed customer’s Millennium software. Id. at 208. Grace then modified the copy of the Millennium software in order to fix bugs and add features and enhancements and sold the modified copies to its customers. Id. at 210. The Third Circuit upheld the district court’s finding that by copying the plaintiff’s software and then modifying it, Grace had “usurped” the plaintiff’s right to make derivative works and had infringed its copyright. Id.; see also Midway Mfg. Co. v. Strohon, 564 F. Supp. 741, 744-46 (N.D. Ill. 1983) (holding that the deletion, replacement and alteration of Midway’s code violated the derivative works right regardless of the first sale doctrine).

Psystar copies and modifies Mac OS X to run on Psystar computers, and, as Psystar puts it, “resells the packages.” 64 As discussed above, Psystar makes three principal modifications to Mac OS X. [redacted] These modifications fundamentally alter the functioning of Mac OS X by enabling its operation on an entirely different, unauthorized platform for which the software, as modified, is not ideally suited. 67 This infringes Apple’s exclusive right to create derivative works.

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D. Psystar Infringes Apple’s Exclusive Right To Distribute Mac OS X

Psystar also infringes Apple’s exclusive right to distribute its copyrighted software under Section 106(3). Psystar’s offering and selling to the public Apple’s Mac OS X software, modified with [redacted] falls squarely within the Act’s prohibitions against unauthorized distribution. Ortiz-Gonzalez v. Fonovisa, 277 F.3d 59, 62 (1st Cir. 2002); Cable/Home Commc’n Corp. v. Network Prods., Inc., 902 F.2d 829, 843 (11th Cir. 1990). Psystar has no defense to this infringement claim. Pursuant to the SLA, Psystar expressly agreed that it would “not rent, lease, lend, redistribute, or sublicense the Apple Software.” 68 Although the SLA permits Psystar to “make a one-time permanent transfer of all [Psystar’s] license rights to the Apple Software,” that provision clearly does not authorize Psystar to make multiple copies of the software and distribute those copies commercially. Accordingly, Psystar’s distribution of Mac OS X violates Apple’s exclusive right to distribute its copyrighted works under the Act.

E. Psystar Is Also Liable For Contributory Infringement

Psystar’s offering and selling to the public pirated Mac OS X software also constitutes contributory infringement. A defendant commits contributory copyright infringement “by intentionally inducing or encouraging direct infringement.” Metro-Goldwyn-Mayer Studios, Inc. v. Grokster Ltd., 545 U.S. 913, 930, 125 S. Ct. 2764, 162 L. Ed. 2d 781 (2005). “[L]iability may attach even if the defendant does not induce specific acts of infringement.” Metro-GoldwynMayer Studios, Inc. v. Grokster Ltd., 454 F. Supp. 2d 966, 984 (C.D. Cal. 2006) (citing Grokster, 545 U.S. 913, 125 S. Ct. at 2782 n.13). “‘[D]istribution of a product can itself give rise to liability where evidence shows that the distributor intended and encouraged the product to be used to infringe.’” Id. (quoting Grokster, 545 U.S. 913, 125 S. Ct. at 2782 n.13). “In such a case, the culpable conduct is not merely the encouragement of infringement but also the distribution of the tool intended for infringing use.” Id. at 984-85 (granting summary judgment of contributory

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infringement based on defendant’s distribution of file-sharing software). Psystar does not dispute that it promotes the use of the modified Mac OS X software in connection with its computers or that it has sold hundreds of computers preinstalled with modified Mac OS X. 69 Psystar advertises that its computers “work[] just like a Mac with Apple’s latest operating system OS X 10.5 a.k.a. Leopard.” As shown above, the undisputed facts establish that the use of Psystar computers infringes Apple’s copyrights. Each time a purchaser of a Psystar computer turns it on, the modified Mac OS X “runs” and creates a copy of the program from the hard drive to the computer’s random access memory. “Ninth Circuit law holds that the copying of software to RAM constitutes ‘copying’” in violation of section 106 of the Copyright Act. MDY Indus., LLC v. Blizzard Entm’t, Inc., No. CV-06-2555-PHX-DGC, 2008 WL 2757357, at *3 (D. Ariz. Jul. 14, 2008) (sale of infringing software program constituted contributory infringement of video game client and server software) (citing MAI Sys., 991 F.2d at 518-19). “Thus, if a person is not authorized by the copyright holder . . . or by law . . . to copy the software to RAM, the person is guilty of [direct] copyright infringement. . . .” Id. Because Psystar sells its computers and encourages its purchasers to infringe Apple’s copyrights when they run the unlicensed, modified copies of Mac OS X on their Psystar computers, Psystar is liable for contributory infringement.

F. Psystar’s Copyright Misuse Counterclaims And Defense Fail As A Matter Of
Law

Psystar asserts that its infringement of Apple’s copyrights is somehow excused by the copyright misuse doctrine. 70 To prove copyright misuse, Psystar bears the burden of proving that Apple exploited its copyright “‘to secure an exclusive right or limited monopoly not granted by the [Copyright] Office and which is contrary to public policy . . . .’” Apple Inc. v. Psystar Corp., 2009 WL 3112080, at *4 (N.D. Cal. Sept. 23, 2009) (Alsup, J.) (quoting Altera Corp. v. Clear Logic, Inc., 424 F.3d 1079, 1090 (9th Cir. 2005)). Psystar cannot meet this burden, and its

-16-

copyright misuse counterclaims and defense fail as a matter of law for at least three reasons.

First, this Court has already rejected Psystar’s allegations that Apple monopolized any relevant market and thereby violated federal and state antitrust laws by restricting the use of its software to Apple computers. As this Court stated in dismissing Psystar’s antitrust counterclaims, “Apple asks its customers to purchase Mac OS knowing that it is to be used only with Apple computers. It is certainly entitled to do so.” Apple Inc. v. Psystar Corp., 586 F. Supp. 2d 1190, 1201 (N.D. Cal. 2008) (also available at Docket No. 33 at 14) (emphasis added). Apple has not imposed any undisclosed, unreasonably restrictive tying agreement on its customers. To the contrary, Apple discloses its licensing conditions to its customers before they are “locked in” to a purchase, and Apple’s customers “knowingly agree to the challenged restraint.” Id. at 1201.

Just as this Court rejected Psystar’s attempts to assert unsupported antitrust claims so should it deny Psystar’s copyright misuse counterclaims and defense that are premised on identical, and equally meritless, allegations. See Serv. & Training, Inc. v. Data Gen. Corp., 963 F.2d 680, 690 (4th Cir. 1992) (summary judgment on defendant’s antitrust claim foreclosed its copyright misuse defense); Bell Atl. Bus. Sys. Servs., Inc. v. Hitachi Data Sys. Corp., 1995 WL 836331, at *11 (N.D. Cal. Dec. 14, 1995) (granting summary judgment on copyright misuse defense that was based on previously disposed-of tying claims). All the evidence contradicts any contention that Apple wields power in a relevant market. For example, sales of Mac computers in the first quarter of 2009 represented 7.6 percent of all new personal computer sales in the United States while the market shares of Apple’s major competitors, Hewlett-Packard and Dell Inc., were 27.6 percent and 26.3 percent, respectively, during the same period. 71 Psystar, thus, cannot purport to premise its copyright misuse defense on an improperly alleged and unprovable antitrust violation.

Psystar would fare no better asserting the copyright misuse doctrine based on public policy because it cannot sustain its burden of establishing any conduct by Apple even approaching

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copyright misuse. Courts recognize copyright misuse only if a copyright owner is extending its copyright in ways that “undermine the Constitution’s goal of promoting invention and creative expression.” See Grokster, 454 F. Supp. 2d at 995 (rejecting argument that “any use of copyright in violation of public policy is sufficient” and holding that only when the “copyright is being used in a manner violative of the public policy embodied in the grant of the copyright”) (internal quotations omitted). Nothing in Apple’s licensing policy violates this public policy; indeed, courts have consistently upheld the license restrictions that Psystar has ignored and now challenges.

As noted above, licensing restrictions limiting the use of the copyright owner’s software to hardware made by the owner are common in the industry. Such restrictions do not, as a matter of law, constitute copyright misuse in violation of public policy. See, e.g., Microsoft Corp. v. BEC Computer Co., Inc., 818 F. Supp. 1313, 1316-17 (C.D. Cal. 1992). For example, in Triad Systems Corporation v. Southeastern Express Company, the Ninth Circuit rejected the defendant’s theory of copyright misuse based on the copyright owner’s restriction that its software be used exclusively with the copyright owner’s hardware and services. Triad Systems, 64 F.3d 1330, 1337 (9th Cir. 1995). Triad manufactured and sold computers and copyrighted software for auto parts stores. Southeastern was an independent service organization of Triad computers. Triad alleged that Southeastern infringed its copyright by making copies of Triad’s software when it serviced Triad computers. Southeastern asserted a copyright misuse defense “on the ground that Triad has used its intellectual property monopoly over Triad software to leverage its position in the Triad computer maintenance market.” Triad Sys. Corp. v. Southeastern Exp. Co., 1994 WL 446049, at *13-14 (N.D. Cal. Mar. 18, 1994). The district court rejected the argument because “Southeastern failed to demonstrate that Triad’s practices are anticompetitive” and “it cannot dispute that copyright owners like Triad are within their rights in using and enforcing restrictive license agreements.” Id. The Ninth Circuit agreed, noting that “Triad did not attempt to prohibit Southeastern or any other ISO from developing its own service software to compete with Triad.” Triad Systems, at 1337.

Nothing in Apple’s voluntary licensing agreements unreasonably restricts creativity or competition. Competitors can, and do, develop competing operating systems and hardware. As

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this Court noted, Psystar’s counterclaims “explain[ed] that Mac OS performs the same functions as other operating systems.” (Dkt No. 33) (citing Countercl. ¶ 21).) Indeed, Psystar sells computers containing other operating systems. (Dkt No. 33, First Am. Countercl. ¶¶ 11, 16.) Psystar could – but has not – developed its own operating system. The decisions by Apple’s customers to enter into a voluntary licensing agreement whereby they agree to use Apple’s operating system software exclusively with Apple’s computers does not restrain in any way the development of competing software. Thus, Psystar’s copyright misuse counterclaims and affirmative defense fail as a matter of law.

G. Section 117’s “Essential Steps” Defense Does Not Immunize Psystar’s
Unlawful Copying, Modification And Distribution Of Mac OS X

Psystar has recently suggested – but not raised as an affirmative defense – that it makes new copies or adaptations of Mac OS X “as an essential step” in its utilization of Apple software, and therefore does not infringe under 17 U.S.C. § 117. 72 This defense has no merit. Section 117 establishes a very narrow exception to the general prohibition against unlawful copying of copyrighted works. See 17 U.S.C. § 117. Pursuant to Section 117, an owner of a computer who “rightfully owns a copy of a copyrighted program is authorized to make another copy of that program” if: (1) the copy is “necessary for him to be able to use the copyrighted program in his computer;” (2) the copy is “made only for the owner-user’s internal use;” and (3) the copy is promptly “destroyed when the original copyrighted work is resold.” Apple Computer, Inc. v. Formula Int’l, Inc., 594 F. Supp. 617, 621-22 (C.D. Cal. 1984) (Formula II) (emphasis original). To qualify as an “internal” copy, the copy “cannot be made accessible to others.” Id. Section 117 is aimed at allowing an owner of a computer program to copy the program into RAM and use it.

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Expediters Intern. of Washington, Inc. v. Direct Line Cargo Mgmt. Servs., Inc., 995 F. Supp. 468, 478 (D.N.J. 1998) (“Courts examining this legislative history have interpreted Section 117 to permit copying for the limited purpose of providing rightful possessors with access to programs for internal use”). Psystar cannot satisfy any of these requirements.

As a licensee of a copy of Mac OS X, Psystar is not an owner of the software and therefore is not entitled to the Section 117 defense. Wall Data Inc. v. L.A. County Sheriff’s Dept., 447 F.3d 769, 784-5 (9th Cir. 2006). 73 But even if Psystar were an owner of its copy of Mac OS X, its activities would not be protected by Section 117. That provision permits the owner to make a single copy of the software, only if the copy is essential to enable the software to run on the owner’s computer and the copy is not accessible to others. Formula II, 594 F. Supp. at 621-22. Of course, Psystar makes multiple copies. The copies are not for internal use; they are modified and marketed and sold to third parties. See 17 U.S.C. § 117(b) (prohibiting transfer of copies that have been adapted). Thus, Psystar’s activities far exceed the conduct permitted by Section 117.

Psystar’s arguments were squarely rejected in Apple Computer, Inc. v. Formula International, Inc. Formula sold a computer kit called the “Pineapple” that permitted a purchaser to assemble a computer nearly identical to an Apple computer. The kit included non-Apple hardware components and copies of Apple software contained on diskettes and on chips installed in the hardware. The court granted Apple’s motion for a preliminary injunction finding that Apple would likely succeed on the merits of its copyright infringement claims based on Formula’s unauthorized copying and distribution of Apple’s software. Apple Computer, Inc. v. Formula Int’l., Inc., 562 F. Supp. 775 (C.D. Cal. 1984) (Formula I), aff’d 725 F.2d 521 (9th Cir. 1984) (granting and affirming preliminary injunction).

A year later, the Court found Formula in contempt of the preliminary injunction order because Formula resumed selling “Pineapple” kits which included Apple software. Formula argued that it had not violated the preliminary injunction because by purchasing the software from

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an authorized distributor, then copying the software onto its chips, it was protected under section 117. Formula II, 594 F. Supp. at 620. The Court rejected Formula’s assertion of Section 117 because (1) Formula was “not an owner-user of a computer,” (2) its copying of Apple’s software could not be construed as for an “‘internal use’ by Formula,” (3) Formula “made Apple’s programs available to others,” and (4) Formula’s “permanent copying” of the Apple programs was not “an essential step” in the software’s use. Id. at 622. See, MAI Sys. Corp., 991 F.2d at 518-19 (approving “the court’s conclusion that the permanent copying of the software onto the silicon chips was not an ‘essential step’ in the utilization of the software”). Psystar’s assertion of Section 117 similarly fails as a matter of law.

H. The First Sale Doctrine Does Not Apply To Psystar’s Copying And
Modification Of Mac OS X

Psystar has also asserted the “first sale” doctrine as an affirmative defense to infringement. This defense, like Psystar’s Section 117 defense, is without merit. The first sale doctrine codified at Section 109 of the Act allows only the “owner” of a “particular copy” of a copyrighted work to “dispose of the possession of that copy.” 17 U.S.C. § 109(a). Psystar’s invocation of the first sale doctrine is therefore flawed for at least three reasons.

First, as discussed above, when Psystar purchases an upgrade DVD of Mac OS X, it is a licensee subject to significant restrictions, not an owner, of a copy of Mac OS X. Under Section 109, only owners of copyrighted material are entitled to dispose of the particular copy they have purchased. Because Psystar is a licensee, not an owner, of its copy of Mac OS X, it is not entitled to sell or otherwise dispose of that copy under the first sale doctrine, but instead must comply with the terms of the SLA. See Adobe Sys. Inc. v. Stargate Software, Inc., 216 F. Supp. 2d 1051, 1060 (N.D. Cal. 2002) (granting summary judgment of copyright infringement and rejecting the defendant’s assertion of the first sale doctrine because the defendant was a licensee, not an owner, of the plaintiff’s software); Adobe Sys. Inc. v. One Stop Micro, Inc., 84 F. Supp. 2d 1086, 1090 (N.D. Cal. 2000) (same); see also Novell, Inc. v. Unicom Sales, Inc., 2004 WL 1839117, at *11 (N.D. Cal. 2004) (provision for automatic termination of the license if the customer breaches any of the terms and requiring the customer to destroy the software is indicative of a license, not a

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sale).

Second, even if Psystar were permitted to assert the first sale doctrine – and it is not – the right to transfer a copyrighted work under the first sale doctrine “applies only to the particular copy” of the copyrighted work which the owner purchased “and nothing else.” Mirage Edition, 856 F.2d at 1344 (first sale doctrine did not apply to the defendant’s sale of prints that the defendant removed from a book it purchased and then framed and resold). At most, Psystar could claim that it is entitled to resell the retail copy of the Mac OS X DVD that it purchased. That is not what Psystar does. Instead, it uses that DVD to make unauthorized, modified copies of Mac OS X that it installs on computers and distributes to its customers. Every subsequent copy that Psystar made and installed on a Psystar computer is not covered under the first sale doctrine. Id. Psystar can no more rely on Section 109(a) to protect its commercial distribution of infringing copies of Mac OS X than could a bootlegger who made photocopies of a book it purchased and sold those copies commercially.

V. UNDISPUTED FACTS ESTABLISH PSYSTAR’S LIABILITY UNDER THE
DMCA’S ANTI-CIRCUMVENTION AND ANTI- TRAFFICKING PROVISIONS

Through the enactment of the DMCA in 1998, Congress adapted the law of copyright to the digital age by forbidding the unlawful copying, use and exploitation of works that are protected from access or use by protective technological measures. See Davidson & Assocs. v. Jung, 422 F.3d 630, 640 (8th Cir. 2005) (defendants violated the DMCA by providing unlawful “emulators” that circumvented the technological protection measures of online game software); 321 Studios v. Metro Goldwyn Mayer Studios, Inc., 307 F. Supp. 2d 1085, 1093-99 (N.D. Cal. 2004) (granting summary judgment under the DMCA for trafficking in DVD-copying device).

Among other things, the DMCA bans the circumvention of technological measures that protect access to copyrighted material, 17 U.S.C. § 1201(a)(1)(A), as well as the trafficking in or marketing of devices that are designed for such circumvention. See 17 U.S.C. §§ 1201(a)(2), 1201(b)(1); see also Universal City Studios, Inc. v. Corley, 273 F.3d 429, 440-41 (2d Cir. 2001) (discussing DMCA’s “anti-circumvention” and “anti-trafficking” provisions); U.S. v. Elcom Ltd., 203 F. Supp. 2d 1111, 1119-20 (N.D. Cal. 2002); RealNetworks, Inc. v. DVD Copy Control Ass’n,

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__ F. Supp. 2d ___, 2009 WL 2475338, at *17 (N.D. Cal. Aug. 11, 2009). Apple’s DMCA claims against Psystar arise under both the anti-circumvention and anti-trafficking provisions.

A. Psystar Violates The Anti-Circumvention Provisions Of Section 1201(a)(1)

To succeed on its section 1201(a)(1) claim, Apple must show that (1) it employs technological measures that effectively control access to the copyrighted Mac OS X software and (2) Psystar has “circumvented” those measures, which the DMCA broadly defines to include “to decrypt an encrypted work, or otherwise to avoid, bypass, remove, deactivate, or impair a technological measure, without the authority of the copyright owner.” 17 U.S.C. § 1201(a)(3)(A). A technological protection is effective for the purpose of meriting the DMCA’s anticircumvention protection if, “in the ordinary course of its operation,” the protection mechanism would prevent access to a copyrighted work. 17 U.S.C. § 1201(a)(3)(B). Apple easily satisfies these elements.

As Psystar admits, Mac OS X, in the ordinary course of operation, will not install, run, or operate on non-Apple hardware. 74 [redacted]

[redacted] See, e.g., Corley, 273 F.3d at 444, 453-54; 321 Studios, 307 F. Supp. 2d at 1096; RealNetworks, 2009 WL 2475338, at *17. In Universal City Studios v. Reimerdes, 111 F. Supp. 2d. 294, 317-18 (S.D.N.Y. 2000), the court found “indefensible as a matter of law” the argument that an encryption key

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protecting access to and copying of DVD’s was not an effective technological protection measure. 111 F. Supp. 2d at 317-18. The Reimerdes court held that “measures based on encryption or scrambling ‘effectively control’ access to copyrighted works, although it is well known that what may be encrypted or scrambled often may be decrypted or unscrambled.” Id. at 318 [redacted]

[redacted]

[redacted]

B. Psystar Violates The Anti-Trafficking Provisions Of Sections 1201(a)(2)
And 1201(b) Of The DMCA

To establish its claims that Psystar traffics in devices that circumvent measures that protect access to, or rights in, copyrighted material, Apple must show that Psystar manufactures and

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distributes computers and software to the public and that its computers and software (a) are “primarily designed or produced for the purpose” of circumventing Apple’s technological protection measures; (b) have “only limited commercially significant purpose or use other than” to circumvent Apple’s technological protection measures;or (c) are “marketed by [Psystar] ... for use” in circumventing Apple’s technological protection measures. 17 U.S.C. §§ 1201(a)(2); 1202(b)(1).

The undisputed facts show that Psystar distributes its circumvention technology with every one of its computers sold with Mac OS X. There is no dispute that Psystar installs this technology on its computers precisely for the purpose of evading protections and enabling Mac OS X to operate on non-Apple hardware. 81 [redacted] Psystar markets its computers as specifically able to run Mac OS X. 83 Thus, all the elements of the anti-trafficking claims are satisfied.

C. Section 1201(f)’s “Reverse Engineering” Exception Has No Application Here

Psystar may argue that it did not violate the DMCA because its efforts to circumvent Apple’s technological protection measures were permitted under Section 1201(f) of the DMCA. Section 1201(f) permits limited acts of circumvention taken for the “sole purpose of identifying and analyzing those elements of the program that are necessary to achieve interoperability of an independently created computer program with other programs.” 17 U.S.C. § 1201(f). Psystar has not pleaded Section 1201(f) as an affirmative defense and therefore has waived it. See Metcalf, 488 F.3d at 841; Ledo Fin. Corp. v. Summers, 122 F.3d 825, 827 (9th Cir. 1997). Even if Psystar were allowed to raise the defense at this late date, Psystar cannot meet the requirements of Section 1201(f).

To assert a 1201(f) defense, Psystar would have to prove that: “(1) [it] lawfully obtained

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the right to use a copy of a computer program; (2) the information gathered as a result of the reverse engineering was not previously readily available to the person engaging in the circumvention; (3) the sole purpose of the reverse engineering was to identify and analyze those elements of the program that were necessary to achieve interoperability of an independently created computer program with other programs; and (4) the alleged circumvention did not constitute infringement.” Davidson, 422 F.3d at 641-42. At a minimum, Psystar does not meet the third and fourth requirements.

Psystar did not “reverse engineer” Mac OS X in order to achieve interoperability between Mac OS X and an independently created computer program. Section 1201(f) allows a legitimate software developer to commit limited circumvention to analyze a software program to create new and independent software that is interoperable with that program. See Senate Rep. (DMCA), p. 32; Comm. Rep. (DMCA) p.42. Psystar did not circumvent Apple’s technological protection measures in order to make new software; it did so in order to “force” copies of Mac OS X to run on non-Apple computers. Nor did Psystar circumvent Apple’s technological protection measures to achieve “interoperability” with another computer program. “‘Interoperability’ means the ability of computer programs to exchange information, and of such programs mutually to use the information which has been exchanged.” 84 17 U.S.C. § 1201(f)(4). But Psystar has no independently created program that needs to exchange information with Mac OS X. Psystar’s only “creation” was a means of bypassing Apple’s technological protection measures so that it could make and sell unlicensed copies of Mac OS X. Nothing in Section 1201(f) authorizes the installation and sale of Apple’s copyrighted software on unauthorized Psystar computers.

Furthermore, Psystar cannot meet the fourth requirement of Section 1201(f) because Psystar infringes Apple’s copyright. 17 U.S.C. § 1201(f)(1)-(3). In Davidson & Assoc. v. Jung, for example, the court rejected the defendants’ argument that they had not violated the DMCA because their acts constituted “reverse engineering” under Section 1201(f). The plaintiff was a video game developer and had established an online site for multiple gamers to play its games over the Internet. Davidson, 422 F.3d at 635-36. The site included security mechanisms to ensure

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that only persons who had purchased a licensed copy of the plaintiff’s games and paid to use the gaming site were allowed access. The defendants developed their own gaming site and reversed engineered the plaintiff’s software so that gamers could play the plaintiff’s games on this alternate site without having to join the plaintiff’s site. The court rejected the defendant’s argument that its reverse engineering was an effort to achieve interoperability under Section 1201(f). The court found that because the defendant’s circumvention “constitute[d] infringement,” Section 1201(f) did not apply. Id. at 642; see also Reimerdes, 111 F. Supp. 2d. at 319-20 (S.D.N.Y. 2000) (section 1201(f) did not apply where the defendant’s circumvention constituted infringement).

Like the defendants in Davidson, Psystar circumvented Apple’s technological protection measures so that it could commit wholesale infringement of Mac OS X. The sole purpose of Psystar’s copying and modifying Mac OS X was to enable it to profit by commercially distributing unlicensed copies of Mac OS X on Psystar computers. Section 1201(f) does not apply when the “defendants’ purpose in developing the [the circumvention device] was to avoid the anticircumvention restrictions of [Mac OS X] and to avoid the restricted access to [the protected work].” Davidson & Assoc., Inc. v. Internet Gateway, Inc., 334 F. Supp. 2d 1164, 1186-7 (E.D. Mo. 2004). Psystar’s efforts to assert Section 1201(f) therefore should fail.

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VI. CONCLUSION

For the foregoing reasons, the Court should grant partial summary judgment on Apple’s First and Second Claims for Copyright Infringement and Contributory and Induced Copyright Infringement under 17 U.S.C. § 501, et seq. and Third Claim for Violating the Digital Millennium Copyright Act, 17 U.S.C. § 1201, et seq. The Court should also grant summary judgment dismissing Psystar’s Eleventh and Thirty-Seventh Affirmative Defenses for First Sale/Exhaustion of Copyright and Copyright Misuse dismissing its Counterclaims for Copyright Misuse.

DATED: October 8, 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.

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CERTIFICATE OF SERVICE

[see PDF]


1 Declaration of Megan M. Chung (“Chung Decl.”) filed herewith, Ex. 1 (Apple 10-K for fiscal year ending September 29, 2001) at 4.

2 Chung Decl. Ex. 2 (Apple 10-K for fiscal year ending September 27, 2008) at 3-4.

3Chung Decl. Ex. 2 at 1. Apple’s hardware is custom-tuned for Apple software, and Apple software is custom-tuned for Apple hardware. Chung Decl. Ex. 4 (Culbert Dep.) at 43:11-45:15, 68:14-19; Declaration of Matthew R. Lynde (“Lynde Decl.”) at ¶¶ 7-8.

4 Chung Decl. Ex. 2 at 1; Ex. 4 at 45:8-15, 49:11-52:22, 53:24-54:19, 56:9-15; Ex. 6, (Mansfield Dep.) at 9:25-10:5, 11:22-13:22, 24:20-26:25; Ex. 7 (Patience Dep.) at 115:12-117:15; 22 23 24 25 26 27 28 Ex. 12 (Schiller Dep.) 24:19-25:11; Ex. 15 (Wright Dep.) at 95:23-105:11.

5 Chung Decl. Ex. 1 at 4.

6 Lynde Decl. at ¶¶ 6-7; Chung Decl. Ex. 1 at 8.

7 Chung Decl. Exs. 42-44.

8 Chung Decl. Ex. 12 at 9:10-11:5; Ex. 13 (Van Vechten Dep.) at 62:23-65:1; Lynde Decl. at ¶ 7.

9 Chung Decl. Ex. 12 at 18:14-20:2.

10 Chung Decl. Ex. 12 at 15:20-17:8.

11 Lynde Decl. at ¶¶ 7-8; Chung Decl. Ex. 6 at 9:25-10:5, 11:22-13:22, 24:20-26:25; Ex. 15 at 95:23-105:11; Ex. 12 at 24:19-25:11; Ex. 13 at 62:23-65:1.

12 Chung Decl. Ex. 45; Lynde Decl. at ¶ 4.

13 Lynde Decl. at ¶ 9; Chung Decl. Exs. 30-40.

14 Chung Decl. Ex. 31 at APP_PSY0038966; Lynde Decl. at ¶ 9.

15 Chung Decl. Ex. 26 at ¶ 1.

16 Chung Decl. Ex. 12 at 14:9-17:8.

17 Chung Decl. Ex. 20 Psystar Supp. Response to RFA’s 14-27 at No. 21.

18 Chung Decl. Exs. 27-29.

19 Chung Decl. Ex. 8 (Roberto Pedraza Dep.) at 42:24-43:1; Ex. 9 (Rodolfo Pedraza Dep. (3/19/09) at 19:18-25.

20Kelly Decl. at ¶¶ 8, 10; Chung Decl. Ex. 4 at 89:19-90:15; Ex. 6 at 23:16-24:19; Ex. 7 at 6:120, 42:10-19, 54:15-20; Ex. 14 (Van Vechten 30(b)(6) Dep.) at 15:16-16:7; Ex. 16 (Wright 30(b)(6) Dep.) at 6:19- 24.

21 Kelly Decl. at ¶¶ 7-13.

[redacted]

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30 Chung Decl. Ex. 8 at 45:12-17; Kelly Decl. at ¶¶ 14-15.

31 Chung Decl. Ex. 19 Psystar Response to RFA’s 101-161 at Nos. 159-161.

32 Chung Decl. Ex. 66 at PS006530; see also Ex. 67.

33 Chung Decl. Ex. 9 at 52:2-25; Ex. 17 Psystar Responses to RFA’s 30-100 at Nos. 30-32, 3637 and 40.)

34 Chung Decl. Ex. 46.

35 Chung Decl. Ex. 17 at Nos. 30-32, 36-37 and 40; Ex. 20 at No. 19.

[redacted]

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41 Kelly Decl. at ¶¶ 22-25; Chung Decl. Ex. 8 at 59:12-60:8, 89:19-91:20, 93:20-94:2; Ex. 9 at 91:18-93:16, Ex. 23 at No. 7.

42 Kelly Decl. at ¶ 27; Chung Decl. Ex. 18, Psystar Supp. Responses to RFA’s 30-100 at Nos. 94-95.

43 Kelly Decl. at ¶ 4; Chung Decl. Ex. 9 at 21:24-23:13; Exs. 51-54.

44 [redacted]

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53Chung Decl. Ex. 9 at 21:24-22:17, 45:12-46:12, 48:24-49:20 and 53:14-23; Ex. 22 Psystar Responses to RFA’s 227-306 at Nos. 246-47; Ex. 24 at No. 25; Ex. 41 at PS009264; .

[redacted]

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59 Kelly Decl. at ¶¶ 32-33; Chung Decl. Ex. 9 at 137:24-138:5; Ex. 10 (Rodolfo Pedraza Dep. (8/07/09) at 55:15-56:19; Ex. 11 at 63:7-64:14; Ex. 21 Psystar Responses to RFA’s 162-226 at Nos. 164-5; Ex. 47, 65.

60 Chung Decl. Ex. 3 at 29:24-31:24, 46:9-23, 94:9-23; Ex. 10 at 56:20-60:4; Ex. 11 at 63:764:14.

61 Although Apple seeks summary judgment here only on its copyright infringement and DMCA claims, it reserves for trial its evidence and argument on all claims – including breach of license, trademark infringement, and related claims. Apple also reserves for trial its evidence and argument regarding Psystar’s willfulness and Apple’s damages incurred as a result of Psystar’s wrongful conduct.

62 Chung Decl. Exs. 27-29.

63 Chung Decl. Ex. 26 at ¶ 2a.

64Chung Decl. Ex. 48.

65 Kelly Decl. ¶ 27c, d.

[redacted]

67 Tests of the Psystar computer (as well as Psystar’s customer complaints) confirm that, when unlawfully installed on a non-Apple computer, the modified Mac OS X does not perform to its intended level of quality. Kelly Decl. at ¶ 34; Chung Decl. Exs. 55-62.

68 Chung Decl. Ex. 26 at ¶ 3.

69 Lynde Decl. at ¶ 11.

70 As late as August 17, 2009 (four days before the close of fact discovery), Psystar stated in response to Apple’s Interrogatory No. 16, which sought the factual and legal basis for Psystar’s “copyright misuse” counterclaim, that it was “unable to provide a complete response” and “responds by incorporating its live counterclaim pleading, which sets forth several of Psystar’s contentions with respect to Apple Inc.’s copyright and its known factual bases for those contentions.” Chung Decl. Ex. 24 at No. 16.

71 Lynde Decl. at ¶ 5. When dismissing Psystar’s counterclaim alleging an illegal “tying” arrangement, this Court already held that Psystar could not define a relevant product market in which Apple wields market power. Apple Inc. v. Psystar Corp., 586 F. Supp. 2d 1190, 1200, 1203 (N.D. Cal. 2008) (also available at Docket No. 33 at 12, 17).

72 Psystar has waived Section 117 as an affirmative defense because it did not plead the defense in its Answer. Jorst v. D’Ambrosio Bros. Inv. Co., 2001 WL 969039, at *9 (N.D. Cal. Aug. 13, 2001) (citing Fed. R. Civ. P. 8(c)); see also In re Adbox, Inc., 488 F.3d 836, 841 (9th Cir. 2007). Although the Court, in its discretion, may permit a defendant to raise an unpleaded defense in opposition to summary judgment, the Court should only do so “where the delay does not prejudice the plaintiff.” Jorst, at *9. When the parties have proceeded through extensive litigation “including the depositions of multiple witnesses” and dispositive motion practice, the plaintiff will suffer prejudice if the defendant is permitted to raise a new, untimely defense. Id. Because the parties have litigated for more than a year and discovery is closed, Apple would be unfairly prejudiced if Psystar were permitted to raise a new affirmative defense based on Section 117 at this late date.

73 See also MAI Sys. Corp., 991 F.2d at 518 (§ 117 does not apply to a licensee); Triad Sys. Corp., 64 F.3d at 1333 (section 117 applied when Triad sold software but did not apply when Triad began to license its software); MDY Indus., LLC, 2008 WL 2757357, at *8 (“[L]icensees of a computer program do not 'own' their copy of the program and therefore are not entitled to a section 117 defense.”)

[redacted]

[redacted]

76 Chung Decl. Ex. 4 at 21:19-22:20, 29:9-30:3, 89:19-90:15; Ex. 7 at 6:9-20; Ex. 15 at 126:124; Ex. 16 at 6:19-24.

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81 Chung Decl. Ex. 24 at No. 25; Ex. 41 at PS009264.

[redacted]

83 Chung Decl. Ex. 50-51.

84 Section 1201(f) does not create an exception for hardware-software interoperability.

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

K.A.D. CAMARA (TX Bar No. 24062646/
MA Bar No. 661087 – Admitted Pro Hac Vice)
[email]
KENT RADFORD (TX Bar No. 24027640 –
Admitted Pro Hac Vice)
[email]
CAMARA & SIBLEY LLP
[address, phone, fax]

EUGENE ACTION (SBN 223023)
[address, phone, fax]

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

APPLE INC., a California corporation,

Plaintiff,

v.

PSYSTAR CORPORATION,

Defendants.

AND RELATED COUNTERCLAIMS

_______________________

CASE NO. CV-08-03251-WHA

PSYSTAR CORPORATION’S
MOTION FOR SUMMARY
JUDGMENT

TABLE OF CONTENTS

I.SUMMARY OF THE ARGUMENT......................................1
A.The Copyright and DMCA Claims...........................1
1. Absence of infringement................................1

2. The limited effect on the industry of a judgment for Psystar in this case..................................................3

B. All Other Claims..............................................4
II. COPYRIGHT CLAIMS....................................5
A. Apple Sold Copies of OS X Leopard...................5
1. Apple admits that it sold the physical DVDs on which OS X Leopard is written......................................5

2. The Copyright Act defines the “owner of a copy” as the owner of the “material object . . . in which a work is fixed” — here, the DVD’s that Apple admits it sold...............................6

3. Controlling Ninth Circuit law (Wise) and the most recent district court decision on point (Vernor) support the conclusion that Apple sold copies of OS X Leopard......................................6

4. Wall Data, MAI, and Triad, are not controlling law and, even if controlling, do not conflict with Wise or Vernor in this case...................................8

B. Psystar Did Not Commit Copyright Infringement By Purchasing, Installing, And Reselling Copies of OS X Leopard..................................9
1. 17 U.S.C. §§ 109 and 117...................................9

2. Lexmark and the lack of copyright protection for functional works......................11

C. Without Copyright Infringement, There Can Be No Violation of the DMCA Because Any Circumvention Does Not Result In Access To A Work Protected By Copyright...............................................13
1. Apple’s Technological Protection Measure and Psystar’s Circumvention.............................................13

2. Psystar Does Not Facilitate Infringement And Therefore Is Not Subject to DMCA Liability.........................................16

3. Apple’s Technological Protection Measure Is Not Effective.................................19

D. Apple’s Attempt To Use Copyright To Enforce Its Tying Of OS X Leopard To Apple-Labeled Hardware Constitutes Copyright Misuse.........................20
III. MOOTNESS................................24
A. Apple Has Waived All Claims For Relief On The Non-Copyright

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Causes of Action Except Claims For Nominative Damages And An Appropriate Injunction.......................................24

B. An Appropriate Injunctions Is Limited To OS X Leopard.......................25

V. CONCLUSION................................................26

iii

TABLE OF AUTHORITIES

CASES

Alcatel USA, Inc. v. DGI Tech., Inc. 166 F.3d 772 (5th Cir. 1999)..........................................23

Altera Corp. v. Clear Logic, Inc., 424 F.3d 1079 (9th Cir. 2005)..............................................22

Assessment Technologies of WI, LLC v. WIREdata, Inc., 350 F.3d 640 (7th Cir. 2003)..................................3, 23

Bergh v. State of Washington, 535 F.2d 505 (9th Cir. 1976).................................................27

Chamberlain Group, Inc. v. Skylink Technologies, Inc., 381 F.3d 1178 (Fed. Cir. 2004)...........................................3, 18, 19, 24

Condesa Del Mar, Inc. v. White Way Sign & Maintenance Co., 1987 WL 17474 (N.D. Ill. 1987)..............................................22

eBay, Inc. v. MercExchange, LLC, 547 U.S. 388 (2006)..........................................26

Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539 (1985)...................................23

Krause v. Titleserv, Inc., 402 F.3d 119 (2d Cir. 2005)...............................7, 11

Lasercomb America, Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990).........................................23

MDC Data Centers v. I.B.M., 342 F. Supp. 502 (E.D. Pa. 1972)......................................22

MercExchange, LLC v. eBay, Inc., 500 F. Supp. 2d 556 (E.D. Va. 2007)............................................26

PGBA v. U.S., 389 F.3d 1219 (Fed. Cir. 2004).............................................26

Practice Mgmt. Info. Corp., v. American Medical Ass’n, 121 F.3d 516 (9th Cir. 1997)......................................23

Qad, Inc. v. ALN Associates, Inc., 770 F.Supp. 1261 (N.D.Ill. 1991)........................................22

Realnetworks, Inc. v. DVD Copy Control Ass'n, No. C‐08‐4548‐MHP, 2009 WL 2475338 (N.D.Cal.2009)...........................18

Response of Carolina, Inc. v. Leasco Response, Inc. 537 F.2d 1307 (11th Cir. 1976).........................................22

Shloss v. Sweeney, 515 F.Supp.2d 1068 (N.D.Cal. 2007)............................................22

SoftMan Products Co., LLC v. Adobe Systems, Inc., 171 F. Supp. 2d 1075 (C.D. Cal. 2001)..............................8, 9

Storage Technology Corp. v. Custom Hardware Engineering & Consulting, Inc. Storage Technology Corp. v. Custom
Hardware Engineering & Consulting, Inc.
, 421 F.3d 1307 (Fed. Cir. 2005)..........................................20

United States v. RodriguezLara, 421 F.3d 932 (9th Cir. 2005)...................................................9

Universal City Studios, Inc. v. Corley, 273 F.3d 429 (2d Cir. 2001)........................16

STATUTES

17 U.S.C. § 101.......................1, 6, 9

17 U.S.C. § 109..................................passim

iv

17 U.SC. § 117.........................................passim

OTHER AUTHORITIES

Dan L. Burk, Anticircumvention Misuse, 50 UCLA L. Rev. 1095 (2003)................................................16

Nimmer on Copyright (2003).......................................7, 11, 16

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TABLE OF EXHIBITS

Ex. A - Leopard EULA

Ex. B - Snow Leopard EULA

Ex. C - Schiller Deposition Excerpts

Ex. D - Email From Steve Zellers

Ex. E - Van Vechten Deposition Excerpts

Ex. F - Culbert Deposition Excerpts

Ex. G - Patience Deposition Excerpts

Ex. H - Wright Deposition Excerpts

Ex. I - Code and Screenshot Showing Retrieval of Haiku and Declaration of Rudy Pedraza

Ex. J - Mansfield Deposition Excerpts

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MOTION FOR SUMMARY JUDGMENT

Psystar moves for summary judgment (1) that Apple take nothing on its claims under the Copyright Act and the Digital Millennium Copyright Act (DMCA), (2) that Apple take nothing on its trademark and trade-dress claims because Psystar’s activities constitute nominative fair use, and (3) that these and all the state-law claims be dismissed as moot because Apple has waived any claim to non-nominal damages and Psystar will consent to pay nominal damages and submit to an injunction limited to OS X Leopard, which is the only appropriate injunction in this case.

I. SUMMARY OF THE ARGUMENT

A. The Copyright and DMCA Claims.

1. Absence of infringement.
Apple sold the copies of OS X Leopard that Psystar installed on its computers and resold to its customers. The OS X Leopard “software license agreement” (herein after “EULA”) states: “You own the media on which the Apple Software is recorded.” And § 101 of the Copyright Act defines copies to mean that media, namely, the DVD on which OS X Leopard is recorded. 17 U.S.C. § 101 (“’Copies’ are material objects . . . .”). Because Apple, according to the terms of its own software license agreement, sold the material objects on which OS X Leopard was fixed, it sold — not merely licensed — copies of OS X Leopard. Each time that Psystar bought a DVD containing OS X Leopard, Psystar became the owner of a copy of OS X Leopard.

Because Psystar owns the copies of OS X Leopard that it buys, §§ 109 and 117 of the Copyright Act come into play. Section 117 provides that “it is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided . . . that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine.” 17 U.SC. § 117. Accordingly, the steps that Psystar takes to get OS X Leopard to run on its computers do not constitute copyright infringement because those steps are “essential . . . in the utilization of the

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computer program [OS X Leopard] in conjunction with a machine [the Psystar computer].” Section 109, the “first-sale doctrine,” provides that “the owner of a particular copy . . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.” 17 U.S.C. § 109. Under § 109, Psystar is permitted to take the copies of OS X Leopard that it purchased and resell these copies to the buyers of Psystar computers. At each stage in its business process, Psystar falls within §§ 109 and 117: in installing OS X Leopard, Psystar is within § 117 because installation is necessary to the use of OS X Leopard on Psystar’s computers; in selling OS X Leopard packaged with its computers, Psystar is within § 109; and in using a Psystar computer running OS X Leopard, Psystar’s customers are in turn within § 117, since they, too, become owners of a copy of OS X Leopard.

[redacted]

Apple cannot assert claims under the DMCA for circumvention of a technological protection measure because such claims can be brought only when the circumvention is for the purpose of and has the effect of infringement. Circumvention alone is not a violation of the DMCA; only circumvention to gain unauthorized access to that which copyright protects is actionable. See Chamberlain Group, Inc. v. Skylink Technologies, Inc., 381 F.3d 1178, 1197–1203 (Fed. Cir. 2004)

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(extended discussion). “17 U.S.C. § 1201 prohibits only forms of access that bear a reasonable relationship to the protections that the Copyright Act otherwise affords copyright owners.” Id. at 1203. Because installing OS X Leopard on Psystar computers and reselling it packaged with those computers is not copyright infringement, any circumvention involved in doing this is not for the purpose of infringement and therefore does not violate the DMCA. [redacted]

Apple’s attempt to use copyright claims to enforce its tying of OS X Leopard to Apple-labeled hardware constitutes copyright misuse. This is because Apple is asserting these claims “to obtain property protection . . . that copyright law clearly does not confer.” Assessment Technologies of WI, LLC v. WIREdata, Inc., 350 F.3d 640, 647 (7th Cir. 2003) (Posner, J.). As to any infringements not already immunized by §§ 109 and 117 or Lexmark, copyright misuse bars Apple’s claims.

2. The limited effect on the industry of a judgment for Psystar in this case.
Apple could have avoided §§ 109 and 117 by licensing copies of OS X Leopard instead of selling them; in fact, in the Snow Leopard license agreement, Apple removed the language stating that “you own the media on which the Apple Software is recorded.” We are not arguing that the author of a computer program must sell copies of that program, with the consequence that purchasers may do what Psystar has done here; we are arguing only that Apple, for whatever reason, perhaps acting on incomplete legal advice, chose to sell copies of its program, OS X Leopard, and that Apple should be held to this decision. Had Apple acted carefully, it would have licensed OS X Leopard subject to the condition that it not be used on non-Apple hardware. A judgment for Psystar here will have no lasting effect on the industry (or even on Apple) because anyone can avoid what Apple has here done by licensing copies instead of selling them.

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B. All Other Claims.

Psystar uses Apple’s trademarks and trade dress to describe Apple’s products, which Psystar resells. This is nominative fair use. It is not the basis for a claim for either trademark infringement or trade-dress infringement. Just as the owner of a Honda Accord may describe the Accord he is reselling as a “Honda Accord” and may include pictures of the Accord in his advertisements (and just as the owner of a used-car dealership may do the same), Psystar, the owner of copies of OS X Leopard, may describe these copies as “Mac OS X Leopard” and may include pictures of OS X Leopard in its advertisements. The harm at which the Lanham Act is addressed — a misrepresentation as to origin or sponsorship of the defendant’s goods that confuses the public — is not present here because Psystar nowhere represents that OS X Leopard is its own product rather than Apple’s. Psystar’s slogan itself disclaims any association with Apple: “It’s not a Mac — it’s for everyone.”

Moreover, as to all the non-copyright claims, Apple has waived its claims for damages. As to all the non-copyright claims, the only relief that Apple continues to seek is nominal damages and an injunction. As to nominal damages, if this Court grants this motion for summary judgment in its entirety, then Psystar will happily pay nominal damages. And as to an injunction, if this Court grants this motion for summary judgment in its entirety, then Psystar will happily submit to an appropriately tailored injunction. Such an injunction, if any injunction is appropriate, should be limited to Psystar’s allegedly illegal activities involving OS X Leopard, since it is only OS X Leopard that this case concerns. Since neither Psystar nor Apple sells OS X Leopard any longer, it is no great burden for Psystar to agree to such an injunction. And with such an injunction granted, there is no further relief for Apple to win at trial.

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II. COPYRIGHT CLAIMS

A. Apple Sold Copies of OS X Leopard.

1. Apple admits that it sold the physical DVDs on which OS X Leopard is written.
[redacted] Psystar purchased one such boxed DVD for each of the Psystar computers running OS X Leopard that it sold. Each time that Psystar shipped a computer running OS X Leopard to an end user, it included one of the boxed DVD’s with that computer. These facts are undisputed. What is in dispute is whether, when Psystar buys a boxed DVD, it is thereby buying or merely licensing a copy of OS X Leopard. The correct view is that Psystar bought a copy of OS X Leopard each time it bought one of Apple’s boxed DVD’s.

The boxed DVDs that Apple sold each contain a complete copy of OS X Leopard. See, e.g., Ex. C (Schiller Depo.) at 14:11–14:25.1

[redacted]

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2. The Copyright Act defines the “owner of a copy” as the owner of the “material object . . . in which a work is fixed” — here, the DVD’s that Apple admits it sold.
Under the Copyright Act, because Psystar owns the physical media on which a complete copy of OS X Leopard was written, Psystar owns a copy of OS X Leopard for purposes of §§ 109 and 117. Both of these sections apply to those who own copies of a copyrighted work: § 109 to “the owner of a particular copy”; and § 117 to “the owner of a copy.” 17 U.S.C. §§ 109, 117. And the Copyright Act defines copy to mean the physical media on which a work is written:
“Copies” are material objects, other than phonorecords, in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. The term “copies” includes the material object, other than a phonorecord, in which the work is first fixed.
17 U.S.C. § 101 (emphasis added). Because “material objects . . . in which a work is fixed” constitutes “copies” under § 101, the owner of such a material object is “the owner of a copy” and “the owner of a particular copy” under §§ 109 and 117.

It is of course true that “Apple and/or Apple’s licensor(s) retain ownership of the Apple Software itself,” as the OS X Leopard agreement goes on to state. Ex. A at 1. But this is only to say that, when Apple sells a copy of OS X Leopard, it is not selling OS X Leopard itself.

3. Controlling Ninth Circuit law (Wise) and the most recent district court decision on point (Vernor) support the conclusion that Apple sold copies of OS X Leopard.
The cases in this Circuit and elsewhere are in accord with Psystar’s view that the sale of a material object on which a copyrighted work is written constitutes the sale of a particular copy of that copyrighted work. In United States v. Wise, 500 F.2d 1180, 1190 (9th Cir. 1977), the Ninth Circuit analyzed an agreement for exhibition of motion pictures and held that the agreement was a license because it “reserved title to the film prints in Universal, and required their return to Universal following the expiration of the contract term.” Here, there is no similar reservation of title to the DVD (as opposed to the software itself) in Apple, and no requirement that a purchaser of a boxed

6

DVD ever return the DVD to Apple. Even where the physical medium was transferred subject to a set of promises not to further transfer it to others (a film print sold to actress Vanessa Redgrave) or even to promptly destroy the physical medium (film prints sold for salvage), the Ninth Circuit held that there had been a sale of a copy. Id. at 1192–94. In Vernor v Autodesk, Inc., 555 F. Supp. 2d 1164, 1170 (W.D. Wash. 2008), the most recent decision on point, the court summarized the Ninth Circuit’s decision in Wise:
In comparing the transactions found to be sales in Wise with those that were not, the critical factor is whether the transferee kept the copy acquired from the copyright holder. When the film studios required that prints be returned, the court found no sale. When the studios did not require the transferee to return the prints, the court found a sale. Even a complete prohibition on further transfer of the print (as in the Redgrave Contract), or a requirement that the print be salvaged or destroyed, was insufficient to negate a sale where the transferee was not required to return the print.
(emphasis added). Judge Jones reaffirmed this opinion, rendered in the context of a motion to dismiss, in a separate opinion on cross motions for summary judgment after extensive briefing and argument, including testimony by Professor Nimmer. See Vernor v. Autodesk, Inc., No. C-07-1189RAJ, 2009 WL 3187613 at *8 (W.D. Wash. 2009).

Here, there is no question that a buyer of a boxed OS X Leopard DVD may keep the DVD indefinitely. There is no requirement anywhere in the Apple agreement that requires such a buyer to return the DVD he bought to Apple. Accordingly, under Vernor and Wise, the sale of the DVD is the sale of a copy of OS X Leopard. At most, what Apple has created “is a 'sale with restrictions on use,’ [which] is a sufficient basis to invoke the first sale doctrine.” Vernor, 555 F. Supp. 2d at 1170–71; see also Krause v. Titleserv, Inc., 402 F.3d 119, 122–24 (2d Cir. 2005) (concluding that a person with title to a physical copy is plainly an owner; contractual restrictions on use considered only as to persons who lack title); SoftMan Products Co., LLC v. Adobe Systems, Inc., 171 F. Supp. 2d 1075, 1084–87 (C.D. Cal. 2001) (economic reality of transaction rather than label in agreement determines whether transaction is a sale; “In light of these indicia, many courts and commentators conclude that a ‘shrinkwrap license’ transaction is a sale of goods rather than a license.”).

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The fact that Apple calls the agreement accompanying OS X Leopard a “software license agreement” has no bearing on whether that agreement, in fact, results in a sale rather than a license. As the Central District of California explained, whether there was a sale depends on the terms of the agreement, not its label:
Merely labeling a transaction as a lease or license does not control. If a transaction involves a single payment giving the buyer an unlimited period in which it has the right to possession, the transaction is a sale. In this situation, the buyer owns the copy regardless of the label the parties use for the contract. . . . The pertinent issue is whether, as in a lease, the user may be required to return the copy to the vendor after the expiration of a particular period. If not, the transaction conveyed not only possession, but also transferred ownership of the copy.
SoftMan Prods. Co. v. Adobe Systems Inc., 171 F. Supp. 2d 1075, 1089 (C.D. Cal. 2001) (emphasis added). Because the OS X Leopard agreement gives the purchaser of a boxed DVD an indefinite right to posses the DVD — and even expressly states that the purchaser owns the DVD — that agreement results in a sale of a copy of OS X Leopard.

4. Wall Data, MAI, and Triad, are not controlling law and, even if controlling, do not conflict with Wise or Vernor in this case.
The Vernor court believed that the Ninth Circuit’s decision in Wise was in conflict with three later Ninth Circuit decisions, Wall Data, MAI, and Triad, but that, in the face of such a conflict, it was bound by Wise. See Vernor, 2009 WL 3187613 at *11 (“The court must follow the oldest precedent among conflicting opinions from three-judge Ninth Circuit panels. United States v. Rodriguez-Lara, 421 F.3d 932, 943 (9th Cir. 2005).”). This is certainly true: to the extent Apple relies on Wall Data, MAI, or Triad to reach a different result than under Vernor, Wise, and SoftMan, this violates the rule in Rodriguez-Lara that the oldest panel decision of the Ninth Circuit controls. But this Court need not reach this question because even under Wall Data, MAI, and Triad, Apple sold the copies of OS X Leopard in its OS X Leopard DVD boxes.

MAI and Triad never expressly considered the question whether the agreement s there at issue resulted in a license or sale of the software in question. In MAI, the defendant did not dispute that the software had been licensed. It disputed only whether its actions constituted “copying” under the

8

Copyright Act. See MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511, 517 (9th Cir. 1993) So too in Triad: the defendant contested copying and asserted fair use, but did not claim to be an owner rather than a licensee of particular copies. See Triad Systems Corp. v. Southeastern Express Co., 64 F.3d 1330, 1335–36 (9th Cir. 1995). Because neither MAI nor Triad considered whether a particular resulted in a license or a sale, neither is relevant to the question whether Apple sold copies of OS X Leopard.

Wall Data does confront the question whether an agreement results in a license or a sale, but even under the test in Wall Data, Apple’s agreement results in a sale. The Wall Data court held that an agreement results in a license if the copyright owner clearly states that he is granting only a license to the copy of software:

Generally, if the copyright owner makes it clear that she or he is granting only a license to the copy of software and imposes significant restrictions on the purchaser's ability to redistribute or transfer that copy, the purchaser is considered a licensee, not an owner, of the software. In this case, as in MAI, the licensing agreement imposed severe restrictions on the Sheriff's Department's rights with respect to the software.
Wall Data Inc. v. Los Angeles County Sheriff’s Dep’t, 447 F.3d 769, 785 (9th Cir. 2006) (emphasis added). Here, Apple has not licensed the copy — meaning, under § 101, the material object on which the copyrighted work is fixed — that it sold. To the contrary, Apple’s agreement expressly states that the purchaser owns the copy: “You own the media on which the Apple software is recorded.” Exhibit A at 1. Thus, even under the rule in Wall Data, Apple sold copies of OS X Leopard.

B. Psystar Did Not Commit Copyright Infringement By Purchasing, Installing, And Reselling Copies of OS X Leopard.

1. 17 U.S.C. §§ 109 and 117
OS X Leopard passes through Psystar in three steps: (1) Psystar purchases computer components from vendors, including both computer hardware and copies of OS X Leopard from the Apple Store or from resellers like Amazon or Best Buy, and assembles these, along with Psystar’s own software, into a Psystar computer that runs OS X Leopard; (2) Psystar sells this computer,

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including all of its components, to an end user; and (3) the end user uses the computer, including OS X Leopard. In none of these steps is any copyright infringement going on. In step (1), Psystar’s installation of OS X Leopard on the computers that it assembles is protected by § 117. In step (2), Psystar’s sale of OS X Leopard as part of a Psystar computer is protected by § 109. And in step (3), the end user’s use of OS X Leopard is protected by § 117 because it is now the end user who owns the copy of OS X Leopard that is installed on the computer in question.

Section 117 provides that it is not infringement for the owner of a copy of a computer program to take steps necessary to run that program on his computer:

it is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided . . . that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine.
17 U.S.C. § 117. Section 117 was put in place to prevent precisely the sort of problem that Psystar now faces, where the owner of a computer program has sold copies of that program but then wants to control what users do with those copies:
Because the placement of a work into a computer is the preparation of a copy, the law should provide that persons in rightful possession of copies of programs be able to use them freely without fear of exposure to copyright liability. Obviously, creators, lessors, licensors, and vendors of copies of programs intend that they be used by their customers, so that rightful users would but rarely need a legal shield against potential copyright problems. It is easy to imagine, however, a situation in which the copyright owner might desire, for good reason or none at all, to force a lawful owner or possessor of a copy to stop using a particular program. One who rightfully possesses a copy of a program, therefore, should be provided with a legal right to copy it to that extent which will permit its use by that possessor.
CONTU Final Report at 13 (quoted in Nimmer § 8.08(b)(1)) (emphasis added).

Because any acts that would otherwise be infringement in the course of installing OS X Leopard on Psystar computers are necessary to get OS X Leopard to run on Psystar’s computers, § 117 renders these acts not infringement. Courts have held that even such otherwise infringing activities as taking a program written for one operating system (DOS) and porting it to a different operating system (Windows) qualify as “essential” to the use of a program and therefore expressly

10

permitted by § 117. See, e.g., Krause v. Titleserv, Inc., 402 F.3d 119, 125–26 (2d Cir. 2005). And the Second Circuit has held that even steps taken to increase a program’s functionality — to add features, for example, or, here, to get OS X Leopard to work on a wider range of computers than simply Apple Macintoshes — qualify as necessary as that term is used in the law. Krause, 402 F.3d at 126–29 (rejecting narrow reading of “essential” as “absolutely necessary” in favor of broader “convenient, useful, appropriate, suitable, proper, or conducive to the end sought”). For the same reason, when the end user comes to be the owner of OS X Leopard after purchasing a Psystar system complete with a copy of OS X Leopard, the end user’s use of OS X Leopard is protected by § 117.

Section 109 provides that the owner of a copyrighted work may not prevent the owner of a copy of that work from reselling his copy on to a third person. “[T]he owner of a particular copy . . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.” 17 U.S.C. § 109. Accordingly, because Psystar purchases copies of OS X Leopard, § 109 gives Psystar the right to resell those copies to its own customers as part of a Psystar system. As the Ninth Circuit has explained:

the first sale doctrine provides that where a copyright owner parts with title to a particular copy of his copyrighted work, he divests himself of his exclusive right to vend that particular copy. While the proprietor's other copyright rights (reprinting, copying, etc.) remain unimpaired, the exclusive right to vend the transferred copy rests with the vendee, who is not restricted by statute from further transfers of that copy, even though in breach of an agreement restricting its sale.
Wise, 550 F.2d at 1187 (emphasis added). Because Psystar bought copies of OS X Leopard, it is free to resell those copies to its end users.

2. Lexmark and the lack of copyright protection for functional works.
[redacted]

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[redacted]

[redacted] The Sixth Circuit addressed precisely this issue in Lexmark Int’l, Inc. v. Static Control Components, Inc., 387 F.3d 522 (6th Cir. 2004). In that case, Lexmark, a printer manufacturer, had set up its printers to use only Lexmark cartridges by having the cartridges send a code to the printer before the printer would operate. See id. at 530. The defendant broke the code and manufactured chips that would feed the code to Lexmark printers, allowing suppliers of cheaper printer cartridges to have their cartridges work with Lexmark printers. See id. at 530–31. Lexmark alleged copyright infringement and violations of the DMCA. See id. at 531.

The Sixth Circuit rejected Lexmark’s copyright infringement claim because the Lexmark lockout code that the defendant used was being used purely for its necessary function of permitting a cartridge to interoperate with a Lexmark printer. The Sixth Circuit held a claim of infringement barred by the doctrines of merger and scenes a faire. See id. at 535–36 (collecting many cases). As the court put it:

Generally speaking, “lock-out” codes fall on the functional-idea rather than the original-expression side of the copyright line. [...] To the extent compatibility requires that a particular code sequence be included in the component device to permit its use, the merger and scenes a faire doctrines generally preclude the code sequence from obtaining copyright protection.
Id. at 536 (emphasis added). A lockout code, because it is functional, cannot be the basis for a claim of copyright infringement.

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[redacted]

[redacted]

For like reasons, Judge Feikens is correct that a poem in the abstract could be copyrightable. But that does not mean that the poem receives copyright protection when it is used in the context of a lock-out code. Similarly, a computer program may be protectable in the abstract but not generally entitled to protection when used necessarily as a lock-out device.
Id. at 544 (emphasis added). [redacted]

C. Without Copyright Infringement, There Can Be No Violation of the DMCA Because Any Circumvention Does Not Result In Access To A Work Protected By Copyright.

1. Apple’s Technological Protection Measure and Psystar’s Circumvention
[redacted]

[redacted]

13

[redacted]

[redacted]

[redacted]

14

[redacted]

[redacted]

[redacted]

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2. Psystar Does Not Facilitate Infringement And Therefore Is Not Subject to DMCA Liability
The DMCA was created to protect against piracy of copyrighted works. See, e.g., 3-12A Nimmer on Copyright § 12A.04 (2003); Dan L. Burk, Anticircumvention Misuse, 50 UCLA L. Rev. 1095, 1135 (2003). The Second Circuit described the motivating purpose of the DMCA: “Fearful [of] the ease with which pirates could copy and distribute a copyrightable work in digital form . . . Congress sought to combat copyright piracy in its earlier stages, before the work was even copied.” Universal City Studios, Inc. v. Corley, 273 F.3d 429, 435 (2d Cir. 2001).

[redacted]

[redacted]

[redacted]

[redacted]

16

[redacted]

[redacted]

[redacted]

[redacted]

The Senate Judiciary Committee expressly stated that the purpose of the DMCA is to “facilitate making available quickly and conveniently via the Internet the movies, music, software,

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and literary works that are the fruit of American creative genius.” S. Rep. No. 105-190, 105th Cong. 2d Sess. at 8 (May 11, 1998). The DMCA was not intended to block legitimate competition rather than to protect digital content from piracy. See 144 Cong. Rec. 2136.

The Federal Circuit, in its Chamberlain decision, established the distinction between property rights created by the Copyright Act, and liability protection created by the DMCA. See Chamberlain Group, Inc. v. Skylink Technologies, Inc., 381 F.3d 1178, 1193 (C.A.Fed. Ill. 2004) (“The essence of the DMCA's anticircumvention provisions is that §§ 1201(a), (b) establish causes of action for liability. They do not establish a new property right.”); Realnetworks, Inc. v. DVD Copy Control Ass'n, No. C-08-4548-MHP, 2009 WL 2475338 (N.D.Cal.2009) (adopting Chamberlain view). This property–liability distinction follows from the text of the DMCA, which indicates that circumvention is not infringement. 17 U.S.C. § 1201(c)(1) (“Nothing in this section shall affect rights, remedies, limitations, or defenses to copyright infringement, including fair use, under this title.”).

Under Chamberlain, “circumvention is not a new form of infringement but rather a new violation prohibiting actions or products that facilitate infringement.” 381 F.3d 1178, 1197. The predicate analysis for any claim arising under the DMCA is a determination of whether the acts or devices complained of facilitate infringement of a protected work.

[redacted]

The specific rule announced by Chamberlain is:

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A copyright owner seeking to impose liability on an accused circumventor must demonstrate a reasonable relationship between the circumvention at issue and a use relating to a property right for which the Copyright Act permits the copyright owner to withhold authorization - as well as notice that authorization was withheld. A copyright owner seeking to impose liability on an accused trafficker must demonstrate that the trafficker's device enables either copyright infringement or a prohibited circumvention.
381 F.3d 1178, 1204.

[redacted]

Even if we assume that Apple has an enforceable contractual right against the use of OS X Leopard on non-Apple hardware, the DMCA claims fail. The DMCA does not create new property rights. A contract cannot be used to create the requisite underlying infringement needed to trigger DMCA liability. See Storage Technology Corp. v. Custom Hardware Engineering & Consulting, Inc. Storage Technology Corp. v. Custom Hardware Engineering & Consulting, Inc., 421 F.3d 1307, 1319 (Fed. Cir. 2005) (“Hence, there is no nexus between any possible infringement and the use of the circumvention devices. Rather, CHE's circumvention of GetKey only allows CHE to use portions of the copyrighted software that StorageTek wishes to restrict technologically. The activation of the maintenance code may violate StorageTek's contractual rights vis-à-vis its customers, but those rights are not the rights protected by copyright law.”).

3. Apple’s Technological Protection Measure Is Not Effective.
[redacted]

19

[redacted]

[redacted]

[redacted] Lexmark, the Court addressed the exact issue of whether the DMCA would apply to a situation where the information needed to access a protected work was available:

Because the statute refers to “control[ling] access to a work protected under this title,” it does not naturally apply when the “work protected under this title” is otherwise accessible. Just as one would not say that a lock on the back door of a house “controls access” to a house whose front door does not contain a lock and just as one would not say that a lock on any door of a house “controls access” to the house after its purchaser receives the key to the lock, it does not make sense to say that this provision of the DMCA applies to otherwise-readily-accessible copyrighted works. Lexmark Intern., Inc. v. Static Control Components, Inc., 387 F.3d 522, 547 (C.A.6 th.2004) (emphasis added).
[redacted]

D. Apple’s Attempt To Use Copyright To Enforce Its Tying Of OS X Leopard To
Apple-Labeled Hardware Constitutes Copyright Misuse.

Once Apple decided on its course of action with OS X, and sold copies of its software, it exhausted certain copyrights. Under the first-sale doctrine, codified in 17 U.S.C. § 109, Apple

20

exhausted its right of distribution. Under 17 U.S.C. § 117, Apple exhausted its right of reproduction in those acts of its customers useful to the utilization of OS X Leopard on any machine. In this case, Apple certainly cannot lawfully restrict under copyright law the customer's choice of hardware because they sold, and did not lease, copies of OS X Leopard. The attempt to use copyright law to enforce such restrictions in these circumstances is an improper extension of copyright law to maintain a limited monopoly over the hardware that runs OS X Leopard, apart from any antitrust implications.P7

Copyright misuse doctrine “forbids the use of the [copyright] to secure an exclusive right or limited monopoly not granted by the [Copyright] Office and which is contrary to public policy to grant.” Altera Corp. v. Clear Logic, Inc., 424 F.3d 1079, 1090 (9th Cir. 2005) (citation omitted). The doctrine applies whenever copyright is “leveraged to undermine the Constitution's goal of promoting invention and creative expression.” Shloss v. Sweeney, 515 F.Supp.2d 1068, 1080 (N.D.Cal. 2007) (internal citations omitted). The purpose of granting protective rights in computer software is to promote progress in the field. See Qad, Inc. v. ALN Associates, Inc., 770 F.Supp. 1261, 1265 (N.D.Ill. 1991) (“Copyright protection must be perceived in terms of the public purpose behind the granting of the copyright. And the only purpose of granting a copyright to an author of computer software - as it is for the progenitors of other written material and patented inventions - is

21

'to promote Progress’ in that field.”).

Unlike traditional property rights that are established to provide more efficient allocation and use of limited resources, copyrights are granted to provide incentives for authors to create. See Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539, 558 (1985). However, because copyrights confer upon their holder the collateral rights associated with enforcement of actionable causes, the court may impose equitable remedies to insure that copyrights and associated litigation are not used contrary to the established purpose. Anti-competitive uses of copyright, often involving license terms, are one such contrary purpose. See Lasercomb America, Inc. v. Reynolds, 911 F.2d 970, 972 (4th Cir. 1990) (finding misuse in “[plaintff]'s attempt to use its copyright [...] to control competition in an area outside the copyright”); Practice Mgmt. Info. Corp., v. American Medical Ass’n, 121 F.3d 516, 521 (9th Cir. 1997) (finding misuse when plaintiff “[conditioned] the license on [licensee]'s promise not to use competitors' products”); Alcatel USA, Inc. v. DGI Tech., Inc. 166 F.3d 772, 793 (5th Cir. 1999) (finding misuse where plaintiff sought “to obtain patent-like protection of its hardware — its microprocessor card — through the enforcement of its software copyright”).

Copyright misuse complements, but does not supplant, antitrust:

The argument for applying copyright misuse beyond the bounds of antitrust, besides the fact that confined to antitrust the doctrine would be redundant, is that for a copyright owner to use an infringement suit to obtain property protection, here in data, that copyright law clearly does not confer, hoping to force a settlement or even achieve an outright victory over an opponent that may lack the resources or the legal sophistication to resist effectively, is an abuse of process.
Assessment Technologies of WI, LLC v. WIREdata, Inc. 350 F.3d 640, 647 (7th Cir. 2003)

Apple misuses their copyrights because they continue to prosecute (a) invalid claims of infringement against Psystar who lawfully purchased copies of OS X Leopard and is protected under 17 U.S.C. §§ 117 and 109; and (b) invalid DMCA claims based on alleged circumvention of a technological protection measure that was neither effective nor actionable since Psystar did not circumvent for the purpose of infringement, having already purchased copies of OS X Leopard. If

22

Apple mistakenly sold a product to the public under terms that extinguished that part of the bundle of copyrights it now seeks to assert, it should not be able leverage the legal system to shift the burden of their error to another party.

Apple has demonstrated its adroitness at many types of engineering. [redacted] F.3d 1178, 1201 (rejecting plaintiff’s arguments that “would allow any manufacturer of any product to add a single copyrighted sentence or software fragment to its product, wrap the copyrighted material in a trivial 'encryption’ scheme, and thereby gain the right to restrict consumers' rights to use its products in conjunction with competing products.”).

[redacted]

[redacted]

Apple should not be able use copyright law to achieve the intended result of its legal engineering: to limit the hardware choices of customers of OS X Leopard and restrict competitors from providing hardware platforms that run OS X Leopard. Apple failed in its efforts to create an effective technology tie-in between OS X Leopard and Apple-labeled hardware. Apple further failed to craft an effective license limiting the scope of use of OS X to Apple-labeled hardware. The pursuit of copyright infringement and DMCA claims is Apple's last effort to achieve lock-in for its

23

products. This is misuse. Or perhaps Apple didn’t fail, but always intended that the real enforcement mechanism is the weapon of engineered litigation, and not technology or contracts except as they form a part of that litigation scheme. That would be extraordinary misuse.

III. MOOTNESS

A. Apple Has Waived All Claims For Relief On The Non-Copyright Causes of Action Except Claims For Nominative Damages And An Appropriate Injunction.

[redacted]

[redacted]

In ruling on Psystar’s motion to compel, this Court based its decision on Apple’s representation that it would not pursue actual damages in this case.

Psystar also contends that Apple’s profit margin information is relevant for Psystar’s defenses to any claims for actual damages, specifically Apple’s trademark-infringement claims. Psystar states that Apple had not yet made an election to limit its trademark claims to statutory damages. Apple, however, represents that it seeks only injunctive relief for its trademark-infringement claims (Reply Br. 1). As such, actual

24

damages are not at issue for the trademark claims and Psystar’s argument on this point is moot.
Order at 4 (emphasis added). Although the order itself is limited to Apple’s trademark claims, the same reasoning would apply to any claim in which Apple sought actual damages. This Court’s ruling that Apple is not required to present profit-margin data (and Apple’s decision not to present that data) should therefore bar Apple from seeking actual damages on any of its claims.

Setting the copyright claims aside, then, Apple is left with claims for injunctive relief only on its trademark, trade dress, and dilution claims and injunctive relief or nominative damages only on its state-law claims.

B. An Appropriate Injunctions Is Limited To OS X Leopard.

No injunction at all is appropriate in this case because Apple cannot show an irreparable injury. See, e.g., eBay, Inc. v. MercExchange, LLC, 547 U.S. 388, 391 (2006) (requirements for injunction in the copyright context). Apple’s failure to seek a temporary restraining order or preliminary injunction despite the fact that Psystar’s allegedly illegal activities have been ongoing and, presumably, have been harming Apple for almost two years makes it almost impossible to credit Apple’s claim that Psystar’s business is doing Apple irreparable injury. See, e.g., MercExchange, LLC v. eBay, Inc., 500 F. Supp. 2d 556, 573 (E.D. Va. 2007); PGBA v. U.S., 389 F.3d 1219, 1229 (Fed. Cir. 2004) (no error to lower court for “consider[ing] [plaintiff]'s failure to seek a preliminary injunction as a factor weighing against a grant of injunctive relief”).

Even if an injunction were appropriate, however, any such injunction should be limited to OS X Leopard and to Psystar products related to OS X Leopard. Any injunction in this case should not extend either to Apple’s new Snow Leopard product or to Psystar’s new products that incorporate or facilitate the use of Snow Leopard, since these are the subject of separate, pending litigation in the United States District Court for the Southern District of Florida. “When an injunction sought in one federal proceeding would interfere with another federal proceeding, considerations of comity require

25

more than the usual measure of restraint, and such injunctions should be granted only in the most unusual cases.” Bergh v. State of Washington, 535 F.2d 505, 507 (9th Cir. 1976). A Leopard injunction would be easy to craft, and easy for Psystar to agree to, since neither Apple nor Psystar still sells any Leopard products. Indeed, this may moot the request for an injunction altogether.

V. CONCLUSION

For the foregoing reasons, Psystar respectfully prays for summary judgment that Apple take nothing on its copyright infringement and DMCA claims, that briefing and argument be set on the appropriate scope of an injunction limited to OS X Leopard, and that the remaining Lanham Act and state-law claims be dismissed as moot.

Dated: October 8, 2009

Respectfully submitted,

CAMARA & SIBLEY LLP

By: /s/ K.A.D. Camara____________________________
K.A.D. Camara

Attorneys for Defendant / Counterclaimant
Psystar Corporation

26

P3 AES is a particular encryption algorithm in wide use throughout the world. 256-bit refers to the length of the key, which is simply an arbitrary sequence of bits, each of which is a 0 or a 1. By using standard numeric representations of characters in the alphabet, the haiku is converted into this 256bit sequence of 0’s and 1’s that functions as the key.

P4 [redacted]

P5 See, e.g., Reply Brief in Support of Apple Inc.’s Motion to Dismiss at 8, Docket No. 146.

P6 See, e.g., http://osxbook.com/book/bonus/chapter7/tpmdrmmyth/.

P7 Apple’s business model, and dominance in the desktop Unix market, presents that rarity of antitrust law – a technological tying case where the sole purpose of the technological mechanism is to tie two products together. See Response of Carolina, Inc. v. Leasco Response, Inc. 537 F.2d 1307, 1330 (11th Cir. 1976) ("In some instances, two products might be illegally tied through the technological relationship between them. If, for example, the systems software was designed to only be compatible with a specific hardware configuration, and that specific hardware configuration, because it is based on information held only by the seller, is only available from that seller, then a violation might be found."); Condesa Del Mar, Inc. v. White Way Sign & Maintenance Co., 1987 WL 17474 at *2-*3 (N.D. Ill. 1987) ("The Court understands Response of Carolina to teach that it is illegal to design two products to be technologically tied for the sole purpose of tying the products rather than to achieve some technologically beneficial result."); U.S. v. Microsoft Corp., 147 F.3d 935, 949-950 (citing Response of Carolina); see also MDC Data Centers v. I.B.M., 342 F. Supp. 502, 504 (E.D. Pa. 1972) ("For anti-trust purposes, supplying an inoperable product which becomes useful only upon acceptance of another product or service from the same seller can amount to an unlawful tie-in.").


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