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Apple Asks for Permanent Injunction Against Psystar - Updated 2Xs
Tuesday, November 24 2009 @ 11:12 AM EST

Apple has filed a motion asking for a permanent injunction against Psystar, statutory damages, and attorneys' fees and costs. Unless Psystar is permanently enjoined, Apple says, it won't stop. And by stop, Apple means Snow Leopard too. It plans to file a motion of transfer in Florida to bring that matter to California. It wants the injunction to cover Snow Leopard too.

For Psystar, this isn't the fun part. Apple's expert calculates [PDF] statutory damages from copyright infringement at "between $1500 and $300,000 and the statutory damages to Apple as a result of Psystar’s violations of the DMCA are between $449,500 and $4,495,000".

As you can see, Apple isn't interested in bifurcating the infringement of Leopard and Snow Leopard. It wants Psystar's infringement shut down, asking for the following relief, page 1 of the Memorandum:

Unless Psystar is permanently enjoined, it will not stop its unlawful conduct – conduct that is causing irreparable harm to Apple’s business, brand and goodwill. Apple is entitled to a permanent injunction enjoining Psystar from: (1) directly or contributorily infringing Apple’s copyrights in Mac OS X; (2) circumventing any of Apple’s technological protection measure in Mac OS X, including by using circumvention devices that include or are capable of generating Apple’s decryption key; (3) possessing circumvention devices that have been used against Apple’s technological protection measures; and (4) trafficking in circumvention devices containing or capable of generating Apple’s key, or any technology, product, service, device, component or part for use in circumventing the technological protection measures in Mac OS X.

Apple also seeks statutory damages under the Copyright Act and the DMCA and reasonable attorneys’ fees and costs as the prevailing party. The evidence of infringement is both undisputed and overwhelming, and Apple is entitled to the maximum statutory damages available. Nevertheless, Apple seeks only a portion of such damages in an effort to reach a swift resolution of these issues.

Money damages alone could never compensate for the irreparable injury that Apple has suffered. A failure to enjoin Psystar from continuing its unlawful activities would constitute an involuntary license of Apple’s immensely valuable intellectual property and encourage others to follow Psystar’s pattern of deliberate disregard of well-established law. Accordingly, this Court should grant a permanent injunction of a scope that will unequivocally end Psystar’s unlawful conduct.

Here are all the documents:


11/23/2009 - 232 - AFFIDAVIT re 231 Notice (Other), Notice (Other) DECLARATION OF JOHN P.J. KELLY IN SUPPORT OF APPLE INC.'S MOTION FOR PERMANENT INJUNCTION by Apple Inc.. (Gilliland, James) (Filed on 11/23/2009) (Entered: 11/23/2009)

11/23/2009 - 233 - AFFIDAVIT re 231 Notice (Other), Notice (Other) DECLARATION OF MATTHEW R. LYNDE IN SUPPORT OF APPLE INC.'S MOTION FOR PERMANENT INJUNCTION by Apple Inc.. (Attachments: # 1 Exhibit A TO DECLARATION OF MATTHEW R. LYNDE IN SUPPORT OF APPLE INC.'S MOTION FOR PERMANENT INJUNCTION)(Gilliland, James) (Filed on 11/23/2009) (Entered: 11/23/2009)

11/23/2009 - 234 - AFFIDAVIT re 231 Notice (Other), Notice (Other) DECLARATION OF CAROL A. SCOTT IN SUPPORT OF APPLE INC.'S MOTION FOR PERMANENT INJUNCTION by Apple Inc.. (Boroumand Smith, Mehrnaz) (Filed on 11/23/2009) (Entered: 11/23/2009)

11/23/2009 - 235 - MOTION for Permanent Injunction Statutory Damages and Reasonable Attorneys' Fees and Costs filed by Apple Inc.. Motion Hearing set for 12/14/2009 08:00 AM in Courtroom 9, 19th Floor, San Francisco. (Attachments: # 1 Affidavit Declaration of Philip Schiller, # 2 Proposed Order)(Gilliland, James) (Filed on 11/23/2009) (Entered: 11/23/2009)

Here's the opening paragraph of Apple's Memorandum in Support [PDF] of its motion:
Psystar Corporation (“Psystar”) has built its business on infringing Apple Inc.’s (“Apple”) copyrights and trademarks, free-riding on Apple’s research and development efforts, and trading on Apple’s hard-earned reputation for high quality, innovative and easy-to-use computers. Psystar’s appropriation of Apple’s intellectual property and goodwill has been systematic and brazen, from the name of Psystar’s “OpenMac” computers to its deliberate pirating of Apple’s Mac OS X. Psystar even seeks to profit from Apple’s efforts to protect its rights, extolling this litigation as Psystar’s “opportunity to gain market share,” in a pitch to venture capitalists.
Would you like to see how Psystar pitched to VC's? A footnote directs us to the Declaration of Megan Chung [PDF], and attached to it are some exhibits [PDF]. Take a look at the first exhibit, which Chung tells the court is a presentation Psytar gave to a number of venture capital firms, and note on page 7 this paragraph:
The on-going litigation will insulate Psystar from competing with other PC manufacturers in the OS X arena
  • The anti-competitive nature of Apple's EULA make it an illegal contract.
  • Once the litigation is over that contract will become invalid, opening Mac OS to other OEMs
  • This presents us with a unique window of opportunity to gain market share and achieve brand recognition before competitors can even enter the market.
Of course, the court upheld the EULA. It was not declared invalid. But look at the pitch. I understand it to mean that they wanted to get sued, so others would be afraid to do what Psystar was doing until after the trial, and meanwhile the publicity would give Psystar brand recognition and a head start. Indeed the Summary page at the end states it baldly: "Thanks to ongoing litigation and current market conditions Psystar has a unique opportunity." Unique is too small a word for this, I think. Litigation as business plan. So now we know why it seemed to want to get sued. They thought it was a market opportunity and a way to get VC money.

Those of you who imagined this was about freedom for the code, hardy har, take a look at page 18, called "Plan of Action". The plan was simple, to use Apple's code to "compete directly against Apple." And what was the actual goal? Not freedom for Apple's code. I believe I'd call it unjust gains at Apple's expense. The brochure projected that Psystar's profit by 2011 would be in the millions, $47,465,719 alone from a mobile line they wanted funding to be able to produce. They figured they'd hold a projected 7% share of all PC sales by 2011. That is how one can measure the projected loss to Apple. If Psystar wanted Apple to fund its business, it should have asked.

Page 19 says Psystar also planned to target students and educators, no less. Great lessons to be learned from Psystar. No doubt about that. The Psystar lesson would have been: Don't bother making money the old-fashioned way. There are big bucks to be made by taking other people's code even if they don't want you to. Hey, wasn't that the SCO fantasy too, now that we think of it? Darl and the gang thought there was big money, billions, to be made from lassoing Linux and making victims pay for a license that violated the terms of the license they already had received with the code, the GPL. And now we see Psystar dreamed of money from infringing Apple's code. Has the uglier part of the VC world decided that software is a sure thing, easy money?

The next exhibit in that collection, Exhibit 3, is part of the transcript of the deposition of the noble Rodolfo Pedraza, videotaped on August 26, 2009, where he tells the court what he thought of Apple's EULA when he learned there was one, after, or so he claims, he began selling. We have a comments policy here, but I'll violate it this one time, because there is no other way to tell you what he said. He thought the EULA was "bullshit". I suspect he may still feel that way, but at least now he knows that the court doesn't share his viewpoint. Reality bites. And it will bite him hard now.

And after that you find out from another transcript which is the next exhibit that Apple does indeed plan to file a motion for transfer, to bring the Florida case to California. "That would be due shortly before Thanksgiving," James Gilliland, Apple's lead attorney, tells the court on page 37 of the PDF. I notice that some of the Psystar ads in the next exhibit, the ones on page 42, 44, and 45, don't designate Leopard. It just says OS X, which presumably means any version.

You find out precisely what Psytar was doing to Mac OS X by reading the affidavit of John Kelly [PDF], where he explains the five different copies we read about earlier. I know you showed interest in that detail, so here it is in greater detail. There are some tables in the document itself you can refer to. The Kelly explanation goes like this:

5. As can be seen from Table 2 above, Psystar has copied and installed at least five (5) different versions or builds of Mac OS X onto its computers’ hard drives between May, 2008 and August, 2009: (i) version 10.5.2 (Computer A); (ii) version 10.5.4 (Computer B); (iii) version 10.5.5 (Computer C); (iv) version 10.5.6, build 9G55 (Computers D-H); and (v) version 10.5.6, build 9G66 (Computer I). I have been informed that Apple first released version 10.5.2 on February 11, 2008, version 10.5.4 on June 30, 2008, version 10.5.5 on September 15, 2008, and version 10.5.6 on December 15, 2008. As can be discerned from this data, Psystar repeatedly created modified versions of Mac OS X and shipped them to customers shortly after Apple released each new version of Mac OS X.

6. Following the release of Apple’s Mac OS X version 10.6 Snow Leopard (“Snow Leopard”), I examined a Psystar computer installed with Snow Leopard. I also examined Psystar’s newest product, called Rebel EFI, which is software that Psystar distributes to enable third parties to run Snow Leopard on non-Apple computers even if the computers were not purchased from Psystar. In both instances, I found that to force Snow Leopard to run on nonApple computers, Psystar does not use the bootloader in Mac OS X. Instead, Psystar substitutes its own bootloader. (A bootloader is the initial set of code used to start the operation of Mac OS X. Further details regarding bootloaders are set forth at paragraphs 16-17 of my October 8 Declaration.) And, as with the circumvention software used by Psystar to run Mac OS X version 10.5 Leopard on Psystar computers, the circumvention software used by Psystar to run Snow Leopard (or enable others to do so) generates Apple’s decryption key and uses it to access the encrypted files in Snow Leopard.

7. In sum, Psystar takes the following steps to enable Mac OS X to run on non-Apple hardware: (a) Psystar uses Apple’s decryption key to circumvent Apple’s technological protection measures and gain access to the encrypted files in Mac OS X; and (b) Psystar modifies Mac OS X by, at a minimum, using a different bootloader. Psystar took both of these steps with respect to every Psystar computer that I inspected, whether that computer was running Leopard or Snow Leopard. In my opinion, Psystar must take both of those steps to enable any retail DVD version of Mac OS X Leopard or Snow Leopard to run on non-Apple hardware.

8. The key used by Apple to decrypt the encrypted files in Mac OS X version 10.6 Snow Leopard is the same key used by Apple to protect the encrypted files within Mac OS X version 10.5 Leopard and is stored in the hardware of a genuine Apple computer. Because of the importance of compatibility between new versions of Mac OS X and existing Apple hardware, it is not surprising that Apple uses the same key. If Apple had required use of a different hardwarestored key to decrypt and access the encrypted files in Snow Leopard, owners of existing Apple computers with Intel processors would have had to purchase new computers or modify their existing hardware in order to upgrade to Snow Leopard. Apple has never released a version of Snow Leopard that runs on anything other than an Intel processor.

Who, you might ask, would invest in something like this? There seems to be a level of interest in litigation investing. A relative of mine was talked into investing in tobacco litigation, until I found out about it. Anyone who tells you litigation is *ever* a sure thing, is either deluded or hustling you. Lawyers who are honest never, ever tell you such a thing. Speaking of which, did you notice this story, $100M Suit Claims Ex-Firm Leader Peddled Phony Investments in Sex Scandal Case?
Fort Lauderdale, Fla., law firm leader Scott Rothstein would piggyback on actual lawsuits, including one tawdry case his firm was handling, to solicit investors in an alleged Ponzi scheme, according to a lawsuit by investors claiming more than $100 million in losses.
It seems there is more than one way to make a buck, these days, from litigation investors.

And finally, to those who are inclined to think Apple is just a big, whining control freak, another expert for Apple, Carol Scott, tells the court [PDF] about some surveys she did, and the results may surprise you and help you to understand what the problem is with Psystar's business plan:

3. In preparation for my testimony in this case, between July and August 2009, I conducted three surveys of approximately 300 respondents each in order to determine, among other things, the likelihood of confusion as to the relationship between Psystar and Apple. Based on a survey of consumers who viewed Psystar’s website, I concluded that consumers are highly likely to be confused and wrongly believe that there must be some relationship between Psystar and Apple. The survey indicated, among other things, that (1) consumers are likely to believe that Psystar received permission from Apple to offer Mac OS X® on Psystar computers; (2) consumers who experience problems when using Psystar computers are likely to believe they are entitled to technical service and support from Apple; and (3) to the extent that consumers experience problems with Psystar computers, they are likely to blame those problems on Apple regardless of the true source of the problems.

4. In one survey, I tested whether consumers would blame problems with Psystar computers running Mac OS X on Psystar or Apple. This survey asked respondents to imagine that they had purchased a Psystar computer and experienced the following four types of computer problems: (1) some of the software programs designed for Mac OS X would not work; (2) the computer froze or crashed often; (3) the computer ran very slowly; and (4) the computer would not turn on. For each of these problems, respondents were asked whether they thought the problem was due to Psystar’s hardware, Mac OS X or both. For the first three problems, a majority of the respondents blamed either Mac OS X, or both Mac OS X and the Psystar hardware. For the fourth problem, where the computer simply would not turn on, 53.1% of consumers blamed Psystar and not Mac OS X. Nonetheless, 28.4% of the respondents thought that the problem resulted from both Psystar hardware and Mac OS X.

5. Apple has established one of the world’s most famous brands through substantial and consistent brand-building activities that have been studied in university classrooms, including mine, as a textbook example of how to create a strong reputation that resonates with customers. Apple has built a reputation for the highest level of customer satisfaction, innovative and high quality products, and excellent customer service and support. As shown by my study, problems with Psystar computers likely will be associated with Mac OS X and Apple. Technical problems with Psystar computers therefore will undermine the reputations of both Apple and its products and, as a result, have an adverse effect on Apple’s brand and goodwill. For example, Apple produced records of telephone calls and written requests consumers made to Apple’s customer support group, AppleCare®, regarding problems with Psystar computers and/or Mac OS X on those computers. Those inquiries to AppleCare and the results from my study confirm the harm that problems with Psystar computers have caused and will likely cause Apple's brand.

6. From my review of the deposition testimony of Rodolfo Pedraza, documents produced by Psystar, and the Psystar Website, I understand that Psystar relies heavily on the use of Apple's trademarks and trade names in its advertising. To the extent that consumers viewing these ads, like the consumers in my surveys, recognize and associate these trademarks and trade names with Apple, then these consumers may also believe that Apple has sponsored or gives Psystar permission to sell Apple products. It is therefore my opinion that Apple's brand image and corporate reputation for reliable, high quality products will be harmed should consumers be unhappy with Psystar's computers and other products.

Do you see now why Apple cared?

Update: Docket number 230, in the earliest version of this article was a clerk's error and so has been removed. PACER says this:

PACER now shows this for docket 230: "11/23/2009 - 230 - *** FILED IN ERROR BY COURT STAFF. PLEASE DISREGARD. ***(whalc1, COURT STAFF) (Filed on 11/23/2009) Modified on 11/24/2009 (whalc1, COURT STAFF). (Entered: 11/23/2009)"
Update 2: Apple has now filed in Florida a summary judgment motion, seeking dismissal, or in the alternative that the case be consolidated with the California case, The MacObserver reports:
In its filing with Judge Hoeveler in U.S. District Court in southern Florida, Apple requested that Psystar's case be dismissed, or at least transfered to Judge William Alsup's court because the cases are essentially identical.

"This case is a transparent attempt by Psystar Corporation to re-litigate the same issues that Psystar and Apple have been contesting... for almost a year and a half," Apple said in its filing. "This Case is the inseparable twin of the California Action, as the legal claims and issues, the technology, the parties, and most of the facts are virtually identical."

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