Psystar and Apple both file for Summary Judgment in California: An in-depth look at their arguments

Sat, Oct 10, 2009

Legal, News

Earlier this week, both Psystar and Apple filed motions for Summary Judgment with the Court in California.  Summary Judgement, in the simplest of terms, is when a Judge throws out a party’s case (or certain issues in a case) because it lacks any substantive legal evidence in support of its claims.  In order for a case to be dismissed via Summary Judgment, there must also be no “genuine issue as to any material fact” between the parties.

Naturally, to convince a Judge that Summary Judgment is proper course of action, a party must file a motion with the Court stating their case – and that’s exactly what Psystar and Apple submitted to the Court just a few days ago. Two hearings are scheduled for November 12th where Judge Alsup will rule on each parties respective motion.

The ongoing legal battle between Psystar and Apple has been somewhat convoluted, with plenty of motions, countermotions, and filings in opposition of countermotions etc.  That being the case, it might be a good time to pour over both Psystar and Apple’s motions for Summary Judgment and get a grasp on what each side is claiming now that discovery is complete.

Apple’s motion for Summary Judgment

Specifically, Apple’s motion is for “partial summary judgment”, and in a heavily redacted brief totaling over 40 pages, it asserts that Psystar has violated Apple’s copyrights in addition to the Digital Millenium Copyright Act (DMCA).

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.

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.

Apple goes on to point out that Psystar is welcome to compete with Apple, as many other companies do, by developing their own operating system.  Allowing Psystar to simply copy, alter, and distribute OS X on a massive scale, Apple argues, would run afoul to the very copyright laws that “have been central to the success of the software industry.”  Indeed, Apple points out that the entire notion of the copyright code is to encourage investment and innovation, and if companies like Psystar are allowed to come in piggy back on years and years of Apple’s research and development, companies will be left with little incentive to innovate.  According to the brief, the release of OS X in 2001 was the culmination of “hundreds of millions of dollars in research and development expenditures.”

Next, Apple explains that they believe in developing integrated products, and by restricting the use of OS X to Apple hardware, they’re able to ensure that “Mac OS X will operate optimally and provide consumers with the highest quality computing experience and technical support.”  Apple goes on to point out that the integrated product model is by no means unique to Apple, as companies such as RIM, Nintendo, and Sony all use a similar approach with their own products.

Regarding the software license agreement (SLA) that comes with OS X, Apple makes it clear that the software is licensed to the user, and not sold.  Furthermore, the SLA that comes with OS X makes it clear before installation that redistribution and modifications to the software aren’t allowed “except under limited circumstances.”

And now come the redactions.

Apple goes on to mention that in an effort to keep OS X exclusively on Apple hardware, OS X comes with technological prevention measures “that prevent a user from installing Mac OS X on a non-Apple computer.”  Apple points out that Psystar is aware of these security measures, and it then discusses how Psystar knowingly gets around them, but we’re not allowed to read the juicy details as the next few pages are heavily and almost entirely redacted.

Basically, Apple writes that Mac OS X cannot run on Psystar’s hardware unless it’s modified, and that altering OS X, as Psystar does, is in violation of the software license agreement.

Apple writes that it’s entitled to Summary Judgment as it pertains to Psystar violating the DMCA because the fact that Psystar “makes unauthorized copies of Mac OS X, modifies the software to circumvent Apple’s technological protection measures, and then commercially distributes the modified software to the public” isn’t in dispute.

Apple writes that Psystar has never denied any of the above allegations, and has instead, responded with affirmative defenses – which is basically when a party says “Your honor, we did what we’re accused of doing, but we have a valid reason.”

One of Psystar’s affirmative defenses is that infringing upon Apple’s OS X copyrights is excusable because of the “copyright misuse doctrine.”  Specifically, Psystar has attempted to argue that Apple has abused its OS X copyright to the extent that it monopolizes OS X and is in violation of anti-trust laws.  Psystar had initially tried to argue that Apple had a monopoly in the OS X market, a theory which the Court already shot down months ago.  Next, Psystar attempted to argue that Apple had a monopoly in the market for premium computers, another theory which was found to be baseless.  And most recently, Psystar argued that Apple held a monopoly in the market for premium Unix based machines.

Apple responds:

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 23    violation.

It seems blatantly obvious that Psystar is starting out with the conclusion that Apple is in violation of anti-trust laws, and is then working backwards in an attempt to prove it, no matter how irrational and illogical those attempts shape up to be.

Another affirmative defense cited by Psystar is that of the “first sale” doctrine, which allows the owner of a particular copy of a product to sell it freely.  For example, if you buy a copy of FIFA ’09 for your Playstation 3, you’re allowed to sell that copy to anyone you want for however much you want.  Psystar attempts to argue that the same principle applies with OS X, but Apple points out that such an analogy is thoroughly flawed.

First, Apple writes that the first sale doctrine only applies to owners of copyrighted material, and not licensees (which Psystar, and all Mac OS X users are).

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.

Apple then writes,

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.”

… 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 9    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.  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.

[Emphasis added]

A solid point by Apple.  Going back to the FIFA ’09 video game example from above, just because you’re allowed to sell it to a third party doesn’t give you the right to makes copies of the video game and then sell them out on the open market to millions of people.

And lastly, Apple writes that to succeed on its DMCA claim, all it has to prove is that it shrouds OS X with anti-circumvention measures in an effort to protect its copyright, and that Psystar has circumvented those measures “without the authority of the copyright owner.”  Apple writes that it has done so.

Psystar’s motion for Summary Judgment

Now we’ll take a look at Psystar’s motion for Summary Judgment, but since a few of their arguments were already discussed above, the analysis may be a little less in-depth.

Psystar, for its part, moves for Summary Judgment to the extent that it has not violated the DMCA, that its actions constitute fair use, and that “these and all the state-law claims be dismissed as moot because Apple has waived any claim to non-nominal damages…”

First, Psystar argues that it’s not in violation of the DMCA because it owns OS X Leopard, and cites a section of the EULA which states, “You own the media on which the Apple Software is recorded.”

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 tiem that Psystar bought a DVD containing OS X Leopard, Psystar became the owner of a copy of OS X Leopard.

That being the case, Psystar argues, the first sale doctrine of the Copyright code applies, and that it’s therefore allowed to purchase and resell copies of OS X to Psystar customers.  Psystar also argues that section 117 of the Copyright act also comes into play, which 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.

Apple, though, argued in its own brief that such an argument is meritless as the section cited by Psystar only comes into play if the copy at issue is “made only for the owner-user’s internal use” and if that copy is “promptly destroyed when the original copyrighted work is resold”.  Psystar obviously makes its copies of OS X accessible to the public at large, an action which falls outside the purview of section 117.

Psystar then argues, somewhat confusingly, that it’s not in violation of the DMCA because “installing OS X Leopard on Psystar computers and reselling it packaged with those computers is not copyright infringement.”

Next, Psystar argues that OS X Leopard is not licensed to the end user, but rather sold, and it again references the “You own the media on which the Apple Software is recorded” portion from the Leopard EULA.

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.

Whats curious about Psystar’s claim is that we’re looking at Apple’s SLA for Leopard right now and it’s abundantly clear that use of the software is on a license basis only, and it’s also explicitly written that users of OS X “agree not to install, use or run the Apple Software on any non-Apple labeled computer, or to enable others to do so.

Also curious is that Psystar is essentially saying that it found a loophole in Apple’s OS X Leopard license that allows it to do what it does without any legal ramifications.  But it also points out that this loophole was subsequently patched up in the Snow Leopard license agreement, which begs the question as to why Psystar filed a similar lawsuit against Apple in the state of Florida over its perceived “right” to sell copies of OS X Snow Leopard on non-Apple hardware.  It seems a bit contradictory and disingenuous, which if you’ve followed the Psystar/Apple case closely, shouldn’t come as too much of a surprise.

Moving along, Psystar goes on to argue that it’s allowed to show pictures of OS X Leopard in its advertisements, and that using Apple’s trademarks in this case is an example of fair use.  Psystar acknowledges that governing law prohibits the use of similar or identical trademarks to the extent that it causes customer confusion.  Psystar apparently believes that it can get around this as their slogan “disclaims any association with Apple: ‘It’s not a Mac -it’s for everyone.”

It seems, following Psystar’s logic, that one could run a restaurant and erect McDonald’s iconic golden arches and be free from legal action if the slogan of said restaurant was “It’s not McDonalds – it’s better.”

Again, some pretty shoddy and elementary legal reasoning from Psystar’s counsel.

Psystar next argues, once again, that it is entitled to ownership over the copies of OS X Leopard that it purchased from Apple.  Psystar goes into exhaustive detail attempting to explain why the software license agreement in OS X Leopard is not really a license at all, but as Apple pointed out in its own memo, this point of contention is ultimately irrelevant because ownership of OS X doesn’t give Psystar the right to modify its contents and sell it wholesale to the public.  The FIFA ’09 example we mentioned above is an apt analogy – ownership doesn’t include the right to engage in endless copying and selling those copies to the public.

Psystar writes,

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.

What’s interesting is that just a few paragraphs earlier, Psystar was harping on a single sentence from Apple’s licensing agreement (“You own the media..) and then it quickly turns around and attempts to dismiss all other language contained in that agreement that happens to be at odds with its position.

Psystar goes on to argue why its not violating Apple’s copyright, and indeed, its entire argument rests on the assumption that it owns every copy of OS X Leopard it purchases, and that it’s not subject to any terms of Apple’s license agreement.

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 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.

Next, Psystar argues that its business in no way has caused Apple any irrerperable injury.

No injunction at all is appropriate in this case because Apple cannot show an irreparable injury. 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.

And even if an injunction is appropriate, Psystar argues, it should only be applicable to OS X Leopard and not to Snow Leopard as that is the “subject of separate, pending litigation in the United States District Court for the Southern District of Florida.”  How convenient that Psystar brought that lawsuit there a few weeks ago.



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