Apple's lawsuit against Psystar examined

So we just got our hands on the complaint Apple filed against Psystar for building off-label Mac clones, and as expected, Steve and friends aren't pulling any punches -- in addition to the eight total claims, request for a permanent injunction, and money damages, Apple wants a recall of every Psystar machine ever sold. That's harsh, but it's not like Apple to take this lightly. Like we've been saying all along, the suit is more about copyright infringement than EULA violations, since Psystar was distributing a modified version of Apple's copyrighted code outside the terms of the EULA. Grab the complaint here [PDF], and then head after the break for a quick breakdown of what Apple says Psystar is liable for.

PS. - Somewhat charmingly, we're quoted in the factual allegations section as calling the Psystar machine we reviewed "crazy loud" -- aww, you shouldn't have, guys. Maybe you want to throw in a citation next time, though? Just a thought.

• Copyright infringement: According to Apple, Psystar modified and redistributed OS X without a license, so straight copyright law applies. This is probably a winning argument -- even if the EULA (which forbids modification and redistribution) is held invalid, redistributing a modified copyrighted work is a big no-no.
  
• Contributory and induced copyright infringement: As we pointed out a while back, by building a business model around the knowing copyright infringement of its customers, Psystar is probably liable for contributory copyright infringement -- this is the same principle that MGM v. Grokster was decided upon back in 2005.
• Breach of contract: This is the EULA violation claim. Contrary to what you may have read elsewhere, EULAs in general have been tested in courts many times and have been held enforceable in several states, including Florida, where Psystar is located. In addition, EULAs are currently valid in the federal Ninth circuit, where Apple's brought suit. It's true that there are some cases holding that EULAs are unenforceable and the Apple's Leopard EULA has never been litigated specifically, but this claim isn't nearly as shaky as it's been made out to be -- it's just not a big money-winner like a copyright claim.
  
• Inducing breach of contract: Apple says Psystar "advised, encouraged, and assisted others" in violating the EULA. Considering that's the heart of Psystar's business, we'd say this one lives and dies with the main EULA claim.
  
• Trademark infringement: Apple has registered trademarks on both "Mac OS" and "Leopard," and it says that Psystar infringed those marks when it advertised that the Open Computer could run "Mac OS Leopard" in a way that made it seem like it was an official product. We're not convinced that this is the strongest claim -- Psystar was basically marketing itself on defiance of Apple, not any kind of official support -- but we can see how a court would buy it, especially since Apple makes a big deal of how Psystar's subpar machines were causing harm to the OS X brand.
  
• Trade dress infringement: This one is pretty interesting, actually -- Apple says that the Mac OS X user interface is well known to consumers and has become associated with Apple to the point where it is protectable trade dress -- and that Psystar infringed on Apple's trade dress rights when it shipped Open Computers that contained OS X. It's around this point where you get the sense that Apple's going for the jugular -- there's no way that any damages Apple gets from Psystar are going to cover the additional cost of litigating a claim like this.
  
• Trademark dilution: Dilution is a special trademark protection reserved for "famous" brands -- Apple undoubtedly qualifies. It's a complicated doctrine, but basically Apple says that by using its trademarks, Psystar caused damage to its brand.
• State unfair competition: Apple says Psystar violated California law by infringing its copyrighted works, specifically the California Business and Professions Code. We're not up on our California law -- any readers want to flesh this out for us? We'd say it's just a failsafe claim to at least get an injunction in case everything else gets thrown out.
  
• Common law unfair competition: This is basically the same as the state unfair competition claim, only based on a different set of doctrines.

That's quite a set of claims -- and it's probably enough to at least get an initial injunction against Psystar while the case heads to court. In the end, though, Apple wants an injunction against the further sale of Psystar boxes in addition to asking for the recall of every Psystar machine sold (which would be fairly unusual if granted), a dizzying array of monetary damages, and its attorney's fees and costs -- which alone would probably bankrupt Psystar. For its part, Psystar has been saying all along that Apple's refusal to allow OS X to run on non-Apple hardware is a violation of antitrust laws and that it's got a "team" of lawyers at the ready, so it should be interesting to see how this all plays out.

[Special thanks to Matt Gavronski of Michael Best & Friedrich in Chicago for his help with this post]

Disclaimer: Nilay's a lawyer and a rockstar, but he's not your lawyer, and none of this is legal advice or analysis.

[TylerM @ Jul 16th 2008 3:59PM]

Isn't there something that Psystar was using as an excuse? Like a monopoly or something that Apple had on its software and that it made it impossible to run Mac software without buying hardware from Apple? Can someone enlighten me?

[MRCUR @ Jul 16th 2008 4:02PM]

"For its part, Psystar has been saying all along that Apple's refusal to allow OS X to run on non-Apple hardware is a violation of antitrust laws and that it's got a "team" of lawyers at the ready, so it should be interesting to see how this all plays out."

[Kaiser-Machead @ Jul 16th 2008 4:05PM]

I read that somewhere as well. Problem is, there IS no actual monopoly, unless there's a vital function in OS X that can't be had in any number of Linux distros and Windows versions. Compound this with the fact that OS X only consumes

[Kaiser-Machead @ Jul 16th 2008 4:26PM]

wow I entered without finishing...


*

[Slizzoff @ Jul 16th 2008 3:55PM]

Damn, steve job never stops working... he has so much on his plate... but it pays off

[Shannin @ Jul 16th 2008 5:10PM]

It sure does, I would kill for a $1 salary!

[Fozzy Bear @ Jul 16th 2008 7:23PM]

ha... but i'd kill for the stock options... you can keep your dollar.

[Snitch @ Jul 17th 2008 12:25AM]

If psystar gets away with this am buying copies of windows XP and i'll change the xp to XP1 and just start reselling them for more money, heck is almost the same thing, i might hire someone to edit the code to bypass the required software key, so it could run on any machine

[r3loaded @ Jul 16th 2008 3:55PM]

I hope Psystar have a good legal team. The antitrust thing is interesting though - whether they can turn it to their advantage remains to be seen.

[Blackstar @ Jul 16th 2008 5:38PM]

Um, put it this way... when Apple legal and the courts are done with them, Psystar won't be able to afford an 'Open Computer'.

[imacmatt09 @ Jul 16th 2008 3:57PM]

"Disclaimer: Nilay's a lawyer and a rockstar, but he's not your lawyer, and none of this is legal advice or analysis."

Too much Guitar Hero Nilay?

Haha just kidding, gotta love your disclaimers.

[SirCrumpet @ Jul 16th 2008 5:00PM]

Not necessarily just guitar hero (though that probably has *something* to do with it). Nilay is actually a guitarist in The Heaven Seventies ( http://h70s.com/ )

Now you know, and knowing is half the battle!

[Ghen @ Jul 17th 2008 7:46AM]

Did not know. Thanks.

[Brian! @ Jul 16th 2008 3:57PM]

Darn. I just ordered a dozen Psystars... what was I thinking?!

[Video Master @ Jul 16th 2008 5:38PM]

Brain I just read your comment below and all I have to say is that you are an IDIOT.

[Russ @ Jul 16th 2008 7:34PM]

Um... oh kay. Right. Split personality, Brian(!)?

[coffee @ Jul 16th 2008 3:58PM]

Psystar absolutely damages the Apple brand by using their OS on non-Apple machines. Apple has a reputation of a great user experience between hardware and software, and has to maintain that reputation by controlling what OSX is installed on.

The copyright infringement is easy. Psystar is done.

[Kaiser-Machead @ Jul 16th 2008 4:02PM]

This reputation stuff aside, I think that it's simply hacking and redistributing this hack for profit that should really kill Psystar. As much as people like to root for the little guy, these people really should've known better. While the sealed genuine copies are officially licensed for the end user, the hacked duplicates preloaded into the machines are clearly not.

[Chris Macdonald @ Jul 16th 2008 4:18PM]

i don't see why coffee is low ranked, he didn't say anything that's not obviously true.. I mean rooting for the little guy is great, but not when the little guy is a criminal.

[justin @ Jul 16th 2008 4:26PM]

That's a bit extreme, don't you think?

I'd like to err on the side of free markets in this instance because there's clearly a void in Apple's lineup of computers for a headless mid-range tower. If Apple won't develop a machine with those specs than someone else out there should be allowed to. I don't think the Apple brand will be less respected because clones are falling apart, it just teaches those who desire quality to purchase quality, thats all.

With that being said...Psystar is about to get sodomized by Apple's legal team.

[coffee @ Jul 16th 2008 4:35PM]

justin,
They could've sold a machine "optimized for OSX", or something to that effect, probably without any action by Apple. When they violate EULA and start playing as an Apple source without license, that's where they crossed the legal line (my opinion).

It doesn't matter if a company manufactures the exact product you want - you can't just take their IP and resell it with that kind of justification. If they don't sell what you want, buy something else, or modify it yourself. When you resell the package commercially, it reflects on the original manufacturer when it ceases to function.

[YesHone @ Jul 16th 2008 4:46PM]

I would say that if anything, Pystar's systems build the Apple brand, as in comparison, the Apple hardware is much higher quality...

[davejay @ Jul 17th 2008 9:41AM]

@ Justin,

The point here is that the decision to offer a headless midrange mac is Apple's to make. Just because there is demand for a product, doesn't give just anyone the right to offer it in violation of IP law.

[lilo @ Jul 16th 2008 6:26PM]

"great user experience between hardware and software" What are you talking about? One-button mouse? What else is there that separates Macs from other computers hardware-wise? Are you really sure that Psystar does not enhance this experience?

[Fozzy Bear @ Jul 16th 2008 7:39PM]

there are always two camps on this:

a) psystar is a bunch of idiots who deserve what's coming for blatant disregard and rampant violation of U.S. copyright law...

and

b) i think they should be allowed to violate whatever law they want because apple doesn't do things exactly the way i think they should...

i'm an 'a' stuck in a world full of 'b's... and i totally get tired of their lack of thought. it's asinine to think that if they were the ones creating the product being infringed upon that they'd be like 'oh yeah, that's cool, anarchy, rock on dude'... idiots.

if apple doesn't make a mid-size tower for you... go buy something else... they don't have to make what you want and you don't have to buy their product...

there is also no 'free-market' argument that applies here... because it already is a free-market... apple sells computers... you buy computers... the government doesn't regulate the business transaction or dictate who can buy and who can sell (i'm not talking about business laws governing the corporation, just the uniform commercial code). that argument is completely irrelevant.

finally, the little guy can sell computers and an OS... but he can't infringe upon the copyrights/trademarks of one companies to the benefit of himself and/or to the detriment of the other company.

it's like hearing a bunch of 12 year olds whine because they can't have their way... it's like stealing and it is still wrong, nut jobs, whether you feel like it should be or not!

CRUSH THEM, APPLE! PROTECT YOUR BRAND!

[krizoitz @ Jul 16th 2008 7:41PM]

@justin

I'd like to err on the side of free markets in this instance because there's clearly a void in Apple's lineup of computers for a headless mid-range tower. If Apple won't develop a machine with those specs than someone else out there should be allowed to.

No one is preventing them from selling headless mid-range towers. You can find those all over in fact. What they aren't (and shouldn't and won't) be allowed to do is to sell a mid range tower with MacOS X. I'd love a cheaper PS3, but just because Sony doesn't make one doesn't give someone else the right to do so. Toyota doesn't sell a hybrid sports car, doesn't mean someone can plop a Toyota Hybrid motor in a sports car and start selling it.

Apple makes a product that is hardware + software. Other people also make products that are hardware + software. Anyone is free to sell that type of product in fact. Or they can just sell hardware. Or just software. Or bananas. But its wrong to take part of someone else product without their permission, pack it in with your own product and sell it. You want to hack your OWN machine to run OS X? Great, more power to ya. But to sell that to people? Nope, sorry, thats a lawsuit (and an easily winnable one at that)

[Keith @ Jul 16th 2008 7:59PM]

The guts of Apple branded computers are nearly identical to the guts of Psystar branded computers. There's nothing magical or technically superior about Apple branded computers.

The only thing this shows is just how over-priced Apple branded computers are and how anti-competitive Apple is for not wanting to face any competition.

Their EULA is a joke. Imagine if the DVD's you bought from Sony had an EULA that said you could only play their DVD's on a Sony DVD player. I don't see this as being any different.

[LarryLarryLarry @ Jul 17th 2008 12:14AM]

" But its wrong to take part of someone else product without their permission, pack it in with your own product and sell it."

Every lemonade stand is a felony crime ring under your legal brilliance. Seriously, coudl you make a more-sweeping statement without having a clue?

I didn't think so.

[KA @ Jul 17th 2008 9:43AM]

Wow... everyone hates everyone...
Congratulations to those people who aren't low ranked.

[Will @ Jul 17th 2008 2:44PM]

To LarryLarryLarry

Well I guess that depends, doesn't it? Did the stand operators make the lemonade directly from fresh lemons, water and sugar? Did they utilize a lemonade mix with artificial sweetener ala crystal light? Probably fine in either of those cases. Now did they buy Minute Maid lemonade and sell it as such? If so, did they purchase it as a reseller? Still.. probably okay.

Now did they buy Minute Maid lemonade, mix it with tap water and a little extra sugar, and sell it as Minute Maid brand lemonade? That might get them shut down.... but maybe they started a whole factory putting this ripped off Minute Maid into their own bottles with the Minute Maid logo on them, but their own crappy kid design? And use crappier material for the bottles creating a worse end user experience? And did they start to sell their "Minute Maid" for half the price of real Minute Maid across the whole country? And claim that they're justified in doing it because Minute Maid is monopolistic by putting its particular mixture of lemon, sweeteners and water only into its own bottles and because there is a market demand for cheap, watered down Minute Maid?

[krizoitz @ Jul 17th 2008 2:49PM]

@ LarryLarryLarry

Every lemonade stand is a felony crime ring under your legal brilliance. Seriously, coudl you make a more-sweeping statement without having a clue?

I didn't think so.

Apparently you can, since you just did. Under your doctrine Sony could copy the xbox OS and sell its own version, Toyota could sell cars using Honda motors, Burger King could start selling McDonald's french fries, and whatever product you make your living selling I could just start selling instead without your permission. What a great idea!

Actually yes lemonade stands COULD be prosecuted and shut down, just because no one does for various reasons (bad press, no significant loss of assets, etc.) doesn't mean its not still technically against the law.

Seriously I hope you haven't actually gone to law school or anything, cause if you have and this is what you learned, you really should demand your money back.

[From My Cube @ Jul 16th 2008 4:01PM]

if Pystar can convince the judge that this is in violation of anti trust laws then nearly all of this will be thrown out...cant wait to see how this one plays out...or pays out

[Fozzy Bear @ Jul 16th 2008 8:25PM]

it's hard to convince a judge that Company A's product should be sold the way Company B wants it sold when Company B has no rights to Company A's product except as an unmodified reseller... which isn't even a right.

[helloUser @ Jul 16th 2008 4:02PM]

I like the one about 'unfair competition'

Reminds me of the time when apple bought a ton of reduced flash chips for their ipods while smaller companys got fucked in the ass. Hypocrites.

[Kaiser-Machead @ Jul 16th 2008 4:07PM]

It would only be hypocrisy if Apple was using those smaller companies' IP to advance itself to their detriment.

[Mikey @ Jul 16th 2008 4:09PM]

Kaiser... so you're saying that it is a hypocrisy then

[Brian! @ Jul 16th 2008 4:10PM]

Apple is NOT a nice company. They do all sorts of horrible corporate things, even the things they love to point fingers at that others do.

I think it is amazing that Apple has created a culture and fan base that becomes more and more extreme. Just the other day I heard a sales guy in an Apple store tell a customer flat outright lies regarding speed, wireless technology, and some other minor details to a perspective customer. He actually said that you won't find built-in webcams in a PC laptop as a selling point.

Of course Apple has to shut down something like this. They have a fan base that will overlook glaring Apple flaws (like cut/paste on the iPhone). What would happen if the average Joe found out he could be an OS X user at a hefty discount in hardware costs... well, that sounds like a problem. Especially in an recession where people are looking to save any dime possible.

[Kaiser-Machead @ Jul 16th 2008 4:13PM]

No. These other companies wouldn't have a similar case just because someone else bought all of the supplies.

[Kaiser-Machead @ Jul 16th 2008 4:15PM]

Brian, if you sold a certain product as a front for a set of another, how would you treat a company that just comes along, takes your product, modify it from one copy and then resell it without permission? Do you just pat them on the back and hand them a generous license?

[Mikey @ Jul 16th 2008 4:30PM]

I think you misunderstood me... Apple uses the IP of other companies all the time to advance Apple to the detriment of the other companies... hence me saying you agree that there is hypocrisy

[Zak @ Jul 16th 2008 4:55PM]

helloUser - You seem to be under the impression that Apple *forced* the chip makers to sell them the chips instead of selling them to smaller retailers. You know, without any conscious choice on the chip maker's part. If you believe that, you are really, really pathetic. What's next, Apple forced people to buy iPods? Apple blackmailed your family? Apple kicked your dog?

Give it up, you're hopeless.

[helloUser @ Jul 16th 2008 5:44PM]

Zak, you stooge, it was all over engadget, read here and inform yourself:

http://www.engadget.com/2005/10/09/samsung-and-apple-being-investigated-by-korean-ftc-for-unfair/

http://www.engadget.com/2005/10/27/creative-ceo-upset-that-apple-created-a-flash-memory-shortage/

There were more stories about that in the link found on those pages, which detailed things more so. I wouldnt expect an apple fanboy (idiot) like yourself yourself to think critically and without bias, therefor im not surprised that your offended by my comments bringing up past hypocritical actions of apple.

You calling me pathetic is rather weak, considering youre incredibly delusional.

[Zak @ Jul 16th 2008 6:03PM]

That's hysterical. You fail at reading the articles you linked, lol.

"He's complaining that Samsung gave Apple a "one-sided deal" that no one else the industry has been able to get"

Where in the article does it say Apple FORCED Samsung to give them that deal? You're insinuating that it was Apple and Apple alone that caused the shortage, and apparently the possibility that Samsung may have had something to do with it is beyond your comprehension. Is that about right?

But sure, let's use your logic and just throw common sense out the window. Let's just assume Samsung wasn't capable of just telling Apple "No." Maybe Apple threatened them at gunpoint, or something. How else do you think Apple could have gotten those chips if Samsung didn't agree to it? Please enlighten us, this should be funny.

And the final quote from that article you linked (oh the irony):

"Boo freaking Hoo. Hate to say it, but business is business and as long as no laws are broken (and we'll leave that issue up to the Korean FTC to decide), there's nothing wrong with a company locking down a strategic resource (in this case, flash memory) in order to keep it out of the hands of the competition."

Does the phrase "hoisted on your own petard" mean anything to you?

[KA @ Jul 17th 2008 9:51AM]

Brian... you'd better have reported that employee... who knows how long it was before Apple found out...

Yes they do lots of nasty things, but they don't train their employees to blatantly lie. If they did, their brand image would be as low as Microsoft's image minus Real's image.

[Scott Beckstead @ Jul 21st 2008 6:20PM]

Yes in a free market, using your superior cash position to corner the market is highly illegal. MORON!

[Scott Beckstead @ Jul 21st 2008 6:28PM]

Brian, moron number two here. What perspective was this customer painted in? your veracity is as questionable as your vocabulary.

[Mikey @ Jul 16th 2008 4:02PM]

Pretty much boilerplate (although the background description is a little long... good padding of the bills by Apple's lawyers).

Should be interesting, the trademark and trade dress claims probably won't amount to much for Apple (trademark because damages are minimal there, and trade dress because the only clear trade dress "infringement" is of the look of the OS itself, but Psystar isn't selling the OS as its own, they are attributing it to Apple).

The copyright and breach of contract claims are the real interesting issues. If it goes to trial (2-3 years from now), and then appeal (another year), this case has the potential to be groundbreaking. *Sigh* too bad it will never get that far.

[CraigJ @ Jul 16th 2008 4:16PM]

Psystar will be bankrupt from legal fees long before that... Which is probably the desired outcome.

[Mikey @ Jul 16th 2008 4:21PM]

Craig... I certain that's the desired outcome. Apple doesn't want this to go to trial either.

[Matthew Donovan @ Jul 16th 2008 4:05PM]

I think that Apple will emerge the clear winner against Psystar. They have great lawyer resources and I think that they will clearly show that Psystar is infringing on copyright. This case will be over very quickly. Psystar claims that they have the right to sell OSX on their hardware. That would be like apple saying that they have the right to put blackberry's operating system on the iphone or Garmin saying that they are able to put Tom Tom GPS software on their hardware. Apple will make a fool/example of Psystar!