Psystar Thumbs Apple, Rolls Out New Mac Clone

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PC clone maker Psystar may be in legal hot water with Apple, but that hasn't stopped the company from releasing yet another unauthorized Mac clone. The company's new Open(3) mini tower PC ships with Mac OS X pre-installed, which is exactly what lead to its ongoing court battle with Apple over licensing and copyright issues.

Psystar found itself squarely in Apple's legal line of fire after it began selling computers with Mac OS X pre-installed, but without first obtaining permission from the Cupertino-based company to offer PCs with the operating system. Apple's licensing does not allow for installing Mac OS X on non-Apple hardware.

Apple claimed that Psystar is infringing on its Mac OS X copyright, and Psystar countered that Apple was violating anti-trust laws. The court tossed out Psystar's anti-trust claims, so the company is now pursuing a copyright abuse claim.

The two companies aren't scheduled to appear in court until November, so Psystar still has a few months to try to sell more of its Mac clones, and Apple's legal team has more time to include the company's newest computer in its case.

Psystar is hoping the court will rule in its favor, but the odds may be against the company. "Psystar is unlikely to win the right to install OS X on its Open Computers, but this lawsuit is going to take a long time," one attorney said.

A long legal battle with Apple will likely cause more harm that good for Psystar, and could drive the company out of business. If so, Psystar's new Open(3) Mac clone could be a collector's item by next year.

[Thanks to Pocket-lint for the heads up.]

Comments

FlipFriddle

Has anyone ever used one of these machines?

B9robot

If you think a piece of junk is a collectors item and would waste your money on such a thing.

geoduck

I haven’t heard of Psystar selling very many systems, I don’t think I’ve actually talked to anyone that has even seen one. Yet Psystar is pouring cash into legal fees and product development. They also appear to have been untouched by the economic downturn of the last few months.

Where is their money coming from?!?

Andyda

More and more it appears that Pystar may have a deep pockets funding source. It will be interesting to find out where all their money for lawyers and such are coming from.

vasic

Keep in mind, Apple’s suit is against 10 John Does for bankrolling Psystar infringing operations.

If Apple is successful, we’ll find out who is behind PsyStar’s deep pockets. Anyone venture a guess? MS perhaps?

geoduck

I don’t think it’s MS. IMO they have as much to lose if the EULA is overturned or even weakened significantly. (They’ve already been found guilty of behavior similar to what Apple is accused of.) I’d bet on a manufacturer. Dell is one name that has come up regularly. As I understand it they have <unofficially> expressed interest in building Mac Clones and because they are not doing well right now, they could be desperate enough to try something like this.

Dean Lewis

Has anyone ever used one of these machines?

MacWorld ran a piece on setting one up and starting with it back in May, 2008:

http://www.macworld.com/article/133323/2008/05/psystar.html

Tiger

We have to assume that Motions for Discovery have already inquired about the principals involved in the company, including its financing. It sure is a risky move, because when it becomes public and if they lose, this person (or persons) quickly becomes untouchable in many IT circles. Good luck finding jobs. I hope it doesn’t drag out forever. Maybe the judge will call the parties in and make a presumptory ruling that this is indeed a violation and tantamount to nothing more than stealing.

Nemo

Pardon me.  But what Psystar is alleging in its counterclaims is nothing like what the U.S. Government alleged and proved against Microsoft.  The Government’s case alleged antitrust and unfair competition claims.  The Government did not allege that Microsoft misused its copyrights in Windows.  If you recall, Judge Alsup rejected Psystar’s antitrust and unfair competition claims as having fatal defects that Psystar was either unable or unwilling to cure, so Psystar instead asserted the little used misuse of copyright claim, basing its argument on what I think is the highly dubious idea that, by using copyright to restrict OS X to its computers, Apple is doing something that the Copyright Act (17 U.S.C. ?? 101 et seq.) does not permit it to do.  The novel idea that you can’t use copyright to restrict an expression, which is in this case is OS X, to a particular tangible medium of expression, which is this case is the hard drive and memory of an Apple-labeled computer, was not present in the United States v. Microsoft.

fo

Nemo… impressive!

Intruder

That is why Nemo is, I believe, a lawyer. The rest of us? Not so much.

FlipFriddle

Hehe. Not so much indeed. Thanks for the link Dean Lewis.

geoduck

I was thinking about MS tying IE to Windows. I see that as vaguely analogous to Apple tying OS-X to Mac computers, at least in the minds of Psystsr.

But IANAL and will defer to Nemo who appears to actually know something about the law.

Nemo

Dear Geoduck:  You are right.  It is analogous.  Since Judge Alsup denied Psystar’s tying claim pursuant to antitrust law, Psystar is asserting essentially the same idea but not as an anticompetitive tying.  Instead, as I explained supra, Psystar has recast the same idea but by alleging that Apple’s use of copyright to restrict OS X to its Apple-labeled hardware exceeds the rights granted to a copyright holder pursuant to the Copyright Act (Act). 

This isn’t fooling Judge Alsup.  He is a very able Judge and sees exactly what Psystar is doing.  I speculate that he is permitting Psystar’s allegation of copyright misuse and should permit it, because Psystar presents a justiciable question of law and, perhaps, a case of first impression with its specific allegation of copyright misuse.  I could not in a quick search find any support in the case law for Psystar’s specific allegation of copyright misuse, but under notice pleading, Psystar has met the very low requirements for stating a claim.  While I think that Psystar’s claim of copyright misuse has no merit, Judge Alsup will wait until the parties have develop a full factual record and presented their best legal arguments before he decides whether Psystar is correct in arguing that Apple can’t use the Act to restrict its operating system, OS X, to its Apple-labeled hardware or whether Apple is correct in arguing that the Act grants it the right to restrict copies and derivatives of OS X to its Apple-labeled hardware and/or to any other tangible medium of expression.  By not prematurely dismiss Psystar’s case and waiting until the case is ripe for decision, Judge Alsup’s ruling, whatever it is, is more likely to survive review by the United States Court of Appeals for the Ninth Circuit. 

This is exciting law.  If Judge Alsup were to rule for Psystar, it could call into question every instance where copyright is used to restrict an expression to a tangible medium, because such a restriction would be copyright misuse.  Thus, a novelist could not restrict his novel to, for example, Random House’s books; Sony or Nintendo restriction of their respective operating systems to their game consoles might be unenforceable.  Could a movie studio restrict its movies to a particular publisher?  Or could a third party, by paying the same royalty as the studio’s chosen publisher, make and sell copies of the movies, and thereby destroy the studio’s chosen business model?  In effect, a ruling for Psystar might very well eliminate the use of copyright to enter into an exclusive arrangement to restrict a copyrighted work to a particular designated medium of expression.  That would limit, if not eliminate, the ability of a copyright holder to negotiate an exclusive arrangement for his/its copyrighted work, and that would dramatically reduce the market value of copyright, even where there is no, as is the case in Apple v. Psystar, allegation of the anticompetitive effect of such an exclusive restriction of a copyrighted work to a labeled, i.e., trademarked, tangible medium of expression.

daemon

This is exciting law.  If Judge Alsup were to rule for Psystar, it could call into question every instance where copyright is used to restrict an expression to a tangible medium, because such a restriction would be copyright misuse.  Thus, a novelist could not restrict his novel to, for example, Random House?s books; Sony or Nintendo restriction of their respective operating systems to their game consoles might be unenforceable.  Could a movie studio restrict its movies to a particular publisher?  Or could a third party, by paying the same royalty as the studio?s chosen publisher, make and sell copies of the movies, and thereby destroy the studio?s chosen business model?  In effect, a ruling for Psystar might very well eliminate the use of copyright to enter into an exclusive arrangement to restrict a copyrighted work to a particular designated medium of expression.  That would limit, if not eliminate, the ability of a copyright holder to negotiate an exclusive arrangement for his/its copyrighted work, and that would dramatically reduce the market value of copyright, even where there is no, as is the case in Apple v. Psystar, allegation of the anticompetitive effect of such an exclusive restriction of a copyrighted work to a labeled, i.e., trademarked, tangible medium of expression.

Wow Nemo, no wonder you think it has no merit. This is an example of a slippery slope arguement that just presents the most extreme outcome imaginable. I don’t suppose you could come with an arguement against Psystar’s case that isn’t hysterical?

I disagree with you Nemo, I view the entire idea of only being able to use Apple’s OS on it’s hardware similar to a movie company restricting you to only using their brand’s players to play their movies.

Nemo

Dear Daemon:  Using copyright to restrict a copyrighted expression to a designated instance of a tangible medium is a right of a copyright holder that is as old as copyright itself.  Until now, the only restrictions that we permitted on that right were found in antitrust law or in laws prohibiting obscene speech.  Other than that, using copyright to restrict an expression to a tangible medium is a venerable instance of the rights and interests that belong to the holder of a copyright.  Since the limitations on that right arising from antitrust law and constitutional obscenity laws clearly are not applicable, Psystar must show why this particular instance, restricting OS X to Apple-labeled hardware, of that general and venerable right to restrict of copyrighted work to a designated tangible medium constitutes misuse and, therefore, should not apply to Apple’s copyright in OS X, as it applies to all other copyrighted works.  I don’t think that Psystar can do it.  I don’t think that it has much of a chance of doing it, but we shall see.

As for your example, supra, it would be a violation of antitrust law but is clearly different from what Apple is doing by restricting OS X to its Apple-labeled hardware.  Some of the seminal cases under the Sherman and Clayton antitrust acts came out of the movie industry, where studios tried to use copyright in ways that diminished competition in markets for related equipment.  Studios would also used copyrighted to restrict movies to their own movie theaters.  The courts struck down both of those acts on antitrust grounds. 

What distinguishes this from Apple’s restriction on OS X is that the studios’ actions clearly hindered and often eliminated competition in related markets, while Apple’s restriction have no effect on competition in any relevant market.  Psystar couldn’t show that Apple’s restrictions on OS X, with just 10% of the domestic market and around 3% of the total world market, has any even appreciable, much less significant, affect on competition in either the markets for computers or for operating systems.  Psystar tried to do it by saying that OS X dominated some artificial and utterly irrelevant market for Apple-capable hardware.  Judge Alsup had only to ask two questions to put paid to that nonsense.  Are the Windows and Linux OSs and the computers that they run on functionally equivalent to Macs running OS X?  Yes, they clearly are. Customers use the computers, Macs and non-Macs, interchangeably for the same purposes.  And even Psystar sells the same computers with Windows, Linux, or OS X in competition with each other.  Are customers informed about the restrictions on OS X before they can’t get their money back by simply returning the Mac or shrink-wrapped box of OS X?  Yes, they clearly are so informed.  Thus, the market consists of all computers that can run either Windows, Linux, and OS X, and Apple’s share of that market is far too small to meet the requirement established by the U.S. Supreme Court for tying claim that can have anticompetitive effect and, thus, override copyright.  Trying to prove the other elements of a tying claim would also, I think, have presented fatal problems for Psystar.

Without a cognizable antitrust claim, Psystar is left with showing why Apple’s exercise of one the most venerable rights of a copyright holder constitutes misuse.  In other words, the law says that, since Apple is informing you, the customer, of its restrictions and since Apple’s approximately 10% of the domestic market isn’t enough to have an anticompetitive effect, you can either accept Apple’s restrictions pursuant to the exercise of its copyright or buy Windows or Linux, or, if you’re Psystar, demonstrate why restricting a copyrighted work to a trademarked medium is suddenly misuse.

As for the possible implications of a ruling in Psystar’s favor.  They would, of course, depend on how Judge Alsup ruled.  If he found a way to limit the scope of a holding that Apple misused its copyright in OS X to the facts of the case.  The ruling could be very narrow and limited in its scope.  However, if Judge Alsup accepts what seems to be Psystar’s current argument, which seems to be that no copyright holder can restrict a copyrighted work to a designated medium, his ruling would have the sweeping and revolutionary consequences that I outlined in my earlier post.  I don’t yet see anything in the record that would allow Judge Alsup to produce a sui generis holding, much less rule in Psystar’s favor.  But these are early days and the parties are just beginning to build the record of facts to which Judge Alsup will apply the law to rule for or against the parties on their respective claims and defenses.

Tik Tok

Nemo offers some pretty well-informed stuff here. It leads me to speculate, since, as a lawyer myself, I know it would take a lot of work to come up with the analysis Nemo did. Nemo, of course, is Latin for “no one” or “no name”. Ulysses used it to trick the stupid Cyclops into thinking that Ulysses wasn’t there, and then our hero did Old One-Eye in.
Is our modern Nemo really one of Apple’s counsel?  I wouldn’t be surprised. But, as I said at the outset, I am just speculating.
Either way, it’s very nice to have Nemo’s erudite contribution to this discussion.

cb50dc

If Apple is successful, we?ll find out who is behind PsyStar?s deep pockets. Anyone venture a guess? MS perhaps?

Maybe AIG wink

Nemo

Dear Tik Tok:  I am flattered by your comments, but I am not one of Apple’s lawyers; I do not represent Apple; I don’t work with Apple’s lawyer, nor do I have any substantial financial interest in Apple that would influence my opinion.  My interest in Apple v. Psystar is purely academic.  However, I am considering filing an amicus brief on certain issues of law that are present in the case.

Lee Dronick

If Apple is successful, we?ll find out who is behind PsyStar?s deep pockets. Anyone venture a guess? MS perhaps?

I doubt that it is MicroSoft, I am thinking that it is one of the PC manufacturers.

Tik Tok

Nemo:  So much for my speculation. But I was right, at least, that the depth of your analyses of the legal issues was not just off the top of your head, but the product of some hard work, research and careful analysis.

If you do file that amicus brief, I guess we’ll all be able to learn who the Ulysses is behind THIS Nemo. Best of luck.

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