Psystar files answer to Apple complaint - "M" word used enthusiastically

Summary:Mac clone maker Psystar has filed answers to Apple's complaint.

Mac clone maker Psystar has filed answers to Apple's complaint.

PDF available here.

Thoughts:

On paper, Psystar's case against Apple sounds comprehensive, logical and thorough.

Psystar's lawyers have dug deep to paint a picture that it's not Psystar that's in the wrong but Apple, and that it's Psystar that's been harmed by Apple, not the other way around. Additionally, the lawyers eager to stress that it's not only Psystar that's been harmed, but Apple's own customers (due to high pricing and a lack of choice) and the wider tech industry (in that OEMs have been locked out on the Mac OS ecosystem).

Like I said, on paper the case sounds good (disclaimer: I am not a lawyer) and my admiration for Psystar has gone up several notches.

Highlights from the filing:

Note: All bold emphasis added by me.

On page 2 we see Psystar take a jab at Apple:

PSYSTAR admits that PLAINTIFF launched the Macintosh line of computers in 1984 but otherwise denies the allegation that PLAINTIFF is "[a] pioneer of the personal computer revolution."  On information and belief, PSYSTAR admits that the Macintosh (or "Mac") utilized a mouse, computer icons, and graphical user interface but lacks information or knowledge as to whether said components and functionality were novel and on that basis denies the remainder of the allegation.

Page 5:

PSYSTAR admits that for a period of several hours on one day that PSYSTAR colloquially referred to certain computers by the name of 'OpenMac' but denies that it currently sells any computer referred to by that name; PSYSTAR denies that it sells any computer under any name that runs a modified, unauthorized version of the Leopard operating system.

Page 5 again:

PSYSTAR denies the allegations in the final sentence of paragraph 12 of the Complaint, specifically: that PSYSTAR makes copies of the Leopard software; that PSYSTAR offers downloads of ‘updates’ to the Leopard software from the website www.psystar.com; that PSYSTAR copies any "updates" generated by the PLAINTIFF; and/or that PSYSTAR generates unauthorized, modified versions of software updates from the PLAINTIFF.

Page 5/6 ... "Oh no, we didn't damage your image":

PSYSTAR admits that the PLAINTIFF seeks an injunction against the alleged misappropriation and alleged infringement of the PLAINTIFF’s allegedly proprietary software and alleged intellectual property; PSYSTAR denies that it has misappropriated any such proprietary software or intellectual property.  PSYSTAR denies that its actions have harmed the consuming public, sells a poor product, and/or has advertised and promoted any such product in a manner that falsely and unfairly implied an affiliation with the PLAINTIFF.  PSYSTAR denies that its action have and/or continue to cause harm to the PLAINTIFF; PSYSTAR likewise denies that its actions constitute a misuse of PLAINTIFF’s intellectual property.

Page 6:

PSYSTAR denies that it has engaged in any action that is unfair, unlawful, exploitive, or that otherwise causes consumer confusion and injury nor that any such action has ever existed.

Page 7:

PSYSTAR admits that the PLAINTIFF claims to license the use of the Mac OS for use only on Apple-labeled hardware although PSYSTAR is without information or knowledge as to what this otherwise vague and ambiguous terminology (i.e., Apple-labeled hardware) refers.

Page 7:

PSYSTAR similarly notes that the PLAINTIFF has never denied PSYSTAR the authorization to install, use, or sell the Mac OS software on any non-Apple-labeled hardware until the filing of the present action.

Page 9:

PSYSTAR denies that Max OS, Mac OS X, Mac OS X version 10.5, and Mac OS X Server all constitute "an original work of authorship" "constituting copyrightable subject matter" as those terms are defined by the United States copyright laws and on that basis denies the allegations;

Page 10:

PSYSTAR denies that it has advised, encouraged, and assisted others to breach the License Agreement; PSYSTAR has not advised consumers to acquire Mac OS X software and install, use, and run it on non-Apple-Labeled computers.  PSYSTAR denies that it has unlawfully induced breach of the License Agreement by others.

Page 11:

PSYSTAR denies the allegation that it has engaged in an unauthorized use of any trademark of the PLAINTIFF; PSYSTAR further denies that any action of PSYSTAR has caused deception or confusion or mistake amongst consumers as to the origin, sponsorship, approval, affiliation, connection, or association between the PLAINTIFF and PSYSTAR and on that basis denies the remaining allegations of paragraph 54.

Page 20:

There is no likelihood that any members of the relevant consuming public will be confused with respect to any activity of PSYSTAR and one or more of the trademarks and/or trade dress of the PLAINTIFF.

Page 21:

The use of any trademark of the PLAINTIFF by PSYSTAR is protected by the Fair Use Doctrine and/or the First Amendment including but not limited to parody, non-commercial use, product comparison, and/or non-competing/non-confusing use.

Page 24:

The PLAINTIFF has attempted to leverage the rights granted under any valid copyright to areas outside the exclusive rights granted by the Copyright Act.  The PLAINTIFF has engaged in certain anticompetitive behavior and/or other actions that are in violation of the public policy underlying the federal copyright laws including, but not limited to, a failure to abide by the fair use and first sale doctrines.

Now we get to the meat of the answer, starting partway down page 24:

The PLAINTIFF has further engaged in copyright misuse through the use of an illicit trying provision in its end-user license agreement for the Mac OS X with respect to only utilizing the Mac OS X software on Apple-Labeled Computer Hardware Systems and as is further detailed in PSYSTAR's counterclaims for violations of the Sherman Act, Clayton Act, and Cartwright Act, which are incorporated herein by reference.  By attempting to enforce this illicit tying provision, the PLAINTIFF is attempting to obtain, maintain, and/or enjoy rights not granted by the Copyright Act including, but not limited to, destroying competition in the Mac OS Capable Computer Hardware Systems market, which is wholly unrelated to any valid copyright.

Page 24/25:

The PLAINTIFF has further engaged in copyright misuse by utilizing any valid copyright in the Mac OS to maintain its monopoly in the Apple-Labeled Computer Hardware System market and is further detailed in PSYSTAR's counterclaims for violations of the Sherman Act, Clayton Act, and Cartwright Act, which are incorporated herein by reference.  By attempting to enforce its End User License Agreement as it pertains to any valid copyright, PLAINTIFF aims to maintain the aforementioned monopoly, the PLAINTIFF is attempting to obtain, maintain, and/or enjoy rights not granted by the Copyright Act including, but limited to, maintaining its monopoly in the Apple-Labeled Computer Hardware Systems submarket, which is wholly unrelated to any valid copyright.

Counterclaim begins page 26:

This is an action under Sections 1 and 2 of the Sherman Act, Section 3 of the Clayton Act, Section 16700 of the California Business and Professions Code (the Cartwright Act), Section 17200 of the California Business and Professions Code, and state common law with respect to the unfair and anticompetitive conduct by counterdefendant APPLE (collectively referred to as the "Counterclaim").

Claims for relief, starting page 26:

  • ... seek redress for APPLE’s illegal tying of the Mac OS to Apple-Labeled Computer Hardware Systems ...
  • ... seek redress for APPLE’s attempts to maintain its monopoly and control prices in the Apple-Labeled Computer Hardware Systems submarket and to destroy competition in the Mac OS Capable Computer Hardware Systems market ...
  • ... seek redress for APPLE’s illegal requirements of its customers to exclusively deal with APPLE as it pertains to the Mac OS and Apple-Labeled Computer Hardware Systems ...
  • ... seek redress for APPLE’s unlawful conduct in violation of state law.
  • The Fifth Claim for Relief of this Counterclaim is brought pursuant to California unfair competition law, California Business and Professions Code § 17200 et seq. to seeks redress for APPLE’s unfair and unlawful conduct in violation of state law.

This on page 30 is interesting but I'm mystified as to what it migth mean:

PSYSTAR is informed and believes, and thereon alleges, that there are substantial barriers to entry in the market for operating systems, including the Mac OS market.  It is prohibitively difficult, time-consuming, and expensive to create any operating system much less one that would offer substantially identical functionality, security, stability, and other aspects offered by the Mac OS.  As such, a potential new operating system entrant faces an almost insurmountable barrier to successful entry to the operating system market, in general, but specifically the Mac OS market.

Here is the claim that a Mac is nothing more than the sum of parts made by third-parties;

23. Any number of companies dedicated to manufacturing and sourcing various components used by the aforementioned manufacturers (e.g., hard drives (Western Digital), processors (Intel and AMD), graphics processing cards (NVIDIA)) also exist.

24. PSYSTAR is informed and believes, and thereon alleges, that one or more of these manufacturers of computer hardware systems are capable and desirous of manufacturing computer hardware systems that host, execute, and run the Mac OS.  PSYSTAR is informed and believes, and thereon alleges, that there is no compelling technological reason that any one of the aforementioned computer hardware system manufacturers could not manufacture and sell computer hardware systems capable of hosting, executing, and running the Mac OS.  PSYSTAR, therefore, is informed and believes, and thereon alleges, that these entities constitute a market that PSYSTAR hereinafter refers to as the Mac OS Capable Computer Hardware Systems market.

Page 31, "anyone can make a Mac":

On information and belief, PSYSTAR alleges that there is no technical reason that a third-party could not accumulate and assemble the hardware components in an Apple-Labeled Computer Hardware System such that said system would be capable of running the Mac OS, that is, such that the system would constitute a Mac OS Capable Computer Hardware System.

Page 31, the claim that Apple is anti-competitive:

For the purposes of this Counterclaim, the exclusive line of APPLE hardware systems that support the Mac OS are referred to as Apple-Labeled Computer Hardware Systems.  PSYSTAR is informed and believes, and thereon alleges, that but for the anticompetitive conduct of APPLE as outlined herein, Apple-Labeled Computer Hardware Systems would otherwise be a competing member of the otherwise diverse Mac OC Capable Computer Hardware Systems market.

An the "M" word:

That is, APPLE’s anticompetitive conduct has created a subsidiary market within the Mac OS Capable Computer Hardware Systems market of which APPLE is the only member and wields monopoly power

Page 32:

PSYSTAR is informed and believes, and thereon alleges, that APPLE’s efforts to define the Mac and Mac OS as an environment of its own began no later than 1997 when APPLE released its Think Different advertising campaign. 

Page 33, enter the "I'm a Mac, I'm a PC" ads:

PSYSTAR is informed and believes, and thereon alleges, that APPLE continued to distinguish the Mac OS from the Windows operating system in its Get a Mac campaign, which commenced in 2006 and continues to the present.  Through this campaign, actor Justin Long, in casual dress, introduces himself as a Mac while another actor, John Hodgman, identifies himself as a PC running the Microsoft Windows operating system; the PC character is dressed in formal, stuffy attire. 

Apple pricing coes under scrutiny on page 34:

36. PSYSTAR is informed and believes, and thereon alleges, that marketplace economics likewise support the assertion that the Windows operating environment is not a viable substitute for the Mac OS.  For example, the MacBook is one of the cheapest Macintosh products commercially available that includes the Mac OS and traditional computer components (e.g., a monitor and a keyboard).  A MacBook with a 2.1GHz Intel Core 2 Duo processor, 1GB memory, 120GB hard drive, and combo drive sells for approximately $1,099.00 from the apple.com website.  A similarly configured computer running an operating system other than the Mac OS retails at dell.com for approximately $674.00, which is nearly $500 less than that of its Mac OS and Apple-Labeled Computer Hardware System counterpart.

37. PSYSTAR is informed and believes, and thereon alleges, that a top of the line MacBookPro with 2.5GHz Intel Core 2 Duo processor, 2GB memory, 250GB hard drive, Double-layer SuperDrive, and 512MB NVIDIA GeForce 8600M GT graphics card sells for approximately $2,799.00 from the apple.com website.  A similarly configured computer (albeit with superior hardware components versus that of the MacBookPro) and running an operating system other than the Mac OS retails at dell.com for approximately $2,300.00, which is nearly $500 less than that of its Mac OS and Apple-Labeled Computer Hardware System counterpart.

Page 35 seens Pystar trot out the zealots:

PSYSTAR is informed and believes, and thereon alleges, that APPLE’s customer loyalty is well-established notwithstanding the higher prices of an Apple-Labeled Computer Hardware System versus those of a similarly situated non-APPLE product.  APPLE customers have, in fact, been referred to by Seeking Alpha as "zealots" and "fanboys" in addition to "Mac loyalists."  These customers, accordingly to Seeking Alpha, will "defend the company and its products in any debate going on around them."

Page 36 sees Psystar roll out evidence that suggests that Apple is a monopoly based on the fact that Apple customers would pay whatever Apple asked for products:

44. PSYSTAR is further informed and believes, and thereon alleges, that a 'small but significant non-transitory increase in price' (SSNIP), including one of at least five percent in the Mac OS, will not result in a change in demand for the Mac OS.  PSYSTAR is informed and believes, and thereon alleges, that such a SSNIP would not likely result in consumers of the Mac OS or Apple-Labeled Computer Hardware Systems or potential purchasers of the Mac OS or Apple-Labeled Computer Hardware Systems electing to purchase another operating system, such as the Windows operating system.  PSYSTAR is informed and believes, and thereon alleges, that APPLE, as a monopolist in the Mac OS market, could profitably impose a SSNIP with respect to the Mac OS and not suffer a material loss of customers choosing a substitute product, such as the Windows operating system.  The nearly $500 price differentiation as illustrated above is, at the least, suggestive of the same.

Page 37:

PSYSTAR, on information and belief, alleges that APPLE is content with the knowledge of having monopoly power in the Mac OS market and that nearly insurmountable barriers exist with respect to any other entity introducing a Mac OS-like operating system.  PSYSTAR is informed and believes, and thereon alleges, that the most significant potential threat to APPLE and the Mac OS market is, therefore, not from a new operating system but from computer hardware system manufacturers that may offer a hardware platform upon which to run the Mac OS—Mac OS Capable Computer Hardware Systems.

Page 38 ... dragging in Steve Jobs:

APPLE’s election to end the Clone Program accelerated at about the same time as the return of Steve Jobs to APPLE as its Chief Executive Officer. 

Page 40 ... beaating Apple with its own EULA:

Thus, as a pre-condition of a license to the Mac OS, APPLE unlawfully requires customers to agree to install, use, or run the Mac OS on—and only on—Apple-Labeled Computer Hardware Systems.  As such, a customer is prohibited from seeking out and choosing any other computer hardware system that is not an Apple-Labeled Computer Hardware System—including but not limited to a Mac OS Capable Computer Hardware System—on which to install, use, and run the Mac OS.

Page 41 ... customers are paying more because no competition exists:

PSYSTAR is informed and believes, and thereon alleges, that with competition eliminated in the Mac OS Capable Computer Hardware System market as it pertains to the Mac OS and Apple-Labeled Computer Hardware Systems, APPLE is free to control and charge customers supra-competitive prices as suggested with respect to the pricing of various Apple-Labeled Computer Hardware Systems against otherwise functional equivalents that would exist in the Mac OS Capable Computer Hardware Systems marketplace.

Page 42 ... calls for Apple to be restrained:

PSYSTAR is informed and believes, and thereon alleges, that APPLE’s pattern of conduct makes it clear that unless restrained, APPLE will continue to misuse the EULA for the Mac OS and various intellectual properties including copyrights related to the Mac OS to artificially exclude competition from Mac OS Computer Hardware System manufacturers thereby depriving customers of a free choice between Mac OS Capable Computer Hardware Systems that would otherwise be capable of running the Mac OS.

Page 46 ... Psystar damaged by Apple:

PSYSTAR, as a result of APPLE’s illicit tying behavior, has been damaged and requests compensatory relief in addition to a declaration as to APPLE’s illicit behavior.

Page 48:

PSYSTAR, as a result of APPLE’s illicit monopoly maintenance, has been damaged and requests compensatory relief in addition to a declaration as to APPLE’s illicit behavior.

Page 49:

PSYSTAR, as a result of APPLE’s illicit exclusionary behavior, has been damaged and requests compensatory relief in addition to a declaration as to APPLE’s illicit behavior.

Page 50:

PSYSTAR, on information and belief, alleges that as a result of APPLE’s illicit behavior, PSYSTAR has been damaged and requests compensatory relief in addition to a declaration as to APPLE’s illicit behavior.

Page 53, summary of what Psystar wants:

1.  Entering judgment for PSYSTAR against APPLE on all counts; 2.  Award PSYSTAR compensatory and statutory money damages, including treble damages and punitive damages, as appropriate; 3.  An award of prejudgment interest, as appropriate; 4.  Declare APPLE’s actions to be in violation of state and federal antitrust laws, state law of unfair competition and the common law, and enjoin APPLE from carrying on such conduct; 5.  Enter such other preliminary and permanent injunctive relief as is necessary and appropriate to restore competitive conditions in the markets affected by APPLE’s unlawful conduct; 6.  That the Court enter such additional relief as it may find just and proper; and 7.  That PSYSTAR recover the costs of this action.

Thoughts?

Topics: Hardware, Apple

About

Adrian Kingsley-Hughes is an internationally published technology author who has devoted over a decade to helping users get the most from technology -- whether that be by learning to program, building a PC from a pile of parts, or helping them get the most from their new MP3 player or digital camera.Adrian has authored/co-authored technic... Full Bio

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