Psystar responds to Apple suit, will countersue
PALO ALTO, Calif.--Mac clone maker Psystar plans to file its answer to Apple's copyright infringement lawsuit Tuesday as well as a countersuit of its own, alleging that Apple engages in anticompetitive business practices.
Miami-based Psystar, owned by Rudy Pedraza, will sue Apple under two federal laws designed to discourage monopolies and cartels, the Sherman Antitrust Act and the Clayton Antitrust Act, saying Apple's tying of the Mac OS to Apple-labeled hardware is "an anticompetitive restrain of trade," according to attorney Colby Springer of antitrust specialists Carr & Ferrell. Psystar is requesting that the court find Apple's EULA void, and is asking for unspecified damages.
Springer said his firm has not filed any suits with the Federal Trade Commission or any other government agencies.
The answer and countersuit will be filed Tuesday afternoon in U.S. District Court for Northern California.
Pedraza attended a press conference his lawyers called to present how Psystar will defend its its OpenComputer Mac clone, which has been for sale online since April.
Psystar's Open Computer, as seen shortly after its unboxing at CNET.
(Credit: CNET News)Psystar's attorneys are calling Apple's allegations of Psystar's copyright infringement "misinformed and mischaracterized." Psystar argues that its OpenComputer product is shipped with a fully licensed, unmodified copy of Mac OS X, and that the company has simply "leveraged open source-licensed code including Apple's OS" to enable a PC to run the Mac operating system.
Pedraza says he wants to make Apple's Mac OS "more accessible" by offering it on less expensive hardware than Apple.
"My goal is to provide an alternative, not to free the Mac OS," said Pedraza. "What we want to do is to provide an alternative, an option...It's not that people don't want to use Mac OS, many people are open to the idea, but they're not used to spending an exorbitant amount of money on something that is essentially generic hardware."
Apple will have 30 days to respond to Pystar's counter claim, and so far has declined to comment on the case.
Other legal experts say Psystar faces a tough legal challenge in proving Apple has engaged in antitrust behavior by loading its software on its own hardware and thereby allegedly harming consumers and competitors. Psystar's ability to prevail on the issue of having the latitude to load Apple's OS on its own hardware, given it has a licensing agreement with the company, may prove an easier road to hoe, legal experts note.
A newcomer to the PC scene, Psystar caused a stir when it first went online selling white box Macs earlier this year. The site went down hours after it opened for business because the company was overwhelmed with orders for the OpenComputer, originally called the OpenMac, which was then changed to its current name. And the site went down several more times as its payment-processing company pulled its services from the Psystar site. Psystar managed to stay shrouded in a bit of mystery for a while, until intrepid gadget blog readers joined the press in fleshing out some details about the company.
Psystar eventually got back online with a new payment-processing service, and it continues to take orders for the OpenComputer and OpenPro Computer. When Apple finally did file suit against Psystar in July, it surprised nearly no one--except perhaps Pedraza. He said he had no contact with Apple before legal papers were filed against his company. Customarily, there is some sort of communication between companies before lawsuits are filed.
For now, Pedraza says it will be "business as usual" at company headquarters. Though he said there was a "slight" downward dip in sales once Apple filed its suit, he plans to go ahead with making servers, and soon, a mobile product, which he said will be "like a notebook." But he refused to offer more detail.
CNET News' Dawn Kawamoto contributed to this story.
Erica Ogg is a CNET News reporter who covers Apple, HP, Dell, and other PC makers, as well as the consumer electronics industry. She's also one of the hosts of CNET News' Daily Podcast. In her non-work life, she's a history geek, a loyal Dodgers fan, and a mac-and-cheese connoisseur. E-mail Erica. 
Also, the DCMA specifically states that software can be hacked for 'interoperability purposes'.... which is all that Psystar is doing if there is any actual hacking involved.
Since the licensing of the Mac OS is specifically limited to its usage on Apple hardware, it is inherently impossible to ship a "fully licensed" copy of the Mac OS on non-Apple hardware. Pedraza doesn't have a clue what he's talking about. Like it or not, Apple's lawyers are going to thrash him.
Penguinisto: Softman vs. Adobe found that the Doctrine of First Sale only applies to software if it is left unopened and the EULA is not agreed to. Once Psystar agreed to the EULA (as they had to when they preloaded the software) they were immediately bound by its terms.
And that is exactly why he's suing.
Personally, if Apple is selling the OS, I see no moral (and IMHO legal) problems whatsoever with someone taking their retail purchase and installing it onto whatever hardware they desire (so long as they don't depend on Apple for support). I myself have a home-build Hackintosh running at home - and I expect zero assistance from Apple for it in either support and/or maintenance (now my dual G5 OTOH is fully covered under AppleCare).
Now someone doing this commercially? Not so sure about. Props to them if they can do it, but they alone have to support their products as fully as Apple would for an official Apple machine.
While Apple's business model wasn't built for doing so, it would be pretty cool to see OEM-geared versions of OSX. My Hackintosh runs flawlessly. I have had zero problems with it, and it has already been put through some serious paces (I recently replaced the mobo/CPU with a Core Duo, so no more SSE3 emulation and therefore I get to run it at full speed). Given this, I know that OSX can and does run just fine on the right non-Apple equipment.
As a bonus, if Dell and HP ever got permission and decided to sell OSX pre-loads, I think Microsoft would be in deep kimchi in less than six months (they'd still have business sales, but they'd pretty much lose the consumer market in no time flat).
/P
It's a nasty situation and I really think Apple may have some trouble here. The legal firm representing Psystar has had suceess in the past against Apple for this sort of thing. They know what they are doing. I'm curious how a hole in the wall white box OEM is suddenly backed by all this money. It's not cheap to go after Apple. Even more so to thumb your nose at them openly and keep in business.
Psystar doesn't have to support the product except for the hardware. The OS is up to the end user. Just because you buy a Psystar unit that has a sealed copy of OS X included doesn't mean you are forced to install it. That gets them out of having to support it at all.
I just don't know about this one. I'm really curious why Apple simply hasn't bought the company out and shut them down. It would be cheaper than the bad press is going to cost them as a result. If Psystar wins, then the consequences of the EULA being nullified could have even larger impact on the industry.
I have doubts as to whether or not Psystar will prevail. They are not only buying upgrade licenses, they are modifying them and reselling them. Also, they are benefiting from the use of Apple trademarks and damaging the reputation of Apple by putting out substandard products that some may think Apple has endorsed (because it runs OS X).
If somehow Apple loses this battle, expect Apple to shift to a tech war. They'll start doing stuff to make sure the OS only runs on their hardware and the like.
I see the consumers as the losers in that scenario. Apple has been fairly lenient because its focus is on selling the hardware. A 5-user family pack can be had for $155. I'd expect that to change. I'd expect some sort of activation tech to get setup. It ain't gonna be nice. Sure the hackers will figure out a way to make it work, so the only ones suffering are the regular folk.
In other words, a small handful of people want to ruin it for everybody else.
Finally, most EULAs (including Apple's) have separability clauses the prevent one invalidated piece of it from invalidating the entire EULA. Just as if Microsoft suddenly had a bit of theirs ruled as invalid, doesn't suddenly mean you can pirate the crap out of Windows.
@m.meister: As long as attributions are plainly and prominently stated, Psystar is not violating Apple's trademark - they are not instilling any confusion between their product (the computer) and the OS (which is Apple's). I could be wrong on that, but it would be hard for Apple to claim it, I think.
Claiming them as upgrade copies only would require the disks to check the existing HDD's for an existing copy of OSX. I know for certain that Apple already employs similar methods (I remember when a buddy of mine thrashed the HDD on his G5 iMac, and when I lent him my dual G5 10.3 restore DVD's to do a re-install, the setup app simply told him that the DVDs weren't authorized for that configuration). So no, the argument that "it's only an upgrade" doesn't fly in this case.
They probably force those checks in every copy they sell, but seriously - it's a simple matter of replacing the TPM checks with a patch that bypasses them. That's how Psystar gets around the checks now, and the legal argument is that the TPM checks are what qualifies as "restraint of trade". It all doubles back to that.
Online-only? No way that'll happen... the first user to have a failed or trashed HDD would scream bloody murder.
Also, Apple is still out-selling pretty much the entire planet and is growing by leaps and bounds, so I don't really see them as wanting to disturb that growth.
That's the rub.
Apple *NEVER* sells the OS. Neither does Microsoft. You can not buy Windows or Mac OS X.
When you buy a CD in a computer store, you are NOT buying the operating system and it does NOT belong to you. What you have purchased is a LICENSE. That's it. The operating system is still the property of the company that made it.
Almost all computer software is handled that way. You do not buy computer software. If you go into a store and pay money for Microsoft Office or Parallels or Adobe Photoshop or other commercial software, you do not own it; you are only buying a license. A license is a limited right to use the program, but you buy that license on the specific (and legally binding) agreement that the software does not belong to you.
You know those licensing agreements you see when you run a program's installer? The ones where oyu just click "OK, OK, OK, next, next, next" without reading? Those are a contract. They say, specifically and in detail, that by clicking "install" you agree that you do not own the software and it does not belong to you. They say that by clicking "install" you agree that the license is a legal contract, and that your right to use the software is instantly terminated, with no refund, if you break any of the licensing agreements.
You may not like it, you may not agree with it, but that's the way it is. If you pay money for Mac OS X, you are not the owner and you have not bought the operating system. You are bound by the licensing agreement, and if you violate it, you no longer have the legal right to use it.
It is illegal to to force a consumer to purchase branded hardware if there is a generic equivalent option; however, that is exactly what Apple is trying to do with their EULA. People who say that the OS X DVD's are upgrades are only looking at one side of the picture. If you already own a Mac with OS X and suddenly your Mac dies (out of warranty), do you have to buy a new official Mac to use your os now? Technically this is like having your battery charger for your Canon camcorder die, and being told you can only use another unit from Canon even though there is a half priced generic charger available.
There are also many people here who think that a person doesn't own the software, they just license it like a lease. This is 100% incorrect. Software licenses are their to help protect the developers intellectual properties. They dictate how the software may or may not be modified so another company can't copy their code and resell it as their own. It also tells you how many computers you can install the software on to identify after which point it would be considered piracy. A software license can also specify what operating systems, hardware and software are needed in order for it to function properly; however, this is to inform the consumer as what they will need, and also to protect the developer from problems that could occur if the software is not installed on an appropriate system. As you can see none of these things are lease like in nature. If they were then you would have to return your software after you were done using it, and there are some pieces of software that literally are leased. Think about it, when was the last time you ever had to return an operating system or any other piece of software?
I'm pretty sure that if you look back you will find that Kodak was sued under the same concept when they were in the copier business. Their lease arrangements and service contracts required that toner be purchased only from Kodak, which shut out the low-cost toner manufacturers. The results were that the courts found that this was an anti-competitive practice and that it had to be stopped.
The notion of a tie between the hardware and software is an interesting one. Never been tested, and probably a very long road for Pystar since Apple has hoardes of cash to spend on legal fees and Pystar doesn't. If they have the staying power, this is going to be an interesting one to watch.
Also, do you think the movie and recording industry would stand by idle and allow the control of copyright holders to be eroded? If Apple lose this case, the movie and recording industry would spend billions of dollars to lobby congress to change the law so they regain control of copyrighted material in the way they do now. Apple is a copyright holder in respect of MacOS X and so they will get the same rights that the recording companies have in respect of copyrighted material. Like it or not, but that's just the way it is.
But you are right that Apple does not have a monopoly and in fact can point that they are a small percentage of the market.
That said, Kodak's share of the plain paper copy market probably never got above 10% either, so give that precedent this may be trouble
like I said, this is going to be interesting to watch!
Actually, Apple does not make that claim. They happily sell boxed copies of OSX without requiring you to buy hardware, or to prove that you own a Mac. Therefore your argument doesn't get very far at all, sorry.
you are wrong, fair use does not apply to resellers, only to end users.
Its my understand that PsyStar is still buying the copies of OS X as a reseller. They then sell the copy of OS X to the customer who then contracts PsyStar to install OS X on the machine PsyStar also sells. So they aren't selling OS X as their own OS. They aren't stealing the software. Its sort of like if I hired a consultant to make a hackintosh for me. I, the end consumer, bought the software. I bought the hardware. I'm just having the consultant put them together for me.
Steve Hynes
oh, yes, but they are saying that if you buy our software, you must buy our hardware (a tie that is potentially illegal under the the US antri trust laws) "
When I bought Leopard I already had Mac and it was my understanding that I was buying an "upgrade" to existing OSX license. Now maybe Apple should have been more clear on that.
Whatever, I hope that Psystar loses both cases.
The rub lies in the fact that OSX is, at its core, an open-source product (see also Darwin).
Psystar is providing an unmodified copy of OS X. That is the truth. The unmodified copy is the copy on the DVD inside the box.
The copy on the hard disk is hacked. You can not put an Apple installer disc in a Psystar computer and install it. It will not work. You have to take the files off the disc, modify them, and disable the hardware checks. That is why Psystar tells you in fine print not to re-install Mac OS X by yourself; because that unmodified copy of OS X they supplied to you will not work on their computer without being modified.
It's a house of a cards argument, and I wish them the best of luck.
1: Psystar will lose for the same reason iPod/iTunes are popular: there's nothing prohibiting a company from creating software that will only work on one machine, accessible only from them. Otherwise we'd never have had arcade rooms, video slot machines, etc etc etc. IT may not be smart business, but unfortunately it's their right. The customer isn't forced to buy Apple products; they choose to, and in doing so, are agreeing to be subject to what Apple wants.
2: Apple has a problem. By not even entertaining the option of another machine and selling the OS separately, they're sending a message that conflicts with the general public: that a machine is a machine is a machine. It wasn't like that in the old days of IBM, but now the Mac is little different from your standard PC, which puts them at a disadvantage. It reminds me of the GSM locked cell phone issue in some ways.
All said, I hope Psystar wins on merit. If they cater their case around the fact that PCs and Macs, at the core, are the exact same in specification, they could win this one. If they focus on that, Apple can't say anything to save their case, because they'd be branded anticompetitive by default. Of course the settlement would just be an adjustment of the EULA to remove that hardware clause, but that'd be a significant win for the little guy. I know I would absolutely grab a copy of Apple OS if I knew it was unchained.
- by nickj1088 August 26, 2008 2:22 PM PDT
- I think Apple has had this coming, and I think that OS X is only the beginning. The iPhone should have a slew coming its way as well. The stranglehold they have had on their hardware and software is becoming increasingly annoying, and the open source community is honestly a very dangerous one to **** off. Many of the lawsuits filed against Microsoft the past 10 years are looking very relevant against Apple, and if Psystar has any success expect more of the same.
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- by protagonistic August 26, 2008 4:11 PM PDT
- Hey, if you don't like the way Apple operates don't buy any Apple products. SJ is not standing there with a gun to your head forcing you into anything. It is their HW and SW so they have every right to control it.
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- by nickj1088 September 10, 2008 3:09 PM PDT
- Then why should Microsoft be brought up on an antitrust case? Why not let companies have complete control over everything no matter the cost to consumers? Take economics dude. I don't like the way Apple operates but I like their products, so why not campaign to force the way they do business.
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