Commentators lacking in any legal background often overlook the nuances in legal cases that are very important. Yes, it is true that Psystar is now raising the “first sale doctrine” to a dominance that it didn’t previously enjoy, but the validity of that argument per se is not at issue right now. Wasting of virtual ink with sound and fury about some new tactic of Psystar is both premature and incorrect. The real issue is much more pedantic.

Can Psystar Use Allegations of Copyright Misuse as Part of its Affirmative Defenses in Addition to its Counterclaims for Declaratory Relief?

There are side trails as well, but that is the core issue. This does not make for flashy headlines, and unless you are a legal geek such as myself, it is likely mind-numbingly boring. It is almost strictly a procedural issue, but don’t let that fool you. It is very important. The Court gave Psystar an opportunity to amend its previously-dismissed counterclaims by submitting a proposed new pleading along with a motion explaining why this new pleading overcomes the weaknesses that the Court had noted. In my opinion, which is shared by Apple’s attorneys, Psystar did not follow the Court’s directive. In my world, “amend” does not comprise a complete re-write with an entirely different theory base. That is the first issue that Psystar must overcome before we even get to the issue of affirmative defenses that are duplicative of counterclaims and whether or not copyright misuse can ever be used as anything other than an affirmative defense.

In every article that I have read on this latest volley, not one even used the word “declaratory” a single time. However, that is the heart of the issue! I know that is not as exciting as painting word pictures of the embattled Psystar attorneys huddling over a conference room table playing pin-the-tail on the novel argument, but it has the annoying characteristic of being the true issue at this point in time. This irks me not only because I value accuracy, but also because it puts me in the distasteful position of having to defend Psystar for the sake of accuracy. I don’t believe they are right, legally or morally, and I don’t think their arguments have merit. But I do believe that they deserve to be reported fairly.

So who is right? At this point, it appears to be a battle of case law with Apple relying heavily on Altera Corp. v. Clear Logic, Inc. and Psystar countering with Practice Mgmt. Information Corp. v. American Medical Ass’n. Obviously there are other cases cited, but these appear to me to be the two most important if I had to narrow them down to two. So what do these cases and their progeny/related cases have to offer in this present dispute? I will take this time to examine a few over the space of the days leading up to the Court hearing (January 22, 2009) and give my lay impressions. Remember once again I am not an attorney. Legal opinions are the province of properly licensed attorneys and nothing I say should be given any more weight than as a citizen of the United States reading and attempting to make sense out of publicly available documents. Also please note that I do have a current edition of the Blue Book with me to ensure that my citations are properly formatted; thus, I am relying upon the way the parties cited the cases. Additionally, I am focusing primarily on two filings: Apple Inc.’s Opposition to Psystar Corporation’s Motion for Leave to Amend and Psystar Corporation’s Reply to Apple Inc. and in Support of Psystar’s Motion for Leave to Amend.

Argument: Psystar Improperly Attempts to Create Counterclaims for the Affirmative Defense of Copyright Misuse.

Altera Corp. v. Clear Logic, Inc., 424 F.3d 1079 (9th Cir. 2005)

Apple argues that the Altera Court “has clearly stated that the doctrine of copyright misuse has no role “beyond ‘its logical place as a defense to a claim of copyright infringement.’” Psystar first alleges that Apple has taken the Court’s words out of context as it was merely citing the history of the claim. However, I believe this is silly. This is a case that was on appeal, and the appellate court upheld the findings of the lower court, so a repition of this history of findings IS a finding of this Court and not some mere factual recital. Psystar’s second point has more merit. The facts in Altera are materially distinguishable because the Altera never alleged copyright infringement against Clear Logic unlike Apple against Psystar. However I believe this misses the forest for the trees. While Psystar is absolutely correct that Clear Logic was not accused of copyright infringement, the Altera Court still affirmed that when the doctrine of copyright misuse was adopted by this Court, it was defined as a defense against copyright infringement. A Counterclaim is not a defense, it is an offensive move. Also, I think it can be argued that although copyright infringement was not expressly alleged, violation of Semiconductor Chip Protectin Act (SCPA) was alleged, and the SCPA appears in the United States Code under Title 17—Copyrights. In fact this Court even described the nature of the SCPA as “[f]iling the gap between copyright law and patent law….” (see page 1081) The reason that this case was taken out of the realm of Federal Copyright Law appears to be due to an “extra element” that caused state law to prevail on this particular issue. Absent this “extra element” this case would be much more directly parallel the current controversy, so I believe the distinguishable portions are distinctions that are unimportant.

The plot thickens further since Clear Logic is making nearly the identical claim as Psystar: that Alcatel was misusing its copyrights on its software to control hardware over which it has no copyright. Sound familiar? The Court states the following (see page 1091):

The intent of the parties is the governing notion of contract law. Altera’s intent is clear from the language of its license agreement: Altera sought to prevent competitors from benefitting from its software. The district court correctly gave effect to the terms of the contract and the intent of the parties and we affirm the district court’s denial of Clear Logic’s motion for summary judgment on that issue.

Open Source Yoga Unity v. Choudhury, 2005 WL 756558 (N.D. Cal. April 1, 2005)

Psystar relies upon this case as a counter to Apple’s claims by showing that the Northern District has allowed copyright misuse as an affirmative claim in a declaratory action. In fact, Psystar apparently felt it so important that it is the sole exhibit to its Reply to Apple. What Psystar fails to reveal is the facts and controversies in this case are precisely of the nature that declaratory actions are intended to resolve. In this suit, Open Source Yoga felt that they would be threatened with legal action regarding certain copyrights claimed by Çhoudhury and requested the Court to make a judgment on this issue to give security and guidance to the parties. Psystar should have thought of this earlier and filed suit against Apple first. This case actually hurts Psystar significantly as can be seen in the following quote:

Copyright misuse exists solely as a defnse to copyright infringement,…, and thus arguably cannot exist as an affirmative claim,…. However, here, OSYU has filed a declatory relief action seeking a judgment that it does not infringe Choudhury’s copyrights. Because there has been a sufficiently immediate and concrete threat that its members will be sued for copyright infringement…. In declaratory relief setting the declaratory relief plaintiff is thus [permitted to “assert” a claim for copyright misuse because the declaratory relief plaintiff is in fact likely to be accused of copyright infringement.…. Therefore, the court determines that as a preliminary matter OSYYU is permitted to assert copyright misuse in this action.

(see page 8 and also footnote 5 which contains additional material that harms Psystar’s case and credibility substantially)

So far, things do not look so great for Psystar on this point. Tomorrow I will examine a few more cases put forth regarding this argument by both parties.

Note: I did not “pull a Psystar” with my use of the ellipsis. The omitted material was primarily case law citations which I felt would make the article appear to be more complicated than it really is and those specific cases will discussed in future parts to this piece.