This is a continuation of my piece from yesterday.

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

Yesterday I came to the conclusion that Psystar thus far has not defeated Apple’s basic argument. In Altera Corp. v. Clear Logic, Inc., 424 F.3d 1079 (9th Cir. 2005), although Psystar is correct that the Plaintiff did not allege copyright infringement; therefore any issue of copyright misuse was irrelevant—Psystar still cannot get around the fact that the Altera Court specifically defined copyright misuse as a defense and not as an affirmative offensive allegation. Even further, the Altera Court upheld a software licensing agreement and refused to see validity in Clear Logic’s argument that Altera was using its software copyrights to create overly board rights to hardware restrictions. Lastly, this case very arguably did contain an allegation of copyright infringement as the rights claimed were under Title 17, but there was an extra element that brought it out of this realm. However, if these broad parameters were applied to this case, Psystar loses.

Additionally, I believe I have shown that Psystar’s reliance on Open Source Yoga Unity v. Choudhury, 2005 WL 756558 (N.D. Cal. April 1, 2005) is even more fatally flawed. Yes, while it is correct that in this case the court allowed a declaratory complaint containing copyright misuse allegations to proceed, it was only because the case was reasonably preemptive as OSYU anticipated that it might be sued and as the court noted (see page 8, footnote 5):

Furthermore, OSYU does not assert the claim as a separate cause of action or seek damages or a separate injunction based on the claim, but rather, it asserts the claim simply as an affirmative defense should it be found liable for infringement.

This fact pattern is precisely the opposite of Psystar’s counterclaims. They are a separate cause of action, and they do seek damages and a separate injunction based on the claims. Seriously this case in my opinion is a major fail for Psystar no matter how you spin it.

So moving on.

MGM Studios Inc. v. Grokster, Ltd., 269 F. Supp. 2d 1213 (C.D. Cal. 2003)

Apple put forth this case and others as evidence that when copyright misuse is asserted both as an affirmative defense and counterclaim that such counterclaims are outside the parameters of the Declaratory Judgments Act. It further asserts that the facts in MGM case match closely to the facts in this case with the plaintiff asserting copyright infringement, and the defendant asserting an affirmative defense of copyright misuse as well as bringing a counterclaim for declaratory relief also based on copyright misuse. In dismissing the counterclaim the MGM court noted (see page 1226):

“Copyright misuse has already been asserted by Sharman [the defendant] as an affirmative defense, and the Court will reach all aspects of that issue if necessary. Separately litigating that defense in a declaratory posture would not serve the purpose of declaratory relief, such as clarifying and settling the legal relations of the parties, or affording a declaratory plaintiff relief from the ‘uncertainty, insecurity, and controversy giving rise to the proceeding.’”

Psystar barely addresses this case, only citing it when claiming that Apple “under pretense,” a very serious professional misconduct charge, improperly used it to claim that Psystar’s counterclaims would “serve only to complicate this litigation needlessly” without explaining how they would. Psystar is flat-out wrong in this piece of rhetoric. Apple cited the above portion of MGM which clearly shows the purpose of declaratory relief, thus taking the position that since Apple holds that Psystar’s counterclaims do not fulfill these purposes, they needlessly complicate the litigation as these issues will already be addressed in the previously filed affirmative defenses. I believe that Psystar’s attorneys are being deliberately obtuse for the sole purpose of posturing.

In reading this case I note that the defendant, and apparently the court, agreed that copyright misuse cannot be the foundation of a claim for damages. Yet Psystar is attempting to do so. Also, Apple was not exaggerating when it stated that the fact pattern of MGM was virtually identical to the present case. For example, (page 1225)

“Sharman contends, however, that the declaratory relief it seeks is not duplicative of its affirmative defense, as a finding of misuse would ‘play [ ] an important notice function and public policy role in identifying for all the world the specific copyrighted works that will be unenforceable against anyone due to Plaintiffs’ wrongful conduct.’”

compared to Psystar’s statements (page 6),

“These unsupported arguments are nothing more than window dressing for Apple’s true concern—the nuclear fallout from a declaratory judgment as to [the] unenforceability of Apple’s copyrights. Such a judgment would ‘have the force and effect of a final judgment’ not only with respect to Psystar but to other parties attempting to compete alongside Apple.”

I believe the MGM court’s rejoinder is apropos (page 1225):

“Without passing on Sharman’s assumption that a finding of misuse would have such breadth of operation, the Court notes that this justification is somewhat specious. If the Court reaches the affirmative defense, any such notice would be equally effected by the Court’s disposition of that defense. Rather, the separate declaratory claim presumably serves but one purpose: to ensure that the misuse issue will be decided, and any notice rendered, even if the affimative defense is mooted by a finding that Sharman is not liable for infringement.”

Once again, I believe that Apple’s case for denying the Motion for Leave to Amend is strong and that this case law is proving that Psystar is merely repeating history rather than blazing some new territory as some would like to believe.

Tomorrow I will discuss Pystar’s primary case: Practice Mgmt. Information Corp. v. American Medical Ass’n, 121 F.3d 516 (9th Cir. 1997). I have not yet read that case. It is possible that my observations over the past two days will be substantially changed after I do.

My plan is to continue to post daily discussions of the case law until the hearing which is currently scheduled for January 22, 2009. It will be interesting to me to see how close or far from the mark I am from the points that each party will argue.