Apple v. Psystar: What Is the Real Issue Before the Court Right Now? (Part 3)
- January 20th, 2009 - 3.21 am UTC
- Apple Legal News, Psystar
- dizzle
This is the third installment of a series examining the latest filings which will be argued before Judge Alsup on January 22, 2008. My purpose is varied. First, I would like to see how closely my thoughts and arguments parallel those of the attorneys. Second, I want those who are interested in this case to see how court cases progress, and the nuances upon which so many things may hang which are often overlooked in favour of sensationalistic headlines.
In those prior articles I had concluded that Psystar’s arguments thus far were not persuasive when examined only in light of the narrow issues before the Court right now—not the case writ large. However in this portion I will take a look at what appears to be the case that Psystar feels to be most strongly in its favour.
Argument: Psystar Improperly Attempts to Create Counterclaims for the Affirmative Defense of Copyright Misuse.
Practice Mgmt. Information Corp. v. American Medical Ass’n, 121 F.3d 516 (9th Cir. 1997)
You read a copy of this case for yourself at Justia.com.
This case is interesting. It involves a licensing agreement for use of a copyrighted written work containing medical codes with a clause requiring that the licensee refrain from using coding systems promulgated in any competing work and to require the use of the licensed work in any other programs administered by the licensee. The case cites to Lasercomb America, Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990) which is sure to play a major part in upcoming arguments (and has already been cited by Psystar). The Lasercomb case also involves a licensing agreement, and significantly it is for software rather than a written publication. The licensing agreement required a wide swath of people to agree not to develop any competing product. In the future, I expect that Psystar will point to these two cases as supporting their improper tie-in argument. However, I believe that attempt will fail. Unlike the instant case, both Practice Mgmt. and Lasercomb involve agreements with very broad restrictions on the use of competing products of the same type. Apple does not require that its users forsake any other operating systems. In fact, Apple hardware can run other operating systems. However, we are not at that point yet if the first hurdle of the duplicative allegations is not cleared. Psystar does make this argument in its Reply (as Apple pointed this out in its Response). However, this seems more appropriate as arguments supporting/opposing a Motion to Dismiss which is sure to come if Psystar is given leave to amend.
As far as Psystar’s reliance on Practice Mgmt. to support its claim that copyright misuse has been recognized by the Ninth Circuit as a valid affirmative cause of action, that argument fails for the same reasons previously discussed with regards to Open Source Yoga. Specifically, in the procedural history, the Practice Mgmt. court noted:
Practice Management, a publisher and distributor of medical books, purchases copies of the CPT from the AMA for resale. After failing to obtain the volume discount it requested, Practice Management filed this lawsuit seeking a declaratory judgment that the AMA’s copyright in the CPT was invalid for two reasons: (1) the CPT became uncopyrightable law when HCFA adopted the regulation mandating use of CPT code numbers in applications for Medicaid reimbursement, and (2) the AMA misused its copyright by entering into the agreement that HCFA would require use of the CPT to the exclusion of any other code.
Once again, this is NOT a counterclaim asserted after being sued for copyright infringement nor is it duplicative of the same party’s affirmative defenses (if any). Just as the spirit of the Declaratory Relief Act exudes, a party unsure of its rights, and being reasonably sure of drawing suit if it goes forward with using the disputed works without purchasing them at full price, asked the court for legal guidance. This, once again, is not at all what happened with Psystar, and the court once again specified that copyright misuse is a defense against copyright infringement.
I hate to keep repeating myself, but I must say each time I am not a lawyer. My opinions should not be considered those of a lawyer but rather an interested citizen examining public records. With that in mind, if I were Psystar and the reality of a huge loss started to loom large, I might start wondering if my attorneys gave proper counsel. Psystar’s affirmative copyright misuse case might have succeeded if they didn’t sit around and wait for Apple to sue them. Just a thought.
I think I have covered the issue of this first question sufficiently to form my own personal opinion that Psystar has improperly pled a duplicative allegation as both affirmative defenses and counterclaims. As we still have several days until the hearing, in the next installment I will start to tackle this question:
Comments
dizzle 21st January 2009, 13.42 pm
Charlie, there are many people in communication with me that are very interested in this topic. If you are not, skip them. I am not a regular news writer here; I am a third-party reviewer. I was asked to write news on major legal happenings, so that is all you will see me write about as far as news goes unless Alex is on holiday, and I fill in for him.
jmo 26th January 2009, 00.48 am
If I might make a point to you: first, yes, actually pystar’s copyright misuse argument is actually valid. It is the never-ending fear of expanding the limited monopoly a copyright holder has to something that isn’t copyrighted. In this case, apple sells the full version of their OS in the store; once you buy this item, then you open up their packaging to find a shrink-wrap licensing agreement, informing you that to use their copyrighted OS, you have to buy their hardware. The hardware is not covered by the copyright; creating the monopoly on their hardware to go with the separate item, the OS, is the textbook definition of copyright misuse. Now, onto why Pystar doesn’t care if they lose: they undoubtedly incorporated; a corporation is limited liability, meaning they can only lose what the corporation owns. They have probably paid out any profits they’ve actually made as dividends to “shareholders” so that they probably don’t have any money. Even if apple loses, they won’t be able to go after the individuals, just the corporate entity (as long as they followed basic incorporation laws). Apple might even get a big judgment, but getting a judgment and actually getting the money are two separate things.
jmo 26th January 2009, 00.50 am
eh, sorry, typo: I meant “even if pystar loses” not “even if apple loses”
dizzle 28th January 2009, 15.39 pm
jmo, I just saw this comment, I am sorry I missed it. If I might make a point to you, unless you are the Judge in this case, which I doubt you are, you cannot say that the copyright misuse argument is valid. That is what is in fact in dispute before the court. It may be your opinion that it is valid, that is another thing altogether.
I do believe (my opinion) that are seriously misconstruing leverage with copyright abuse. In order to have leveraging power (as far as I understand it, and am eager for someone who is trained in the law) you must have a certain amount of marketing power. They are not expanding their software copyright to the hardware whatsoever, you have a fatal flaw in logic. They are not restricting the use of their hardware. You can install any OS you want on their hardware. You can use their hardware as a doorstop. All of the limitations are on the copyrighted product, the software.
Now can they limit the software to that extent? So far, the courts have disagreed with you with regards to EULAs, and I am sure you are a fine fellow, but I hope you understand that I am writing on what the law is, not what it should be. I have some very definite opinions on what the law should be, but World of Apple has very little editorial content. I express my opinions on my personal blog which is linked to my name.
Now as far as Psystar not caring if they lose, you haven’t thought this through entirely. True, they have the shield of being a corporation, but there are ways to pierce the corporate veil. Since they did not attempt to get a declaratory judgment that they could in fact infringe upon Apple’s claims, claims which Rudy Pedraza already admitted he was aware of, then a good argument can be made that the incorporation was done in bad faith. Further, don’t forget about those ten John Does. Who are they? That could lead to a piercing of the corporate veil. What if the John Does are family members? Do you think Rudy Psystar would care if some of his family members were exposed to personal liability? This is not as risk-free as you are supposing.
I know you don’t mean to, but trying to explain what a corporation to me is is like me trying to tell an electrician what electricity is. At the firm where I am a paralegal, nearly all of our clients are corporate clients. I serve subpoenas on corporations all the time. Prior to this work, I was a legal secretary for a firm representing homeowners associations – all corporate clients.
Rudy cannot claim ignorance of the license, he already mouthed off about it before suit. Loose lips sink ships.
dizzle 28th January 2009, 15.41 pm
My own typing errors, you are misconstruing leveraging with copyright misuse
and
I am eager for a licensed attorney (which I am not whatsoever) to correct my understanding in any point at which I err