“We can sit by and watch competitors steal our patented inventions, or we can do something about it. We’ve decided to do something about it,” said Steve Jobs, Apple’s CEO. “We think competition is healthy, but competitors should create their own original technology, not steal ours.”

Engadget offers a brief breakdown of the patents Apple claims HTC has infringed.

• The ‘331 Patent, entitled “Time-Based, Non-Constant Translation Of User Interface Objects Between States,” was duly and legally issued on April 22, 2008 by the United States Patent and Trademark Office.
• The ‘949 Patent, entitled “Touch Screen Device, Method, And Graphical User Interface For Determining Commands By Applying Heuristics,” was duly and legally issued on January 20, 2009 by the United States Patent and Trademark Office. A copy of the ‘949 Patent is attached hereto as Exhibit B.
• The ‘849 Patent, entitled “Unlocking A Device By Performing Gestures On An Unlock Image,” was duly and legally issued on February 2, 2010 by the United States Patent and Trademark Office. A copy of the ‘849 Patent is attached hereto as Exhibit C.
• The ‘381 Patent, entitled “List Scrolling And Document Translation, Scaling, And Rotation On A Touch-Screen Display,” was duly and legally issued on December 23, 2008 by the United States Patent and Trademark Office. A copy of the ‘381 Patent is attached hereto as Exhibit D.
• The ‘726 Patent, entitled “System And Method For Managing Power Conditions Within A Digital Camera Device,” was duly and legally issued on July 6, 1999 by the United States Patent and Trademark Office. A copy of the ‘726 Patent is attached hereto as Exhibit E.
• The ‘076 Patent, entitled “Automated Response To And Sensing Of User Activity In Portable Devices,” was duly and legally issued on December 15, 2009 by the United States Patent and Trademark Office. A copy of the ‘076 Patent is attached hereto as Exhibit F.
• The ‘105 Patent, entitled “GMSK Signal Processors For Improved Communications Capacity And Quality,” was duly and legally issued on December 8, 1998 by the United States Patent and Trademark Office. A copy of the ‘105 Patent is attached hereto as Exhibit G.
• The ‘453 Patent, entitled “Conserving Power By Reducing Voltage Supplied To An Instruction-Processing Portion Of A Processor,” was duly and legally issued on June 3, 2008 by the United States Patent and Trademark Office. A copy of the ‘453 Patent is attached hereto as Exhibit H.
• The ‘599 Patent, entitled “Object-Oriented Graphic System,” was duly and legally issued on October 3, 1995 by the United States Patent and Trademark Office. A copy of the ‘599 Patent is attached hereto as Exhibit I.
• The ‘354 Patent, entitled “Object-Oriented Event Notification System With Listener Registration Of Both Interests And Methods,” was duly and legally issued on July 23, 2002 by the United States Patent and Trademark Office. A copy of the ‘354 Patent is attached hereto as Exhibit J.

Complete USITC and Deleware Court filings below.

Delaware Filing

USITC Filing

Apple HQ, 1 Infinite Loop | Photo by Wysz - Flickr

Yesterday afternoon Apple held its annual shareholder meeting at its Cupertino headquarters. This year discussions focused primarily on the company’s financial situation and environmental issues.

At the meeting the shareholders re-elected Jobs and the Apple board of directors. The topic of previous board member Eric Schimdt came up when one shareholder asked if the Google CEO had conducted properly while serving on Apple’s board. Jobs said that “Eric Schmidt conducted himself appropriately and recused himself on matters that might involve conflict”.

Also approved was Ernst and Young as Apple’s public accounting firm for the year 2010.

During the meeting two shareholder proposals were voted down, in-line with board recommendations. The first proposal read as follows, “Shareholders request that the Board of Directors prepare a sustainability report describing corporate strategies regarding climate change, specifically to reduce greenhouse gas emissions and address other environmental and social impacts such as toxics, recycling and employee and product safety.”

The board rebutted with, Apple “is already substantially fulfilling—and in many respects exceeding—the request for information in Proposal No. 6″.

On the second opposed and denied proposal was for Apple to amend the bylaws to establish a sustainability committee “to ensure our corporation’s sustained viability”…”responding to changing conditions and knowledge of the natural environment, including but not limited to, natural resource limitations, energy use, waste disposal, and climate change.”

The board opposed the proposal with the following, “[Apple] takes environmental sustainability very seriously, and the Company has made significant progress in reducing the environmental impact of the Company’s operations and products, as described in the Company’s statement in opposition to Proposal No. 6, above. However, the Board does not believe a Board committee dedicated to this issue is necessary”.

After all the proposals were out of the way Steve Jobs, Tim Cook and Peter Oppenheimer fielded some questions.

One shareholder asked if Jobs has returned to Apple in a limited capacity, the CEO simply replied with “No” adding that while he was out, “Tim took the helm and Apple didn’t miss a beat.”

Other areas of interest mention include Jobs’ view on Apple’s financial situation. A present shareholder asked if Apple would use it’s current $40 billion cash and short-term investments to pay dividends, Jobs refuted saying that Apple is holding cash to take “big, bold” risks.

Jobs said that China is a market with lots of promise and said that Apple would open 25 retail stores in the near future.

Related: Apple’s 2010 Proxy statement.

The investigation is based on a complaint filed by Eastman Kodak Company of Rochester, NY, on January 14, 2010. The complaint alleges violations of section 337 of the Tariff Act of 1930 in the importation into the United States and sale of certain mobile telephones and wireless communication devices featuring digital cameras and components thereof that infringe a patent asserted by Kodak. The complainant requests that the USITC issue an exclusion order and cease and desist orders.

Kodak alleges that the iPhone and Blackberry use technologies that infringe patents and has asked the ITC to ban the imports of units in the United State.

The USITC will offer a “final determination in the investigation at the earliest practicable time.”

iPhone 3GS | Image courtesy of Apple

Apple has been officially awarded the “IPHONE” trademark in the U.S. Patent and Trademark Office under number 3,746,840 covering International Classes 9, 28 and 38.

Of interest from the award which covers both the name and logo is that the trademark includes classes 9, 28 and 38. The most interesting of the three being class 28 which covers “Handheld unit for playing electronic games.”

View the full patent certificate here, awarded on February 9, 2010.

“Psystar sought to provide a lower cost, higher quality alternative to Apple’s hardware.”

Higher quality? Is that why the man who won the Psystar video contest is so pleased with the quality of his purchase?

And this redefinition of the truth:

“Apple sued Psystar for copyright infringement and violations of the anti-circumvention provision of the DMCA claiming that selling hardware capable of running OS X (and hence competing with Apple in the market for personal computers) is illegal.”

And we thought that Steve Jobs had a reality distortion field. Too bad for Psystar, no one seems to be buying theirs. (double-meaning intended)

A copy of Apple’s filing can be found here.

In addition to her position as Assistant Editor at World of Apple, dizzle runs idrankthekoolaid, an Apple fangrl satire blog, and is an Administrator and Hostess at MyAppleSpace and their vidcast MASTv.

Although Psystar could raise the issue of Rebel EFI with Judge Alsup, it is unlikely that they will proceed any further until the Appeal is heard by the Ninth Circuit. Nothing new has transpired in the Florida case.

I wonder who paid the hefty filing fee of $455.00.

In addition to her position as Assistant Editor at World of Apple, dizzle runs idrankthekoolaid, an Apple fangrl satire blog, and is an Administrator and Hostess at MyAppleSpace and their vidcast MASTv.

The move from Apple to ban the imports of Nokia mobile phones into the United States is identical to that of Nokia’s who last month filed with the ITC to ban the import of “virtually all” Apple products.

In a comment to Bloomberg Nokia spokesman Mark Durrant said that the company “will study the complaint when it is received and continue to defend itself vigorously.

“However this does not alter the fact that Apple has failed to agree appropriate terms for using Nokia technology and has been seeking a free ride on Nokia’s innovation since it shipped the first iPhone in 2007.”

The battle between Apple and Nokia started in October last year when Nokia alleged that the Apple iPhone infringed 10 of its patents. Apple countered this claim by filing a lawsuit against Nokia claiming that the company had infringed 13 of Apple’s patents.

In addition Kodak has filed two sperate cases against Apple saying that the iPhone infringes patents related to “digital cameras and certain computer processes.”

“Kodak has a long history of digital imaging innovation and we have invested hundreds of millions of dollars creating our industry-leading patent portfolio,” said Laura G. Quatela, Chief Intellectual Property Officer, and Vice President, Eastman Kodak Company. “In the case of Apple and RIM, we’ve had discussions for years with both companies in an attempt to resolve this issue amicably, and we have not been able to reach a satisfactory agreement. In light of that, we are taking this action to ensure that we protect the interests of our shareholders and the existing licensees of our technology.

“Our primary interest is not to disrupt the availability of any product but to obtain fair compensation for the use of our technology,” Quatela said. “There’s a basic issue of fairness that needs to be addressed. Those devices use Kodak technology, and we are merely seeking compensation for the use of our technology in their products.”

Kodak’s complaint to the ITC against Apple and RIM is a limited exclusion order preventing the importation of infringing devices, including certain mobile telephones and wireless communication devices featuring digital cameras.

“We remain open to negotiating a fair and amicable agreement with both Apple and RIM, which has always been our preference and our practice with other licensees,” Quatela said. “We seek to avoid litigation in our licensing programs whenever possible. But when the infringement is persistent, we will act to defend the interests of our shareholders and licensees, and to promote the fair compensation that is the bedrock of innovation.”

In paragraph 4, Pedraza makes a statement that seems to be contradictory to Psystar’s stated position in the Miami Court; that is, the California case does not involve Rebel EFI. How so? Pedraza states that Psystar has ceased selling Rebel EFI in order to comply with the California Injunction, but why do so if that Injunction didn’t apply to that product.

In paragraphs 5 and 6, the details of behind-the-scenes agreements between the parties is revealed. Psystar has agreed to destroy all but one copy of the current version of Rebel EFI and to save a copy of all prior versions. Apparently this agreement was made due to Apple’s concern that Psystar might construe the Injunction as requiring the destruction of all product.

In addition to her position as Assistant Editor at World of Apple, dizzle runs idrankthekoolaid, an Apple fangrl satire blog, and is an Administrator and Hostess at MyAppleSpace and their vidcast MASTv.

In addition to Nokia’s previous infringement complaint, Nokia is now complaining that seven patents are being infringed by Apple “to create key features in its products in the area of user interface, as well as camera, antenna and power management technologies.”

“Nokia has been the leading developer of many key technologies in small electronic devices” said Paul Melin, General Manager, Patent Licensing at Nokia. “This action is about protecting the results of such pioneering development. While our litigation in Delaware is about Apple’s attempt to free-ride on the back of Nokia investment in wireless standards, the ITC case filed today is about Apple’s practice of building its business on Nokia’s proprietary innovation.”

Following Nokia’s original patent case, Apple countersued in early December after previously stating that it would vigorously defend itself.

Recap of Florida Action

On August 27, 2009, Psystar filed a Complaint against Apple which was amended on October 27, 2009. The Amended Complaint sought a declaratory judgment on the legality of Psystar’s business model including its production of Mac Clones running Snow Leopard and its Rebel EFI software. In this filing Psystar repeated its antitrust allegation and added a new allegation of violation of the Lanham Act claiming that Apple is misleading the public (i.e. lying) in stating that Psystar’s clones are illegal. Apple’s response comprised a Motion to Dismiss or To Transfer Venue (November 24, 2009) on the following grounds (simplified for summary):

1. The suit is “a transparent attempt to re-litigate” the same allegations that were ruled upon in the California suit.

4. This case is not ripe for litigation and as such is improper “anticipatory litigation.”

On December 10, 2009, Psystar filed its Response in Opposition to Apple’s Motion to Dismiss and asserted the following (I have grouped their counter-arguments under the same four points above):

1. The suit is “a transparent attempt to re-litigate” the same allegations that were ruled upon in the California suit.

Psystar responded that the two cases involve totally different products with unique fact patterns that were not present in the California suit. Additionally, while Judge Alsup concluded that “Mac OS compatible hardware” was not a valid market for purposes of the antitrust claims, the present complaint alleges a monopoly in the market for personal computers with a UNIX operating system.

2. This case is “the inseparable twin of the California Action, as the legal claims and issues, the technology, the parties, and most of the facts are virtually identical.”

Psystar contends that the method used for allowing Snow Leopard to run on generic hardware is completely different from the method used for Leopard, both in fact and technology and thus is significantly distinguishable from the California litigation. Additionally, Psystar has since ceased selling its computer with Snow Leopard instead focusing on the software-only product, Rebel EFI, which was not at all a factor in the California case. Lastly, Psystar alleges that the main thrust of this suit is its entirely new allegation that Apple has violated the Lanham Act by claiming that Psystar was selling an illegal product.

3. If both cases were left to stand, it would result in a wasteful duplication of the Court’s and the parties’ resources as well as being in contravention of the “first-filed” rule.

The Florida suit is the first-filed suit concerning Snow Leopard and Rebel EFI which were not part of the California litigation, with Snow Leopard being specifically excluded from that action. Further, Psystar does not object to having two separate cases as it concerns their resources, particularly since all of its key witnesses are in Florida. Lastly, the California case is nearly over. It is not a currently pending case and the case law on the first-filed rule deals with present potential conflicts (forward-looking) and not on past judgments (backward-looking).

4. This case is not ripe for litigation and as such is improper “anticipatory litigation.”

Psystar points out that all declaratory actions contain some sense of being anticipatory litigation as the party is asking the Court to make a legal determination on their rights. In order for a case to be improperly anticipatory, the filing party would have had to first receive written notice that they were about to be sued. Additionally, the case is not solely a declaratory action but also contains affirmative antitrust allegations.

**Editorial note: Incredibly, Psystar actually argued that “Apple had given no specific, concrete indications that it intended to sue Psystar over Snow Leopard or Rebel EFI before Psystar filed this case.” Come on!

On December 21, 2009, Apple filed its Response to Psystar’s Reply and argued as follows:

1. Psystar’s representations of the rulings of the California Court as finding that transfer would be improper are false.

In support of this allegation, Apple quoted Judge Alsup:

This is without prejudice to any motion before Judge Hoeveler to transfer the Florida action here, as to which this order expresses no opinion and is without prejudice, in the event of a transfer, to a new motion to modify the case management schedule.

Apple further stated that this is a pattern and practice of Psystar in its filing, once again quoting Judge Alsup:

Psystar continues to grossly mischaracterize prior rulings in this case…

and

[Psystar has had] a particular facility with taking a word or phrase and somehow making it into a concession on which an entire structural argument is based.

Additionally, Rebel EFI wasn’t even on the market at that time, and even though Judge Alsup had previously refused to allow Snow Leopard to be a part of Apple’s case in chief, he did make a ruling on Snow Leopard, thus demonstrating the Court’s intent to apply the rationale of the injunction to other Psystar products.

2. The first-filed rule must apply as the two cases substantially overlap.

In support of this contention, Apple stated that the California Injunction confirms that the cases overlap in that Judge Alsup not only ruled on Leopard, but also ruled on Snow Leopard and specifically reserved jurisdiction to rule on Rebel EFI. As such, Snow Leopard has definitely been removed from this case and, Apple argues, Rebel EFI is currently before Judge Alsup. The fact that Judge Alsup reserved the right to rule on Rebel EFI, and Psystar already stated its intention to file such a motion with that Court, Apple is not “backward-looking” as Psystar claims, but forward-looking to such a forthcoming ruling.

3. Psystar is repackaging its dismissed anti-trust claims from the California suit.

While Psystar claims that the facts and issues of law are significantly different, Judge Alsup’s Injunctive Order speaks otherwise. Apple specifically said:

Judge Alsup found that Psystar violated the DMCA by manufacturing and trafficking in devices intended to circumvent the technological protection measure in Mac OS X to run Apple’s software on non-Apple hardware. Rebel EFI is simply a repackaged version of Psystar’s circumvention technology. And Psystar has now stated that it will seek from Judge Alsup regarding the legality of Rebel EFI.

And although Psystar is claiming that the antitrust allegations in the Florida case relate to behaviour that happened after those counterclaims were dismissed, it is still the very same behaviour. And still just as appropriate under the law.

4. Psystar’s First Amended Complaint is Anticipatory.

Although Psystar is relying upon the lack of a cease and desist letter to justify an anticipatory action, the notice requirement is just that: notice. Psystar cannot claim that it was on notice that Apple would sue to protect its rights in OS X as it had already done so, aggressively pursued adding new products when they were relevant, and apparently convinced Psystar enough that it alleged in its own Amended Complaint that it “stands threatened” by a future suit brought by Apple. Psystar cannot have it both ways. Any other affirmative claims are repackaged assertions of the issues already adjudicated by Judge Alsup.

Where things stand now

It appears that both parties have requested that the Court allow oral argument. The Court is not obligated to grant this request and may choose to simply rule on the filings. We need to wait and see.

As a follow-up to my earlier article reporting that Psystar had been listing Rebel EFI as being out of stock, their site now reads:

Psystar has voluntarily suspended the sale of our Rebel EFI software product. Psystar feels it would be prudent to halt the sale of Rebel EFI while we explicitly ask the court for clarification on the legality of Rebel EFI. Our patience has been tested but our resolve is unwavering. Psystar’s vision of bringing the Mac OS to generic PC hardware is and always will be unyielding. Although Rebel EFI may be temporarily unavailable for purchase on the Psystar online store, those who purchase a t-shirt or donate over twenty dollars will receive one free copy of Rebel EFI once the court has ruled in our favor on this issue. We respectfully disagree with courts notion that we are “hardcore copyright infringers”. Psystar has never, and will never, condone software piracy. It’s your software, you should be able to use it where you want to. If you purchase an off-the-shelf copy of OS X Snow Leopard, its your right to use that software. A publisher cannot forbid you from reading a book in the bathroom or listening to a music disc while riding your bicycle. There should be no difference in the software realm, no matter how much money Apple or anyone else throws at it. That is the real issue here and what we have always been fighting for. Psystar will continue to support all of its existing customers of hardware and software through this transitional period. Warranties on hardware will continue to be honored as long the customer has a valid warranty. Rebel EFI support for existing customers, as always, will remain exclusively available through email and the built-in ticket interface.

Wow. A few comments are in order. First though, the interested reader may want to read the transcript of the injunction hearing in California. You may find a full copy here, and as far as I have seen, only freely available here at World of Apple.

Our patience has been tested but our resolve is unwavering.

Poor things, their patience has been tested. Isn’t that a bit like a tic complaining when the dog finally scratches it off?

…once the court has ruled in our favor on this issue.

Courts generally do not care for braggadicio.

We respectfully disagree with courts notion that we are “hardcore copyright infringers”.

Grammar problems aside, is this the same Court that Psystar just assured us would rule in its favour? Dissonance much?

Just so that it is obvious that the Court didn’t make that statement as an offhand comment, here is what was said (page 19 of transcript):

I want to be clear. While this record is sketchy on Rebel EFI, it is not sketchy on the hardcore infringement of your client.

On page 19, the Court expressed its rationale for granting a very broad injunction:

The normal rule is that an injunction is always almost always broader than the four corners of the complaint, because, otherwise, it would be too easy to let an infringer just move on to the next problem. It would always be Zeno’s Paradox at work.

Zeno’s Paradox FTW! “Contumacious conduct” (page 13) comes in close second.

If you purchase an off-the-shelf copy of OS X Snow Leopard, its your right to use that software. A publisher cannot forbid you from reading a book in the bathroom or listening to a music disc while riding your bicycle. There should be no difference in the software realm, no matter how much money Apple or anyone else throws at it. That is the real issue here and what we have always been fighting for.

Psystar once again tries to paint itself as the champion of the oppressed, but really, they are opportunistic champions of their own self-interests. They have zero respect for the Hackintosh community, and for the most part, that feeling is mutual. Apparently they don’t have much respect for their customers either as they blatantly misrepresent the transaction as a sale when they well know that it is a license; a license which has been held up by the Court in a most explicit manner at the very beginning of this suit. It gets no better with their attempt at logic. Apple does not forbid someone from using their licensed software in a particular locale, but on a particular device. If Rudy wants to use a Macbook while he is on the loo, I am sure that Apple couldn’t care less.

Psystar will continue to support all of its existing customers of hardware and software through this transitional period.

Like this guy?

In reading this transcript (particularly pages 8 through 9), I have a feeling where Psystar might attempt to take this case; into an individual user’s rights under Section 117. Rudy Pedraza, for example, might bring suit in his own name alleging that he is representative of a class of people who need their rights clarified as to their legal standing to purchase Rebel EFI. In so doing, Psystar could attempt to work from the user backwards and claim that if a consumer can legally buy Rebel EFI, then Psystar should be able to legally sell it. Although I do not claim to know the law in that situation, in sheer logic, however, that simply does not follow. Additionally, the courts have consistently held that Section 117 is an affirmative defense to suit, not a basis for suit itself. Thus, if Apple sued an individual user for making a Mac clone (which Apple has not done), then that user could plead Section 117 as a defense. However, in the absence of suit (or perhaps a letter threatening suit), the user could not offensively pursue Apple under the same Section. Not that Psystar has ever been bothered by a pesky thing like facts.

And of couse we have the appeal to the Ninth Circuit on Judge Alsup’s grant of summary judgment to Apple on the issue of copyright misuse to keep us amused for years to come.

In addition to her position as Assistant Editor at World of Apple, dizzle runs idrankthekoolaid, an Apple fangrl satire blog, and is an Administrator and Hostess at MyAppleSpace and their vidcast MASTv.

Well it has been a while since I have reported on this case due to personal family troubles, and truth is, I have not completely kept up with all of events. Rather than never finding time to go back and read front the point I left off, I am going to start with the latest developments and go back and read the most relevant items. I welcome reader input as to any fact or nuance that I might have missed.

A few days ago, I was reading my RSS feeds and noticed multiple sites proclaiming that Psystar was dead. I thought to myself, ”Self, I bet that turns out to be completely wrong. None of these stories deal with the two million reasons Psystar has to keep things going.” It was this bit of failure to be skeptical of a sound byte quote that motivated me to jump back into the game.

So let’s back up a bit. On December 15, 2009, Apple prevailed in its attempt to obtain a permanent injunctive order against Psystar for any clones produced running Leopard or Snow Leopard. Psystar had been desperately trying to make Snow Leopard a separate issue but failed. I think that failure is finally righting a very bad ruling made earlier in the case in which Judge Alsup punished Apple for its battle to keep Snow Leopard out of that litigation primarily because it wasn’t released yet. That decision completely baffled me, but finally it appears that Judge Alsup has corrected himself in a roundabout way.

This Order does effectively end Psystar’s future as a trash-talking Mac cloner. There is no ambiguity or wiggle-room in that facet. However, Judge Alsup refused to exclude Psystar’s product, Rebel EFI (did I mention how much I hate cheesy, self-serving names?), from the injunction. Here is the precise wording (apologies for the lengthy quote; it is necessary):

B. REBEL EFI
Since the terms of an injunction must be “reasonable to prevent or restrain” further infringement of a copyright or violation of the DMCA, it follows that an injunction must be limited as “to restrain acts which are the same type or class as unlawful acts which the court has found to have been committed or whose commission in the future, unless enjoined, may fairly be anticipated from the defendant’s conduct in the past.” Orantes-Hernandez v. Thornburgh, 919 12 F.2d 549, 564 (9th Cir. 1990) (quoting NLRB v. Express Pub. Co., 312 U.S. 426, 435 (1941)); 17 U.S.C. 502(a), 1203(b)(1).

Consistent with this standard, a permanent injunction against Psystar should, at a minimum, encompass the acts found unlawful in this action. In other words, an injunction should at least cover Psystar’s acts constituting infringement of Apple’s reproduction, distribution, and derivative-work rights under the Copyright Act, Psystar’s acts constituting contributory infringement of Apple’s reproduction right under the Copyright Act, and Psystar’s acts violating the anti-circumvention and anti-trafficking provisions of the DMCA, as found at summary judgment (Dkt. No. 214).

Psystar does not dispute this legal standard (Dkt. No. 237 at 4). Instead, Psystar concentrates its fire on obtaining an exclusion for its aforementioned Rebel EFI product from any injunction issued by this order. Psystar advances three reasons for such an exclusion: (1) Rebel EFI only works with Apple’s Snow Leopard product, and Snow Leopard should be excluded from the injunction; (2) the method by which Rebel EFI operates does not fall within “the same type or class” of acts found to be infringing or unlawful in this action, and raises legal issues not litigated by the parties; and (3) an injunction that does not exclude Rebel EFI would cause substantial interference with the sovereignty of in the United States District Court in the Southern District of Florida, where a separate action involving Rebel EFI is pending (Dkt. No. 237).

Since this order has already determined that an express exclusion for Snow Leopard is improper, Psystar’s first argument fails. With respect to Psystar’s second argument that Rebel EFI differs materially from this case in both fact and law, Psystar cites to no decisions where the terms of an injunction under the Copyright Act or DMCA specifically excluded a non-litigated product of the accused infringer. Instead, Psystar attempts to distinguish the decisions cited by Apple and this order — such as Walt Disney — supporting the extension of injunctive relief to non-litigated works of the copyright holder as being “cases where the additional, non-litigated conduct was the same in all legally relevant respects to the actually litigated conduct” (Dkt. No. 237 at 5).

Psystar’s argument belies even a casual reading of these decisions. Walt Disney and its progeny addressed the issue of whether non-litigated copyrighted works of the copyright holder should be included within the scope of a court’s injunction. Here, Apple is the copyright holder whose rights have been asserted, and therefore Walt Disney is clearly applicable as to whether Snow Leopard should be included in an injunction. By contrast, Rebel EFI is a product of Psystar, the accused infringer in this case (See Dkt. No. 237 at 4). And whether a non-litigated act or product of an accused infringer falls within the ambit of an injunction goes to the enforceability, rather than the scope, of the injunction. See In re Lorillard Tobacco Co., 370 F.3d 982, 986 (9th Cir. 2004) (noting that the three fundamental characteristics of an injunction are that it is directed to a party, enforceable by contempt proceedings, and designed to protect the substantive relief sought by a complaint in more than a temporary fashion) (citations omitted) (emphasis added).

In other words, distinguishing the Walt Disney line of decisions provides no protection to Psystar with respect to its own product, Rebel EFI. Whether Rebel EFI violates the terms of the injunction set forth in this order is a factual issue more appropriate for a contempt action. See Jerry’s Famous Deli, Inc. v. Papanicolaou, 383 F.3d 998, 1001 (9th. Cir. 2004) (affirming a contempt order after factual findings by the district court indicated that the defendant violated a permanent injunction directed to prevent infringement of the plaintiff’s trademarks).

Common sense also supports this distinction between the terms and enforceability of an injunction. As Psystar readily admits, Rebel EFI has not been litigated in this action and was not subject to discovery. Moreover, Psystar’s opposition brief appears to purposefully avoid providing a straightforward description of what Rebel EFI actually does (See Dkt. No. 237). Thus, it is not only inappropriate, but impossible to determine on this record whether Rebel EFI falls within “the same type or class of unlawful acts” found at summary judgment. This order declines to “bless” a product about which it knows little of substance. Psystar’s second argument is therefore rejected, and Psystar — if it continues to do so — sells Rebel EFI at its peril.

Finally, Psystar asserts that issuing an injunction without excluding Rebel EFI would “invade the jurisdiction of Judge Hoeveler of the United States District Court for the Southern District of Florida” (Dkt. 237 at 3). To support their argument, Psystar cites to United States v. AMC Entertainment, 549 F.3d 760, 770 (9th Cir. 2008), quoting in relevant part:
[W]hen exercising its equitable powers to issue an injunction, a court must be mindful of any effect its decision might have outside its jurisdiction. Courts ordinarily should not award injunctive relief that would cause substantial interference with another court’s sovereignty.

What Psystar conveniently omits, however, are the paragraphs immediately following the quoted language. As the remainder of the decision clearly explains, the district court’s granting of a nationwide injunction in AMC Entertainment was improper because the injunctive relief directly conflicted with an existing decision by the Fifth Circuit, and circuit courts “expect [their] pronouncements [to] be the final word within the [c]ircuit’s geographical area, subject only to en banc or Supreme Court review.” Id. at 771. Since neither the United States District Court for the Southern District of Florida nor the Eleventh Circuit Court of Appeals has issued any pronouncement on the legality of Rebel EFI under the Copyright Act or DMCA, Psystar’s argument lacks merit. Moreover, as explained above, whether Rebel EFI or any future or non-litigated Psystar product violates the injunction issued by this order is a question more appropriate for contempt proceedings. This order does note, however, that if such contempt proceedings are brought against Psystar, comity with respect to the action before Judge Hoeveler in Florida will be properly considered. This determination would, of course, also examine the harm that delay would cause Apple, the stage of the proceedings in the Florida case, and whether the record before the undersigned provides a more complete framework to do justice to the issues presented. But these questions are for another day.

In sum, Rebel EFI will not be expressly excluded from the terms of the injunction. It should be clear, however, that this ruling is without prejudice to Psystar bringing a new motion before the undersigned that includes real details about Rebel EFI, and opening itself up to formal discovery thereon. This would serve the purpose — akin to a post-injunction motion vetting a “design-around” in a patent action — of potentially vetting (or not vetting) a product like Rebel EFI under this order’s decree. Moreover, Psystar may raise in such a motion any defenses it believes should apply to the factual circumstances of its new product, such as the 17 U.S.C. 117 defense raised in its opposition and at oral argument. Whether such a defense would be successful on the merits, or face preclusion or other hurdles, this order cannot predict. What is certain, however, is that until such a motion is brought, Psystar will be selling Rebel EFI at its peril, and risks finding itself held in contempt if its new venture falls within the scope of the injunction.

In short, Judge Alsup refused to expressly exclude Rebel EFI from the injunction. That wording is significant in light of other statements in the Order indicating that Judge Alsup was none too pleased with Psystar selective quotation of case law and misquoting the Court’s Orders by failing to put them within their proper context. Judge Alsup in this Order and a separate Final Judgment Order expressly retained enforcement jurisdiction.

Why did Judge Alsup possibly leave the door open to Psystar? He was not clear on Rebel EFI actually worked, though he strongly suspected that once he did, it would violate the clear guidance articulated in the portions of the Order describing why the clones were enjoined. He basically put the equivalent of a “Bad Dog” sign outside the fence and asked Psystar if they really want to open that gate. They might not like what they find inside.

So what will Psystar’s next move likely be? Exactly what the Judge told them to do. Don’t sell Rebel EFI without filing a new motion in which more details on the product are given so that a firm decision can be made. And, as of this date, Rebel EFI is listed on Psystar’s site as being “out of stock.” Of course that is not precisely true, let’s just say its slightly true, because Rebel EFI is a software program; it is not possible for it to be “out of stock.” I guess it would have just killed the Pedrazian pride to say that it was unavailable until further notice. I expect to see such a Motion from Psystar in the immediate future.

To sum things up, why was I suspicious when I read that Psystar was giving up the ghost? Well, their prior settlement with Apple in which they agreed to pay over two million dollars in damages is tolled until all of the legal avenues, including appeal, have been exhausted. It is in Psystar’s best interest to keep this horse alive as long as possible. And Attorney Camara might not mind losing fees for the priceless publiclity he and his firm have been receiving for this case. I believe that Camara knows that the case is a dog but hopes that it will put his name out there for some career-making technology case.

Also, I keep wondering, what ever happened to the ten John Does? I don’t see where Apple ever struck them as parties. It is as if they were mentioned and vanished into the virtual ether.

In addition to her position as Assistant Editor at World of Apple, dizzle runs idrankthekoolaid, an Apple fangrl satire blog, and is an Administrator and Hostess at MyAppleSpace and their vidcast MASTv.

Psystar whose website has already ceased operation will fire its eight employees according to Psystar attorney Eugene Action. Action also said that Psystar’s President Rudy Pedraza will begin “shutting things down immediately”.

[Update - 19 December 2009] Despite the above details it appears that Psystar has little intention of ceasing operation. Within the last few hours the company’s website has returned, although doesn’t contain any hardware on sale. A new report from Computerworld suggests that the original quote from Psystar attorney Eugene Action was incorrect. The clarification comes from K.A.D. Camara, of the Houston, Texas firm Camara & Sibley LLP, “Regrettably, Mr. Action was misquoted in an early story that seems to have been picked up elsewhere. Psystar does not intend to shut down permanently.”

Camera added that although Psystar will cease sales of PCs installed with Mac OS X, the company will continue to sell PCs with other operating systems. Psystar will continue to sell Rebel EFI.

• Copying, selling, offering to sell, distributing, or creating derivative works of plaintiff’s copyrighted Mac OS X software without authorization from the copyright holder;
• Intentionally inducing, aiding, assisting, abetting, or encouraging any other person or entity to infringe plaintiff’s copyrighted Mac OS X software;
• Circumventing any technological measure that effectively controls access to plaintiff’s copyrighted Mac OS X software, including, but not limited to, the technological measure used by Apple to prevent unauthorized copying of Mac OS X on non-Apple computers;
• Manufacturing, importing, offering to the public, providing, or otherwise trafficking in any technology, product, service, device, component, or part thereof that is primarily designed or produced for the purpose of circumventing a technological measure that effectively controls access to plaintiff’s copyrighted Mac OS X software, including, but not limited to, the technological measure used by Apple to prevent unauthorized copying of Mac OS X on non-Apple computers;
• Manufacturing, importing, offering to the public, providing, or otherwise trafficking in any technology, product, service, device, component, or part thereof that is primarily designed or produced for the purpose of circumventing a technological measure that effectively protects the rights held by plaintiff under the Copyright Act with respect to its copyrighted Mac OS X software.

Judge Alsup stated in the injunction that he doesn’t want to see Psystar “engage in defiant or unreasonable conduct”. Psystar has until December 31st 2009 to comply and Psystar “must immediately begin this process, and take the quickest path to compliance; thus, if compliance can be achieved within one hour after this order is filed, defendant shall reasonably see it done.”

Additionally Psystar must “immediately destroy any technology, product, device, component, or part thereof in its custody or control that has been used to circumvent any technological protection measure that effectively controls access to plaintiff’s copyrighted Mac OS X software, or effectively protects the rights held by plaintiff under the Copyright Act with respect to its copyrighted Mac OS X software”.

In a turn of events Apple is now countersuing Nokia claiming that the worlds largest mobile phone maker is infringing on 13 of Apple’s technology patents. “Other companies must compete with us by inventing their own technologies, not just by stealing ours,” Apple said.

Apple has yet to reveal which patents are in question.

In particular the OFT had Apple adjust its terms which apply to consumers who buy from “Apple and iTunes stores and download software from the web”. The OFT identified terms in these agreements which “raised concerns under the Unfair Terms in Consumer Contracts Regulation 1999 (UTCCRs).”

Following discussions with the OFT Apple agreed to revise its terms to ensure the following:

• do not exclude liability for faulty or mis-described goods
• are consistent with consumer rights under the Distance Selling Regulations
• are drafted in plain or intelligible language
• do not potentially allow changes to be made to products and prices after an agreement is made.

In the OFT statement Jason Freeman, Legal Director, OFT Consumer Markets Group, said, “The contract or terms of use between a company and a consumer, whether they are found online or on paper, must be clear, fair and easy to understand. In particular, it is important that consumers are given clear and accurate information about their consumer rights in case things go wrong. We have worked closely with Apple to secure these changes and we believe they will improve confidence and clarity for consumers.”

Nokia claims that the iPhone breaches certain patents related to “one or more of the GSM, UMTS and 802.11 wireless communications standards” and seeks unspecified compensation or other relief.

Apple’s response to the case is not yet due but intends to “defend the case vigorously.”

Further reading: Apple’s 2009 Form 10-K.

Nokia claims that Apple is infringing ten patents related to Global System for Mobile communications, or GSM; wireless local area network, or WLAN; and Universal Mobile Telecommunications System, or UMTS.

“The basic principle in the mobile industry is that those companies who contribute in technology development to establish standards create intellectual property, which others then need to compensate for,” said Ilkka Rahnasto, Vice President, Legal & Intellectual Property at Nokia. “Apple is also expected to follow this principle. By refusing to agree appropriate terms for Nokia’s intellectual property, Apple is attempting to get a free ride on the back of Nokia’s innovation.”

Nokia says that it has agreements with around 40 other mobile phone manufacturers allowing use of Nokia’s technologies but Apple is not one of them.

The complaint came from Palm despite the fact that Palm was using an Apple Vendor ID to trick iTunes into thinking the Pre was a iPod.

The ruling by USB-IF not only dismissed Palm’s complaint but actually bit back at the company requesting that Palm explain why they used a Vendor ID not belonging to them.

Google’s response clashes with that of Apple’s saying that Senior Vice President Phil Schiller personally called Google to inform them that the app had been rejected for the reason that it “duplicated the core dialer functionality of the iPhone”. This is a contradiction of Apple’s response which asserted that the app had not been rejected and was still being studied.

Later last week Apple also released a statement, reasserting that Apple had not rejected the Google voice app and continues to be in discussions with Google.

Today former senior vice president and general counsel of Intel Corporation joined Apple as General Counsel and senior vice president of Legal and Government Affairs, reporting to Apple CEO Steve Jobs. Daniel Cooperman who served in the role for the past two years will retire at the end of September.

“We are thrilled to have Bruce join our executive team, and wish Dan a very happy retirement,” said Steve Jobs, Apple’s CEO. “With Bruce’s extensive experience in litigation, securities and intellectual property, we expect this to be a seamless transition.”

On one really exciting note, it is possible that I might be able to personally attend significant hearings since the Court is only about 90 minutes away from where I reside. The only problem with that is when hearing dates change at the last moment and obviously I have to give my employer advance notice. If there are any World of Apple readers who will be attendance at some of the same hearings, I look forward to meeting you.

Apple’s Letter Brief dated August 10, 2009

You may read this Letter Brief in full here.

As you can see, Apple outlines the history of the discovery of the destruction of certain data. It is interesting that Psystar filed for its bankruptcy protection right after Apple notified Psystar of this spoliation and other deficiencies in the Court-ordered production. Despite this, Psystar didn’t take any corrective measures until months after Apple’s notification.

Even though the deleted code featured so prominently in discussions, please note footnotes 3 and 5 of the Letter Brief:

Footnote 3 [the text to which this footnote refers is redacted]: When asked why, Psystar’s counsel stated that Psystar’s email and customer support software (SupportSuite) randomly “deleted or loses” emails. While counsel says that Psystar has contacted SupportSuite regarding this issue, Psystar has yet to find any emails or chat messages showing such contact with that vendor. Psystar also has not provided evidence of, and Apple is unaware of, any other steps taken by Psystar to halt the deletion of relevant emails by Psystar’s email system. Moreover, Psystar did not inform the Court of this email deletion at the two CMCs [case management conferences] in this case or at the last motion to compel hearing where Psystar’s emails and attachments were at issue.

Footnote 5 [the text to which this footnote refers is redacted]: Psystar has produced one version of the bootloader and just last week provided its July 2009 bootloader. However, Psystar has not produced the other bootloaders it previously used on its computers.

In its request for relief, Apple asks for sanctions citing general case law on the scope and breadth of the Court’s authority in this regard, but specifically requests:

If Psystar does not produce all prior versions of its code, then Apple respectfully requests that the Court exercise its inherent authority by granting Apple an inference adverse to Psystar on its copyright and DMCA claims and by awarding Apple its fees and costs associated with bringing this motion or as the Court otherwise sees fit.

This Letter Brief was authored by Mr. Gililand who, although he was present at the August 20, 2009 hearing, did not argue the issues.

Psystar’s Response Letter Brief dated August 19, 2009

You may read this Letter Brief in full here.

This filing is, quite literally, a piece of work. Let me count the ways.

Psystar has not destroyed evidence or acted in bad faith in its discovery responses.

Really? Psystar has not destroyed evidence?

The only materials not produced…

Why were they not produced? BECAUSE THEY WERE DESTROYED! Is Mr. Camara suffering from cognitive dissonance in this filing?

Since Psystar acted in good faith to comply with its discovery duties…

Did it? In my world, “good faith” means actually being knowledgeable about what your duties are. As Apple pointed out, the Court’s Supplemental Order governing discovery stated that the parties must “take affirmative steps as are necessary to preserve evidence.” And, quoting from Apple’s Letter Brief:

Moreover, as stated in the October 30, 2008 Joint Case Management Statement, Psystar’s principals were put on notice of this duty to preserve and a document preservation notice was sent out to Psystar’s employees.

Yet we are to believe that (even if their prior attorney never advised them, which I absolutely do not believe) that poor little “cash-strapped” Psystar was too stupid to figure out that a lawsuit about their alleged wrongful use of code would require the preservation of the code that was at the heart of the case!

As the parties agreed in their list of legal issues at issue, this topped the list:

3. Legal Issues: The Parties submit the following list of legal issues in dispute:
a. Whether Psystar’s alleged use, reproduction, creation of derivative works, distribution and/or
display of Apple’s copyrighted works constitutes direct and/or contributory copyright infringement
under the federal Copyright Act, 17 U.S.C. §501 et seq.

We aren’t talking about their July 2008 order for pencils and staples or even the precise brand of packing peanuts that were found by a South Florida service technician inside a Psystar box when it was opened up to be serviced, but the very issues that are being litigated. And if this were so, why just some of the code? Why wasn’t all the code other than the current generation being used erased if this was just standard operating procedure for this “small, understaffed” persecuted start-up?

As did Apple, I draw the readers’ attention to the Court’s Supplemental Order to Setting Initial Case Management Conference docketed July 21, 2008.

4. Pursuant to FRCP 26(d), no formal discovery shall be initiated by any party until after the meet-and-confer session required by FRCP 26(f), except by stipulation or prior court
order. As soon as a party has notice of this order, however, the party shall take such affirmative
steps as are necessary to preserve evidence related to the issues presented by the action, including, without limitation, interdiction of any document-destruction programs and any ongoing erasures of e-mails, voice mails, and other electronically-recorded material.

Umm, “electronically-recorded material”? Should that be unclear to a technology company?

But even more telling is Psystar’s own statement in the JOINT proposed Case Management Statement docketed October 30, 2008:

6. Evidence Preservation

Psystar’s Statement. Counsel for Psystar has personally counseled the principals of Psystar as
to the retention of documents and other information as they pertain to the issues in this lawsuit. A
retention notice was subsequently issued to the principals of Psystar memorializing the same.
Retention of documents includes but is not limited to electronic mail, physical documents and things,
and other electronically-recorded materials.

So who is lying here? I also have to wonder in these numerous allegations of malpractice by Psystar’s former counsel whether or not there has been a limited waiver of the attorney-client privilege so that Apple could depose Colby Springer on this issue. Hey this is just me, but I would be hesitant to so openly bad-mouth and throw under the bus a business to whicht you owe $80,000.00.

Mr. Camara goes on to state:

This case deserves to be resolved on the merits. While Apple would achieve its goal of destroying a competitor and leaving the law ambiguous, a grant of relief in the form of infringement and DMCA claims resolved entirely in favor of Apple would be a gross distortion of justice.

It is a gross distortion to suggest that such extreme measures are what Apple requested. I quoted above what was specifically requested and what would amount to summary judgment on the DMCA and infringement claims is noticeable by its utter absence.

In describing Psystar’s (Mr. Camara also makes the mistake of mispelling his own client’s name at least two times in his filing) procedures, he admits that each Psystar unit loaded with OS X is not in fact loaded with an individually purchased disk for each unit. In fact, what Psystar has done is to create one or more “master copies” that are used to produce the merchandise. Thus in fact, Psystar has not stepped in the shows of an initial purchaser that allegedly has the right to do what it wishes with its purchased copy (this is wording things in a light most favourable to Psystar when in fact I do not agree that it is a purchased copy but rather a purchased license). That purchased copy is never installed. An improper and (in my opinion) clearly illegal COPY is. This explains what appeared to be the utterly inane Requests for Admissions asking for Apple to admit that any two or more copies of the “Mac OS” install disk are the same for all intents and purposes, such as Requests for Admissions number 174, 177, and 179 discussed in a prior article.

Continuing:

Apple focuses its complaints on three non-Psystar and non-Apple files allegedly discovered on Pystar machines sold in the past: dsmos.kext (“dsmos”), AppleDecrypt.kext (“AppleDecrypt”), and Netkas. Psystar acknowledges that it has previously downloaded and evaluated these binary files. It is possible that any or all of these files may have accidentally appeared on a production machine, since evaluation often occurred on the same machine used to manage the master copy for production machines. Psystar is a small business and cannot afford the equipment or personnel needed to fully isolate all of its activities to prevent these kinds of mishaps. However, none of these files (a) have ever formed a part of the Psystar system; (b) have been necessary to run a Psystar computer; or(c) currently exist in any form on Psystar production machines. Nor possessed or viewed the source code to dsmos, AppleDecrypt, or Netkas.

First, let’s have a moment of silence to mourn Psystar, of whom we must be continually reminded that they are only a small leech and cannot afford the equipment or personnel needed to comply with discovery requirements. Ahem. More seriously, is this paragraph true? And did Psystar seriously claim that it never used AppleDecrypt and Netkas and that these may have “accidentally” appeared on a production machine? Did Mr. Camara actually see his client’s nose growing when those representations were made?

From the hearing:

1 MS. BOROUMAND SMITH: Okay.
2 So in order to run Mac OS X on nonApple hardware,
3 Psystar had to do two things: They had to use the kernel
4 extensions that I’ve been talking about, and they also had to
5 modify the operating system by using different boot loader

Compare that with Mr. Camara’s statement that:

However, none of these files (a) have ever formed a part of the Psystar system; (b) have been necessary to run a Psystar computer; or (c) currently exist in any form on Psystar production machines.

Mr. Camara is being very slippery here. Technically he can say that those specific files are not necessary to run a Psystar computer, but that is highly misleading as either those files or their equivalents ARE in fact necessary. He would also have us believe that Apple just happened to find those files which his client has never used that Casper the Friendly Ghost slipped in on one of his midnight jaunts. Come on.

Observations from the August 20, 2009 Hearing

Now I shall defend why I was disappointed in Apple’s performance at this hearing. As you can see above, the statements and activities are pretty outrageous, at least in my opinion. Yet Apple’s counsel walked into this hearing fully prepared to simply enter into a Stipulation with opposing counsel that this code can be assumed for sake of argument to have been on all Psystar machines produced prior to September 2008. Mr. Camara was about to be handed the not only the golden goose but a nice golden egg it laid.

MR. CAMARA: We would, but we have offered to
5 stipulate that until the time the computers had open Cojones on
6 them, we will stipulate that all of them had this code on them.

MS. BOROUMAND SMITH: So that’s stipulation works,
21 so long as it’s presented to the jury.
22 THE COURT: Of course it would be.

3 MR. CAMARA: If what we are telling the jury is that Apple
4 decrypt dsmos and the Netkas boot loader were on all Psystar
5 computers shipped before a certain date, we are happy to have
6 that be an instruction to the jury.
7 What I was talking about was if the Court were to
8 prefer a more prejudicial instruction, like Psystar destroyed
9 evidence.
10 THE COURT: What’s wrong with telling the jury that
11 you destroyed the evidence?
12 MR. CAMARA: Well, Your Honor, we think —
13 THE COURT: Is there an issue of bad faith in this
14 case?
15 MR. CAMARA: Yes, Your Honor.
16 THE COURT: Well, if there is an issue of bad faith
17 and somebody’s been destroying evidence, that’s highly
18 relevant.

6 THE COURT: If your people happened to destroy
7 evidence along the way that’s relevant, then the jury is going
8 to hear about it. And that’s your problem if it’s prejudicial
9 because, you know, evidence can be prejudicial, but rightly so.
10 And if somebody is destroying evidence, that’s your — to my
11 mind, a jury can at least say, hey, they’ve been out destroying
12 evidence, they’re guilty as sin.

13 THE COURT: Well, let me give you some general
14 principles. I’m missing something in this discussion, so I
15 want you to help me understand what I’m missing.
16 One way to go here is to just let Apple prove —
17 we’ll have no stipulations. One way to go is no stipulations,
18 and then Apple just prove it up at trial that all this stuff
19 was destroyed. That happens in a lot of trials, and the jury
20 then says, ah-hah, they destroyed evidence, I don’t like these
21 people, they are trying to infringe.
22 But the jury gets all that information because it’s
23 highly relevant to the issue of intent. That’s one way to go.
24 Another way to way go would be have a stipulation,
25 but if you have a stipulation, you can’t have it both ways.
1 You can’t then start putting in the same evidence that the
2 stipulation goes to. So you would just have a cold two or
3 three sentence stipulation that says here is what we did, here
4 is what we did not do. And then you just argue it to the jury
5 that there is bad faith, based on — you wouldn’t be putting in
6 additional evidence because that would be superfluous.
7 Those are two different ways to try a case, one with
8 a stipulation that knocks out a lot of the Q and A, one without
9 it but you don’t get the benefit of the stipulation but you
10 would then get the Q and A.
11 Ms. Smith, what bothers me about your approach is
12 you want me to instruct — I’m not going to do all this
13 instructing the jury. I can tell them that if somebody
14 destroys evidence, they can consider that on the issues of bad
15 faith, sure I can do that. But I’m not going to say that there
16 has been bad faith. I’m not going to say that there has been
17 destruction, unless something — if you all were to stipulate
18 and say here is what was destroyed, here is what is not
19 destroyed, then I can instruct the jury along those lines, of
20 course.
21 But then that would preclude you from — maybe not
22 100 percent, but 90 percent from getting into the details of
23 that with evidentiary material because that is the whole point
24 of the stipulation. So what am I missing here?
25 Now, I’ll give you one other — some lawyers in your
position, Ms. Smith, would be delighted to have all this
2 evidence, and you would just throw it in front of the jury and
3 say look how bad these people are. And you would not want a
4 stipulation. You would not — so what is it you are trying to
5 ask me to — be careful what you wish for, because you might
6 get it and regret it at trial.

The Court goes on in its explanation but as you can see, it appears that Judge Alsup saw that Ms. Smith was about to willingly lose a huge potential advantage at trial and spoon-fed her on why she might want to reconsider that position.

The final agreement was discussed in this portion:

2 THE COURT: Here is one thing that I think should be
3 done, and this is not a stipulation, per se, it’s going to be a
4 court ordered interrogatory.
5 But Ms. Smith, you are going to write it. I don’t
6 want a big firm — I don’t want a big firm thing with
7 definitions and instructions, just a plain interrogatory with
8 no lead-in that says something like, do you admit that Apple
9 decrypt was used on computers? You make it, you know, refine
10 that.
11 Then I assume your answer is going to be “yes.”
12 MR. CAMARA: Well, Your Honor, I think so, too, but
13 we haven’t seen the basis for their motion. They haven’t
14 supplied the expert testimony.
THE COURT: They don’t need to.
16 Listen, you ought to go what was on your own
17 computers. If you don’t know what’s on your own computers, I’m
18 going to get upset.
19 MR. CAMARA: We have offered that as a stipulation,
20 and the answer will be yes, Your Honor.

I chuckled at the Court’s statement that if Psystar doesn’t know what is on their own computers he is going to be upset.

The hearing went on to discuss the specifics and requirements for these interrogatories and the subjects that should be covered. The bottom line was:

THE COURT: Now, the jury may take into account that during the
16 course of discovery you tried to clean up the problem. But
17 they can also figure out, probably, that there was some monkey
18 business going on earlier. And maybe that indicates bad faith,
19 and that’s up to them.
20 If they want to — you know this would be classic
21 evidence that goes to intent, if they were lying about whether
22 the Apple decrypt was used or not. So that part I think should
23 be done.

During this portion, Apple could have also emphasized much more how Psystar was not in compliance with the Court’s prior Order on discovery with regards to email and attachments and the concoction of the new story of how their email provider just deletes random emails willy-nilly. That is quite a tall tale. Heck, I am smaller (and possibly even more cash-strapped) than even poor little teensy-weensy Psystar, and I have three full backups of all of my data at any one given time so if Google decides to randomly delete emails, I still have them. Yet, we are to believe that this just did not occur to these guys who fancy themselves the champions of Open Source hacking? I couldn’t even hack into my own computer, and it occurs to me. I am gullible, but I am not THAT gullible.

Lastly, the Court asked Ms. Smith what relief Apple was seeking:

7 THE COURT: Now, how much are you asking for by way of
8 sanctions?
9 MS. BOROUMAND SMITH: We are seeking the amount that
10 we expended on filing this motion.
11 THE COURT: How much is that?
12 MS. BOROUMAND SMITH: I haven’t done the
13 calculation. I apologize.
14 THE COURT: You get $5000.
15 MS. BOROUMAND SMITH: Okay, thank you, Your Honor.
16 THE COURT: Probably a lot less than you really
17 spent. But —
18 You going to complain about $5000?
19 MR. CAMARA: No, Your Honor.

Of course he isn’t going to complain. He knows his client just dodged a potentially crippling bullet. I would bet my biscuits that the actual amount was closer to $15,000.00. I am not an attorney and am not privy to their strategy etc., but as a lay observer and backseat driver it seems to me that Ms. Smith should either have come prepared with that figure or been able to throw out some calculations on the fly that would have given the Court something to work with rather than having to pull a round number out of the air. This is especially so considering the fact that Psystar doesn’t have two pennies to rub together and such a sanction could greatly motivate them to go away for a nuisance sum.

Now lest the reader think that the Court unfairly led Apple into a situation that would be more favourable to them at trial, in a future article I will show where something similar was done for Psystar (in addition to the Court’s very merciful sanctions).

I think that’s enough for now. Talk to you more soon!

08/24/2009 – 96 – Minute Entry: Discovery Hearing held on 8/20/2009 before William Alsup (Date Filed: 8/24/2009). Supplemental briefs due by 8/27/09. Deft shall pay pltf $5,000 in attys fees. (Court Reporter Sahar McVickar.) (dt, COURT STAFF) (Date Filed: 8/24/2009) (Entered: 08/24/2009)

However, before reporting on what transpired, a brief review of the filings that led to this hearing is in order. Rather than delaying the publication of this information so that I might digest this information down, I refer the reader to Groklaw’s excellent articles on the subject:

EULAs, Psystar, and the Reality Principle – Updated

Apple v. Psystar takes a darker turn in discovery – Updated

I have some additional thoughts that I would like to add to what Groklaw has reported, but I shall do so in subsequent articles during the “downtime” until the deadline for additional filings which is August 27, 2009 with another ruling no sooner than the end of August.

So What Happened at the Hearing?

Preamble

In this article, I am going to boil the proceedings down to the most basic facts so that the World of Apple readers can understand why Psystar was sanctioned and additional briefs were ordered to be filed. However, this transcript is dense with additional items of interest and areas in which I have some pretty strong editorial opinion. I will reserve that additional analysis for the coming days so that the information can be teased out in reasonable-sized portions. While I might derive some sick enjoyment from reading hundreds of pages of legalese, I realize that most peoples’ eyes will become Krispy-Kremeified long before mine.

I must once again remind the readers that I am not a lawyer and legal opinion would have to be obtained from a properly licensed and qualified attorney. Also, the reader may wonder why I don’t provide a copy of the transcript but rather only excerpts. There are two reasons. First, typically the court docket will indicate that transcripts are not full public record until after a certain date at which point they may be assessed through the PACER database. This particular docket entry does not contain such a restriction though I believe that is an oversight. However, the second reason is one of professional courtesy to the Court Reporter who makes the majority of her income through the purchases of her transcripts, and I will not unfairly deprive her of any potential income.

Although there were more than two issues raised in the various filings, only two were the subject of substantive discussion leading to rulings. Mr. Camara and three colleagues appeared on behalf of Psystar; and Ms. Smith and two colleagues appeared on behalf of Apple with Mr. Camara and Ms. Smith making the oral arguments.

Issue: Did Psystar improperly dispose of relevant evidence?

Ms. Smith informed the Judge that the parties agreed that Psystar had destroyed relevant evidence consisting of two kernel extensions and a bootloader prior to September 2008. The only issue before the Court therefore was one of damages since the parties agreed that the evidence should have been preserved. Explanations of the significance (or lack thereof) of the lost evidence were given to the Judge. Additionally Mr. Camara argued that Psystar’s prior counsel failed to properly advise their client on evidence preservation and that the destruction was therefore innocent and not willful.

However, things got much more interesting in this portion of the transcript:

THE COURT: What is the relief that you are getting
3 that is — warrants attorney’s fees?
4 MS. BOROUMAND SMITH: Well, it’s the fact that had
5 they not lied to us in their 30(b)(6) deposition, Your Honor,
6 and told us that they did — we basically went down this whole
7 path trying to find all of this information. We have spent
8 time meeting and conferring with them, writing briefs, only to
9 find out today what we should have known back in May –
10 THE COURT: Go back over all that. That sounds
11 plausible. Go back through that chronology of how you got
12 misled on this.
13 MS. BOROUMAND SMITH: Sure.
14 So back in March, we had a 30(b)(6) deposition of
15 Psystar’s CEO, Rudy Pedraza. At that deposition, we asked him
16 whether he knew what the dsmos kernel extension was, whether
17 Psystar used the dsmos kernal extension –
18 THE COURT REPORTER: Slow down just a little for me.
19 MS. BOROUMAND SMITH: I’m sorry.
20 And similarly, we asked him about the Apple decrypt
21 kernel extension and whether or not Psystar used that kernel
22 extension: The answers to all of those questions were “no.”
23 We then –
24 THE COURT: Stop just a second.
25 MS. BOROUMAND SMITH: Yes.

1 THE COURT: That’s totally false, isn’t it?
2 MR. CAMARA: Well –
3 THE COURT: I mean, sounds totally false based on
4 what I’m hearing today that that testimony was just false.
5 MR. CAMARA: Well, here’s what happened. They –
6 the people at Psystar — well, I won’t defend that, Your Honor,
7 I think those answers were false.
8 THE COURT: All right.
9 MR. CAMARA: Coming from a 30(b)(6) deponent.
10 THE COURT: All right.
11 MR. CAMARA: Robert Pedraza at the business was in
12 charge of this, but, certainly, Rudy Pedraza should have had
13 that information at the 30(b)(6) deposition.

I believe that was the tipping point for the Judge to award sanctions. Both sides agree that evidence was destroyed though they disagree to an extent as to the reasons why that happened. However, Mr. Camara wisely decided to not even attempt to justify Rudy Pedraza’s completely false testimony. But for that false testimony, it is possible that no sanctions would have been ordered for reasons that I will outline in a follow-up piece.

So that is the bare bones of what happened to lead to the $5,000.00 sanction award with the really “juicy” part extracted.

Issue: Is Psystar entitled to the breadth of information it sought in Mr. Schiller’s deposition?

Judge Alsup at the beginning of the hearing stated that he was not going to decide any other issue that day other than that of the destruction of evidence. There was quite a bit of preparatory discussion on the issue of Mr. Schiller’s testimony, and it is to that issue that the Court ordered the parties to prepare briefs for his further and later consideration. This issue ended with the following discussion:

THE COURT: Well, you ought to go ahead and do the
11 depositions on what they are willing to provide. And then in
12 the meantime, I’m going to ask you to submit by Monday briefs
13 on the issue of whether or not Townsend is correct that the
14 profit margins for the plaintiff are irrelevant, irrevocably
15 irrelevant.
16 MS. BOROUMAND SMITH: Your Honor, may we be
17 permitted to do the deposition on the topic that — on the
18 information that we are willing to provide next week?
19 THE COURT: Go ahead and do that, yes. Because, I
20 mean, I won’t rule on this, probably, next week. I won’t even
21 be here next week.
22 MS. BOROUMAND SMITH: Okay, Your Honor.
23 THE COURT: So I won’t be able to rule on it. But
24 you can get the briefing done — in fact, I’ll give you till
25 Thursday of next week. My law clerk can be looking at it. And

1 both sides simultaneously submit, and as soon as I get back,
2 I’ll try to rule on it around August 31.
3 MS. BOROUMAND SMITH: So submit by Thursday of next
4 week?
5 THE COURT: You got all these problems: I may have
6 to undo the trial date if you continue to have all these
7 problems because, see, now you are putting me in a position
8 where you are going to come in and say, oh, we go to redo the
9 experts, oh, we got to do all this after-the-fact discovery.
10 I’m not going to undo the trial date yet, but this
11 is what — all these discovery motions put a lot of pressure on
12 the trial date and the schedule.
13 MS. BOROUMAND SMITH: We understand that, Your
14 Honor.
15 MR. CAMARA: Your Honor, given that the witness
16 designated to testify on damages refused to do so, might we
17 request that that deposition take place in Houston, which would
18 be far more convenient for us and for our cash-strapped client?
19 MS. BOROUMAND SMITH: Your Honor, they are out here
20 next week for depositions for Rudy Pedraza, anyways, because
21 one point that Mr. Camera didn’t mention was the fact that all
22 of their financials documents were not provided to us until
23 last Friday.
24 THE COURT: All right, do all of that out here. I
25 don’t think it’s warranted to go to Houston yet.

1 Is there another dispute you have, or is that it?
2 MR. CAMARA: That is all on our side, Your Honor.
3 MS. BOROUMAND SMITH: I believe that’s it for us
4 right now, as well, Your Honor.

Remember, these are just the bare facts explaining the $5,000.00 sanction and the request for additional briefs, but I will state that although this development has been represented by some as Apple wiping the floor with Psystar, that is not at all what happened. In fact, it is my opinion that Apple’s counsel delivered a somewhat lackluster performance, and that it was not at all the case that Judge Alsup clearly favoured Apple and gave Psystar the smack-down. As much as I would like that to be the case, that is not how I view the transcript of the proceedings. I intend to support this assertion in the promised follow-up articles.

I think that got your attention. And it is my hope that this douse of cold water will bring the reporting of this development down to reality. While I have a disfavourable opinion of Psystar and the honesty of its representatives, the gratuitous dissing of their attorneys that has regularly occurred is uncalled for. These professional men and women are not stupid though reading some reports one might get the impression that they regularly run face-first into brick walls. In fact, Mr. Camara is the youngest person to matriculate at Harvard Law School. Here is a point of trivia: the “K” stands for Kiwi. Face it, any kid who had to grow up with the name “Kiwi” had to toughen up unless that is a common Filipino name, and I am showing cultural ignorance.

And yes, I do find it humourous that Kiwi is going against Apple and Mr. Papaya is the friendliest of fruits. (the two people on the planet who got that last part without having to click-through are now wiping liquid off of their monitors)

Be on the lookout for analysis of the finer details of the hearing in the upcoming days.

ORDERED AFTER HEARING
Parties shall file supplemental briefs by 8/27/09. Defendant shall pay Plaintiff $5,000.00 in attorneys fees for bringing the motion.

Maybe now Psystar will figure out that it is not all fun and games with silly threats and contests on your website when dealing with the Federal Court System. Note that it was Psystar itself that was sanctioned, not their law firm.

Since, oddly enough, the English word “sanction” also has the opposite meaning of “to approve,” Wikipedia’s concise layman’s summary of legal sanctions is helpful:

Sanctions are penalties or other means of enforcement used to provide incentives for obedience with the law, or with rules and regulations.[1] Criminal sanctions can take the form of serious punishment, such as capital punishment, prison time, or severe fines. Within the civil law context, sanctions are usually monetary fines, levied against a party to a lawsuit or his/her attorney, for violating rules of procedure, or for abusing the judicial process. The most severe sanction in a civil lawsuit is the involuntary dismissal, with prejudice, of a complaining party’s cause of action, or of the responding party’s answer. This has the effect of deciding the entire action against the sanctioned party without recourse, except to the degree that an appeal or trial de novo may be allowed because of reversible error.

Since no further detail was given, all we can really conclude is that Judge Alsup was annoyed to the tune of $5,000.00. Lauren could have bought herself a totally tricked out Mac Pro for that.

In minor news, the Bankruptcy Court recently corrected a clerical error in its prior Order making it clear that the case was dismissed with prejudice for a period of twelve months (and not six as it had mistakenly said in one part of the prior Order).

In addition to her position as Assistant Editor at World of Apple, dizzle runs idrankthekoolaid, an Apple fangrl satire blog, and is an Administrator and Hostess at MyAppleSpace and their vidcast MASTv.

Typically, in Federal Court, discovery requests and answers are not filed with the Court unless there is some dispute, and even then, they are often heavily redacted as we have already seen with the Letter Brief filed by Apple on April 29, 2009. In fact, the parties had earlier requested, and had been granted, a Protective Order allowing the redaction (or filing under seal) of certain areas of inquiry in any discovery which must be used as an attachment in support of any filing. Due to these circumstances, we know precious little about precisely what types of inquiries were propounded by both parties. However, attached to Rudy Pedraza’s Declaration filed with the Bankruptcy Court were copies of Apple’s Answers to Psystar’s First, Second, and Third Requests for Admission (comprising 181 separate Requests).

General Information on Requests for Admission

 
Before discussing the contents of the filings uncovered, I will give a short primer for the layperson on the nature and purpose of the discovery avenue of “Requests for Admission.”

Requests for Admission are covered under Rule 26 of the Federal Rules of Civil Procedure. The interested reader can go to the link to read the rule and its technicalities in full. But to put it simply, Requests for Admissions are used to determine what items that the parties can agree are true or false and thus will not need to be proven at trial. For example, in an auto accident case, one party may ask the other to admit that it was not raining at the location of the accident at the time of the accident. This would obviate the need to obtain official weather records in order to prove that particular fact. Another common use of Requests for Admissions are to establish the authenticity of documents so that the original author or records custodian of the documents is not required to come into Court at trial simply to tell the jury that the document is genuine and kept in the ordinary course of business. My general philosophy is that attorneys should not ask stupid Requests for Admissions (with stupid being my subjective standard—the Rules are pretty lenient so that worthwhile requests are not chilled, and the responding party has the protection of objecting in detail). My personal opinion of an example of such would be asking the other party to admit that the basis for their case is entirely without merit (which Psystar did in fact do in their requests). That is just inane, and well, insulting to the intelligence of the recipient and contributes to the public perception that a great deal of law practice is silly showboating. Unfortunately, that is the nature of the beast at times in American jurisprudence.

In my particular job as a legal assistant, some cases tend to be very document-intensive. In such situations, Requests for Admissions are very helpful to both sides to get document authentication out of the way which will shorten the trial and spare the jury from strictly pro forma testimony.

Now however boring all of that might seem, one can glean a great deal of a party’s trial strategy and case theories from the Requests made.

Rudy Pedraza’s Representations Regarding Apple’s Responses to Psystar’s Requests for Admissions Numbered 1 through 181

 
Here are the discovery documents that Pedraza provided.

Apple Inc.’s Responses to Psystar Corporation’s First Set of Requests for Admission (Nos. 1–53)
Apple Inc.’s Responses to Psystar Corporation’s Second Set of Requests for Admission (Nos. 54–84)
Apple Inc.’s Responses to Psystar Corporation’s First Set of Requests for Admission (Nos. 85–181)

First, I wonder if Pedraza obtained the permission of Apple of make these publicly available considering that the parties had agreed to keep certain discovery private. In fact, in Apple’s request to the Bankruptcy Court for relief from the automatic stay, its main exhibit was filed under seal to maintain the privacy of the discovery process. I found it difficult to imagine that Apple agreed to this publication.

Here is what Pedraza stated in his sworn Declaration to the Bankruptcy Court:

Notice that Pedraza alleged that Apple failed to answer and instead has objected to all Interrogatories and/or Requests for Admissions in an attempt to further bury Psystar in legal bills without providing any information, and as example, he provides the Bankruptcy Court with Psystar’s 181 REQUESTS FOR ADMISSION! Hello Mr. Pot, there is a kettle over here that suspects you and he share a colour. In examining these Requests we can get a good glimpse into Psystar’s thought processes as to their discovery and litigation strategy. I will extract some broad areas for examination in this article (not intending to cover every minutiae).

Is it TRUE that Apple “failed to answer and instead has objected to all Interrogatories and/or Requests for Admissions”?

 
Short Answer: No, it is not true.

Long Answer: For those with no experience in the legal field, a review of Apple’s responses may appear to support Pedraza’s assertions. However, Apple’s responses are typical form and practice in the legal industry. Lawyers are paid and trained to advocate zealously for their clients to the best of their abilities within the bounds of professional ethics. As such, they look for even the slightest advantage or phrase that they can use to help their client. Therefore, in written discovery, unless a question/request is very straightforward, nearly every answer will be prefaced by certain objections so that they are preserved, and then, the answer will say something to the effect of “however, without waiving said objections, Plaintiff/Defendant responds XYZ.” Pedraza is correct in that Apple provided objections to all the Requests for Admissions (and as I will show, some of Psystar’s requests are just plain ridiculous and tiresome), he is absolutely duplicitous in his claim that Apple failed in toto to answer. Pedraza is not some innocent illiterate from the boondocks who “gosh golly gee” didn’t know that prefacing answers with objections are typical legal pracitce. In fact, I would LOVE to know if Psystar did the exact same thing. Here is a typical Request and Answer from the very first Request propounded (the General Objections referred to are typical prefaces to all discovery responses that form the first few pages):

Apple responded as is typical in legal proceedings. It protected itself as best as possible from any vulnerabilities in poor wording or ambiguity in the Request and then answers to what it represents is the best of its ability. Nearly every single Request and Answer follows this pattern. There are only few that were objected to in full without a denial or admission. In fact, I had to read all the way to Request Number 47 to find the first example. Did Apple use invisible magic ink so that Pedraza could swear to the Court that Apple failed to answer and only objected to ALL Requests for Admissions? Truth has not been Psystar’s trademark. It is not surprising that they conjure up fake facts considering that they make fake Macs.

In fact, the only Requests that were objected to in full were Requests numbered 47, 48, 49, 50, 51, and 53. That is 6 out of 181. Mr. Pedraza appears to have a bit of an exaggeration problem. In my review, Apple readily admitted to numerous issues of fact. In my own job, I have seen Responses come back in which every (or nearly every) Request is denied. However, all that being said, stepping back from my perspective of being accustomed to such filings, I can understand how Pedraza would be frustrated though I find it difficult to have any sympathy since he answered “I don’t know” over 80 times to questions about the finances of his “very small company” (his representation as he loves to continually whinge in order to represent Apple as the fat bully in the sandbox).

While we are talking about Pedraza’s internal reality distortion field, let’s compare these two statements.

First, from Psystar’s response to Apple’s request to the Bankruptcy Court to lift the automatic stay:

Okay, so Apple has not filed a motion for injunctive relief though it is requested in its Amended Complaint. Now notice what Pedraza says:

It seems that in Rudy-land “has not” is equivalent to “unable to” and evidences that Apple’s case is not clear. Interesting. Why? Because Psystar asked for injunctive relief as well in its Amended Counterclaims but also has not filed a motion for same. Will Pedraza apply the same standard to Psystar? Long live Janus.

And let us not forget this zinger:

Is it true that Psystar ”made every effort to provide them all the documents in our possession”? Well only if you believe not even bothering to print out email attachments and giving potentially contradictory statements as to whether they even still exist comprises making every effort. In my world, the sky is blue, and that is not making every effort.

Moving on…

What can we glean about Psystar’s case strategy from these Requests for Admissions?

 
Obviously I cannot bore you to death by going through all 181 requests individually. Well, technically I could, but I won’t. I have grouped what seems to be the most important and interesting categories for brief discussion with selected example Request(s) and Answer(s) for examples.

Category: Vendors other than Apple sell the “Mac OS.”

Apparently Psystar believes that it is somehow pertinent that users may obtain OS X from entities other than Apple. How that is relevant is beyond me. The consumer does not buy Windows directly from Microsoft; does that somehow denigrate Microsoft’s interest in controlling their intellectual property? The consumer does not generally buy books directly from the authors; does that mean they can produce unauthorized derivative works at will? I would conjecture that Psystar is attempting to piggy-back a case that since the OS is available outside of Apple that Apple has no right to dictate how it can be used. This seems even more likely to be the goal when considering the next category.

Category: Consumers can buy a retail box of the “Mac OS” without purchasing any other Apple product.

Once again, the relevance fails me. A person may buy a copy of Leopard and use it for kindling if they wish. A person can be given a Macintosh upon which they install the product. This is inanity. My guess, again, is that Psystar is attempting to show that although Apple has placed restrictions on the use of the product; it has not required any proof or point of sale proof of being able to actually enforce the restrictions.

Category: It is possible to install and run the “Mac OS” without modifying the “Mac OS” on machines manufactured by vendors other than Apple.

And

Okay, this category is more substantive and appears to be geared towards defeating Apple’s claim of violation of the DMCA which requires anti-circumvention technology. Yet, and interestingly separated by over thirty Requests, Psystar appears to pursue a completely different admission as follows (for example):

I have noted this contradictory tension in prior articles here and here. I must note, however, it is not unusual in Requests for Admissions for a party to ask for two contradictory admissions in order to pin the opposing party to commit one way or the other.

Category: Apple has no copyright rights on any code which is licensed to Apple under an open source license.

I think that is a very valid and interesting point raised by Psystar. I know basically nothing about code and programming so I can only comment on the issues it may pose in this case taking what Psystar is alleging as true. Is Apple’s code a derivative work? and if so, how does that affect the intellectual property rights? My gut reaction is that this argument is NOT good for the open source community or organizations pushing for open standards. Why would a company want to risk losing its intellectual property rights simply because it mixed open source code with its proprietary code? This is just one of the many points that irritates me about some Psystar supporters. Get this straight: Psystar is NO friend of the open source community and “open-ness.” They are just a couple of guys looking to make a buck without much care of how it affects anyone or anything else. There is a reason why the osx86 Project creator is no fan.

Category: Ahhh, we’re right! Just admit it!

 
I am sorry, but I found these next Requests hilarious along the lines of “when did you stop beating your wife?” These are allowable under the Rules as far as I can see, but in my personal opinion this is the type of nonsense that causes people to think poorly of the law and attorneys.

Category: Lack of Real Damages

Basically Psystar wants to establish that even if there were some violation of copyrights or other intellectual property rights; Apple suffered no quantifiable damages from Psystar, presumably because Psystar paid full retail price for each of its copies of Leopard (allegedly) and that its customer base wouldn’t have purchased an Apple-labeled computer due to the higher cost. This of course ignores other intangible losses such as brand dilution and the like (though Psystar did address those in separate Requests).

Category: The Clone program was profitable. Or was it?

Eh? So if Apple made money, then the big, bad corporation wants to make more money (as if that is inherently wrong), and if they didn’t, well that is why they want to persecute poor little Psystar. Tails Psystar wins, Heads Apple loses. Ahem.

Category: Go ahead Apple, admit you want to make money.

Apple is not a charity and wants to make the most money possible. Shocking I know. Somehow I suspect that Psystar would also like to make as much money as possible. In fact, I have it through the grapevine that Rudy has bragged about his own ambitions to be filthy rich.

Category: Ignorant Consumers

Shall Apple waterboard them until they do? Seriously, if anyone states that they have read and agree to certain terms and conditions, the other party has every legal reason to rely upon that declaration (assuming mental competence, age, etc.) I admit it; I have never read any EULA. But I also would never claim that my agreement to something I didn’t read is anyone’s problem but my own. Further, its not as if the end-users are agreeing to something that is a well-kept secret or outlandish.

Category: Apple is the exclusive licensor of “Mac OS,” and has in the past licensed it to other entities who then sold Macintosh “clones” to the public.

It seems, Psystar wants to establish the foundation that Apple as a company had no issue with a business model that included third-party licensing. The inference that Psystar might want to draw from this is that Apple should not have an issue with it today; and it was a viable business model in the past. My response: So? Businesses can change their models for whatever legal reason they choose. Psystar puts some distance between these Requests and the following:

Category: It’s all Steve’s fault (and he’s a hypocrite).

The video linked to above has since been removed, but here is another copy of it (light profanity warning).

Last year my best friend said she would give me a thousand dollars and has since changed her position after figuring out that she was better off keeping it. That basically is what their argument amounts to. It is so vapid I am almost without words. Will Psystar be suing Apple when they eventually include the Bag ‘O Hurt also known as Blu Ray? Psystar has changed its positions faster than Linda Blair has spun her head so I find this beyond chutzpah or the Dunning Syndrome on their part.

Category: All Steve Jobs stated that Apple wanted from its licensees was that they pair their “fair share” for the licensing rights and that said “fair share” would be the retail cost.

Psystar seems poised to argue that it is fulfilling what Steve Jobs wanted prior cloners to do: pay full retail price. Yes, this is hopelessly naive and simplistic, but that appears to be their point. And I hate to give them a much needed reality-check: the technology world is not the same as it was a decade ago.

Category: Apple is picking on us!!! Or put another way, Apple is aware of other third parties who are violating the EULA, such as the osx86 project, but has not sought to enforce the EULA against them.

That sound you hear is Psystar attempting to throw the Hackintosh hobbyist community under the bus so that they can make a buck off of someone else’s work. In legal strategy, they seem to be claiming selective enforcement and waiver. However, I think this will be a tough row to hoe since Rudy was well aware that they were purposefully spitting in Apple’s pie and didn’t really care if they got sued.

Category: Apple informs the public that a purchaser owns the actual physical media which contains the software. Further, Apple has never requested the return of the physical media.

I feel dumber just reading and writing that. Let’s move on.

Category: Installing the software creates a copy on the user’s machine and in the RAM each time the software is executed.

I didn’t think it could get worse. It did. It has already been decided in a case cited earlier (I could get the case if someone really, really wants it) that the machine loading a “copy” into RAM isn’t a license violation and basically is a useless argument against licenses.

Category: Licensing rather than sale is done to circumvent 17 U.S.C. §109, §117

 
and

Category: Apple’s EULA defining the software as licensed and not sold is intended to keep the software from being installed on machines made by other vendors.

This right now is their best argument, but unfortunately for them; the District in which this suit is filed has not been persuaded by this line of reasoning in the past.

Category: Apple hardware is not covered by any Apple copyrights, and Apple-labeled hardware is not expressly defined in Apple’s filings.

and

Category:Apple has alleged that Psystar has violated multiple sections of U.S.C. 17 and one or more licenses attached to Apple’s filings.

This line of argumentation was discussed pretty thoroughly here for the interested reader. Again, this is part of their stronger points (the word “stronger” being used in a very loose manner).

Category: Apple distributes labels that resemble the Apple logo with the “Mac OS” and that people can put those stickers on any computer.

Oh come on!!! You’ve have GOT to be kidding me. That is almost as bad as this:

Category: Apple-labeled computers may be purchased from Apple’s websites.

Okay……

Category: Exhibits 13 through 15 from the March 19, 2009 deposition of Rudy Pedraza cannot by authenticated or verified by Apple.

Without knowing what these documents are, it is difficult to comment. Apparently there are documents that Psystar doesn’t like and wishes to put as much distance between it and them as possible.

Category: Apple purchased computers from Psystar both before and after July 3, 2008.

Okay….. so now we know who bought the ones that were sold to entities other than Engadget and the like.

Category: Apple dissembled, decompiled, and reverse-engineered a Psystar restore disc.

Okay…..

Category: Any two or more copies of the “Mac OS” install disk are the same for all intents and purposes.

I am not at all sure what they are driving it besides a colossal tribute to Captain Obvious. Well this look into their prior discovery will assist in my upcoming articles on the newest bizarre twists that this case has taken over the past week. Be on the lookout for more! Oh goody!

Remember, I am NOT an attorney and any legal opinions would have to be determined by a properly licensed and qualified attorney.

In addition to her position as Assistant Editor at World of Apple, dizzle runs idrankthekoolaid, an Apple fangrl satire blog, and is an Administrator and Hostess at MyAppleSpace and their vidcast MASTv.

The article goes onto mention that Google may find itself in some bother over the company denying the use of the VoIP Skype on the Android phone platform.

Consumers who use Android, the Google-developed operating system for wireless devices, can’t use Skype, a leading Voice over Internet Protocol (VoIP) service. A pioneer in free Internet calling, Skype allows you to talk as long as you want without draining cellphone minutes.

Android users get Skype Lite, a watered-down version of the original that routes calls over traditional phone networks — not the Internet. As a result, long-distance calls are still cheap or free, but cellphone minutes are gobbled up every time a Skype Lite call is made.

Google has reportedly been asked to address its own application approval process for Android as part of the FCC’s investigation.

Additionally Apple has filed numerous documents under seal (private) with the California Federal Court. World of Apple is determining what little information may be gleaned as a matter of public record. From the brief review, Apple is contending that Psystar purposefully and willfully destroyed relevant evidence that it infringed upon Apple’s code. Specifically, while Psystar may not NOW be using Apple’s code (arguably), it has in the past and has conveniently lost all evidence of that fact. The plot thickens. It seems that Psystar are precisely the bad boys I have suspected.

The last activity we reported in the California case was the news that Psystar requested leave for substitution of counsel. Their proposed new lead law firm is none other than Camara & Sibley, LLP of Houston, Texas; the firm that represented Jammie Thomas against the RIAA in which Ms. Thomas not only lost, the RIAA was awarded even more monetary damages than sought. I am not so certain that such a recent track record should recommend itself to Psystar who’s less than forthright activities and thus far shaky legal position are not exactly pristine. Ms. Thomas’ loss was due to a combination of many factors and cannot be placed solely, if at all, at the feet of the skill of her attorneys (and I agree with Groklaw that the damages are unconscionable). Case decisions involve many complex relations that cannot be reduced so easily, and it appears that the jury followed the law as written—law which is highly hated by many and arguably unduly oppressive. That being said, however, if I were Psystar, I would be concerned that perhaps their new firm cannot rehabilitate their blackened case and image; fair or not. Jammie was a sympathetic defendant; Psystar is not.

Previously, I had been curious and speculated as to why Psystar might have retained a Texas law firm. One theory, which I stated as absolutely pure speculation, now appears extremely unlikely. The Texas location of the new firm appears to be entirely coincidental to the notorious reputation of one Texas court District. Camara & Sibley positions itself as a flat fee/contingency fee firm that allows their clients to limit their legal fee exposure and “make intelligent decisions about whether and when to settle or compromise.” For Psystar, who “may” (they aren’t talking) be planning on stiffing their prior counsel, that would be an attractive benefit (the cost part—I am not convinced of the intelligent part considering that their CEO answered “I don’t know” over eighty times to basic financial questions during his 30(b)(6) deposition). The firm’s home page boasts this image:

I called their offices to confirm that the yellow dots represented active matters rather than local offices. The caption of “active matters nationwide” appeared after my phone call. Their representative did tell me that the website was under active construction and not yet complete. As you can see, there is a South Florida connection which may be how they became involved with Psystar. I performed a Florida Southern District check and could not find either named partner as being listed as counsel on any case, active or otherwise. I also performed searches in the state court system dockets for Miami-Dade, Monroe, and Broward counties without success. As the firm’s page does not list associate attorneys it is possible that there is an associate involved in an active case or that there is a specialty docket that I did not search as I made the assumption that the most likely case involvement would be in the civil state court or civil federal court system for the South Florida area.

Recent Case Activity

July 23, 2009: The parties filed an agreed Stipulation to Continue Settlement Conference due to the fact they are they busily conducting discovery, and Psystar’s recently retained counsel needs time to get up to speed so that the conference can meaningfully proceed. On July 24, 2009 the Court agreed to postpone the settlement conference until October 6, 2009 (see page three of previous link). This date change does not affect the trial date or any other deadlines.

July 27, 2009: The Court granted Kiwi Camara’s Application to Appear Pro Hac Vice on behalf of Psystar. Wikipedia provides a good definition of “pro hac vice” for those unfamiliar with the term:

Pro hac vice, Latin for “for this occasion” or “for this event,” (literally, “for this turn”) is a legal term usually referring to a lawyer who has not been admitted to practice in a certain jurisdiction but has been allowed to participate in a particular case in that jurisdiction.

Lastly, the transcript of the January 22, 2009 hearing regarding Psystar’s copyright misuse counter-claim is now publicly available. World of Apple had purchased a copy right after the hearing and reported on it here.

In addition to her position as Assistant Editor at World of Apple, dizzle runs idrankthekoolaid, an Apple fangrl satire blog, and is an Administrator and Hostess at MyAppleSpace and their vidcast MASTv.

To offer some background, Google Voice is a service originally known as Grand Central, at the most basic function Google Voice offers a single phone number of your choice that will ring multiple phones, e.g. work, home, mobile, etc. Along with this unified number there is also a unified voice mail system, accessible via the web. Google Voice also allows listening in on voice mails as they’re being left, setting custom away messages for different callers, blocking of telemarketers and many more features.

Several third party Google Voice apps had been available on the App Store for some months and Google had submitted the official app for review not long ago. The apps main functions are to facilitate dialling out of the phone using the Google Voice number, sending SMS messages, showing a call history and access to the online voicemail system.

On July 27 Apple rejected Google’s official iPhone app and removed all the previously approved apps from the App Store causing uproar amongst the media and iPhone owners. At the time it was unclear whether the decision was Apple’s or AT&T’s, it was later revealed that AT&T was most likely behind the ban.

Today it has been revealed that the U.S Federal Communications Commission has taken interest in the matter. In letters sent to Google, AT&T and Apple the FCC makes mention to an ongoing case started by Skype which questions wireless open access and also another case regarding handset exclusivity.

All the letters as well as the document containing details about RM-11361 can be seen below.

Petition to Confirm a Consumer’s Right to Use Internet Communications Software and Attach Devices to Wirele…

FCC letter to Apple

FCC Letter to AT&T

FCC Letter to Google

On the Bankruptcy docket there are just two entries which do not have associated filings as follows:

07/17/2009 46 Meeting of Creditors Held and Concluded Filed by U.S. Trustee Office of the US Trustee. (^UST13, DD) (Entered: 07/17/2009)

07/17/2009 47 Until Further Notice, the United States Trustee Will Not Appoint a Committee of Creditors Pursuant to 11 USC Section 1102. Filed by U.S. Trustee Office of the US Trustee. (^UST13, DD) (Entered: 07/17/2009)

To put this in context, here is the prior entry from July 2, 2009:

07/02/2009 45 Notice of Hearing (Re: 44 Motion to Dismiss Case Voluntary Filed by Debtor Psystar Corporation.) Hearing scheduled for 08/04/2009 at 02:00:00 PM at 51 SW First Ave Room 1406, Miami. (Howlan, Elaine) (Entered: 07/02/2009)

Apparently there was a confidential meeting of the creditors held, and it was decided at this time that a committee will not be appointed. I suspect that this is due to the prior docket entry showing there is a pending hearing date upon which Psystar might be released from bankruptcy. Remember, that is not a dead certainty despite the fact that Psystar misrepresented that it was to its customers via its newsletters.

Basically, this is all pro forma at this points, but it shows that both Courts are moving their dockets along.

Now here is my speculation. It seems apparent that there was some conflict of interest over the outstanding legal bills which were disclosed in Psystar’s Bankruptcy filings, thus, a change was needed on those grounds. However, my attention was drawn immediately to the retention of Texas counsel. It could mean absolutely nothing, but Texas courts are well-known (though this reputation is disputed) for being friendly to Plaintiffs in intellectual property cases. For example:

Juries in East Texas, unlike those in Houston, Dallas or Austin, are much less likely to have a member with any technical training or education, which exacerbates the problem from the defense perspective, but makes East Texas federal courts an attractive venue for would-be plaintiffs, who know that the jury will, instead, gravitate toward softer or superficial issues that are difficult to predict.” The result is to facilitate the activities of what Tyler calls “patent pirates”: enterprises that exist to file patent suits rather than to manufacture products, and which benefit from asymmetrical costs of litigation (discovery in a patent case can cost the manufacturer-defendant a million dollars or more, while the plaintiff license-holder may have few or no documents worth discovering).

(via Overlawyered)

Even though that quote deals more with patent cases, the same reputation is true of intellectual property cases in general. Psystar would definitely benefit from a less technically savvy jury pool. So, you might ask, how is this relevant since Psystar is the Defendant? Well, don’t forget that they are also a Plaintiff in their countersuit, and not liking the cool reception in California, might want to try their hand in Texas. This is sheer speculation. I have no idea or basis as to how it would be possible to get this case moved or a sister case opened in Texas. It may be totally impossible. However, I find it hard to find it merely coincidental that a Texas attorney was retained. Perhaps it was simply for his experience in similar successful cases. I am positive more information will be forthcoming.

It is the responsibility of counsel to ensure that whatever discovery is needed for all sides to evaluate the case for settlement purposes is completed by the date of the settlement conference.

Does this mean that someone who can do more than answer “I don’t know” more than 80 times when asked financial questions about Psystar will give a 30(b)(6) deposition within the next several weeks? Will those elusive email attachments be printed and produced to Apple?

Any party who is not a natural person shall be represented by the person or persons not directly involved in the events which gave rise to the litigation but with full authority to negotiate a settlement.

This may be common in California, but I have never seen such a stipulation in mediation orders on cases that I have worked on as a legal assistant. This means that although Rudy Pedraza may attend (as he certainly will), he cannot be the person at the conference who has the authority to settle the case. This is somewhat illusory since whatever authority any other designated person is given will have been given by Rudy, but I suspect the reason for this provision is to have such authority given outside of the mediation itself which can get highly emotional. This way, the amount of potential settlement is decided in a more calm state of mind.

Also, it appears that the Court is ordering a second mediation by its statement in Paragraph 18:

This matter is hereby REFERRED to MAGISTRATE JUDGE BERNARD ZIMMERMAN for MEDIATION/SETTLEMENT.

No deadline for this second mediation is given, thus I expect that to be designated in a future Order, likely coming from Magistrate Judge Zimmerman.

Here is the entire Order if you would like to read all of the nitty-gritty.

A Closer Look at the Declaration of Rudy Pedraza

Though I was reluctant to definitively state in “my last article that the motivation for, and the timing of, Psystar’s bankruptcy was to elude complying with the Court order to pony up financial information and produce a representative that could say more than “I don’t know” at deposition, upon multiple readings of the Pedraza Declaration, there is no doubt. He basically admits as much in his “Declaration. How so? Remember that the context of this Declaration is Psystar’s opposition to Apple’s request to the Bankruptcy Court to life the automatic stay of the California case. Let’s connect the dots.

One. Pedraza unilaterally claims that there are no issues of fact before the Court.

That is patently untrue. Just off the top of my head without even going line by line through Apple’s Amended Complaint, Apple alleged that Psystar has modified Apple’s code (a disputed matter of fact), did not purposefully lead the public to associate itself with Apple by using the name “OpenMac” (a disputed matter of fact), and that they are in cahoots with ten as-yet-unidentified John Does (a disputed matter of fact). Unless Psystar is now admitting all of these issues, those are disputed issues of fact. It is simply ludicrous and less-than-honest to claim in a sworn document to a court that such is the case. It may turn out that any issues of fact turn out to be trivial; however, the Court has not declared that as of this date. To borrow a line from Psystar’s attorney Colby Springer, just because Pedraza wishes this to be the case does not make it so. In other words, if wishes were fishes we would all cast nets.

Two. Pedraza claims that Apple has engaged in extensive and unnecessary motion practice. I am sorry, but Pedraza is either woefully ignorant of complex legal cases or his nose grew when he swore to this. Let’s look at the facts.

On September 30, 2008, Apple filed a Motion to Dismiss Psystar’s Counterclaims. Up until this point, the two law firms were acting very judiciously by agreeing to give each other extensions for various items (and continued to do so) rather than running to the Court. Since this Motion was granted by the Court, I think it can hardly be called an unnecessary motion.

On November 26, 2008, Apple filed a Motion for Leave to File an Amended Complaint. Psystar agreed to this motion obviating any need for further Court involvement. That hardly seems like an unnecessary motion.

On December 8, 2008, Psystar filed a Motion for Leave to File an Amended Countersuit.

On December 30, 2008, Apple filed its opposition to the Amended Countersuit, which was granted in part. Again, obviously not unnecessary.

On February 25, 2009, the parties filed a JOINT Motion for Protective Order.

On April 29, 2009, Apple filed its Letter Brief alleging non-compliance with discovery. Apple prevailed in this regard. Obviously, once again, a meritorious filing.

I am sorry folks, but the above history is hardly indicative of extensive and unnecessary motion practice. I would love for Mr. Pedraza to take a look at some of the cases that I routinely work on. The records are publicly available. This particular case has gone rather smoothly between the two law firms with minimal need for motion practice and Court involvement.

Three. Pedraza claims that Apple simply pursued frivolous discovery in an attempt to stonewall and bury them.

The Court record proves otherwise. Judge Alsup found it was unreasonable that a computer company could not figure out that it should simply print-out email attachments if they had some file corruption that prevented them from being electronically duplicated; that Psystar did not make a good-faith attempt to get basic requested records; and that answering “I don’t know” over 90 times to relevant questions in a 30(b)(6) deposition was not acceptable. Project much Mr. Pedraza? I agree there was stonewalling going on, but the fingers pointing back at Psystar are the four fingers of the truthpocalypse.

Four. Pedraza asked the Bankruptcy Court to lift the stay, but hobble Apple so that it could not pursue its discovery rights that were granted by the California court.

It is crystal clear. Things didn’t not work out as Pedraza had hoped and someone is going to finally have to answer those questions that Apple has been asking. Methinks Mr. Pedraza doth protest too much.

I believe it is helpful to provide a timeline of events leading up to the current posture of this matter, and I have done so at the conclusion of this piece with links for additional reference and past World of Apple analysis to those who are interested. Additionally, within the timeline I have provided copies of previously obtained transcripts that have not been posted elsewhere. I am able at this time to post them as the time limit noted in the Federal Court docket for public release has passed.

Current Status

On June 11, 2009, the Bankruptcy Court denied Psystar’s request for continued use of its check stocks and deposit slips but granted Psystar’s request to continue to use its business forms. This has been misreported in several places leaving the impression that Psystar was allowed to use none of its business documents while in fact they were allowed the use of some.

However, it is significant that they were denied access to their bank accounts. The exact reasons are somewhat mystifying as it is my understanding that such requests are routinely granted, though often with the requirement of a notation on the forms indicating that the business is in bankruptcy status. One factor may certainly be the fact that Psystar’s two requests did not satisfy the Local Rules for such requests which require the amounts in said accounts to be disclosed.

(J) Motions for Authority to Maintain Prepetition Bank Accounts. A motion seeking authority to maintain prepetition bank accounts shall include:

(1) a schedule listing each prepetition bank account which the debtor seeks to maintain postpetition;

(2) the amount on deposit in each such account as of the petition date; and

(3) whether the depository is an authorized depository pursuant to 11 U.S.C. §345(b).

If the debtor is unable to provide the foregoing information, the motion shall set forth the reason why such information is not available, and provide an estimate as to when the debtor shall be able to supplement its motion with such information.

This appears to be yet another example of Psystar desiring to hide financial information at worst or sloppy lawyering at best. There simply isn’t enough information to form a solid theory though the pattern and practice of Psystar’s hiding the financial ball certainly is the circumstantial culprit.

On June 5, 2009, Apple requested that the Bankruptcy Court lift the automatic stay of proceedings in the California Court case and argued that the outcome of that case must be adjudicated as Psystar’s very business model depends upon its being able to use intellectual property claimed by Apple. Psystar opposed arguing that it would be prohibitively costly for it to maintain both proceedings simultaneously. On June 19, 2009, the Court granted Apple’s request. If in fact Psystar was hoping that the bankruptcy would stall Apple’s probe into their finances and potential backers; it didn’t succeed. That was certainly Apple’s theory as to the timing:

What I found odd in Apple’s request is that in its description of its amendments to its original complaint, the ten John Doe defendants are glaring in their absence:

However, there was another document filed at this time that has received little to no attention from the Apple web: the Declaration of Rudy Pedraza. In that document, Psystar openly declared that it is considering a second bite at the anti-trust apple in a future suit filed under Florida state laws rather than Federal.

On July 1, 2009, Psystar requested a voluntary dismissal from the bankruptcy proceeding. Below are the pertinent portions distilling their position.

I personally believe that there is an elephant in Psystar’s warehouse that is left unmentioned in this pleading: a bankruptcy trustee could unilaterally reach a settlement with Apple if the case is ongoing. I might be mistaken in this as I am not an attorney and do not claim significant knowledge of bankruptcy proceedings, but that was one of my first thoughts which was also mentioned by P.J. at Groklaw:

[T]his is an argument they have to make to persuade the judge that this motion should be granted instead of just shutting the company down in Chapter 7, with a trustee appointed to take over for the current management, who could settle the litigation, maybe tell Apple who was behind all this, and turn out the lights. Leaving Chapter 11 is their best option, they argue. Maybe their one and only, others might be thinking. Or, it’s all just chess. If Psystar has secret backers, then they maybe could afford to do both, but they’d prefer not to continue with a strategy that didn’t pan out.

As discussed above, Apple has yet to response to Psystar’s request.

Psystar’s Attempt at Rehabilitating its Public Image

As I am on Psystar’s mailing list, a few days ago I received this tactless email (in my personal opinion which is founded on my belief that Psystar is an opportunistic leach of a company—yes, that is an entirely subjective personal opinion):

Upon receipt, I immediately forwarded a copy to Apple and its attorneys. The part that I found particularly tasteless was Psystar’s attempt to paint itself as some champion of the “little people,” when in fact their own EULA is hypocritically more restrictive than Apple’s. Further, the twist on the common lemonade saying to “When life gives you apples, make applesauce,” is embarassingly unfunny. Life didn’t “give” them apples. They purposefully sought a fight and are not some innocent victims. Additionally, their parasitic business model depends upon the very company that they boast to grind into sauce. Without Apple’s work, there would be no Psystar. The analogy that comes to mind is a virus that requires its host to survive but mindlessly kills it at times.

All that aside, there is some interesting information revealed. Apparently this new product announcement is going to be the mystical goose that laid the golden clone in order to convince the bankruptcy judge that they should be released from the bankruptcy proceedings because they have found a viable product to revitalize their business. That is a very slim reed. Psystar also brazenly claims that they will be formally discharged by the Bankruptcy Court. I would suggest that Apple file a Motion to Inspect Psystar’s Crystal Ball.

What’s Next?

Now that the Bankruptcy Court has lifted its Stay, and Psystar apparently agrees, the California Federal Court will proceed. However, due to the interpolated bankruptcy case the Scheduling Order may need to be amended, and a hearing to discuss that issue is scheduled for 7/9/09. Additionally, since it is unknown whether Psystar met the 5/18/09 deadline to produce financial records, that may also be an outstanding issue to be addressed by the Court. If Psystar failed to meet that deadline (which was prior to its bankruptcy filing), they will likely be required to pay Apple’s attorney’s fees with regards to that portion of the discovery dispute. A new date for the supplementary 30(b)(6) deposition will need to be decided as the prior date became mute when Psystar filed for bankruptcy before it arrived. Additionally, as already mentioned, Apple has yet to file a response to Psystar’s request for voluntary dismissal (if they are permitted a response—I do not know bankruptcy cases well enough to say for certain, but since Apple features so prominently in Psystar’s request, it would seem reasonable to presume Apple would be permitted to respond.)

Timeline of Major Events

The majority Northern District case docket can be found at Justia with hyperlinks to the actual filings. As Justia can be about one week behind, here is a copy of the docket as it existed on 7/4/08.

April 2008: Miami-based Psystar begins selling desktop Mac clones from its website.

June 2008: Psystar adds a rack-mount server Mac clone to its line-up.

3 July 2008: Apple files its Complaint against Psystar in the Northern District Court of California.

8 August 2008: Psystar files its Apple files its Motion to Dismiss Psystar’s Counterclaims.

16 October 2008: Psystar files its Opposition to Apple’s Motion to Dismiss. World of Apple reported on this filing here.

23 October 2008: Apple files its Reply to Psystar’s Opposition to its Motion to Dismiss. World of Apple reported on this filing here.

6 November 2008: Case Management Conference held before Judge Alsup.

6 November 2008: Hearing held on Apple’s Motion to Dismiss Psystar’s Counterclaims. World of Apple reported on this filing here. Now for the first time, and only on World of Apple, a copy of the entire transcript of this hearing may be found here.

7 November 2008: The Court enters the Case Management Scheduling Order. World of Apple reported on this filing here.

18 November 2008: The Court enters its Order Granting Apple’s Motion to Dismiss. World of Apple reported on this filing here and here.

26 November 2008: Apple requests Leave of Court to file its Amended Complaint with Psystar’s Consent. World of Apple reported on this filing here.

2 December 2008: Apple files its Amended Complaint adding ten “John Doe” co-defendants and a DMCA count. See article above for our commentary.

8 December 2008: Psystar files its Motion for Leave to File its First Amended Counterclaims. World of Apple reported on this filing here and here.

16 December 2008: Psystar files its Answer to Apple’s Amended Complaint. World of Apple reported on this filing here.

30 December 2008: Apple files its Opposition to Psystar’s Motion for Leave to File its First Amended Counterclaims. World of Apple reported on this filing here and also provided a four-part issue analysis:

• Part One
• Part Two
• Part Three
• Part Four

8 January 2009: Psystar files its Reply to Apple’s Opposition to its Motion for Leave to File its First Amended Counterclaims. World of Apple reported on this filing here.

22 January 2009: Hearing held on Psystar’s Motion for Leave to File its First Amended Counterclaims. World of Apple reported on this filing here. Again for the first time, and only on World of Apple, a copy of the entire transcript of this hearing may be found here.

6 February 2009: The Court enters its Order Granting in Part and Denying in Part Psystar’s Motion for Leave to File First Amended Counterclaims. World of Apple reported on this filing here.

12 February 2009: Psystar files its Amended Counterclaim for Declaratory Relief Against Apple based on its new theory of copyright misuse. World of Apple reported on this filing here.

18 February 2009: Mediation conducted. No settlement was reached.

3 March 2009: The Court enters its Order Granting the Parties’ Joint Motion for Protective Order. World of Apple reported on this filing here.

4 March 2009: Apple files its Answer to Psystar’s First Amended Counterclaims. World of Apple reported on this filing here.

20 March 2009: Deposition taken of Psystar CEO Rudy Pedraza.

29 April 2009: Apple files its Letter Brief Regarding Discovery Dispute. World of Apple reported on this filing here.

4 May 2009: Psystar files its Letter Brief in Response to Apple. World of Apple reported on this filing here.

5 May 2009: Hearing held on discovery dispute between the parties.

8 May 2009: The Court enters its Order Compelling Psystar’s Production of Financial Documents and 30(b)(6) Deposition.

18 May 2009: Court-ordered deadline for Psystar to produce certain categories of financial documents.

The entire Bankruptcy docket may be viewed here.

21 May 2009: Psystar files for Chapter 11 Bankruptcy in the United States Bankruptcy Court for the Southern District of Florida and also requests that it be allowed to maintain its existing bank accounts.

26 May 2009: Psystar files its Suggestion of Bankruptcy with Attached Copy of Bankruptcy Petition with the California Court.

1 June 2009: The California Court enters its Order Staying Case.

3 June 2009: Court-ordered deadline for Psystar to produce a knowledgeable representative for a 30(b)(6) deposition regarding Psystar’s finances.

5 June 2009: Apple requests the Bankruptcy Court for relief from the automatic stay. World of Apple reported on this filing here.

9 June 2009: Bankruptcy schedules filed by Psystar. A virtual storm of inaccuracies blew through the Apple web over the $75,000.00 value that was assigned to the Apple lawsuit. World of Apple reported on this filing and the many misconceptions here.

11 June 2009: The Bankruptcy Court denies in part and grants in part Psystar’s request to continue to use its business forms and records. This is discussed above.

15 June 2009: Psystar’s files its Response to Apple’s Request to Lift Automatic Stay.

19 June 2009: The Bankruptcy Court grants Apple’s request to lift the automatic stay.

25 June 2009: Apple puts the California Court on Notice that the Bankruptcy Court granted its request to lift the automatic stay.

26 June 2009: A Case Management Conference for the California case is set for 7/9/09.

1 July 2009: Psystar files its request to the Bankruptcy Court for Voluntary Dismissal.

9 July 2009: Scheduled date of Case Management Conference with the California Court.

4 August 2009: Hearing scheduled for Psystar’s request to the Bankruptcy Court for Voluntary Dismissal.

Apple has yet to respond to Psystar’s request. This is discussed above.

I had been feeling under the weather for about a month and thus the delay in getting this information to my readers. Thank you for your patience, support, and loyalty. [Editors note – big thanks to dizzle for this superb work.]

Please look for a summary of the status thus far as well as some interesting tidbits not yet reported here (or elsewhere that I have seen) over this weekend.

It was reported at the time that the Palm Pre emulates an iPod therefore tricking iTunes into syncing with the device, in Apple’s support note titled “About unsupported third-party digital media players” the company warns that future updates to iTunes could break such features.

Apple designs the hardware and software to provide seamless integration of the iPhone and iPod with iTunes, the iTunes Store, and tens of thousands of apps on the App Store. Apple is aware that some third-parties claim that their digital media players are able to sync with Apple software. However, Apple does not provide support for, or test for compatibility with, non-Apple digital media players and, because software changes over time, newer versions of Apple’s iTunes software may no longer provide syncing functionality with non-Apple digital media players.

Several days ago (I have been a bit ill and could not write this piece until now), Psystar filed its required Summary of Schedules with the Florida Bankruptcy Court. A copy of this filing may be viewed here. On Page 10, as part of “Schedule F — Creditors Holding Unsecured Nonpriority Claims,” Apple’s claim is listed as being valued at $75,000.00.

Misinformation from the Apple Web. Again.

Recently, Macworld reported that Psystar claimed that Apple has a $75,000.00 claim against them and proceeded to ignorantly speculate on how that dollar figure was calculated. Specifically:

It’s possible that all or part of the $75,000 represents Mac OS X orders Psystar placed with Apple. At the list retail price of $129 per license, the $75,000 translates into 581 copies of Leopard.

Umm. What? It is apparent that the writer of this piece knows very little about the law. Anyone at all familiar with the Federal Court system would know immediately why that figure was chosen.

Please see Section 1332 of the United States Code:

(a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between—
(1) citizens of different States;
(2) citizens of a State and citizens or subjects of a foreign state;
(3) citizens of different States and in which citizens or subjects of a foreign state are additional parties; and
(4) a foreign state, defined in section 1603 (a) of this title, as plaintiff and citizens of a State or of different States.

Notice the value there? $75,000.00. If we return to Apple’s Amended Complaint, Paragraph 19, under the heading, Jurisdiction and Venue, we read:

This Court has subject matter jurisdiction pursuant to 28 U.S.C. sections 1331, 1332 and 1338 because this action arises under the copyright and trademark laws of the United States, there is complete diversity of citizenship between the parties, and the amount in controversy exceeds $75,000.00.

Apple’s Prayer for Relief did not name a sum certain so the only certainty as to the value of Apple’s claim (if successful) is that Apple has claimed that it meets the $75,000.00 threshold (technically, the threshold is $75,000.01) required for Federal jurisdiction. That is all that bankruptcy filing means. This is really basic stuff here folks. Right next to that amount Psystar acknowledged that the claimed amount was unliquidated. Here is a definition of that term as used in law:

DAMAGES, UNLIQUIDATED. The unascertained amount which is due to a person by another for an injury to the person, property, or relative rights of the party injured. These damages, being unknown, cannot be set off against the claim which the tort feasor has against the party injured.

So there is no need to speculate. It is a matter of routine.

Now, there is something MUCH more interesting in the bankruptcy filing and that is that Psystar claims over $3,011,682.80 in assets. Yes, you read me correctly. $3,011,682.80 in assets. Their personal property comprising inventory, office equipment, and a small bank account is valued at $11,682.80; so where is the remaining $3,000,000.00? Here is what Psystar claims is worth that amount (see Page 6):

Proprietary bootstrap technology, operating system interoperability technology, manufacturing process technology and safeupdate screening technology.

Sidenote: I thought these guys were the champions of non-proprietary software? Oh yeah, that’s right. Their EULA is even more restrictive than Apple’s.

Additionally, the filing reveals that Rudy Pedraza’s investment of $120,000.00 previously mentioned is actually credit card debt (see Page 12). Ouch.

On a final front, Apple’s Motion for Relief from Stay is scheduled for hearing on June 17, 2009.

(1) whether relief would result in a partial or complete resolution of the issues;
(2) lack of any connection with or interference with the bankruptcy case;
(3) whether the other proceeding involves the debtor as a fiduciary;
(4) whether a specialized tribunal with the necessary expertise has been established to hear the cause of action;
(5) whether the debtor’s insurer has assumed full responsibility for defending it;
(6) whether the action primarily involves third parties;
(7) whether litigation in another forum would prejudice the interests of other creditors;
(8) whether the judgment claim arising from the other action is subject to equitable subordination;
(9) whether movant’s success in the other proceeding would result in a judicial lien avoidable by the debtor;
(10) the interests of judicial economy and the expeditious and economical resolution of litigation;
(11) whether the parties are ready for trial in the other proceeding; and
(12) the impact of the stay on the parties and the balance of harms.

In my opinion, the essence of Apple’s strongest arguments are contained in the following statements:

As applied to the facts presently before the Court, not only will the Debtor suffer little, if any, prejudice should the stay be lifted, but denying the Motion and maintaining the stay will prejudice Apple. Apple, like all owners of intellectual property, has a strong interest in making sure that its property rights are protected from unauthorized use. Refusing to grant relief from stay will cause delay in protecting those rights.

Indeed, having these issues resolved before the District Court is essential to the determination of whether the Debtor can successfully reorganize and emerge from Chapter 11. At some point prior to any attempted reorganization, it must be determined whether the Debtor’s current business model – selling computers running Apple’s proprietary Mac OS X Leopard operating system without permission or authorization from Apple – is a viable business or, instead, unlawful copyright and trademark infringement, and, if the latter, whether an alternative business model would support a successful reorganization. The Debtor has no legitimate property rights in an infringing product and cannot pursue reorganization of its business affairs based on the sale of products that violates applicable non-bankruptcy law.

Indeed, Psystar commenced this bankruptcy case just weeks before the June 26, 2009 close of all fact discovery and the affirmative expert report deadline in the Infringement Action, shortly after the May 8, 2009 granting of Apple’s motion to compel additional documents from Psystar, and just prior to a June 4, 2009 scheduled deposition resulting from that motion to compel. After a brief period for expert discovery, the pre-trial conference was scheduled for October 26, 2009, in advance of the November 9, 2009 trial date.

Since the filing of this case, there is no evidence that Psystar has altered its business model or in any way ceased its infringing conduct. Its website remains operational and it continues to offer for sale Open Computers running Mac OS X Leopard. Thus, it appears that Psystar’s post-petition operations are identical to its pre-petition conduct in all relevant respects, thus subjecting the Debtor to ongoing claims of infringement.

Translation: Psystar is going on with business as usual and continuing to harm Apple such that an injustice to Apple and impediment to the bankruptcy case would take place if the case was not allowed to continue as scheduled. Further, in reading between the lines, Psystar’s timing of its declaration of bankruptcy follows on the heels of a potentially damaging discovery Order from Judge Alsup. Lastly, Apple cannot properly exert its claims as a creditor, nor can Psystar put forth any reasonable reorganization plan, until their dispute is resolved.

Apple anticipated that Psystar may argue that continued litigation costs would cause it irreparable injury. In response, Apple cited substantial case law purporting to state that such costs are not to be considered irreparable harm in bankruptcy cases that are filed in the midst of ongoing litigation.

Obviously, Apple makes numerous nuanced arguments in its 24-page filing. However, I believe that this summary gives the World of Apple readers an understandable snapshot of Apple’s position. I will interact with Apple’s arguments in more detail if and when Psystar files a Motion in Opposition.

Psystar, in the meantime, filed a request for an Order of the court authorizing the employment of Lazaro J. Lopez, Esq., to represent it in the bankruptcy proceedings. An emergency hearing is scheduled on that request for today.

Here are copies of Apple’s filings:

Motion of Apple, Inc. for Relief From Stay

Exhibit 1 to Motion for Relief From Stay