• In Brief: Alabama Woman Sues Over Alleged iPhone 3G Defects
• In Brief: Amended Complaint Filed in Alabama iPhone Case
• A Possible Hurdle for the Alabama 3G iPhone Suit

Since that time, on October 10, 2008, Apple moved to Dismiss Plaintiffs’ Amended Complaint for Failure to State a Claim. Basically, Apple alleges that the Plaintiffs failed to comply with a necessary condition precedent to bringing a lawsuit on the alleged grounds under Alabama law: they failed to contact Apple to allow Apple the chance to repair or replace the iPhones if necessary. Apple also alleges that a case for unjust enrichment is barred under the terms of its One Year Warranty.

The Plaintiffs responded on October 21, 2008, relying heavily on the much-publicized problems that some users were having with their devices resulting in Apple already providing multiple corrective updates and that Apple and/or its distributors leaked information that additional corrective updates were forthcoming which would remedy the problems in full. Thus, they claim that Apple had sufficient notice to satisfy the spirit of the Alabama requirement. They further claim that they cannot be denied unjust enrichment relief as they were unaware of the One Year Warranty and its terms.

On October 24, 2008, the Court noted that the parties are in dispute as to the existence and/or knowledge of this warranty and gave the parties seven days to attempt to come to an agreement on that issue. If the parties could not agree, the Court stated that it would rule upon Apple’s Motion without assuming the existence and/or delivery of the alleged warranty.

On November 4, 2008, the Court issued its Opinion and Order as two separate filings. The Court’s Opinion noted that the existence and/or delivery of the warranty remains a contested issue. The Court granted Apple’s Motion to Dismiss as to the warranty claims and denied the Motion as to the unjust enrichment claim. While this may seem confusing, the granted portion was based not upon the existence of the disputed warranty issued by Apple but upon the Alabama Commercial Code which legislates that providing actual notice is an absolute condition precedent to any claim of breach of warranty. The Court noted that the Code provides that the seller must be notified within a reasonable amount of time after discovery of the problem or else be barred from any remedy. [emphasis in original] The Court rejected the Plaintiffs’ argument of general notice and opined in some detail as to its reasoning that notice was required as to these specific devices purchased by these specific people.

In its separate Order of the same date, Counts I and II of the Plaintiff’s complaints were officially dismissed with prejudice (meaning that they are adjudicated in finality, unless appealed, if possible) and that the Plaintiffs’ claim of unjust enrichment remained as there were factual disputes between the parties as to the existence and/or delivery of the alleged One Year Warranty provided by Apple. The Court noted that this dismissal with prejudice does not affect the rights of any members of the putative class.

On November 19, 2008, Apple responded to the remaining claim and various factual allegations in the Plaintiffs’ Amended Complaint. The crux of Apple’s Answer is its denial that the iPhone 3G is defective. As far as the request for class-action status, Apple denied that class treatment is warranted in this instance and that any members of this purported class have not been damaged or entitled to relief. Apple repeated its assertion of the existence of its One Year Warranty which would bar the claim of unjust enrichment. Apple also asserted nineteen affirmative defenses. At first, I was going to repeat them all here but decided to wait for reader input as I am learning that not all tech geeks are also legal geeks who like to read court filings for fun. Let me know if those additional details are something you would be interested in.

The last filing was entered on November 20, 2008 and comprised an Order from Judge Acker reminding the parties of certain local rules and asking for notification if this case should be evaluated for ADR (alternative dispute resolution).

I will post additional updates regarding this case as they become available.

In his research Munster noted that Apple was offering discounts on seven products and those discounts averaged 8%. Mac Sales averaged 13 sales per hour, up from 2 per hour earlier in November. iPhone sales averaged 3.4 per hour up from 1.3 earlier in the month.

Munster concluded that Macs are selling better than expected and iPhones are in line with expectations.

Also in his report Munster explains how he can maintain a target on AAPL of $250 a share. Munster writes that his target is based on 20 times earnings and is using Apple’s non-GAAP earnings which included revenue from the iPhone.

Mini DisplayPort on the new MacBook

The availability of a license confirms that the port is propriety from Apple but should allow third-party developers to make adapters to allow notebooks with VGA and DVI connections to use the new 24-inch LED Cinema Display.

“Through this motion, Apple seeks leave to file its Amended Complaint … attached hereto as Exhibit A, adds a Digital Millennium Copyright Act claim, additional factual allegations related to Apple’s previously asserted claims and Doe defendants. The DMCA claim is based on new information that Apple has learned since the filing of its original complaint. Apple’s Amended Complaint is timely, does not cause any prejudice to Psystar and should be permitted.”

So what does this possibly mean? It could be confirmation of my long-standing theory that the Psystar principals are merely patsies for some larger interests who wish to be spared the publicity of going against Apple but would benefit from a victory in this case. Under my theory those interests would be the as-yet unidentified “Does 1–10″ that Apple wishes to add as co-defendants. The plot thickens indeed.

It is likely that the Court will grant this motion. The parties themselves had already previously agreed to a date of January 19, 2008 to amend the pleadings. Psystar has indicated to Apple’s counsel that it opposes this filing.

I note that the proposed Amended Complaint is six pages longer than the initial Complaint. I have verified that this addition is not comprised by exhibits but rather the Complaint itself.

Doe Defendants 1–10

The Amended Complaint reveals tantalizingly little about these unidentified parties. Here is the extent of the information pled:

18. On information and belief, persons other than Psystar are involved in Psystar’s unlawful and improper activites described in this Amended Complaint. The true names or capacities, whether individual, corporate, or otherwise, of these persons are unknown to Apple. Consequently they are referred to herein as John Does 1 through 10 (collectively the “John Doe Defendants”). On information and belief, the John Doe Defendants are various individuals and/or corporations who have infringed Apple’s intellectual property rights, breached or induced the breach of Apple’s license agreements and violated state and common law unfair competition laws. Apple will seek leave to amend this complaint to show the unknown John Doe Defendants’ true name and capacities when they are ascertained.

If I am right, some backers of Psystar are sweating right now, and if they are paying the bills, I would not be surprised to see some push for a nominal settlement. For another take on the possible identity of these “Doe” defendants please see: Has Psystar Ruined the Hackintosh for Everyone?

Additional Allegations in Amended Complaint

Paragraph 12 is expanded to include Psystar’s OpenPro, and Psystar’s practice of offering Leopard updates at its site that are either exact copies or modified versions of Apple’s copyrighted software. From this point on, the paragraph numbers do not match as Apple has added two additional paragraphs prior to the paragraph previously numbered as 14 and later moves around and adds other paragraphs. These first additional paragraphs mention Psystar’s plans to release additional computers using unauthorized copies of Leopard, including laptops, as well as Psystar’s practice of distributing a restore disk and providing support for customers to install Mac OS X software in an unauthorized manner.

In its General Allegations, Apple quotes more extensively from the EULA including the Transfer and Termination provisions. In the First Claim for Relief, allegations of additional copyright infringement, including unauthorized derivative works, are added. The Third Claim for Relief points out that Apple had taken measures to protect their copyright, and the defendant has illegally circumvented these measures. The Fourth Claim for Relief sets forth with more specificity Psystar’s alleged infringements. The Fifth Claim for Relief includes a new allegation that Psystar has admitted it was aware of the existence of the EULA. The Seventh Claim for Relief contains additional information on Psystar’s alleged harm to Apple’s trade dress and reputation. In the Eighth Claim for Relief, as in earlier claims not here noted, Apple makes a specific allegation that Apple’s Trade Dress is non-functional. The import of that allegation is beyond my ken. An Eleventh Claim for Relief was added alleging violations of Common Law Unfair Competition.

Many of the allegations contain strengthened wording of “intentional, willful and in conscious disregard of Apple’s rights.”

Apple’s Prayer for Relief contains a request for a preliminary injunction which was noticeably absent from the first Complaint which only sought a permanent injunction. It is my opinion that the Court may very well grant a preliminary injunction until the case is resolved. Apple can easily argue that Psystar’s business does not solely rely upon its disputed sales of non-Apple hardware loaded with OS X as Psystar also sells computers loaded with Windows and Linux.

The above listing of changes is not intended to be all-encompassing. It is the product of my first review of the documents for the most important highlights. As I have time to examine the filings more closely, I will provide additional information. I remind the reader that my opinions are lay-opinions as I am not an attorney, and if authoritative opinions are desired, a competent licensed attorney should be consulted.

Copies of the filings can be downloaded below:

• Motion for Leave to Amend
• Proposed Amended Complaint

Update: I added a link to an article with a differing theory on the potential identity of the as-yet unnamed defendants and made minor grammatical changes.

iPhone 3G is a lot of amazing things — a revolutionary phone, widescreen iPod, breakthrough Internet device, and home for thousands of applications. And with an iPhone 3G Gift Card, it’s also the perfect gift. Give one in any amount starting at $25 toward the cost of a new iPhone.

The advert which shows an iPhone 3G accessing information on the internet “really fast” received 17 complaints from the public who stated that the “ad was misleading, because they believed it exaggerated the speed of the iPhone 3G.”

In a response Apple claims that the “opening line of the voice-over stated “So what’s great about 3G?”. They believed that the claim clearly positioned the content of the ad as a comparison of the new 3G iPhone with its 2G predecessor.”

Adding that “the implication that the 3G iPhone allowed downloads and internet access that was ‘really fast’ by comparison to the previous generation was not misleading.”

In addition to Apple’s response Clearcast also defended the ad saying that “they received supporting evidence for the claim and were satisfied that the 3G iPhone could achieve speeds that, when compared to the rest of the market, were reasonably fast.”

The ASA ruled that the ad “must not appear again in its current form” after deciding that the ads “repeated use of the claim “really fast”, were likely to lead viewers to believe that the device actually operated at or near to the speeds shown in the ad.”

Although the ruling was made by Judge Kenneth Karas on November 7 the decision was only made public earlier this week.

In the ruling Judge Karas wrote “Because Mr. Papermaster has been inculcated with some of IBM’s most sensitive and closely-guarded technical and strategic secrets, it is no great leap for the Court to find that Plaintiff has met its burden of showing a likelihood of irreparable harm.”

The judge also touched on Papermaster’s point that Apple and IBM are no longer competitors, Karas noted that although Papermaster would not be designing chips for Apple he would no doubt have to call upon is superior experience that he received from IBM.

“It is likely that Mr. Papermaster inevitably will draw upon his experience and expertise in microprocessors and the ‘Power’ architecture, which he gained from his many years at IBM, and which Apple found so impressive, to make sure that the iPod and iPhone are fitted with the best possible microprocessor technology and at a lower cost,” adding; “Indeed, any claim that he would merely use general engineering skills is belied by Apple’s focus on Mr. Papermaster’s ’spot on’ knowledge of semiconductors and microprocessor design,” he added.

Karas ruled that the case would run on a fast track, “The Court has ordered that an expedited discovery schedule be arranged and that the trial take place as soon as practicable after discovery is completed,” he said.

The complaint from users of the new notebooks was that standard definition movies purchased from the iTunes store would not playback on an external display due to HDCP restrictions.

Apple writes the following about the update:

This update is recommended for owners of MacBook, MacBook Air, and MacBook Pro with Mini DisplayPort. The update addresses an issue where some standard definition purchases from the iTunes Store do not play on some external displays.

The update means that content purchased from the iTunes store should now playback with no issues.

The report comes after Best Buy announced that it is offering $150 off all Macs.

Mark your calendars. And start your research now by browsing the Apple Online Store to find iPod, iPhone, and Mac gifts for everyone on your list.

Apple has not disclosed any discounts but those interested can view World of Apple’s articles on Apple’s Black Friday sales for 2007, 2006 and 2005. Unlike some previous years Apple appears to be running the promotion across the globe on the same day.

The BBC writes that EMI still owns rights to the Beatles back catalogue and therefore must make an agreement with Apple Corps before digital distribution can begin.

“EMI want something we’re not prepared to give ‘em. It’s between EMI and The Beatles I think - what else is new?,” McCartney stated to the BBC. “Last word I got back was it’s stalled at the moment. But I really hope it will happen because I think it should.”

AppleInsider has received word from EMI who said that the company is “working hard to secure [an] agreement with Apple Corps to make the Beatles’ catalogue available in digital form” but added “the various parties involved have been unable to reach agreement.”

EMI hopes to make progress “soon.”

When we redesigned the new Macbook, our designers and engineers set a goal of making not only the greenest notebook Apple ever produced, but the greenest family of notebooks. So every new Macbook has been built using materials that are highly recyclable and free of many harmful substances present in other computers.

In the advert and on a new section of its website Apple touts that fact that its new MacBook Air, MacBook and MacBook Pro are free of harmful toxins, highly recyclable, very energy efficient and come in compact packaging.

The update which is available through Software Update and on Apple’s website is said to contain “stability improvements” and is recommended for all Safari 3.2 users.

Late last week, IBM posted the appropriate bond. Also of interest, just like Psystar (but hopefully with actual merit, unlike Psystar), Papermaster countersued IBM right back. Papermaster alleges:

• The employment agreement signed by Papermaster precludes him from working for any direct or business enterprise competitor with IBM. Papermaster argues that Apple fails on both counts; it is not a direct competitor and it is not a business enterprise company, but rather a consumer products company.
• The agreement is overly broad as its prohibition lasts for one year which is unreasonably long in the fast-paced world of technology.
• The agreement provides that it shall be governed by the laws of New York, but Papermaster actually works in Texas and would work for Apple in California and those two states are not friendly to such agreements.
• Papermaster signed an agreement with Apple that he would not disclose any of IBM’s secrets. (Yes, I do see the irony.)

(via MacWorld and MacOSKen show 11/19/08)

A Hearing is set for February 9, 2009.

Pro Applications Update 2008-04 addresses general performance issues and improves overall stability.

Applications included in the update:

* Final Cut Pro 6.0.5
* Compressor 3.0.5
* Color 1.0.3
* Shake 4.1.1

The linked page gives more details on the specific updates.

The included notes with the update state the following improvements in the update:

iTunes 8 and iTunes U are now accessible with VoiceOver on your Mac.

• Enhancements to Maps
  - Google Street View
  - public transit and walking diretions
  - display address of dropped pins
  - share location via email

• Enhancements to Mail
  - resolved isolated issues with scheduled fetching of email
  - improved formatting of wide HTML email

• Improved stability and performance of Safari
• Podcasts are now available for download in iTunes application (over Wi-Fi and cellular)
• Decrease in call set-up failures and call drops
• Improved sound quality of visual voicemail messages
• Pressing the Home button from any Home screen takes you to the first Home screen
• Preferences to turn on/off auto-correction in Keyboard settings

Although not listed Emoji icons are included and Apple has issued a technote on Emoji and troubleshooting Emoji.

The vulnerability was initially revealed by ComputerBild earlier in the week but was transcribed in more detail today by Fraunhofer Institute for Secure Information Technology (SIT).

SIT has revealed that it notified Apple of the vulnerability one month ago and that a fix will be available via a firmware update on November 21. The report corroborates earlier reports that the latest iPhone OS would be released on Friday November 21.

The iPhone ships with the ability to send and receive SMS only which has caused some people to become aggravated that even very basic phones on the market can send and receive MMS messages but the iPhone can’t.

MMS messages allow for the transfer of images, audio, video and rich text.

In the report it is said that Telia will be pushing the MMS application to users in Sweden in the next couple of months, there is no word whether other carriers will also be creating similar applications.

[Update] It has been revealed that Mobispine is the provider of the MMS solution for Telia in Sweden. The company has released a press release about its MMS application for the iPhone (PDF).

Mobispine AB (MOBS) the market leader in delivering
mobile solutions to operators announced the availability of the world’s first true Multimedia
Messaging (MMS) for iPhone. Mobispine is now offering a “white label” MMS service for iPhone
to global operators. This new and innovative service will increase revenue per user (ARPU) and
generate profits for operators.

Apple has posted a support document which lists the feature changes in the update:

• Music can be streamed via AirTunes to Airport Express speakers or other Apple TVs in your house.
• Apple TV can now learn other remote controls and use them in addition to the Apple Remote.
• Playlists in iTunes that contain Movies, TV Shows, Podcasts, and Music Videos can now be seen on Apple TV.
• Support for volume control in Music.

Speaking at LISA ‘08 Hubbard showed a slide during his presentation, about the evolution of Mac OS X from large servers to embedded platforms, which showed a slightly more specific date for the release of Mac OS X Snow Leopard than we’ve seen before.

The slide which can be viewed in a PDF of Hubbard’s presentation states that Snow Leopard will see a release in Q1 2009.

Snow Leopard was announced at WWDC 2008 and at the time Apple said that the latest OS would ship “in about a year.”

It should be noted that previous releases of Mac OS X have gone through extensive testing in the developer community and so far Snow Leopard has only had two test release, both of which were to a limited amount of developers.

First, here are some basics for persons unfamiliar with legal proceedings. Apple had initially sued Psystar for copyright infringement; inducing others to commit copyright infringement; breach of contract; inducing others to commit breach of contract; trademark infringement; trade dress infringement; trademark dilution; and violations of state and common law unfair competition acts. Psystar responded with thirty-seven affirmative defenses to these claims and brought a countersuit against Apple. Psystar’s countersuit alleged violations of Sections 1 and 2 of the Sherman Antitrust Act and Section 3 of the Clayton Antitrust Act as well as California-specific business codes and state common law on unfair and anti-competitive business practices. So essentially there were two lawsuits going on at one time with Apple being both the Plaintiff and Counter-Defendant, and Psystar being both the Defendant and Counter-Plaintiff.

Apple moved to dismiss Psystar’s counterclaims for reasons previously discussed here. I had predicted that Apple would lose its motion, not because I thought it was without merit, but rather that motions to dismiss are rarely granted unless the arguments are particularly compelling. Although I found Apple’s arguments to be strong, I am not an attorney, so I predicted the usual outcome of losing on a motion to dismiss since every presumption is given in favour of the non-moving party. I made a foolish bet on this prediction with Alex Brooks that I will now have to live up to, but I ask him to have mercy and let me fulfill my end of the bargain over the weekend. [Editors note - I’m ensuring dizzle keeps her end of the deal]

The Court Order Granting Apple’s Motion to Dismiss comprised nineteen pages of very lucid commentary. I understand the issues and legal concepts much more now having read those nineteen pages than I did reading the hundreds of pages of materials submitted and/or referred to by both parties. As I said before, I like this Judge. He is very clear and to the point. Following is an abbreviated summary of the Court’s opinions by category.

Legal Standards for Granting a Motion to Dismiss

Psystar’s counsel had argued that the existence of the various alleged markets was an issue of fact and not an issue of law. Some explanation is needed here. Generally speaking, the judge is present to make decisions on issues of law, while the jury is present to make decisions on issues of fact. Therefore, Psystar was claiming that Apple’s arguments, even if valid, simply were not grounds for dismissal since they were not solely issues of law but also contained disputed issues of fact. Apple obviously disagreed. My earlier statement, “It [the Motion to Dismiss] appears to hinge on Apple’s arguments on the legal standards required to prevail,” turned out to be quite correct.

Judge Alsup found that Psystar merely made conclusory and unsupported allegations of law and inferences drawn therefrom without plausible factual grounding. The case of Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1964–65 (May 21, 2007) factored heavily in the Court’s reasoning.

The alleged Mac OS market

The dispute between the parties in the counterclaims concerned whether the Macintosh OS is a single-product market, or whether there are other operating systems, such as Windows, that are also part of the relevant market. Psystar’s success absolutely depended on their being able to demonstrate this single-product market theory, and they argued that this was a factual determination for a jury. The Court noted:

The definition of antitrust “relevant market” is typically a factual rather than a legal inquiry, but certain legal principles govern the definition.… Whether products are part of the same or different markets under antitrust law depends on whether consumers view those products as reasonable substitutes for each other and would switch among them in response to changes in relative prices.

Citing Newcal Industries, Inc. v. Ikon Office Solutions, 513 F.3d 1038, 1044 n.3 (9th Cir. 2008).

Now I understand much more clearly why Psystar focused so heavily on the idea that a small but significant non-transitory increase in price (SSNIP) would not reduce Apple’s consumer base to any significant degree. At first blush, this seems quite strong in Psystar’s favour. Many Mac users would pay even more for the product without considering switching to Windows. However, the Newcal case dealt with a derivative, not a primary, market. Basically, in that case, there were two competing manufacturers of copying equipment. The issue was not with the primary sale of the copiers but with the sale of parts and supplies. It is completely inapplicable to Psystar’s claim. As an example, if this present case was about Apple requiring only Apple-branded RAM and Apple-branded hard drives, then perhaps there would be a precedent, but not in a case alleging a single-product primary market. The Court recognized that Psystar did cite one case which could lend support to their allegation; however, that case had later been implicitly over-ruled and was no longer valid case law.

The Court also noted:

Single-brand markets are, at a minimum, extremely rare. “Even where brand loyalty is intense, courts reject the argument that a single branded product constitutes a relevant market.”

Citing Green County Food Market, Inc. v. Bottling Group, 371 F.3d as75, 1282 (10th Cir. 2004).

Thus:

[Psystar’s] pleadings, however, fail to allege facts plausibly supporting the counterinuitive claim that Apple’s operating system is so unique that if suffers no actual or potential competitors.

In reading the decision, I sensed a hint at this point where the Judge seemed to be telling Psystar that if they could provide a factual basis for their SSNIP claim, rather than simply making conclusory statements of law, an amended counterclaim might survive dismissal. I suspect that Psystar will scour the Apple fanboy sites for hyperbolic statements of loyalty to the death for the cause of Apple and Dear Leader. However, a little more digging will find just as many current Apple users who would certainly consider a switch if the prices were higher. Ah, but would they switch to Windows? Probably not, but this points to the big pink elephant in the middle of the room that seems to have been ignored thus far. Apple is losing some consumers daily, and a large reason is due to price. To whom? Linux. The price can’t be defeated; it is free. There is no way with free alternatives readily accessible to the typical Macintosh consumer that Psystar can make the argument that there isn’t a reasonably equivalent substitute without Rudy Pedraza crossing his fingers behind his back. The Court noted what I had previously said: It is possible that this willingness to pay a higher price is due to additional perks to the purchaser that aren’t so easily quantifiable, such as customer service, the coolness factor, and other such intangibles.

Judge Alsup pointed to the same admission noted by Apple in Psystar’s own pleadings that the Mac OS performs the same functions as other operating systems; operating systems which Psystar itself also sells as alternatives to OS X. I am also somewhat self-pleased (I beg the reader’s indugence) that the Court also noted the same foot-shooting argument that I had detected. Apple’s aggressive ad campaign against Vista doesn’t prove that Vista isn’t a competitor; the whole purpose of the campaign is to prevail against a very real competitor.

In short, Judge Alsup agreed with Apple that Psystar’s arguments on this point were internally contradictory and circular.

The alleged Mac OS capable hardware market and the alleged Apple-Labeled hardware submarket

As per the Court, Psystar’s Federal causes of action in this regard are absolutely dependent on the existence of separate markets with improper tying practices between the two. Additionally the alleged violations of the Sherman and Clayton Acts depend upon the existence of the submarket claimed by Psystar. Although Psystar did not use the terminology of “aftermarket,” the Court used the term “aftermarket” as functionally equivalent to “submarket,” presumably in an effort to give Psystar the benefit of the doubt, and acknowledged that Newcal did allow for the potential of a distinct single-brand aftermarket. However, here is where things get very interesting. Enter stage right: The End-User Licensing Agreement (EULA).

The Court noted that Newcal specifically excluded single-brand aftermarkets that were created by fully disclosed contractual agreement. Citing Newcal at page 1048, the Court noted:

“…the law prohibits an antitrust claimant from resting on market power that arises solely from contractual rights that customers knowingly and voluntarily gave to the defendant.”

In a related case to Newcal, Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451 (1992), the aftermarket customers did not have full knowledge of the consequences of the agreement tied to the initial purchase so is thus distinguishable from the present controversy. Again, quoting Judge Alsup:

“…here Apple asks its customers to purchase Mac OS knowing that it is to be used only with Apple computers. It is certainly entitled to do so.… Psystar also asks the Court to create a non-existent market. This order declines to do so.”

The Court distinguished this case from current litigation cited by Psystar against Apple concerning the iPhone in which customers were required to sign a two-year contract with AT&T but were not told that Apple and AT&T had entered into a five-year exclusivity agreement, effectively tying the customer to AT&T for five years instead of the disclosed, and agreed-upon, two years. Obviously that is not the case here. The purchaser of the Mac OS makes his purchase with full knowledge of the limitation.

The Court lastly dealt with Psystar’s reliance upon United States v. Microsoft Corp., 253 F.3d 34 (C.A.D.C. 2001). Judge Alsup acknowledged that portions of that case do support Psystar’s contentions but that other portions flatly contradict them. Further, the Judge noted the age of the case and his doubts on its continued applicability in the face of rapidly changing technology. Additionally, the Court also noted that the case was completely factually distinct as it did not deal with a single brand/product market but the stifling of existing competitors in the browser market.

California State Claims

The Court noted that the Cartwright Act is patterned after the Federal Sherman Act and that the failures noted above would also apply here. There are some differences in the laws, but Psystar did not allege any that would survive the aforementioned deficiencies; such as inter-firm agreements rather than unilateral conduct. Further, the relevant markets would still have to be established, which the Court has opined that Psystar has filed to do.

Since I am more familiar with Court filings and Orders than the average layperson, I chuckled at the Court’s final comment where others might have paid it no attention:

The remaining cases Psystar cites are similarly unenlightening.

(bold emphasis mine) That was a subtle stinger aimed directly at Psystar “creative” use of case law.

Conclusion

It is very important to note that Apple did not prevail in one important area. Apple requested that Psystar’s counterclaims be dismissed “with prejudice.” That would mean that Psystar would have no opportunity to raise them again in modified form. Instead, the Court dismissed the counterclaims without prejudice, giving Psystar twenty days from November 18, 2008 to move for leave to amend its counterclaims and to explain how the amendment would cure the problems described in the order. I have not reviewed the Local Rules for this Court on the procedures for calculation of time, so I am hesitant to set a date certain when this is due. It is safe to assume that the deadline is approximately December 8, 2008.

I believe that Psystar will try again. They have to. If they completely lose their counterclaims, they have very little chance of winning this case. In my lay opinion, their affirmative defenses are very weak. Another real possibility is that settlement discussions will take place during this twenty-day window with Apple making a business decision to pay some “go away” money, and if I were Rudy Pedraza, I would take it and run. Psystar has much more to lose by proceeding, and right now both parties are in an uncertain position creating an atmosphere ripe for settlement. Apple knows that it is possible that Psystar may file amended counterclaims that pass muster with the Court. I have seen it happen in cases I have worked on in which a court strongly criticizes a party’s arguments and later allows them in amended form. Psystar knows that the Court is likely to dismiss any amended counterclaims. If Pedraza waits, and the Court does rule against Psystar again, Apple has very little motivation to settle and a lot of motivation to make an example out of Psystar.

I have noted some Apple web writers asking if this Order could be appealed. As the writers in question appear to be somewhat unsophisticated in legal terminology, I believe what they are asking is whether or not Psystar can file what is known as an interlocutory appeal. At this point, I confess that is beyond my ken, and I will inquire with lawyers that I know. Until that time, the Wikipedia link does provide some information on guidance formulated by the Supreme Court for allowable interlocutory appeals. Right now, however, the Order is definitely NOT ripe for an interlocutory appeal—assuming for sake of argument that this order is within the scope of qualifications for such an appeal—as the dismissal is without prejudice. The question would not arise until such time as the Court dismisses the counterclaims with prejudice, if it ever does.

Another motivation for Psystar to settle might exist if my prior musings are correct. Basically I argued that if Apple were to lose, all they would have to do is cease selling Mac OS X separately and that “market” would evaporate. They could charge slightly more for the computer which would include the OS and free upgrades for the life of the machine as long as it meets the technical specifications. If this is a real possibility (and frankly I have no idea if it is even feasible on the accounting side of things), unless Psystar is counting on some large monetary judgment, their victory would be meaningless. Further I see no basis for any large monetary judgment, Psystar has continued their business up until this point, what quantifiable damages do they have? If their main goal is the intangible prize of being allowed to install OS X on non-Apple hardware, and my solution is feasible, the only ones who will have anything to show for the effort is their attorneys.

Here is a downloadable copy of the Order for the reader’s review.

Made minor grammar corrections after publication.

According to the Mac Rumors forum member the listing for the MacBook Air cautioned buyers stating that the system had a malfunctioning hinge and minor blemishes on the outer shell. But the listing did not allude to its pre-production status.

The MacBook Air differs from models that shipped in early-2008 as it only features a 60GB hard drive with Mac OS X Tiger pre-installed and more prominently the lower enclosure is made from black plastic.

The serial number of the machine would indicate that it was manufactured in May 2007 a full seven months before Apple even announced the MacBook Air.

MacBook Air has no identifying label and has a plastic bottom enclosure | Image courtesy of Mac Rumors

System Profiler Identified the Machine as an M82 | Image Courtesy of Mac Rumors