Apple Inc. v. Psystar Corporation

Filing 235

Memorandum of Points and Authorities in Support of 231 MOTION for Permanent Injunction Statutory Damages and Reasonable Attorneys' Fees and Costs filed by Apple Inc.. Motion Hearing set for 12/14/2009 08:00 AM in Courtroom 9, 19th Floor, San Francisco. (Attachments: # 1 Affidavit Declaration of Philip Schiller, # 2 Proposed Order)(Gilliland, James) (Filed on 11/23/2009) Modified on 11/24/2009 (sis, COURT STAFF).

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Apple Inc. v. Psystar Corporation Doc. 235 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page1 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TOWNSEND AND TOWNSEND AND CREW LLP JAMES G. GILLILAND, JR. (State Bar No. 107988) MEHRNAZ BOROUMAND SMITH (State Bar No. 197271) MEGAN M. CHUNG (State Bar No. 232044) J. JEB B. OBLAK (State Bar No. 241384) Two Embarcadero Center, Eighth Floor San Francisco, CA 94111 Telephone: (415) 576-0200 Facsimile: (415) 576-0300 Email: jggilliland@townsend.com mboroumand@townsend.com mmchung@townsend.com jboblak@townsend.com O'MELVENY & MYERS LLP GEORGE RILEY (State Bar No. 118304) Two Embarcadero Center, 28th Floor San Francisco, CA 94111 Telephone: (415) 984-8700 Facsimile: (415) 984-8701 Email: griley@omm.com Attorneys for Plaintiff and Counterdefendant APPLE INC. UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION APPLE INC., Plaintiff, v. PSYSTAR CORPORATION, a Florida corporation, Defendant. AND RELATED COUNTERCLAIMS. Case No. 08-3251 WHA APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS Date: Time: Courtroom: Judge: Trial Date: December 14, 2009 8:00 a.m. 9 Hon. William Alsup January 11, 2010 APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA Dockets.Justia.com Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page2 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 IV. V. III. B. C. D. 3. 4. 2. I. II. TABLE OF CONTENTS Page INTRODUCTION ..........................................................................................................1 APPLE IS ENTITLED TO A PERMANENT INJUNCTION UNDER THE COPYRIGHT ACT AND THE DMCA.................................................................2 A. Apple Is Irreparably Harmed By Psystar's Illegal Conduct................................2 1. Psystar's Infringement Will Continue To Irreparably Harm Apple's Brand, Business Reputation And Goodwill..................................................................................................4 Psystar Should Not Be Permitted To Undermine Apple's Competitive Position By Infringing And Contributing To Others' Infringement Of Apple's Copyrights ...............................................................................................6 By Trafficking In Circumvention Devices, Psystar Has Spawned Other Infringers .......................................................................7 Damages Are Inadequate To Compensate Apple ...................................8 A Permanent Injunction Would Not Harm Any Legitimate Interest Of Psystar ...............................................................................................8 Protecting Copyrighted Works Serves The Public Interest.................................9 The Permanent Injunction Must Be Sufficient To Prevent Psystar's Violation Of Apple's Rights Under The Copyright Act And The DMCA...........................................................................................9 Psystar Should Be Enjoined From Making And Distributing Unauthorized Copies Of, And Circumvention Devices For, Subsequent Versions Of Mac OS X..................................................................11 E. APPLE IS ENTITLED TO STATUTORY DAMAGES..............................................13 A. B. The Number Of Psystar's DMCA Violations And Copyright Infringements ....................................................................................................15 Every Factor Supports A High Statutory Damages Award ..............................16 AN AWARD OF REASONABLE ATTORNEYS' FEES AND COSTS IS APPROPRIATE..........................................................................................17 CONCLUSION .............................................................................................................19 APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA i Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page3 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CASES TABLE OF AUTHORITIES PAGE 321 Studios v. Metro-Goldwyn-Mayer Studios, Inc., 307 F. Supp. 2d 1085 (N.D. Cal. 2004) .................................................................................... 8 A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001)................................................................................................... 8 Apple Computer, Inc. v. Formula Int'l Inc., 725 F.2d 521 (9th Cir. 1984)..................................................................................................... 7 Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240 (3rd Cir. 1983) .......................................................................................... 7, 8, 9 Apple Inc. v. Psystar Corp., 2009 U.S. Dist. LEXIS 94019 (N.D. Cal. Sept. 23, 2009) ....................................................... 3 Berkla v. Corel Corp., 302 F.3d 909 (9th Cir. 2002)................................................................................................... 17 BMG Music v. Gonzalez, 430 F.3d 888 (7th Cir. 2005)................................................................................................... 12 Chanel, Inc. v. Doan, 2007 U.S. Dist. LEXIS 22691 (N.D. Cal. Mar. 13, 2007) ...................................................... 15 Dunn & Fenley, LLC v. Allen, 2007 U.S. Dist. LEXIS 75292 (D. Or. Oct. 9, 2007) .............................................................. 18 Eagle Servs. Corp. v. H20 Indus. Servs., Inc., 532 F.3d 620 (7th Cir. 2008)................................................................................................... 17 eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) .............................................................................................................. 2, 3 Elecktra Entm't Group, Inc. v. Bryant, 2004 U.S. Dist. LEXIS 26700 (C.D. Cal. Feb. 13, 2004)....................................................... 15 F.W. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S. 228 (1952) ................................................................................................................ 15 Fantasy, Inc. v. Fogerty, 94 F.3d 553 (9th Cir. 1996)..................................................................................................... 17 APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA ii Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page4 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES (continued) PAGE Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) .......................................................................................................... 17, 19 Frank Music Corp. v. Metro-Goldwyn-Mayer Inc., 886 F.2d 1545 (9th Cir. 1989)........................................................................................... 17, 19 Gates Rubber Co. v. Bando Am., Inc., 798 F. Supp. 1499 (D. Colo. 1992), aff'd in part, vacated in part on other grounds, 9 F.3d 823 (10th Cir. 1993).......................................................................................................... 9 Harris v. Emus Records Corp., 734 F.2d 1329 (9th Cir. 1984)................................................................................................. 14 High Sierra Hikers Ass'n v. Blackwell, 390 F.3d 630 (9th Cir. 2004)..................................................................................................... 8 Historical Res. v. Cabral, 80 F.3d 377 (9th Cir. 1996)............................................................................................... 17, 18 Lava Records, LLC v. Jennifer Ates, 2006 U.S. Dist. LEXIS 46683 (W.D. La. July 11, 2006) ......................................................... 7 LGS Architects, Inc. v. Concordia Homes, 434 F.3d 1150 (9th Cir. 2006)................................................................................................... 2 Los Angeles News Service v. Reuters Television International Ltd, 149 F.3d 987 (9th Cir. 1998)................................................................................................... 15 Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, 518 F. Supp. 2d 1197 (C.D. Cal. 2007) ........................................................................... passim Microsoft Corp. v. Coppola, 2007 U.S. Dist. LEXIS 40515 (N.D. Cal. May 24, 2007) ...................................................... 15 Microsoft Corp. v. E&M Internet Bookstore, Inc., 2008 U.S. Dist. LEXIS 4381 (N.D. Cal. Jan. 22, 2008) ......................................................... 18 Microsoft Corp. v. Lopez, 2009 U.S. Dist. LEXIS 36064 (W.D. Wash. Apr. 7, 2009) ...................................................... 9 Microsoft Corp. v. Marturano, 2009 U.S. Dist. LEXIS 44450 (E.D. Cal. May 27, 2009)................................................. 2, 3, 8 Microsoft Corp. v. Nop, 549 F. Supp. 2d 1235 (E.D. Cal. 2008)................................................................................... 14 APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA - iii - Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page5 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES (continued) PAGE Microsoft Corp. v. Ricketts, 2007 U.S. Dist. LEXIS 40898 (N.D. Cal. May 24, 2007) ...................................................... 15 Mortgage Elec. Registration Sys. v. Brosnan, 2009 U.S. Dist. LEXIS 87596 (N.D. Cal. Sept. 4, 2009) ......................................................... 4 Mun Hwa Broadcasting Corp. v. Kim, 2007 U.S. Dist. LEXIS 42787 (M.D. Ga. Jun. 13, 2007) ....................................................... 19 MySpace, Inc. v. Wallace, 498 F. Supp. 2d 1293 (C.D. Cal. 2007) .................................................................................... 4 N.A.S. Import Corp. v. Chenson Enter., Inc., 968 F.2d 250 (2d Cir. 1992).................................................................................................... 14 NLRB v. Express Pub. Co., 312 U.S. 426 (1941) .................................................................................................................. 9 Orantes-Hernandez v. Thornburgh, 919 F.2d 549 (9th Cir. 1990)..................................................................................................... 9 Pac. & S. Co. v. Duncan, 744 F.2d 1490 (11th Cir. 1984)............................................................................................... 11 Peer Int'l Corp. v. Pausa Records, Inc., 909 F.2d 1332 (9th Cir. 1990)........................................................................................... 14, 15 Perfect 10 v. Amazon.com, Inc., 416 F. Supp. 2d 828 (C.D. Cal. 2006, overruled on other grounds, 487 F.3d 701 (9th Cir. 2007)) ........................................................................................................................................ 9 Princeton Univ. Press v. Mich. Document Servs., 99 F.3d 1381 (6th Cir. 1996)................................................................................................... 11 Rent-A-Center, Inc. v. Canyon Television & Appliance Rental, Inc., 944 F.2d 597 (9th Cir. 1991)..................................................................................................... 4 Sara Lee Corp. v. Sycamore Family Bakery Inc., 2009 U.S. Dist. LEXIS 100554 (D. Utah Oct. 27, 2009) ......................................................... 4 Silicon Image, Inc. v. Analogix Semiconductor, Inc., 2008 U.S. Dist. LEXIS 109842 (N.D. Cal. Nov. 3, 2008)...................................................... 12 SimplexGrinnel LP v. Integrated Sys. & Power, Inc., 642 F. Supp. 2d 206 (S.D.N.Y. 2009)..................................................................................... 12 APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA - iv - Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page6 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES (continued) PAGE Sony Computer Entm't Am. v. Divineo, Inc., 457 F. Supp. 2d 957 (N.D. Cal. 2006) ...................................................................................... 7 Sony Computer Entm't Am. v. Gamemasters, 87 F. Supp. 2d 976 (N.D. Cal. 1999) ........................................................................................ 7 Spencer Promotions Inc. v. 5th Quarter Enterprises Inc., 1996 U.S. Dist. LEXIS 8686 (N.D. Cal. Feb. 21, 1996)......................................................... 17 Stuhlbarg Int'l Sales Co. Inc. v. John D. Brush & Co., 240 F.3d 832 (9th Cir. 2001)..................................................................................................... 4 Tiffany (NJ) Inc. v. Luban, 282 F. Supp. 2d 123 (S.D.N.Y. 2003)..................................................................................... 14 Triad Sys. Corp. v. Southeastern Express Co., 54 F.3d 1330 (9th Cir. 1995)................................................................................................. 2, 8 University City Studios, Inc. v. Reimerdes, 111 F. Supp. 2d 294 (S.D.N.Y. 2000)................................................................................. 7, 17 Walt Disney Co. v. Powell, 897 F.2d 565 (D.C. Cir. 1990) .......................................................................................... 11, 12 Warner Bros. Entm't Inc. v. RDR Books, 575 F. Supp. 2d 513 (S.D.N.Y. 2008)................................................................................... 7, 9 Warner Bros. Records, Inc. v. Brown, 2008 U.S. Dist. LEXIS 95171 (N.D. Cal. Nov. 13, 2008).................................................. 9, 11 Warner Bros. Records, Inc. v. Romero, 2007 U.S. Dist. LEXIS 79848 (N.D. Cal. Oct. 29, 2007)....................................................... 11 STATUTES 17 U.S.C. 502 ........................................................................................................................... 2, 9 17 U.S.C. 504 ............................................................................................................................. 14 17 U.S.C. 505 ............................................................................................................................. 17 17 U.S.C. 1201 ....................................................................................................................... 1, 10 17 U.S.C. 1203 ....................................................................................................................... 2, 13 APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA -v- Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page7 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 OTHER AUTHORITIES TABLE OF AUTHORITIES (continued) PAGE 3 Melville B. Nimmer & David Nimmer, Nimmer on Copyrights 14.06[C] at 14-92 (1991)9, 14 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright 14.06[B]................................. 3 Federal Rule of Civil Procedure 54............................................................................................... 17 Federal Rule of Civil Procedure 65................................................................................................. 9 APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA - vi - Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page8 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. INTRODUCTION Psystar Corporation ("Psystar") has built its business on infringing Apple Inc.'s ("Apple") copyrights and trademarks, free-riding on Apple's research and development efforts, and trading on Apple's hard-earned reputation for high quality, innovative and easy-to-use computers. Psystar's appropriation of Apple's intellectual property and goodwill has been systematic and brazen, from the name of Psystar's "OpenMac" computers to its deliberate pirating of Apple's Mac OS X. Psystar even seeks to profit from Apple's efforts to protect its rights, extolling this litigation as Psystar's "opportunity to gain market share," in a pitch to venture capitalists.1 On November 13, 2009, this Court granted Apple's motion for summary judgment on its claim for infringement of Apple's copyrights in Mac OS X, finding that "Psystar has violated Apple's exclusive reproduction right, distribution right, and right to create derivative works." (Docket No. 214 at 10.) The Court also held Psystar liable for contributory copyright infringement and violations of Sections 1201(a)(1), 1201(a)(2) and 1201(b)(1) of the Digital Millennium Copyright Act ("DMCA") for circumvention and trafficking in circumvention devices. (Id. at 10, 13-14.) Unless Psystar is permanently enjoined, it will not stop its unlawful conduct conduct that is causing irreparable harm to Apple's business, brand and goodwill. Apple is entitled to a permanent injunction enjoining Psystar from: (1) directly or contributorily infringing Apple's copyrights in Mac OS X; (2) circumventing any of Apple's technological protection measure in Mac OS X, including by using circumvention devices that include or are capable of generating Apple's decryption key; (3) possessing circumvention devices that have been used against Apple's technological protection measures; and (4) trafficking in circumvention devices containing or capable of generating Apple's key, or any technology, product, service, device, component or part for use in circumventing the technological protection measures in Mac OS X. Apple also seeks statutory damages under the Copyright Act and the DMCA and reasonable attorneys' fees and costs as the prevailing party. The evidence of Psystar's willful Declaration of Megan M. Chung ("Chung Decl.") in Support of Apple's Motion for Permanent Injunction, Statutory Damages and Reasonable Attorneys' Fees and Costs at Ex. 1 at PS009263. APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 1 1 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page9 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 infringement is both undisputed and overwhelming, and Apple is entitled to the maximum statutory damages available. Nevertheless, Apple seeks only a portion of such damages in an effort to reach a swift resolution of these issues. Money damages alone could never compensate for the irreparable injury that Apple has suffered. A failure to enjoin Psystar from continuing its unlawful activities would constitute an involuntary license of Apple's immensely valuable intellectual property and encourage others to follow Psystar's pattern of deliberate disregard of well-established law. Accordingly, this Court should grant a permanent injunction of a scope that will unequivocally end Psystar's unlawful conduct. II. APPLE IS ENTITLED TO A PERMANENT INJUNCTION UNDER THE COPYRIGHT ACT AND THE DMCA Sections 502(a) of the Copyright Act and 1203(b)(1) of the DMCA empower the Court to grant a permanent injunction "on such terms as it may deem reasonable to prevent or restrain" infringement of a copyrighted work or a violation of the DMCA. 17 U.S.C. 502(a), 1203(b)(1). To obtain a permanent injunction, Apple must demonstrate: "(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction." eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006); Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, 518 F. Supp. 2d 1197, 1210-14 (C.D. Cal. 2007); Microsoft Corp. v. Marturano, 2009 U.S. Dist. LEXIS 44450, at *22 (E.D. Cal. May 27, 2009). A. Apple Is Irreparably Harmed By Psystar's Illegal Conduct Under traditional copyright principles, Apple is entitled to a presumption of irreparable harm because it has prevailed on its infringement claim. See LGS Architects, Inc. v. Concordia Homes, 434 F.3d 1150, 1155 (9th Cir. 2006); Triad Sys. Corp. v. Southeastern Express Co., 54 F.3d 1330, 1335 (9th Cir. 1995). Under this authority, Apple need not show that Psystar's conduct has caused irreparable harm. After the Supreme Court's decision in eBay regarding injunctions in patent cases, however, district courts have been split as to whether the presumption of irreparable APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 2 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page10 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 harm continues to apply in copyright cases.2 The Ninth Circuit has not expressly considered whether eBay has eliminated the presumption of irreparable harm in the copyright context. As this Court previously noted, although "[i]rreparable harm may not be presumed, [ ] in run-of-the-mill copyright litigation, such proof should not be difficult to establish. Thus, [p]laintiffs may establish an irreparable harm stemming from the infringement (e.g., loss of market share, reputational harm)." Apple Inc. v. Psystar Corp., 2009 U.S. Dist. LEXIS 94019, at *9 (N.D. Cal. Sept. 23, 2009) (quoting Grokster, 518 F. Supp. 2d at 1215). As demonstrated below, Apple easily meets this standard for showing irreparable harm. When determining whether a plaintiff faces the threat of irreparable harm, courts should consider evidence of past infringement as well as the likelihood of future infringement. See 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright 14.06[B] (2008). Apple has proven, and the Court has found, that Psystar infringes Apple's copyrights and violates the DMCA. (Docket No. 214 at 10, 13-14.) Moreover, there is ample evidence that, unless permanently enjoined, Psystar will continue its pattern of infringing, and contributing to the infringement of, Apple's copyrights in Mac OS X and circumventing Apple's technological protection measures. (Chung Decl. Ex. 1 at PS009263, 9272-77; Ex. 2 (Pedraza Dep.) at 101:18102:16; Ex. 3 (Summ. J. Hr'g. Tr.) at 23:4-6.) Psystar has already distributed computers and software that infringe (and contribute to the infringement of) Apple's copyrights in, and circumvent the technological protection measures of, at least versions 10.5.2, 10.5.4, 10.5.5 and 10.5.6 of Mac OS X. (Declaration of John P.J. Kelly ("Kelly Decl.") 5.) Psystar has announced its intention to continue infringing (and to contribute to the infringement of) Apple's copyrights in, and circumventing the technological protection measures in, the current upgrade of Mac OS X, version 10.6.3 Accordingly, Apple is entitled to a permanent injunction prohibiting the Compare Marturano, 2009 U.S. Dist. LEXIS 44450, at *23 (holding that copyright infringement is presumed to give rise to irreparable harm, and where infringement is willful plaintiff need not introduce evidence of a threat of future harm) with Grokster, 518 F. Supp. 2d at 1210-14 (holding that post eBay, there is no presumption of irreparable harm upon the establishment of liability in copyright cases). To enable Mac OS X (whether Leopard or Snow Leopard) to run on non-Apple hardware, Psystar must (a) use Apple's decryption key to circumvent Apple's technological protection measures and access the encrypted files in the Mac OS X and (b) modify the software by, at a minimum, using a different bootloader. (Kelly Decl. 6; Chung Decl. Ex. 5 (Psystar's website APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 3 2 3 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page11 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 infringement of Apple's copyrights and violation of the DMCA with respect to both current and future versions of Mac OS X. 1. Psystar's Infringement Will Continue To Irreparably Harm Apple's Brand, Business Reputation And Goodwill Courts have long held that damage to brand, business reputation or goodwill constitutes irreparable harm. See, e.g., Rent-A-Center, Inc. v. Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991) ("[I]ntangible injuries, such as damage to ongoing recruitment efforts and goodwill, qualify as irreparable harm."); accord Grokster, 518 F. Supp. 2d at 1215; MySpace, Inc. v. Wallace, 498 F. Supp. 2d 1293, 1305 (C.D. Cal. 2007) ("Harm to business goodwill and reputation is unquantifiable and considered irreparable . . ."). Actual loss of goodwill is not required to establish irreparable harm. Mortgage Elec. Registration Sys. v. Brosnan, 2009 U.S. Dist. LEXIS 87596, at *24 (N.D. Cal. Sept. 4, 2009). "The Ninth Circuit has recognized that the potential loss of goodwill or the loss of the ability to control one's reputation may constitute irreparable harm . . . ." Id. (citing Stuhlbarg Int'l Sales Co. v. John D. Brush and Co., 240 F.3d 832, 841 (9th Cir. 2001) ("Evidence of threatened loss of prospective customers or goodwill certainly supports a finding of the possibility of irreparable harm.")). Recently, in Sara Lee Corp. v. Sycamore Family Bakery Inc., 2009 U.S. Dist. LEXIS 100554, at *19 (D. Utah Oct. 27, 2009), the court held that "without an injunction, the strong reputation of this very popular product could be forever tarnished." The court found that the "threatened injury to [plaintiff's] control over the quality of its [product] is irreparable" and concluded that the harm to plaintiff's reputation and goodwill resulting from defendant's infringement was "largely unquantifiable." Id. Apple has invested billions of dollars in research and development, advertising and customer support to establish an unequaled reputation for high quality products and superior customer service that is critical to the marketing of its products and the development of its brand, reputation and goodwill. (Declaration of Philip Schiller ("Schiller Decl.") in Support of Apple's Motion for Permanent Injunction, 3; Declaration of Matthew R. Lynde ("Lynde Decl.") in Support of Apple's Motion for Permanent Injunction, 7,15.) Apple's integrated product offering computers with Mac OS X, version 10.6 and a Rebel EFI, a circumvention device.) APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 4 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page12 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 business model ensures that Apple's software and hardware work flawlessly together to provide consumers with highly reliable, innovative and easy-to-use computers. (Schiller Decl. 4; Lynde Decl. 8.) Apple maintains strict quality controls for all its products and its after-sale service and support. (Schiller Decl. 5; Lynde Decl. 9.) Apple provides regular product updates and upgrades to ensure continued user satisfaction, even after purchase. (Schiller Decl. 6.) Apple maintains innovative and upscale stores, in addition to its on-line presence, in order to attract new customers and provide support to existing ones. (Schiller Decl. 6; Lynde Decl. 9.) Each customer contact from Apple's advertisements to its post-purchase support is thoroughly considered and carefully executed to ensure an outstanding product experience. (Schiller Decl. 6.) As a result of its unique and unparalleled focus on customers, Apple ranks at the top of the personal computer industry in consumer surveys. In 2007, 2008 and 2009, Apple received top Consumer Report reader scores for both laptop and desktop technical support. (Lynde Decl. 23.) Apple also was ranked at the top of the American Customer Satisfaction Index in the personal computer category in 2009, and continues to command the strongest repurchase intent of any personal computer brand. (Id.) Third party brand analysts have noted that Apple's brand is associated with "beautiful simplicity," and have valued Apple's brand in the billions. (Id. 20.) In contrast, Psystar can claim little or no brand recognition of its own. (Id. 12-14.) Rather, Psystar has illegally profited from Apple's efforts rather than investing in developing its own products and building its own goodwill. Since its inception, Psystar has invested less than $2,000 in research and development and a minimal amount in advertising. What little advertising Psystar undertakes centers around using Apple's trade dress, trademarks and trade names. (Id. 13; Declaration of Carol A. Scott ("Scott Decl.") in Support of Apple's Motion for Permanent Injunction, 6.) Psystar's systematic pirating of Apple's software and trafficking in circumvention devices represents a profound threat to Apple's reputation, goodwill and brand. Psystar distributes a modified version of Mac OS X that lacks the functionality of the original product. Psystar does not attempt to match Apple's focus on quality and customer service or its investment in the APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 5 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page13 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 manufacture, sale or support of its products. (Lynde Decl. 13, 16.) Psystar's customers have experienced serious problems with Psystar's products and after-sale customer support. (Id. 16.) Numerous customers have complained about not being able to connect to other Apple hardware and software, the inability to use Apple software applications, Psystar's computers' incompatibility with Apple-released system upgrades and about general dissatisfaction with Psystar's customer service and technical support. (Id.) Psystar's lack of quality control and the defects in Psystar computers have injured, and will continue to injure, Apple's reputation and goodwill because customers tend to blame the operating system for their computer's problems, regardless of their true source. (Lynde Decl. 22; Scott Decl. 5.) Indeed, on several occasions, Apple customer service representatives have received calls from Psystar customers seeking help with Psystar computers. (Lynde Decl. 22; Scott Decl. 5.) Once these callers learn that Apple cannot provide support for Psystar computers, they believe that Apple does not provide the quality products and support it promises in advertisements. (Schiller Decl. 8; Lynde Decl. 22; Scott Decl. 5.) As a result, Apple's reputation for excellence is harmed. The injury that Apple suffers to its brand, reputation and goodwill is irreparable and unquantifiable. Calculating lost sales due to this impact is inherently difficult to do and impossible for any situations in the future. (Lynde Decl. 25.) Because Psystar continues to infringe Apple's copyrights and violate the DMCA, only an injunction can stop the harm to Apple. 2. Psystar Should Not Be Permitted To Undermine Apple's Competitive Position By Infringing And Contributing To Others' Infringement Of Apple's Copyrights Psystar admits that it makes wholesale copies of Mac OS X and sells those unauthorized copies to the public for the purpose of competing with Apple. (See Psystar's Response to Apple's Motion for Summ. J. at 6-7 (Docket No. 204); Chung Decl. Ex. 4.) The Court has ruled that by doing so, Psystar has "infringed Apple's exclusive reproduction right, distribution right and right to create derivative works" and is liable for infringement. (Docket No. 214 at 4-5, 10.) Psystar also has committed contributory infringement by enabling others to make unauthorized copies of Mac OS X. (Id. at 10.) Psystar should not be permitted to willfully undermine Apple's APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 6 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page14 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 competitive position by "construct[ing] its business around its infringement." Apple Computer, Inc. v. Formula Int'l Inc., 725 F.2d 521, 525-26 (9th Cir. 1984) (citing Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1254 (3rd Cir. 1983) ("the jeopardy to Apple's investment and competitive position caused by [the defendant's] wholesale copying of many of its key operating programs . . . satisfies the requirement of irreparable harm needed to support a preliminary injunction")); see also Warner Bros. Entm't Inc. v. RDR Books, 575 F. Supp. 2d 513, 553 (S.D.N.Y. 2008) ("because [defendant] appropriates too much of [plaintiff's] creative work . . . a permanent injunction must issue to prevent the possible proliferation of works that do the same and thus deplete the incentive for original authors to create new works"). To prevent Psystar from realizing its goal of appropriating Apple's investment and market share,4 Psystar must be permanently enjoined from making and selling unauthorized copies of current and future versions of Mac OS X and contributing to the infringement of Mac OS X by third parties. 3. By Trafficking In Circumvention Devices, Psystar Has Spawned Other Infringers As this Court found, Psystar is trafficking in devices that enable others to circumvent Apple's technological protection measure to gain access to and copy Mac OS X. (Docket No. 214 at 13-15.) Psystar is continuing to actively market those devices and has announced its intention continue to do so to enable others to infringe Apple's copyrights. (Chung Decl. Ex. 5; Lynde Decl. 11-12, 34.) If Psystar is not permanently enjoined from marketing unlawful circumvention devices, other parties will be encouraged and enabled to continue infringing Apple's copyrights in Mac OS X. Sony Computer Entm't Am. v. Divineo, Inc., 457 F. Supp. 2d 957, 968-69 (N.D. Cal. 2006); University City Studios, Inc. v. Reimerdes, 111 F. Supp. 2d 294, 343 (S.D.N.Y. 2000); Sony Computer Entm't Am. v. Gamemasters, 87 F. Supp. 2d 976, 988 (N.D. Cal. 1999). A permanent injunction therefore is necessary to stop Psystar from continuing its unlawful activity and to deter others from doing the same. Lava Records, LLC v. Jennifer Ates, 2006 U.S. Dist. LEXIS 46683, at *12 (W.D. La. July 11, 2006) (court permanently enjoined defendant's copyright infringement in part because of "the need to deter future infringement by 4 Chung Decl. Ex. 1 at PS009263, 9272-77. 7 APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page15 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Defendant and others"); see also, 321 Studios v. Metro-Goldwyn-Mayer Studios, Inc., 307 F. Supp. 2d 1085, 1105 (N.D. Cal. 2004). 4. Damages Are Inadequate To Compensate Apple There is compelling evidence that Psystar will not be able to pay any statutory damages resulting from its unlawful conduct. Grokster, 518 F. Supp. 2d. at 1214, 1219 ("[d]amages are no remedy at all if they cannot be collected"). In 2008 and 2009, Psystar's costs exceeded its revenues. (Lynde Decl. 36.) Psystar has already filed for bankruptcy once during the course of this litigation, listing the value of its assets (except for what it claims as its own intellectual property, which it significantly overvalued) at between $0 and $50,000; Psystar's list of owed claims amounted to over $250,000. (Id. 37). Moreover, even if Psystar could pay damages, the harm to Apple's brand, reputation and goodwill is unquantifiable. Finally, there also is evidence of continuing third party infringement due to Psystar's induced infringement of Apple's copyrights. Such inducement "greatly erodes Plaintiffs' ability to enforce their exclusive rights." Grokster, 518 F. Supp. 2d at 1217 (citing A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1029 (9th Cir. 2001)). Indeed, the very need to file multiple lawsuits "as a consequence of [Psystar's] inducement is itself supportive of an irreparable harm finding." Id. at 1219. B. A Permanent Injunction Would Not Harm Any Legitimate Interest Of Psystar "In issuing an injunction, the court must balance the equities between the parties and give due regard to the public interest." High Sierra Hikers Ass'n v. Blackwell, 390 F.3d 630, 642 (9th Cir. 2004). Here, the balance of equities clearly weighs in favor of Apple. Psystar has no legitimate interest in the ability to continue infringing Apple's copyrights or in violating the DMCA. A defendant whose entire business is premised on misappropriation of Apple's intellectual property cannot claim it suffers hardship by being forced to stop such infringement. See e.g., Triad, 64 F.3d at 1338 ("Where the only hardship that the defendant will suffer is lost profits from an activity which has been shown likely to be infringing, such an argument in defense merits little equitable consideration . . . ." ) (internal quotation marks omitted); Franklin Computer, 714 F.2d at 1255 (knowing infringer cannot be permitted to construct its business around its infringement); Marturano, 2009 U.S. Dist. LEXIS 44450, at *23 ("The court perceives APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 8 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page16 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 no harm to Defendant since an injunction were [sic] merely require Defendant to comply with the Copyright and Lanham Acts."). Psystar's entire business is based on infringing Apple's copyrights and circumventing Apple's technological measures. (Lynde Decl. 11-12 and Ex. A.) Psystar has no legitimate interest in being permitted to continue those unlawful activities to Apple's detriment. C. Protecting Copyrighted Works Serves The Public Interest The public interest is promoted by protecting Apple's copyrights against continued infringement and by upholding the provisions of the DMCA. See Grokster, 518 F. Supp. 2d at 1222 (citing Perfect 10 v. Amazon.com, Inc., 416 F. Supp. 2d 828, 859 (C.D. Cal. 2006), overruled on other grounds, 487 F.3d 701 (9th Cir. 2007)); Microsoft Corp. v. Lopez, 2009 U.S. Dist. LEXIS 36064, at *11 (W.D. Wash. Apr. 7, 2009) ("The public's interest is undoubtedly served by preventing Defendant from distributing deceptively counterfeit Microsoft software."). The injunction Apple seeks would advance the basic goal of copyright law to "prevent[] the misappropriation of the skills, creative energies, and resources which are invested in the protected work." RDR Books, 575 F. Supp. 2d at 553 (citing Franklin Computer, 714 F.2d at 1255). D. The Permanent Injunction Must Be Sufficient To Prevent Psystar's Violation Of Apple's Rights Under The Copyright Act And The DMCA The Court has broad discretion under Fed. R. Civ. P. 65(d) "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 F.2d 549, 564 (9th Cir. 1990) (quoting NLRB v. Express Pub. Co., 312 U.S. 426, 435 (1941)); see also Gates Rubber Co. v. Bando Am., Inc., 798 F. Supp. 1499, 1522 (D. Colo. 1992), aff'd in part, vacated in part on other grounds, 9 F.3d 823 (10th Cir. 1993) (citing 3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright 14.06[C] at 14-92 (1991)). A federal court may "grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright." 17 U.S.C. 502(a); Warner Bros. Records, Inc. v. Brown, 2008 U.S. Dist. LEXIS 95171, at *6 (N.D. Cal. Nov. 13, 2008). APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 9 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page17 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 This Court has ruled that Psystar infringed Apple's copyrights in Mac OS X by violating Apple's exclusive reproduction right, distribution right and right to creative derivative works. (Docket No. 214 at 10.) The Court held that "Psystar has used decryption software to obtain access to Mac OS X and to circumvent Apple's technological measure when modifying Mac OS X in its production process" in violation of section 1201(a)(1) of the DMCA. (Id. at 13.) This Court determined that Psystar violated sections 1201(a)(2) and 1201(b)(1) of the DMCA by installing circumvention technology on the computers it distributes with Mac OS X and marketing those computers as running with Mac OS X. (Id. at 13-14.) And this Court ruled that Psystar is "a contributory infringer" because it intentionally induced or encouraged others to directly infringe Apple's copyrights in Mac OS X. Psystar's direct and contributory copyright infringement and violations of the DMCA entitle Apple to permanent injunctive relief. Apple therefore seeks an order from this Court enjoining Psystar from: Infringing Apple's copyrights in Mac OS X; Manufacturing, distributing, preparing or using any non-Apple computer installed with a reproduction or derivative work of Mac OS X; Manufacturing, distributing, preparing or using any product that creates or facilitates the reproduction or modification of Mac OS X on non-Apple computers; Circumventing any technological protection measure in Mac OS X; Possessing any technology, product, device, component, or part thereof that has been used to circumvent any technological protection measure in Mac OS X, and requiring Psystar to destroy any technology, product, device, component, or part thereof in its custody or control that has been used to circumvent any technological protection measure in Mac OS X; Manufacturing, importing, offering to the public, providing, or otherwise trafficking in circumvention devices using, containing or capable of generating Apple's decryption key, or any technology, product, service, device, component or part thereof for use in circumventing any technological protection measure in Mac OS X; and Inducing, aiding or assisting others in infringing Apple's copyrights in Mac OS X or in circumventing any technological protection measure in Mac OS X. Apple's injunction is tailored to prevent and restrain Psystar from infringing Apple's copyrights in Mac OS X, circumventing Apple's technological protection measures in Mac OS X, and APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 10 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page18 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 trafficking in circumvention devices used to avoid any technological measures that restricts access to Apple's copyrighted software. E. Psystar Should Be Enjoined From Making And Distributing Unauthorized Copies Of, And Circumvention Devices For, Subsequent Versions Of Mac OS X In its summary judgment filings, Psystar asserted that any permanent injunction should be limited to Psystar's distribution of computers with Mac OS X version 10.5 Leopard. (Psystar Summ. J. Mot. at 25.5) Psystar stated that such an injunction would pose no difficulty to Psystar because it no longer distributes computers with Mac OS X Leopard. Psystar's admission that it has moved on to infringing subsequent versions of Mac OS X confirms that any injunction must extend beyond Mac OS X Leopard, and Psystar should be enjoined from copying, modifying and selling unauthorized copies of subsequent versions of Mac OS X. "It has . . . been generally accepted that upon a finding of infringement, an injunction may be issued as to existing and future works." Brown, 2008 U.S. Dist. LEXIS 95171, at *6 (emphasis added) (citing Princeton Univ. Press v. Mich. Document Servs., 99 F.3d 1381, 1392-93 (6th Cir. 1996) ("The weight of authority supports the extension of injunctive relief to future works.")); see also Pac. & S. Co. v. Duncan, 744 F.2d 1490, 1499 n.17 (11th Cir. 1984); Warner Bros. Records, Inc. v. Romero, 2007 U.S. Dist. LEXIS 79848, at *3-4 (N.D. Cal. Oct. 29, 2007). For example, in Walt Disney Co. v. Powell, the defendant had infringed Walt Disney's copyrights in Mickey and Minnie Mouse by manufacturing and distributing t-shirts featuring the cartoon characters' images. 897 F.2d 565, 566 (D.C. Cir. 1990). The defendant argued that the district court abused its discretion in permanently enjoining him from distributing t-shirts featuring images of other Walt Disney copyrighted cartoon characters, including Donald Duck, Pluto, and Goofy, because those copyrights were not at issue in the suit. Id. The court of appeal rejected the defendant's argument, finding that when "liability has been determined adversely to the infringer, there has been a history of continuing infringement and a significant threat of future infringement remains, it is appropriate to permanently enjoin the future infringement of works owned by the Psystar argued that "[a]ny injunction in this case should not extend either to Apple's new Snow Leopard product or to Psystar's new products that incorporate or facilitate the use of Snow Leopard." (Id.) APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 5 11 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page19 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 plaintiff but not in suit." Id. at 568. The evidence shows that Psystar has a history of direct infringement, contributory infringement and trafficking in circumvention technology to enable others to infringe Apple's copyrights in various versions of Mac OS X. Psystar has illegally distributed computers running versions 10.5.2, 10.5.4, 10.5.5 and 10.5.6 of Mac OS X with circumvention devices designed to defeat Apple's technological protection measures. (Kelly Decl. 4-5 and Table 2.) Psystar admits its intention to continue infringing Apple's copyrights and violating the DMCA with respect to version 10.6 of Mac OS X as well as subsequent versions. (See Psystar Summ. J. Mot. at 25; Chung Decl. Ex. 3 at 23:2-5; Chung Decl. Ex. 5.) Psystar's pattern of misconduct and declared intent are more than sufficient to extend the injunction to subsequent versions of Mac OS X. "[I]n cases where courts have found that defendants have engaged in a pattern of infringing the plaintiffs' copyrights such that there is a threat that other copyrights owned by the plaintiffs will be infringed, they have routinely entered injunctions that enjoin infringement by those defendants of all of the plaintiffs' copyrights, even if the copyrighted works have not yet been created." Silicon Image, Inc. v. Analogix Semiconductor, Inc., 2008 U.S. Dist. LEXIS 109842, at *25 (N.D. Cal. Nov. 3, 2008). It is therefore appropriate to include current and future versions of Mac OS X within the injunction to "ensure that [Psystar's] misconduct does not recur as soon as the case ends." BMG Music v. Gonzalez, 430 F.3d 888, 893 (7th Cir. 2005). Moreover, by infringing, or contributing to the infringement, of subsequent versions of Mac OS X, such as version 10.6 "Snow Leopard," Psystar is also infringing, or contributing to the infringement of, Apple's copyrights in Mac OS X and Mac OS X Leopard. Mac OS X Snow Leopard is a derivative work of Mac OS X and Mac OS X Leopard. (See Chung Decl. Ex. 6.) By making unauthorized copies of Mac OS X Snow Leopard, or by enabling others to make unauthorized copies of Mac OS X Snow Leopard, Psystar infringes, or contributes to the infringement of, Apple's copyright in Snow Leopard and its copyrights in the underlying works, Mac OS X and Leopard. SimplexGrinnel LP v. Integrated Sys. & Power, Inc., 642 F. Supp. 2d 206, 213-14 (S.D.N.Y. 2009) ("[A]ny infringement of the preexisting material infringes the preexisting work, rather than the derivative work from which the pre-existing material may have APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 12 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page20 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 actually been copied."). Moreover, the software Psystar uses to run Mac OS X either Leopard or Snow Leopard on non-Apple computers, contains the same key that this Court found violated the anti-circumvention and anti-trafficking provisions of the DMCA. (See Docket No. 214 at 1315; Kelly Decl. 4.) Thus, the injunction must prevent Psystar from trafficking in any device that allows Psystar to circumvent technological protection measures in Mac OS X software. Because Apple's requested injunction prohibits acts relating to Mac OS X, that injunction would prohibit Psystar from infringing current and future versions of Mac OS X, from engaging in contributory infringement of current and future versions of Mac OS X, and from trafficking in circumvention devices that enable others to make unauthorized copies of current and future versions of Mac OS X. But Psystar's actions with respect to multiple versions of Mac OS X justify, and indeed compel, a permanent injunction that explicitly applies to future versions of Mac OS X. III. APPLE IS ENTITLED TO STATUTORY DAMAGES Apple seeks statutory damages for Psystar's copyright infringement and its violations of the DMCA. The undisputed facts in this case establish that Apple is entitled to a statutory award near the maximum amount allowed: (1) Psystar's entire business is premised on free riding on Apple's decades-long investments in research and development and marketing; (2) Psystar's infringement is willful and systematic; (3) Psystar destroyed source code and lied under oath about it; (4) Psystar continues to infringe and must be deterred from doing so; and (5) Psystar's unlawful conduct has spawned other infringers. Thus, in light of Psystar's deliberate and extensive pattern of violating Apple's rights and the necessity of deterring similar conduct, Apple is entitled to a substantial statutory damages award. Under the Copyright Act, Apple may recover statutory damages for each of Psystar's DMCA violations "in the sum of not less than $200 or more than $2,500 per act of circumvention, device, product, component, offer, or performance of service, as the court considers just." 17 U.S.C. 1203(c)(3)(A). Apple may also elect to seek statutory damages for Psystar's infringement of each of Apple's two infringed copyrights "in a sum of not less than $750 or more than $30,000 as the court considers just." 17 U.S.C. 504(c)(1). Courts have wide discretion in APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 13 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page21 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 calculating statutory damages, "constrained only by the specified maxima and minima." Harris v. Emus Records Corp., 734 F.2d 1329, 1335 (9th Cir. 1984). "The court is guided by `what is just in the particular case, considering the nature of the copyright, the circumstances of the infringement and the like . . . ." Peer Int'l Corp. v. Pausa Records, Inc., 909 F.2d 1332, 1336 (9th Cir. 1990). Following these broad guidelines, courts have developed several factors to ensure a statutory damages award is just: (1) the expenses saved and the profits reaped [by the infringer]; (2) the revenues lost by the plaintiff; (3) the value of the copyright; (4) the deterrent effect on others besides the defendant; (5) whether the defendant's conduct was innocent or willful; (6) whether a defendant has cooperated in providing particular records from which to assess the value of the infringing material produced; and (7) the potential for discouraging the defendant. Microsoft Corp. v. Nop, 549 F. Supp. 2d 1235, 1237 (E.D. Cal. 2008) (citing Tiffany (NJ) Inc. v. Luban, 282 F. Supp. 2d 123, 125 (S.D.N.Y. 2003)); see also N.A.S. Import Corp. v. Chenson Enter., Inc., 968 F.2d 250, 252 (2d Cir. 1992) ("In determining an award of statutory damages . . . a court may consider `the expenses saved and profits reaped by the defendants in connection with the infringements, the revenues lost by the plaintiffs as a result of the defendant's conduct, and the infringers' state of mind-whether willful, knowing, or merely innocent.'") (quoting 3 Nimmer on Copyright 14.04[B], at 14-41 (1991)). The Ninth Circuit has determined that proof of actual damages is not necessary to obtain statutory damages. In Peer International Corp., the defendant argued that a statutory damages award of the maximum $50,000 per violation "should not be converted into a windfall where, as a practical matter, the plaintiff has suffered only nominal damages." 909 F.2d at 1336-37. In rejecting this argument, the Ninth Circuit stated, [i]t is clear . . . that a plaintiff may recover statutory damages `whether or not there is adequate evidence of the actual damages suffered by the plaintiff or of the profits reaped by defendant.' Harris, 734 F.2d at 1335. The Supreme Court has stated that `even for uninjurious and unprofitable invasions of copyright the court may, if it deems it just, impose a liability within [the] statutory limits to sanction and vindicate the statutory policy `of discouraging infringement.' Id. at 1337 (citing F.W. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S. 228, 233 (1952)). APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 14 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page22 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Eight years later, the Ninth Circuit affirmed that evidence of actual damages is not necessary to obtaining statutory damages. In Los Angeles News Service v. Reuters Television International Ltd, the Ninth Circuit ruled that a plaintiff may recover statutory damages "whether or not there is adequate evidence of the actual damages suffered by plaintiff or of the profits reaped by defendant . . . ." 149 F.3d 987, 996 (9th Cir. 1998); see also Chanel, Inc. v. Doan, 2007 U.S. Dist. LEXIS 22691, at *13 (N.D. Cal. Mar. 13, 2007) (citing Los Angeles News Serv., 149 F.3d at 996 ("Plaintiff may recover statutory damages without offering evidence of plaintiff's actual damages or the defendant's profits because of the dual `compensatory and punitive purposes' of statutory damages.")); Elecktra Entm't Group, Inc. v. Bryant, 2004 U.S. Dist. LEXIS 26700, at *14 (C.D. Cal. Feb. 13, 2004) ("Deterrence of future infringement is an important factor in determining damages under the Copyright Act, and therefore an award of statutory damages need not equal the amount of a plaintiff's actual damages.").6 A. The Number Of Psystar's DMCA Violations And Copyright Infringements Apple is entitled to recover statutory damages for each of Psystar's DMCA violations. Psystar violates the DMCA in the following ways: The first violation occurs when Psystar boots up each of its computers containing Psystar's circumvention technology to test it before shipping it to customers. The second violation is the shipment of a Psystar computer containing Psystar's circumvention technology. The third violation is the shipment of an order form with each Psystar computer that offers the customer a restore disk containing Psystar's circumvention technology. The fourth violation occurs when Psystar ships a restore disk to a customer that contains Psystar's circumvention technology. Apple seeks statutory damages for only two of these four violations the shipment of computers and the shipment of restore disks. Undisputed evidence shows Psystar has sold 768 Indeed, in two default judgment actions this Court did not consider plaintiff's lost profits at all when awarding double the minimum statutory damages for copyright infringement. Microsoft Corp. v. Ricketts, 2007 U.S. Dist. LEXIS 40898, at *12-13 (N.D. Cal. May 24, 2007) (internal citations omitted) (entering default judgment for copyright and trademark infringement); Microsoft Corp. v. Coppola, 2007 U.S. Dist. LEXIS 40515, at *12-13 (N.D. Cal. May 24, 2007) (same). When awarding twice the minimum, this Court noted only that "plaintiff has presented no estimate of how much defendant profited from her infringing activity." Id. at 13 (emphasis added). APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 6 15 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page23 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 computers running Mac OS X. (Lynde Decl. 42.) Undisputed facts prove Psystar has shipped 262 restore disks to its customers. (Id.) Thus, Apple seeks statutory damages for 1,030 of Psystar's DMCA violations. Apple also seeks statutory damages for Psystar's infringement of Apple's Mac OS X and Mac OS X Leopard version 10.5 copyrights. B. Every Factor Supports A High Statutory Damages Award The evidence, including that which supports Apple's claim for irreparable harm, overwhelmingly supports a high statutory damage award. Psystar's entire business is premised on infringing Apple's copyrights and modifying its software code to enable Mac OS X to run on nonApple computers. Through August 10, 2009, Psystar's infringement has generated a gross profit of $243,055. (Lynde Decl. 11.) Psystar has spent less than $2,000 on research and development compared to Apple's several billion dollars spent over the last three decades. (Id. 13.) Psystar uses Apple's trademarks in its advertising to draw in Apple's customers. (Chung Decl. Ex. 4; Lynde Decl. 14; Scott Decl. 6.) Thus, any statutory award must be sufficient to deter Psystar's continued infringement and significant enough to discourage other companies who have been emboldened by Psystar's infringement. There is abundant evidence that Psystar's infringement has been willful, and its conduct reflects a contempt for established law. Psystar continued to infringe after Apple filed this lawsuit, and made no attempt to modify its products to avoid infringement. Rudy Pedraza, Psystar's Chief Executive testified that he learned about Apple's copyrights and end user license agreement shortly after he began selling computers and thought the agreement was "bullshit." (Chung Decl. Ex. 2 at 77:2-20.) Moreover, despite the pendency of this lawsuit, Mr. Pedraza declared in his intention to continue circumventing Apple's technological protection measures in future unreleased versions of Mac OS X. (Chung Decl. Ex. 2 at 101:18-102:5; see also id. at Ex. 5.) Psystar erased code on its computers after litigation began, making Apple's proof that much more difficult and drawing a discovery sanction from the Court. (Docket No. 96.) Psystar then went on to name its new circumvention software "Open Cojones," reflecting its brazen disregard for Apple's rights. APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 16 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page24 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 In sum, Psystar built a business predicated on stealing Apple's intellectual property. As a result, Apple seeks $2,000 for each of the 1,030 DMCA violations and $30,000 for each of the infringed copyrights, for a total statutory damages award of $2,120,000. IV. AN AWARD OF REASONABLE ATTORNEYS' FEES AND COSTS IS APPROPRIATE The Court has discretion to award full costs and reasonable attorneys' fees to the prevailing party for copyright infringement and DMCA violations. See 17 U.S.C. 505, 1203(b)(5); Reimerdes, 111 F. Supp. 2d at 345 & n.277 ("The DMCA permits awards of costs and attorney's fees to the prevailing party in the discretion of the Court"). There is a presumption in favor of awarding costs and attorneys' fees to a prevailing party. See Fed. R. Civ. P. 54(d)(1); Berkla v. Corel Corp., 302 F.3d 909, 921 (9th Cir. 2002) ("the rule [54(d)(1)] creates a presumption in favor of awarding costs to a prevailing party"); Frank Music Corp. v. Metro-Goldwyn-Mayer Inc., 886 F.2d 1545, 1556 (9th Cir. 1989) ("Plaintiffs in copyright actions may be awarded attorney fees simply by virtue of prevailing in the action; no other precondition need be met, although the fees awarded must be reasonable"); see also Eagle Servs. Corp. v. H20 Indus. Servs., Inc., 532 F.3d 620, 625 (7th Cir. 2008) ("The presumption in a copyright case is that the prevailing party though if it is the plaintiff, only if his copyright had been registered) . . . receives an award of fees.") (internal citations omitted); Spencer Promotions Inc. v. 5th Quarter Enterprises Inc., 1996 U.S. Dist. LEXIS 8686, at*13 (N.D. Cal. Feb. 21, 1996) ("Plaintiffs need not show any other preconditions in order to obtain an award of reasonable attorney's fees"). In deciding whether to award attorneys' fees, courts consider a non-exclusive list of factors: "[1] the degree of success obtained; [2] frivolousness, [3] motivation, [4] objective unreasonableness (both in the factual and in the legal components of the case), and [5] the need in particular circumstances to advance considerations of compensation and deterrence." Historical Res. v. Cabral, 80 F.3d 377, 379 n.1 (9th Cir. 1996) (citing Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994)); Fantasy, Inc. v. Fogerty, 94 F.3d 553, 559 (9th Cir. 1996). Though exceptional circumstances are not a prerequisite to an award of attorneys' fees, the willful nature of defendants' infringement is an important factor favoring an award of fees. Historical Res., 80 APPLE INC.'S MEMORANDUM IN SUPPORT OF ITS MOTION FOR PERMANENT INJUNCTION, STATUTORY DAMAGES AND REASONABLE ATTORNEYS' FEES AND COSTS, CASE NO. 08-3251 WHA 17 Case3:08-cv-03251-WHA Document235 Filed11/23/09 Page25 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 F.3d at 378-79; see also Microsoft Corp. v. E&M Internet Bookstore, Inc., 2008 U.S. Dist. LEXIS 4381, at *8 (N.D. Cal. Jan. 22, 2008) (J. Alsup) ("The willful nature of defendants' infringement and the importance of deterring the sale of counterfeit products weigh in favor of granting attorney's fees"). All the factors cited above favor an award of attorneys' fees to Apple. First, Apple's success is complete and unquestionable. On summary judgment, Apple proved Psystar infringed Apple's Mac OS X by reproducing, distributing and creating derivative works, induced copyright infringement, and violated the anti-circumvention and anti-trafficking provisions of the DMCA. Second, Apple's claims clearly cannot be characterized as frivolous or objectively unreasonable; they were successful. Rather, Psystar's defenses were frivolous and unsustainable given Psystar's pirating of Apple's Mac OS X and circumvention of its technological protection measures. See Dunn & Fenley, LLC v. Allen, No. 02-1750-JE, 2007 U.S. Dist. LEXIS 75292, at *10 (D. Or. Oct. 9, 2007) (finding defenses unsustainable given "the overwhelming similarity in the works in question" and awarding plaintiff its attorney's fees). Psystar's defenses were objectively unreasonable in both fact and law considering: Psystar did not oppose Apple's contributory copyright infringement claim, Psystar w