Apple Inc. v. Psystar Corporation

Filing 40

MOTION for Leave to File First Amended Counterclaim filed by Psystar Corporation. Motion Hearing set for 1/15/2009 08:00 AM in Courtroom 9, 19th Floor, San Francisco. (Attachments: # 1 Exhibit First Amended Counterclaim, # 2 Proposed Order Proposed Order, # 3 Exhibit Annotated Counterclaim, # 4 Exhibit Law Review Article)(Springer, Colby) (Filed on 12/8/2008)

Apple Inc. v. Psystar Corporation Doc. 40 Case3:08-cv-03251-WHA Document40 Filed12/08/08 Page1 of 13 1 ROBERT J. YORIO (SBN 93178) yorio@carrferrell.com 2 COLBY B. SPRINGER (SBN 214868) cspringer@carrferrell.com 3 CHRISTOPHER P. GREWE (SBN 245938) cgrewe@carrferrell.com 4 CARR & FERRELL LLP 2200 Geng Road 5 Palo Alto, California 94303 Telephone: (650) 812-3400 6 Facsimile: (650) 812-3444 7 Attorneys for Defendant/Counterclaimant PSYSTAR CORPORATION 8 9 10 11 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION CASE NO. CV-08-03251-WHA PSYSTAR CORPORATION'S NOTICE OF AND MOTION FOR LEAVE TO AMEND Date: Time: Courtroom: Judge: Thursday, January 15, 2009 8:00 a.m. 9, 19th Floor Hon. William Alsup 12 APPLE INC., a California corporation, 13 14 v. Plaintiff, 15 PSYSTAR CORPORATION, a Florida corporation, 16 Defendant. 17 18 AND RELATED COUNTERCLAIMS. 19 20 PLEASE TAKE NOTICE that on THURSDAY, JANUARY 15, 2009, AT 8:00 A.M., or as soon thereafter 21 as the matter can be heard, in the courtroom of the Honorable William Alsup, located at 450 22 Golden Gate Avenue, San Francisco, California 94102, defendant and counterclaimant, PsyStar 23 Corporation ("PsyStar") will, and hereby does, move for an order granting PsyStar leave to file its 24 First Amended Counterclaim and ordering that the First Amended Counterclaim submitted with this 25 motion be deemed filed. The motion will be based on this Notice of and Motion for Leave to 26 Amend, the following Memorandum of Points and Authorities, PsyStar's First Amended 27 Counterclaim (Exhibit A), and the Proposed Order (Exhibit B) filed herewith. The motion is 28 further based on all of the files and records of this action and on any additional material that may be -1- Psystar Corporation's Notice of and Motion for Leave to Amend (Case No. CV-08-03251-WHA) Dockets.Justia.com Case3:08-cv-03251-WHA Document40 Filed12/08/08 Page2 of 13 1 elicited at the hearing of this motion. For the convenience of the Court, an annotated version of the 2 PsyStar's First Amended Counterclaim with respect to PsyStar's initial counterclaim is attached 3 hereto as Exhibit C. 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 -2- Psystar Corporation's Notice of and Motion for Leave to Amend (Case No. CV-08-03251-WHA) Case3:08-cv-03251-WHA Document40 Filed12/08/08 Page3 of 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 VI. V. III. IV. I. II. TABLE OF CONTENTS INTRODUCTION .......................................................................................................................... 5 ARGUMENT ................................................................................................................................. 7 I. The Federal Rules, Supreme Court, and Ninth Circuit Routinely Grant Leave to Amend ........................................................................................... 7 The Federal Rules, Supreme Court, and Ninth Circuit Routinely Grant Leave to Amend ........................................................................................... 7 Copyright Misuse is Recognized by the Court of Appeals for the Ninth Circuit ........................................................................................................... 8 Copyright Misuse is Not Dependent Upon Establishing the Elements of an Antitrust Claim .............................................................................................. 8 Apple's EULA Attempts to Utilize Apple Copyrights to Secure Exclusivity with Respect to Apple-Labeled Computer Hardware Systems to the Exclusion of Mac OS Capable Computer Hardware Systems--an Exclusive Right Not Covered by the Copyright Act ...................... 10 Apple's Use of the DMCA to Extend its Copyrights to Cover Uncopyrightable Hardware Components Under the Guise of `Technological Protection Measures' Constitute a Misuse of the DMCA .................................................................................................................. 11 Apple's Misuse of Its Copyrights Contravenes Antitrust Law and Policy and is Actionable Under California's Unfair Competition Statute ................................................................................................................... 12 17 CONCLUSION ............................................................................................................................ 13 18 19 20 21 22 23 24 25 26 27 28 -3- Psystar Corporation's Notice of and Motion for Leave to Amend (Case No. CV-08-03251-WHA) Case3:08-cv-03251-WHA Document40 Filed12/08/08 Page4 of 13 1 2 CASES TABLE OF AUTHORITIES 3 A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001) ...................................... 8, 10 AICCO, Inc. v. Ins. Co. of N. Am., 90 Cal.App. 4th 579 (2001) ................................................. 12 4 Alcatel USA, Inc. v. DGI Techs., Inc., 166 F.3d 772 (5th Cir. 1999) ...................................... 8, 11 5 Cel-Tech Comms., Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163 (1999) ...................... 12 6 DCD Programs, Ltd. v. Leighton, , 833 F.2d 183 (9th Cir. 1987) ................................................ 7 7 DSC Communications Corp. v. DGI Techs., Inc., 81 F.3d 597 (5th Cir. 1996)............................ 8 8 Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2003) ...................................... 7 Foman v. Davis, 371 U.S. 178 (1962) ........................................................................................... 7 9 In re Independent Service Organizations Antitrust Litigation, (CSU, L.L.C v. Xerox 10 Corporation), 203 F.3d 1322 (Fed. Cir. 2000)........................................................................ 8 11 Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984) .................................................... 6 12 Lasercomb America, Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990) ................................. 8, 9, 10 Morton Salt Co. v. G.S. Suppieger Co., 314 U.S. 488 (1942) ....................................................... 9 13 Practice Mgmt. Information Corp. v. American Medical Ass'n, 121 F.3d 516 (9th 14 Cir. 1997) ............................................................................................................................ 8, 9 15 qad, inc. v. ALN Assocs., Inc., 770 F. Supp. 1261 (N.D. Ill. 1991) ............................................ 10 Supermarket of Homes, Inc. v. San Fernando Bd. of Realtors, 786 F.2d 1400 (9th 16 Cir. 1986 ) ................................................................................................................................ 8 17 Tanaka v. University of Southern California, 252 F.3d 1059 (9th Cir. 2001) .............................. 6 18 Tippett v. Terich, 37 Cal.App.4th 1517 (1995) ........................................................................... 12 19 Triad Sys. Corp. v. Southeastern Express Co., 64 F.3d 1330 (9th Cir. 1995) .............................. 8 United States v. Webb, 655 F.2d 977 (9th Cir. 1981) ................................................................... 7 20 STATUTES 21 22 7 U.S.C. § 106 .............................................................................................................................. 11 CAL. CODE CIV. PROC. § 1021.5 .................................................................................................. 13 23 24 RULES FED. R. CIV. P. 15(a)(2) ................................................................................................................. 8 25 26 OTHER RESOURCES 27 ANTICIRCUMVENTION MISUSE, 50 UCLALR 1095 (2003) ..............................................11 28 -4- Psystar Corporation's Notice of and Motion for Leave to Amend (Case No. CV-08-03251-WHA) Case3:08-cv-03251-WHA Document40 Filed12/08/08 Page5 of 13 1 2 3 INTRODUCTION In its Order dated November 18, 2008 (Order), the Court granted Apple's motion to dismiss 4 PsyStar's counterclaims for violations of federal and state antitrust law. SEE Order, 1, 17, 19 5 (dismissing PsyStar's claims under Sections 1 and 2 of the Sherman Act as well as Section 3 of the 6 Clayton Act). A series of state law claims were likewise dismissed. SEE Order, 1, 17-18 7 (concerning dismissal of PsyStar's Cartwright Act and unfair competition claims). As a further part 8 of that Order, the Court stated that "PsyStar may move for leave to amend" and that "[a]ny such 9 motion should be accompanied by a proposed pleading" explaining why the bases for dismissal of 10 PsyStar's initial counterclaims had been "overcome by the proposed pleading." Order, 19. PsyStar 11 was further directed to "plead its best case." Id. PsyStar believes that it has complied with the 12 Court's order in this regard. 13 PsyStar respectfully disagrees with a number of the Court's conclusions including those 14 related to market definition and the viability of PsyStar's single product market allegation. SEE 15 GENERALLY Order, 5-17. Notwithstanding, PsyStar reserves the right to pursue those issues on 16 appeal. For the purpose of the present motion, PsyStar focuses its amendments to a number of 17 claims asserted in PsyStar's initial counterclaim (Counterclaim) but that were overlooked during 18 the Rule 12(b)(6) briefing and, ultimately, the Court's aforementioned Order. Specifically, PsyStar 19 pleads its case with respect to seeking a declaratory judgment as to the unenforceability of any and 20 all asserted copyrights by Apple. SEE PsyStar's First Amended Counterclaim, ¶¶ 2-3, and 67-77 21 (concerning request for declaratory relief with respect to Apple's copyright misuse through use of 22 its EULA); see also Apple's First Amended Complaint, ¶ 25-33 (concerning direct infringement) 23 and ¶ 34-42 (concerning contributory and/or induced copyright infringement). PsyStar also seeks a 24 declaratory judgment as to the unenforceability of Apple's copyrights in light of Apple's newly 25 asserted Digital Millennium Copyright Act (DMCA) claim. SEE PsyStar's First Amended 26 Counterclaim, ¶¶ 2-3, and 78-90 (concerning request for declaratory relief with respect to Apple's 27 copyright misuse through use of the DMCA); SEE Apple's First Amended Complaint, ¶ 43-54. 28 -5- Psystar Corporation's Notice of and Motion for Leave to Amend (Case No. CV-08-03251-WHA) Case3:08-cv-03251-WHA Document40 Filed12/08/08 Page6 of 13 1 These claims for declaratory relief are sought in light of the brazen misuse of Apple 2 copyrights. SEE PsyStar's First Amended Counterclaim, ¶ 47-56. Apple's copyright misuse occurs 3 in the context of both the Apple EULA (¶ 47-51) and spurious DMCA assertions (¶ 52-56). Both 4 of these efforts constitute Apple having leveraged (and continuing to leverage) the limited 5 monopoly granted by the U.S. Copyright Office under the U.S. Copyright Act to areas outside that 6 statutory grant. Apple's leveraging conduct constitutes copyright misuse thereby rendering the 7 corresponding copyrights unenforceable. 8 PsyStar likewise seeks a corresponding declaration of Apple having engaged in unfair 9 competition under California's unfair competition statute. SEE PsyStar's First Amended 10 Counterclaim, ¶ 91-104 (concerning PsyStar's third and fourth claims for relief). Apple's 11 copyright misuse--which is wholly and completely independent of any antitrust pleading standard 12 or requirement--violates the policy and spirit of the antitrust laws therefore constituting unfair 13 behavior and otherwise giving rise to an actionable claim under the California Business and 14 Professions Code. 15 While copyright misuse may have found its origins in antitrust law, its pleading 16 requirements are--as noted above--wholly and completely independent of those requirements 17 imposed upon an antitrust counterclaim. SEE Order, 6 (requiring identification of the relevant 18 market in an antitrust context) CITING Tanaka v. University of Southern California, 252 F.3d 1059, 19 1063 (9th Cir. 2001) (finding that "[f]ailure to identify a relevant market is a proper ground for 20 dismissing a Sherman Act claim"); SEE ALSO Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 21 23 n.39 (1984) (finding the standards for establishing a Sherman Act Section 1 and Clayton Act 22 Section 3 claim to be the same). As such, PsyStar's First Amended Counterclaim, on its face, 23 already avoids the issues related to the Mac OS being an "independent market" as well as those 24 concerns raised with respect to the submarket/aftermarket relationship of Apple-Labeled Computer 25 Hardware Systems and Mac OS Capable Computer Hardware Systems. SEE Order, 12 (concerning 26 Mac OS market), 17 (concerning submarket/aftermarket relationship), 19 (requiring an 27 "expla[nation] why the foregoing problems are overcome by the proposed pleading"). 28 -6- Psystar Corporation's Notice of and Motion for Leave to Amend (Case No. CV-08-03251-WHA) Case3:08-cv-03251-WHA Document40 Filed12/08/08 Page7 of 13 1 2 3 4 5 I. ARGUMENT The Federal Rules, Supreme Court, and Ninth Circuit Routinely Grant Leave to Amend Federal Rule of Civil Procedure 15(a) provides that leave to amend a pleading "shall freely 6 [be] give[n] . . . when justice so requires." FED. R. CIV. P. 15(a)(2) ). The Supreme Court of the 7 United States and Ninth Circuit Court of Appeals each have affirmed that leave to amend should be 8 granted with "extreme liberality." Foman v. Davis, 371 U.S. 178, 182 (1962) ; SEE Eminence 9 Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (finding that "[a]bsent prejudice 10 . . . there exists a presumption under Rule 15(a) in favor of granting leave to amend") (emphasis in 11 original); SEE ALSO United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981) (finding that courts 12 should be guided by policy favoring decisions on the merits "rather than on the pleadings or 13 technicalities"). The primary factors relied upon by the Supreme Court and the Ninth Circuit in 14 denying a motion for leave to amend include "bad faith, undue delay, prejudice to the opposing 15 party, and futility of amendment." DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 16 1987) . None of those factors are present here. 17 The amended counterclaims asserted herewith are made in good faith and within the time 18 permitted by the Court. Further, these claims do not prejudice Apple as copyright misuse has 19 already been raised in the context of an affirmative defense and was likewise alleged--albeit 20 disregarded in the Rule 12(b)(6) process--in PsyStar's initial counterclaim. SEE Counterclaim, 2421 25 (thirty-seventh affirmative defense for copyright misuse); SEE ALSO Counterclaim, ¶¶ 100, 109, 22 115 (alleging anticompetitive behavior vis-ą-vis Apple's misuse of copyrights). Discovery is 23 ongoing and scheduled to conclude in June 2009 meaning that Apple will be offered a full 24 opportunity to propound discovery on these claims. Finally, and as is established in greater detail 25 below, each of PsyStar's amended counterclaims are valid claims supported by the law and 26 properly plead to withstand challenged under Rule 12(b)(6). 27 28 -7- Psystar Corporation's Notice of and Motion for Leave to Amend (Case No. CV-08-03251-WHA) Case3:08-cv-03251-WHA Document40 Filed12/08/08 Page8 of 13 1 II. 2 3 Copyright Misuse is Recognized by the Court of Appeals for the Ninth Circuit The copyright misuse doctrine "prevents copyright holders from leveraging their limited 4 monopoly to allow them control of areas outside the monopoly" otherwise granted by the Copyright 5 Act. A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1026-27 (9th Cir. 2001) . Recognized in 6 association with the doctrine of patent misuse, the copyright misuse doctrine is firmly established 7 as a limitation on licensing restrictions that are either anticompetitive or otherwise violate the 8 public policy underlying the federal copyright laws. The Ninth Circuit is among those courts that 9 recognize that the copyright misuse defense "forbids the use of the copyright to secure an exclusive 10 right or limited monopoly not granted by the Copyright Office." Practice Mgmt. Information Corp. 11 v. American Medical Ass'n, 121 F.3d 516, 520 (9th Cir. 1997) (QUOTING Lasercomb America, Inc. 12 v. Reynolds, 911 F.2d 970, 977-79 (4th Cir. 1990)) ; SEE ALSO Triad Sys. Corp. v. Southeastern 13 Express Co., 64 F.3d 1330, 1337 (9th Cir. 1995) AND Supermarket of Homes, Inc. v. San Fernando 14 Bd. of Realtors, 786 F.2d 1400, 1408 (9th Cir. 1986) . 15 16 17 III. Copyright Misuse is Not Dependent Upon Establishing the Elements of an Antitrust Claim Like the patent misuse defense, copyright misuse has not been limited to circumstances in 18 which a plaintiff has violated the antitrust laws. SEE Lasercomb, 911 F.2d at 976-79 ); SEE ALSO 19 Alcatel USA, Inc. v. DGI Techs., Inc., 166 F.3d 772, 792-95 (5th Cir. 1999) AND DSC 20 Communications Corp. v. DGI Techs., Inc., 81 F.3d 597, 601-02 (5th Cir. 1996) . "[A] defendant 21 in a copyright infringement suit need not prove an antitrust violation to prevail on a copyright 22 misuse defense"; misuse may be based upon the public policies reflected in the copyright laws 23 themselves. Practice Mgmt., 121 F.3d at 520-21 ) (emphasis added). In that regard, the Noerr24 Pennington doctrine or any other antitrust defense would not immunize Apple's actions as they 25 pertain to misuse of copyright. Id.; SEE ALSO In re Independent Service Organizations Antitrust 26 Litigation, (CSU, L.L.C v. Xerox Corporation), 203 F.3d 1322, 1329 (Fed. Cir. 2000) (declining to 27 find exclusionary conduct in violation of the antitrust laws absent "evidence that the copyrights [at 28 issue] . . . were used to gain monopoly power beyond the statutory copyright granted by -8- Psystar Corporation's Notice of and Motion for Leave to Amend (Case No. CV-08-03251-WHA) Case3:08-cv-03251-WHA Document40 Filed12/08/08 Page9 of 13 1 Congress").1 The rationale for copyright misuse in these cases has been that courts should not 2 facilitate the expansion of a copyright beyond the boundaries set forth in the Copyright Act, which 3 is exactly what would happen if the Court were to enforce certain terms in Apple's EULA. 4 The boundaries set by the Copyright Act must be respected because they reflect Congress' 5 recognition that intellectual property rights serve the public interest by "increasing the store of 6 human knowledge and arts," and do not serve only the private interest of "rewarding inventors." 7 Lasercomb, 911 F.2d at 976). Each of the aforementioned cases establish the rule that the 8 copyright misuse doctrine applies any time a copyright owner attempts to circumvent the 9 boundaries surrounding his copyrights under the Copyright Act. The Ninth Circuit has declared 10 unequivocally that it "adopt[s] that rule." Practice Mgmt., 121 F.3d at 520). 11 It should be noted that copyright misuse does not require a party alleging misuse to show 12 that they were directly harmed by the abusive practice. SEE E.G. Lasercomb, 911 F.2d at 979 13 (finding that "the defense of copyright misuse is available even if the defendants themselves have 14 not injured by the misuse."); CF. Morton Salt Co. v. G.S. Suppieger Co., 314 U.S. 488, 494 (1942) 15 (finding that "[i]t is the adverse effect upon the public interest of a successful infringement suit in 16 conjunction with the patentee's course of conduct which disqualifies him to maintain the suit, 17 regardless of whether the particular defendant has suffered from the misuse of the patent."). 18 Notwithstanding, PsyStar asserts that it has most definitely been harmed by the misuse of Apple's 19 copyrights--the present litigation being clear evidence to that fact. 20 21 22 23 24 25 26 27 28 PsyStar does not re-plead its Sherman and Clayton Act antitrust claims (and related state claims) in the context of the present motion and amended counterclaim. PsyStar does, however, reserve the right to move the court for leave to amend and reintroduce those antitrust claims subject to proof that Apple used its copyright to gain monopoly power beyond the statutory right copyright granted by Congress. In that context, while PsyStar has eliminated much of the previously plead subject matter as it pertains to market definition from its initial Answer and Counterclaim, the present amendments are made solely for the simplification of the pleadings. The present amendments should not be construed as PsyStar discounting the merits of the previously plead allegations. -91 Psystar Corporation's Notice of and Motion for Leave to Amend (Case No. CV-08-03251-WHA) Case3:08-cv-03251-WHA Document40 Filed12/08/08 Page10 of 13 1 IV. 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 Apple's EULA Attempts to Utilize Apple Copyrights to Secure Exclusivity with Respect to Apple-Labeled Computer Hardware Systems to the Exclusion of Mac OS Capable Computer Hardware Systems--an Exclusive Right Not Covered by the Copyright Act Apple's attempt to establish control over Apple-Labeled Computer Hardware Systems visą-vis its copyrights and corresponding EULA constitutes an attempt to secure an "exclusive right" that was "not granted" by the Copyright Office. Lasercomb, 911 F.2d at 977 ). To appreciate this, the Court need only note that in Section 106 of the Copyright Act, Congress set forth the six exclusive rights that a copyright owner enjoys: (1) reproduction; (2) creation of derivative works; (3) distribution; (4) public performance; (5) public display; and (6) digital public performance. 17 U.S.C. § 106 . As a result, by attempting to secure rights in hardware (Apple-Labeled Computer Hardware Systems), which are outside the scope of copyright, Apple's EULA unquestionably "seek[s] to control areas outside of their grant of monopoly" under the Copyright Act. A&M Records, 239 F.3d at 1026-27 (9th Cir. 2001) ); CF. qad, inc. v. ALN Assocs., Inc., 770 F. Supp. 1261 (N.D. Ill. 1991) (finding "qad's misuse was even more egregious: It used its copyright to sue ALN and to restrain it from the use of material over which qad itself had no rights. That is a misuse of both the judicial process and the copyright laws") (emphasis added). By misusing its copyrights through its EULA to extend its "exclusive rights" under Section 106 of the Copyright Act to include Apple-Labeled Computer Hardware Systems, Apple has rendered its copyrights unenforceable. -10- Psystar Corporation's Notice of and Motion for Leave to Amend (Case No. CV-08-03251-WHA) Case3:08-cv-03251-WHA Document40 Filed12/08/08 Page11 of 13 1 V. 2 3 4 Apple's Use of the DMCA to Extend its Copyrights to Cover Uncopyrightable Hardware Components Under the Guise of `Technological Protection Measures' Constitute a Misuse of the DMCA Apple's (mis)use of the DMCA in its First Amended Complaint closely resembles the 5 behavior at issue in Alcatel USA, Inc. v. DGI Techs., Inc. where the Fifth Circuit barred DGI from 6 doing with contract and copyright what Apple is attempting to do vis-ą-vis the DMCA. 166 F.3d 7 772 (5th Cir. 1999). In Alcatel, DSC had developed both an operating system and a microprocessor 8 card for a telecommunications switch. Running the operating system required copying the 9 operating system into the microprocessor's memory. DGI developed microprocessor cards 10 compatible with the DSC operating system. To test and use the DGI cards required loading the 11 DSC operating system into the cards' memory but the DSC license agreement prohibited the 12 running its operating system on non-DSC cards. The jury found that DSC's license agreement 13 constituted copyright misuse; the Fifth Circuit agreed: "DSC has used its copyright to indirectly 14 gain commercial control over products DSC does not have copyright, namely its microprocessor 15 cards." Id. at 793; SEE Anticircumvention Misuse, 50 UCLALR 1095, 1134 (2003) (referencing 16 Alcatel and positing "a misuse of the [DMCA] circumvention right" by "leveraging the right 17 granted in the technological control system to control unpatented" hardware) (attached hereto as 18 Exhibit D). 19 The same public policy that forbids use of a copyright monopoly to control purchasers' use 20 of third party materials by barring enforcement of the copyright lever should likewise block 21 enforcement of the DMCA when it is used to go beyond the scope of either copyright or access. 22 Use of the DMCA as a "paracopyright" was recognized years ago as being "ripe for abuse." 23 Anticircumvention Misuse, 50 UCLALR at 1113 (finding that "[p]aracopyright seems additionally 24 positioned to facilitate anticompetitive licensing terms" including "`shrinkwrap' licensing" and 25 other "noncompetition provisions"). These abuses of copyright have--"[i]n the past,"--been 26 "restrained by judicial application of the misuse doctrine." Id. at 1114. Scholars, in this regard, 27 have "suggest[ed] the need to recognize a new claim of anticircumvention of paracopyright 28 misuse." Id. at 1132; see also id. at 1140 (finding "that the need for a doctrine of anticircumvention -11- Psystar Corporation's Notice of and Motion for Leave to Amend (Case No. CV-08-03251-WHA) Case3:08-cv-03251-WHA Document40 Filed12/08/08 Page12 of 13 1 misuse is real, and the time for its application will arrive shortly, if indeed it has not already 2 arrived"). 3 As evidenced by the present pleadings, that time has arrived and copyright misuse is the 4 solution. Apple is attempting to use its copyrights in the Mac OS not to prevent unauthorized 5 production of any copyrightable elements but to prevent competitors from developing competing 6 hardware systems interoperable with the Mac OS. Through the use of anti-circumvention and the 7 DMCA, Apple is attempting to leverage its copyright limited monopoly in reproduction of the Mac 8 OS into a broader monopoly in a separate hardware market. This is the exact behavior that is 9 prohibited by the copyright misuse doctrine. The fact that the misuse occurs in the context of the 10 DMCA is irrelevant as the doctrine remains nevertheless applicable. 11 12 13 14 California's unfair competition law is intended to protect competitors as well as consumers VI. Apple's Misuse of Its Copyrights Contravenes Antitrust Law and Policy and is Actionable Under California's Unfair Competition Statute 15 from unfair practices. SEE Tippett v. Terich, 37 Cal.App.4th 1517, 1536 (1995) (overruled on other 16 grounds). When an entity claims to have suffered from injury from a competitor's "unfair" act or 17 practice, the principal test is whether that act or practice threatens "an incipient violation of an 18 antitrust law, or violates the policy or spirit of one of the antitrust laws because its effects are 19 comparable to, or are the same as, a violation of the law." Cel-Tech Communications, Inc. v. Los 20 Angeles Cellular Tel. Co., 20 Cal. 4th 163, 187 (1999) ) (emphasis added). Notwithstanding, the 21 unfair competition claim is not dependent upon any pleading requirement of an actual antitrust 22 claim--only the spirit of the same. Leveraging of a monopoly right into an otherwise unrelated 23 market (i.e., the copyrights related to the Mac OS into the Apple Labeled Computer Hardware 24 Systems market) most surely runs afoul of the `spirit' of a federal leveraging or tying claim. In that 25 regard, the conduct is actionable. SEE Cel-Tech, 20 Cal. 4th at 163 (finding an act that "threatens of 26 harms competition" to be actionable); see also AICCO, Inc. v. Ins. Co. of N. Am., 90 Cal.App. 4th 27 579, 590 (2001) ) (finding that unfair competition may be plead as part of a claim for a declaratory 28 judgment). Fees are likewise awardable to the extent that bringing an end to the complained of -12- Psystar Corporation's Notice of and Motion for Leave to Amend (Case No. CV-08-03251-WHA) Case3:08-cv-03251-WHA Document40 Filed12/08/08 Page13 of 13 1 action involves either an important right or affects a significant benefit to the general public. SEE 2 CAL. CODE CIV. PROC. § 1021.5 . 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 -13- CONCLUSION For the foregoing reasons, PsyStar respectfully requests that the Court grant PsyStar's motion for leave to amend and allow for entry of the First Amended Counterclaim attached hereto as Exhibit A. Dated: December 8, 2008 CARR & FERRELL LLP By: /s/ Colby B. Springer ROBERT J. YORIO COLBY B. SPRINGER CHRISTOPHER P. GREWE Attorneys for Defendant/Counterclaimant PSYSTAR CORPORATION Psystar Corporation's Notice of and Motion for Leave to Amend (Case No. CV-08-03251-WHA)