Apple Inc. v. Psystar Corporation

Filing 192

DECLARATION of MEHRNAZ BOROUMAND SMITH in Opposition to 182 MOTION for Summary Judgment [Declaration of Mehrnaz Boroumand Smith in Opposition to Psystar's Motion for Summary Judgment] filed byApple Inc.. (Attachments: # 1 Exhibit (s) 1-6, # 2 Exhibit (s) 7-14)(Related document(s) 182 ) (Boroumand Smith, Mehrnaz) (Filed on 10/22/2009)

Apple Inc. v. Psystar Corporation

Doc. 192 Att. 1

Case3:08-cv-03251-WHA Document192-2

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EXHIBIT 7
DECLARATION OF MEHRNAZ BOROUMAND SMITH IN OPPOSITION TO PSYSTAR'S MOTION FOR SUMMARY JUDGMENT

Dockets.Justia.com

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DECLARATION OF MEHRNAZ BOROUMAND SMITH IN OPPOSITION TO PSYSTAR'S MOTION FOR SUMMARY JUDGMENT

Case3:08-cv-03251-WHA Document192-2

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SteitPdnv

PSYSTAR Corporation
MWk-530058: Content Pages
26 Sep 2008 02:05 PM

joel

Davidson

Hello, Greg.

(Staff)

The following links are the URL5 to the content pages we llave created. If you would like to change any of the pages just shoot us an e-mail reply, well be in the office tomorrow as well so we can definitely take care of that.
http://www.psystar.com/thinking_about_buyjng_a.j, d_appl e.htni httP://www.psystar.com/buying_a_used apple computer. html http://www.psystar.com/why_b uy_a_used_eppie_compu. html http://www.psystar. corn/looking_into_a_used_app computer. html http://www.psystar.com/replaclng_you_ppi0 computer. html
http://www. psysta r. corn/looking_to_re pia ce_your_a ppie.htrnl http ://www.psystar. corn/rep laclng_yo nr_mac_nl nl.htmi http ://ww w . psys ta r . com/g et_p id_of_yo u r_pp c_nac1

http://www. psysta r. corn/repiacing_your_ppc_ma,tl
http://www - psysta r. corn/check_out_the_mac_os. ttrnl

httP://www.psystar.com/looklng_to_get_an_apple_computer. html
Posted on: 26 Sep 2008 02:05 PM

(User)

Greg Marsden Thanks, 1H take a look through these. One thing e did notice s that in lE on a po your phones in out of place on all the pages, see below:

thanks, Greg.

Posted on: 26 Sep 2008 02:14 PM

Greg Marsden Hi J00l,
(User)

Aside Iron, the phone t being out of place In LE issue I mentioned earlier today I alto noticed the buy now buttons all go to the open pro page even when the page Is talking about the regular open computer like
would probably scare off some people looking for the cheaper version. Can you go through those pages aad make sure it links to the right product. Also, I think in general ehe pages are on the right track though sorne of them are very brief end basically just the comparison. It might be a good idea to add testimonials fron, buyers or quotes from favorable reviews or some other additional content to these pages to help wake them more impactful and meaty. I don't think it would be a good idea io start running traffic at these just yet uni ii at least the buy Inks are fixed, can that be fised by Monday? Also I wanted to check on how your tracking works and If I nead to add anything to the uRLs below for tracking purposes? Do you aieo have Google conversion tracking already installed for your shopping ca re?
Thanks, Greg.
Posted on: 26Sep 2008 05:01 PM

http://www. psyssa r. corn/check_Out_the_ma c_Os. html which

Greg Marsden l-Il Joel,
(User)

Aside From the phone t being out of piace in LE issue I mentioned earlier today I also noeiced the buy now buttons all go to the open pro page even when ehe page is talking about the regular open computer like

P300 9087
CONFIDENTIAL

Case3:08-cv-03251-WHA Document192-2

Filed10/22/09 Page5 of 53

make sure lt links to the right product. Also, I think in general the pages are on the right track though some of then are very brief and basically just the comparison. It might be a good idea to add testimonials from buyers or guotes from favorable reviews or some other additional content to these pages to help make them more impactful and meaty. I dont think it would be a good Idea to start runnIng traffic at these Just yet until at least the buy links are fixed. Can that be fixed by Monday? Also I wanted to check on how your tracking works and If I need to add anything to the URIs below for tracking purposes?
installed for your shopping cart?
Thanks, Greg.
Posted on. 26sep2008 05:01 PM

http://www.psystar.cora(theck_out_the_mac_os.html which would probably scare off some people looking for the cheaper version. Can you go through those pages and

Oo you also have Google conversion trackFng already

Rudy Pedraza Greg,
(Staff)
The google conversion code has been Installed. Regarding the landing page corrections, those will be done by tomorrow. I will have one of the web guys go through them and add some links/testimonials as we spoke about

earlier as well. I'd still like to get these into a working state and start throwing some traffic on them sometime
Best, --Rudy
Posted on: 26 sap 2008 05:22 PM

this weekend. That way we can be sure things are working by the time Monday comes around.

Rudy Greg, Pedraza

(usar)

The google conversion code has been Instailed. Regarding the landing paga corrections, those will be done by tomorrow. I will hava one of the web guys go through them and add some links/testimonials as we spoke about earlier as well. I'd still like te get these Into a working state and start throwing some traffic on them sometime this weekend. That way we can be sure things are working by the time Monday comes around. Bett, --Rudy Ticket History Joel Oavidson (Staff) Posted On; 26 sep zoos 02:05 PM
Hello, Greg.

The following links are the URL5 to the content pages we have created. If you would like to change any of the pages just shoot us an e-mail reply, we'll be in the office tomorrow as well so we can definitely take care of that.
http;//www. psysta r.com/tOpi aking_a bout_buying_a_used_apple. html http://www. psysta r.com/buying_a_u sed_a pple_coropute,. html http://www. psysta r.com/why_buy_a_used_apple_computer. html http: //www. psysta r.com/looting_Into_a_u sed_a pple_computer. h tri, I http://www. psysta r.com/replacing_your_apple_compute r.html http: //www.psysta r.com/looking_ro_replace_your_apple. html http: //www.psysta r. com/replacing_your_mac_ml nl.html http: //www.psysta r.com/get_rid_er_you r_ppc_m Sc. html http://www.psysta r.com/replacing_your_ppc_ma c. html http://www.psysta r.comcheck_out_th e_mac_os.htmi http://www.psysta r. corn/looking_to_get_an_apple_cow puter.htrnl

Greg Marsien (ClIent) Posted On; 26 Sep ZOOa 02:14 PM

Thanks, Ill take a look through these. one thing I did nolice is that in lE on a pc your phone# is out of place on all the pages, see below:

P500 9088
CONFIDENTIAL

Case3:08-cv-03251-WHA Document192-2

Filed10/22/09 Page6 of 53

thanks, Greg.

imageool.png (88.48 KO)

Greg Marsden (Client) Posted on: 26 sep 2008 05:01 PM
Hi Joel,

Aside from the phone t being out of place in XE issue I mentioned earlier today I also noticed the buy now buttons all go to the open pro page even when the page is talking about the regular open computar like http://www.psyster.com/check_out_tbs_mac_os.html which would probably scare off some people looking for the cheaper version. Can yeu go through those pages and make sure it lioka to the right product. Also, t think in general the pages are on the right track though some of thorn are very brief and basically just the comparison. It might be a good Idea to add testimonials from buyers or quotes from ravorable reviews or some other additional content to shese pagas to help make than more lmpactful and meaty. I dont think lt would be a good idea to start running traffic at these just yet until at least the buy links ara fixed. Can that be fixed by Monday? Also I wanted to check on how your tracking works and if I nasd to add anything to the URLs below for tracking purposes? Do you also have Googla conversion tracking already installed for your
shopping cart?
Thanks, Greg.

Greg Marsden (Client) Posted On: 26 sep ZOOS 05:01 PM
Hi Joel,

Aside from the phone # being out of piace in LE issue I mentioned earlier today I also noticed the buy now buttons all go to the open pro page even when the page is talking about the regular open computer like http://www. psystar.com)check_outsha_mac_os.html which would probably scare off tome people looking for the cheaper version. Can you go through those pages and slake sure it links to the right product. Also, I think in general the pages ers on the right track though sons of them are very brief and basically just the comparison. lt might be a good Idea to add testimonials from buyers or quotes from favorable reviews or some other additional content to shese pages to help make theni more I mpactful and meaty. 1 don't think It would be a good idea to start running traffic at these Just yet until at least the buy links are fixed. Can that be fixed by Monday? Also I wanted to check on how your tracking works end if I need to add anything to the URLs below for tracking purposes? Do you also hove Coogleconvcrsion tracking already i nstalied for your
she pping cart?

Thanks, Greg.

Tickes Details

Ticket ID; MMM-530058 Department: Admin Priority: Medium Status: Open
Posted on: ZOSep zooa 85:12 PM

PSOO 9089
CONFIDENTIAL

Case3:08-cv-03251-WHA Document192-2

Filed10/22/09 Page7 of 53

EXHIBIT 9
DECLARATION OF MEHRNAZ BOROUMAND SMITH IN OPPOSITION TO PSYSTAR'S MOTION FOR SUMMARY JUDGMENT

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DECLARATION OF MEHRNAZ BOROUMAND SMITH IN OPPOSITION TO PSYSTAR'S MOTION FOR SUMMARY JUDGMENT

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EXHIBIT 13
DECLARATION OF MEHRNAZ BOROUMAND SMITH IN OPPOSITION TO PSYSTAR'S MOTION FOR SUMMARY JUDGMENT

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9/13/2009

Case3:08-cv-03251-WHA Document192-2

Filed10/22/09 Page31 of 53

EXHIBIT 14
DECLARATION OF MEHRNAZ BOROUMAND SMITH IN OPPOSITION TO PSYSTAR'S MOTION FOR SUMMARY JUDGMENT

Case3:08-cv-03251-WHA Document192-2

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AMENDED EXPERT REPORT OF

PROFESSOR CAROL A. SCOTT

September 16, 2009

Case3:08-cv-03251-WHA Document192-2

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I. Qualifications
I am a Professor of Marketing at the Anderson Graduate School of

Management at

the University of

California, Los Angeles ("UCLA"). I hold a Ph.D. in Marketing from

Northwestern University, where my minor field of study was Social Psychology. I also
received a Master of Science in Management degree from Northwestern University and a

Bachelor of Science in Business and History Education degree from the University of
Texas at Austin. I have served variously as the Chairman of

the Faculty, Associate Dean,

and Assistant Dean of

the Anderson Graduate School of

Management from 1985 through
the Anderson School Executive Program.

1994. I am currently the faculty director of

Over the past thirty years, I have taught courses on Marketing Strategy and Management,

Consumer Behavior, Advertising, Distribution Strategy, and International Marketing to students in undergraduate and graduate education programs at UCLA, Stanford Business

School, Harvard Business School, and Ohio State University. I also have published

numerous journal aricles, research reports, and book chapters on Consumer Behavior,
Marketing Research and other marketing topics, a complete list of

which is included in my
the

Currculum Vitae, attached hereto (Exhibit 1). I have served on the editorial boards of

Journal of Marketing, Journal of Marketing Research, and Journal of Consumer Research.
I have been a member of

the board of directors for Sizzler International and A-Fern
the board of directors of

Medical Corporation, Inc. and currently am a member of

United

Online, Inc. and Classmates Media Corp. Over the past 26 years I have served as a consultant and testifying expert for a variety of issues. A list of my recent testimony
projects is attached (Exhibit 2).

2

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II. Scope of Opinions

I have been asked by counsel for Apple Inc. ("Apple") to investigate various issues
with respect to the level of recognition by consumers of

the Mac OS X Leopard desktop
the

image as well as the likelihood that consumers would be confused by Psystar's use of

Mac OS X Leopard operating system on its computers and by its offer on its website to sell

computers that purport to use the Mac OS X Leopard operating system. Finally, I was
asked to address the extent to which Apple's brand equity and reputation would be hared
by the sale ofPsystar computers that are described as running the Mac OS X Leopard
operating system.

III. Summary of Opinions

Having reviewed and analyzed the evidence available to me, it is my opinion that:
1. Consumers in the market for a personal computer recognize the Mac OS X

Leopard desktop image, and they believe that it is put out by a single source,
i.e., it has acquired secondary meaning. Furher, a large percentage of

consumers who recognize the desktop associate it with the Apple or Mac
brands.

2. Despite Psystar's small changes to the Mac OS X Leopard desktop image and
the fact that Psystar does not install the operating system on Apple hardware

products, consumers who see Psystar's version of the Mac OS X Leopard
desktop image running on Psystar computers in a post-sale environment also
are likely to recognize the desktop image. In my studies, the number of

consumers who viewed Psystar's altered desktop image running on Psystar

computers and associated it with a single company was similar to the number of

3

Case3:08-cv-03251-WHA Document192-2

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consumers who viewed the unaltered desktop image and associated it with a

single company. In both instances, the most frequently mentioned company
was Apple; i.e., consumers are likely to be confused that the operating system
running on the Psystar computers is the same as that sold by Apple.

3. Consequently, consumers shopping for computers on the Psystar website are
likely to be confused as to the relationship between Apple and Psystar. That is,
consumers are likely to believe that Psystar has and is required to obtain

permission from Apple to offer Apple's Mac OS X Leopard operating system
on its computers. Thus Psystar's use of the Mac OS X Leopard operating system on its website and on its computers is likely to create a false association

between Psystar and Apple. Further, consumers who experience problems
when using Psystar computers are likely to believe that they are entitled to
technical service and support from Apple.

4. Consumers are likely to believe that technical problems they experience with

Psystar computers are due, at least in part, to the Mac OS X Leopard operating
system. Therefore, Apple's world famous brand, its reputation for quality

products, as well as the Apple marks which stand for the Apple and Mac brands

(e.g., "Apple", "Mac", and the Apple logo), and which are used by Psystar on
its website and computers, all wil be tarished.

iv. Basis of Opinions

My opinions are based on three surveys conducted under my supervision in July
and August, 2009, as well as on a review of other documents filed in this case and my

4

Case3:08-cv-03251-WHA Document192-2

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professional expertise in this area.

1 Exhibit 3 lists the materials I obtained from counseL.

Detailed support for each of

my opinions is given below. In my professional opinion each

of

the sureys undertaken was done in a proper and unbiased maner consistent with well

accepted standards of marketing research and consumer research done in the context of

litigation.2 These results are valid and reliable. I am continuing my review and analysis,
and I may refine or expand my opinions as further information and materials come to my

attention. I reserve the right to supplement this report to the extent that additional
information becomes available which may affect my opinions.
A. The desktop image of Mac OS X Leopard (hereafter "Mac OS") is

recognized by consumers as having a single source, i.e., it has acquired
secondary meaning.
There can be no doubt that Apple is one of

the world's most famous brands.

Numerous third party brand rankings consistently include Apple in their lists of top
global brands. For example, Milward Brown's "Brandz" list of

top 100 global brands

released in April, 2009, ranks Apple as number six in the world with a brand value of

just

over $63 bilion.3 Similarly, the well-known brand consulting firm, Interbrand, in its top
global brand rankings for 2008, listed Apple as number 24 in the world with a brand

value of almost $14 bilion.4 Indeed, all major brand ranings include Apple among the
most famous and valuable.5

i As suggested by some sources in the field of litigation research, I observed three focus groups and several one-on-one personal interviews of consumers in the market for personal computers that were conducted by a member of my staff to assist me in preparing surey questions in clear and easily understandable language (See Diamond, Shari Seidman, "Reference Guide on Surey Research," in Reference Manual on Scientific this pretesting was to Evidence, 2nd. Ed. (Federal Judicial Center, 2000), pgs. 229-276). The purose of ensure that questions would be understood as I intended them, and I have relied on them to help design the surveys that were used and discussed in this report.
2 ibid.

3See www.millwardbrown.com/sites/Optimor

4 See ww.interbrand.com
5 See affdavit of Thomas R. La Perle, "Use of

the Apple and Apple Logo Trademarks and Variants," August

12, 2009, for a more inclusive list.

5

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These high brand ranings have not been achieved through happenstance, but

rather through substantial and consistent brand building activities. Chief among these
activities, of course, is a well-resourced and impeccably executed integrated marketing communications program that includes media advertising, outdoor billboards,

sponsorships and events, and a substantial web presence among other elements. I understand that in 2008 alone, Apple spent almost $500 milion dollars on advertising,
and has spent almost $4 billion dollars on advertising in 1994 through 2008.6

Advertising alone, however, canot create a strong valuable brand. Rather, strong brands
that stand for excellence are built through consistently outstanding product quality,

product design, and brand consistent distribution and pricing strategies.? Indeed, Apple is often used in university classrooms, including mine, as a classic, textbook example of
how to use each element of

the marketing mix, i.e., product, promotion, distribution, and

pricing, to create a strong brand that resonates with its customers.

Along with the overall Apple corporate brand, Apple has also built and promoted
several product and product family brands that have achieved fame in their own right.

Chief among these, perhaps, is the Macintosh, or Mac family of computers and operating systems which was first introduced during the 1984 Superbowl with the iconic and now
legendary "1984" advertisement. I understand that the Mac family of

products has been

promoted consistently alongside the Apple corporate brand since that time, and that it has
contributed, and continues to contribute, a large portion of Apple's revenues and profits.s
6 Ibid., p. 40. 7 See for example, Aaker, David A., Building Strong Brands, New York: The Free Press, 1996 Chapter 2 for

an example of a successful, integrated brand building program for Satu when that automobile was first introduced. 8 See Affdavit of the Apple and apple Logo Trademarks and Variants," dated Thomas R. La Perle, "Use of August 12, 2009, and Affdavit of John Donald, "Use of the Mac Trademarks and Variants," dated August 12,2009.

6

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Both the Apple corporate brand and the Mac product brand use a number of

well-known

logos or trademarks and other trade dress elements to denote their identity.9

In July and August, 2009, I conducted a nationwide survey of297 U. S. individuals
in the market for a personal computer to determine the degree to which the standard Mac

os X Leopard desktop image which includes various Apple and Mac marks and other
elements of

trade dress has acquired secondary meaning, i.e., that the design or product is

recognized in the market by a significant number of consumers as identifying a single
source, regardless of

whether consumers know who or what that source is.lO Specifically,

my study was designed to test whether consumers believe the Mac OS X Leopard desktop

image is associated with a single company. I further investigated the degree to which
consumers identify the single company source as Apple or Macintosh and the degree to

which elements of the desktop image are used as source identifiers. In-person interviews
were conducted in ten locations across the United States: New York, Atlanta, Tampa,

Akon, Dallas, Chicago, Seattle, San Diego, Denver, and San Jose. Participants were
recruited in shopping malls, and interviews were conducted in private offces off of the
mall floor. No Apple stores were located in these malls, which are listed in Exhibit 4.
Between 30 and 35 interviews were conducted at each location.

All participants were screened either to have personally purchased a computer

within the past twelve months (54%) or to have personally stared shopping and doing the research to purchase a computer in the next twelve months (46%). In addition,
respondents were asked a series of other qualifying questions to ensure that study
respondents:
9 Ibid.
10 See Ninth Circuit Manual of model

jur instrctions civil (Trademark) 15.10(Aug. 2009 ed.)

7

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� Were at least 18 years of age;
� Had no one in their household who worked for an advertising agency, a public relations firm or a marketing research company;
� Had no one in their household who worked for a company that manufactures, distributes or sells computers;

� Had no one in their household who worked for a store in the mall;
� Had not heard about the topic or subject of any interviews being conducted in the mall; and � Had not participated in a market research study, other than a political poll, in
the last 6 months.

Quotas for age and gender were established to create a sample similar to personal
1 computer purchasers.

1 The demographic breakdown of paricipants is shown in Exhibit

5. A copy of

the recruitment screening questionnaire is shown in Exhibit 6.

In accordance with generally accepted procedures designed to reduce any potential

bias, the survey was conducted on a double-blind basis, i.e., procedures were followed to

ensure that neither the interviewers nor the interviewees knew the purpose or sponsor of

the surveyor knew that the survey was in any way connected to litigation. Interviews were 5 to 10 minutes in length. I developed the questionnaire and interview methodology, and a
member of my staff trained, instructed and supervised all of the interviewers. To reduce any tendency toward guessing, general instructions asked respondents to

tell the interviewer if they did not know or were not sure of an answer to any question.
Survey participants were then asked to look at large color photographs of computer screens

from the three operating systems that Psystar sells: LinuxlUuntu, Mac OS X Leopard,
and Windows. No monitors were visible in these photographs to prevent any

II Apple: Grow Mac Study: APP _PSY0056267

8

Case3:08-cv-03251-WHA Document192-2

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identification being based upon the name of

the hardware manufacturer. The name of

the

hard drve icon on the Mac OS photograph was changed from the standard "Macintosh
HD" to "Hard Drive" so as not to provide respondents with the brand name of the
operating system. The photographs of the two other operating systems were included in
the study to disguise the true object of

the study (i.e., respondents would not know that we

were most interested in their beliefs about the Mac OS photograph). In addition, the
photograph of the Windows operating system was used to provide a benchmark of

results

for perhaps the most widely used and most well-known personal computer operating
system. The photograph of

the LinuxlUuntu operating system functioned as a type of

control group to help rule out the hypothesis that respondents would identify any nonWindows operating system as an Apple or Mac product.
Copies of

the photographs used in this study are shown in Exhibit 7. Pictures were

presented individually to the participants and the order was rotated across the three

operating systems. The participant was told to take as long as shelhe wanted to look at
each photograph.

After looking at each photograph, survey participants were asked if they recognized

what appeared on the pictured screen. Paricipants who answered positively were asked if
they associated the computer screen or any parts of it with one company or with more than

one company. Then they were asked to name the company or companies that they had in mind. To determine any substantive basis for these answers, participants were asked to
state their reasons for identifying each company mentioned. These last two questions were
open-ended, that is, participants were not prompted with responses or given choices, therefore allowing participants the opportunity to say whatever came to mind.

9

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Interviewers recorded all responses verbatim. Paricipants were then asked to indicate
which operating systems were used by computers that they had

ever owned and which

operating system is used on the computer they currently own. Finally, respondents were
asked to grade themselves on a four point scale regarding their proficiency with computers.
All responses were entered online by the interviewers. A copy of

the complete

questionnaire is provided in Exhibit 8. The Instrctions to Interviewers is given in Exhibit

9. After all the interviews were completed, all surey paricipants were called to validate

the sureyY
The results of

this survey indicate that a large majority of consumers in the market
the 297

for personal computers recognize the Mac OS X Leopard desktop image. Of

respondents, 233 (78.5%) recognized the image in the photograph of

Mac OS X Leopard.
LinuxlUuntu and 93.6% who

This compares to 44.4% who recognized the photograph of

recognized Windows. The widespread recognition of

Mac OS X Leopard - almost 80% of

respondents - is quite remarkable given its small market share relative to Windows.13
Of

the 297 total paricipants in the study, 166 (55.9%) associated the image with

only one company, or a single source. There are persuasive reasons to assess secondary
meaning by considering only those consumers who have seen or who recognize the
image14. Obviously, consumers who have not seen the image cannot have any secondary
associations with it. The proportion of

those people who are familiar with the image and

have formed a secondary association is a better measure of the distinctiveness and the
12 All participants were called to confirm their partcipation in the surey. Partcipants who had provided
wrong telephone numbers were excluded from the surey. 133 participants were actually contacted, and all

confrmed their participation in the survey. 13 "HP Takes the Lead in u.s. PC Market as Consumer Shipments Beat Expectations, According to IDC,"
Reuters,

4/15/09. 14 "Sureying Secondary Meaning", Vincent N. Palladino, The Trademark Reporter, March 1994-April 1994,

84 TMR 155.

10

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distinctive capabilities of a mark. Under this approach, I calculate that 71.2% of
consumers, i.e., 166 of233 respondents, believe that the image stems from a single source.
This result again compares favorably with the 71.3% of

respondents who recognized the

Windows image and associated it with one company. Thus, I conclude that the desktop
image of the Mac OS X Leopard operating system has acquired secondary meaning.

Although not required for a determination of secondary meaning, respondents in my study were further questioned to determine whether they could, in fact, name the
15 Of respondents who recognized the Mac
company or companies that they had in mind.

OS X Leopard desktop image, 66.1 % (154 out of233) correctly named Apple and/or

Macintosh as the single company with which they associate the desktop image. The
percentage of all respondents who correctly named Apple or Macintosh as the single

company with which they associated the desktop image was also high, i.e., 51.9% (154 of
297). Despite its high market share, for the Windows desktop, approximately 55.2% of

respondents (164 of297) recognized the image and solely associated it with Microsoft or
Windows. Only 3 % (9 of 297) of respondents who viewed the Ubuntu desktop associated this image with Apple or Macintosh, demonstrating that consumers do not simply assume that any non-Windows operating system is associated with Apple or Macintosh.
To fuher investigate the substantive basis of

respondents' beliefs about the source

of the desktop images, respondents were asked what made them think that the photographs

were associated with the particular companies they had identified. As shown in Exhibit 10
Table 5, 73.4% (105) mentioned one or more features of

the desktop image as reasons for

associating the Mac OS X Leopard desktop with Apple or Macintosh. The respondents
15 This procedure also serves as a check on the robustness of respondents' answers to the question regarding

single or multiple company associations.

11

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mentioned the Apple icon, the Finder in the menu bar, the icons along the bottom or the
dock, specific program icons, and the aurora borealis background as well as the overall

look and feel (e.g., "everyhing").
These results provide strong evidence that the Mac OS X Leopard desktop image is

widely recognized and is perceived to be provided by a single company. Although
association with a single but anonymous source would be suffcient to demonstrate that the
image has acquired secondary meaning,16 these results show that a majority of consumers
know the identity of

the source, i.e., the Apple or Macintosh brands and base this identity

on one or more of the Apple marks or specific features of the image.

B. Consumers who see Psystar's version of the Mac OS X Leopard desktop image running on Psystar computers in a post-sale
environment also are likely to recognize the image and associate it with solely with Apple.
This means they are likely to be confused that the operating system on Psystar's

computers is the same as that sold by Apple. I understand that Psystar has slightly altered
the Mac OS X Leopard desktop design and runs a version of

Mac OS X Leopard that has
I? Accordingly, I wanted to test whether

been modified to run on Psystar's computers.

these changes would affect consumer perceptions of the desktop image or avoid
confusion that would otherwise be present if consumers believe that the Mac OS X

Leopard on the Psystar computer is the same as the Mac OS X Leopard that is solely
associated with Apple.

Once a customer purchases a Psystar computer that runs its version of the Mac

OS, that computer and the desktop image may be viewed or used by other consumers in a

post-sale environment. For example, someone walking past the desk of a person using a
16 See Footnote 14
17 See Report of

Dr. John Kelly, Section S.D.

12

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Psystar computer may see the operating system softare as displayed on the monitor. To

determine the degree to which consumers would be confused by observations of or
experiences with a Psystar computer rung its version of

Mac OS X, and believe that

the operating system is the same as that sold by Apple, I conducted a second study of 283

consumers in ten cities in the United States in July and August, 2009. These cities were:

New York, Tampa, Atlanta, Akon, Chicago, Dallas, Denver, Seattle, San Jose and San
Diego. The screening criteria for inclusion, and the procedures and survey questions
were exactly the same as for the first study. The only difference was that the photographs
in this second study were photographs of non-Apple computer monitors running the three

operating systems sold by Psystar: Linux, Mac OS X, and Windows. The photograph of
the Psystar machine ruing its version of

Mac OS X was almost identical to the

photograph of the Mac OS X Leopard screen shown in the first, secondary meaning

study. See Exhibit 11. The Psystar version of the Mac OS renames the hard drive the
"Open HD" and one or more icons are missing along the bottom portions of the screen in

the dock area. Paricipants were asked to assume that they were walking past someone .
else's computer, and saw these images on the screen.

All responses were entered online by the interviewers. A copy ofthe complete
questionnaire is provided in Exhibit 12.

The results of

this study clearly indicate that consumers are highly likely to be

confused by Psystar's version of the Mac OS X operating system and to identify it as
being associated with Apple or Macintosh. Once again, 80.6% (228) of

the 283 total

respondents recognized the photo. This compares with 92.9% (263) who recognized the
photograph of

the Windows desktop, and 45.2% (128) who recognized the LinuxlUuntu

13

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screen. Ofthe total sample of283 respondents for this study, 58% (164) associated the
Max OS X Leopard image with only one company. This compares favorably to 69.6%
(197) of

the total sample who associated the Windows desktop with only one company.

Finally, the company most frequently mentioned as the one company respondents
associated with the image was Apple or Macintosh, mentioned by 150 of

the respondents,

or 53.0% of

the total sample (150 of283), and 65.8% of

those who initially said they

recognzed it. A comparable analysis for the Windows desktop image showed that 162
respondents associated the image with Microsoft. This represents 57.2% of

the total

sample (162 of283) and 61.6% ofthose who said they recognized the image at all (162

of263). Very few respondents thought that Apple or Macintosh were associated with the
relatively unfamiliar LinuxlUuntu softare, i.e., 8, or 2.8% of

the total sample. A

further analysis was done to test the hypothesis that more experienced computer users,

being more knowledgeable, would be less likely to be confused. This analysis, however,
showed that respondents who rated themselves as more knowledgeable about computers where just as likely to be confused as less knowledgeable consumers.

As I did in the secondary meaning survey reported earlier, I also asked

respondents why they associated the image with a paricular company, e.g., Apple or

Mac. In this study, like the secondary meaning one, respondents mentioned varous
features of

the Mac OS X Leopard image. Specifically, 111 respondents, or 79.3%, of

those who associated it with Apple or Mac did so because of one or more of these
features (see Exhibit 10-6).

In sumary, my study shows that consumers, and even fairly sophisticated
consumers, are very likely to associate the desktop image shown on Psystar systems with

14

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only one company and to believe that company is Apple or Macintosh. They also are
likely, therefore, to be confused in the belief that the Psystar system is the same Mac OS
X Leopard operating system that is sold by Apple.

C. Consumers shopping on the Psystar website are likely to be confused as to the relationship between Psystar and Apple.
In July and August 2009, I conducted a nationwide survey of356 participants to
determine consumers' understanding of

the relationship between Psystar and Apple. In-

person interviews were conducted by experienced interviewers in research facilities in
shopping malls in ten cities across the United States in order to reflect the geographic
diversity of

major markets for personal computers. These ten cities were New York,

Atlanta, Tampa, Akon, Dallas, Chicago, Seattle, San Diego, Denver, and San Francisco.
No Apple stores were located in any of

the malls. Approximately 30 to 35 interviews

were conducted at each location. A list of the malls in provided in Exhibit 4.
All survey respondents were screened to ensure that they had, in the past twelve months, personally purchased a computer from a website similar to Psystar's, i.e., where
the purchaser configures the computer's specific features such as size of

hard drive or

type of

processor, or that they planned to purchase, in the next 12 months, a computer

from the same kind of

website. To emphasize a population that likely would be attracted

to the Psystar website and to be interested in both paries' products, respondents were

screened such that two-thirds of the respondents had purchased or planed to consider
purchasing an "Apple", "Macintosh", "Mac", "iMac", "MacMini", or "MacPro".
Furher, this breakdown of computer ownership or consideration is consistent with the
definition ofPsystar's target market given by Mr. Rodolfo Pedraza in Exhibit 8 to his

15

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deposition taken on March 19,2009.18 Specifically, this documents states that Psystar's
target users and markets are (l) Windows based PC users who want to experience Mac
Os X without paying the premium for an Apple computer, (2) current Apple users who

would like a machine that can be upgraded, and (3) users looking to buy a used Apple
computer to save money.

Respondents were asked a series of additional qualifying questions to include in
the sample only those who:

. Were at least 18 years of age;
. Had no one in their household who worked for an advertising agency, a public

relations firm or a marketing research company;
. Had no one in their household who worked for a company that manufactures

distributes, or sells computers.
. Had no one in their household who worked for a store in the mall;
. Had not heard about the topic or subject of any interviews being conducted in

the mall, and;
. Had not paricipated in a marketing research study, other than a political poll,

in the last six months.

Age and gender quotas were established so that the sample would be similar to

online purchasers of Apple computers. The demographic breakdown of participants is
shown in Exhibit 14. A copy of

the recruitment screening questionnaire is shown in

Exhibit 15.

The surey was conducted on a double-blind basis, meaning that neither the

interviewer nor the interviewees knew the purpose or sponsor of the surveyor knew that

the survey was in any way connected to litigation. Interviews were 6 to 10 minutes in
18 Deposition of Rodolfo Pedraza, March 19, 2009, Exhbit 8, page 16 titled "Target Users and Markets."

16

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length. I developed the questionnaire and interview methodology, and a member of

my

staff trained, instructed and supervised all of the interviewers. Approximately 8 to 10
respondents on the first day of interviewing in each location were pre-recruited by telephone to ensure that an adequate number of respondents would be available while a
member of my staff was present to train interviewers and observe several interviews for
quality control puroses. All other respondents were recruited from the mall floor. The

screening questions used to recruit paricipants was the same whether respondents were
pre-recruited via telephone or solicited from the mall floor.
General surey instructions asked respondents to tell the interviewer if they did

not know or were unsure of an answer to any question. Respondents were first shown a
photograph ofPsystar's website home page (See Exhibit 16), and asked if

they had ever

heard ofPsystar. If

they had heard of

the company, they were asked what they had heard.
the operating

Next, respondents were asked which company or companies make each of

systems listed for sale on the Psystar home page. Respondents were then shown a
photograph of

the Psystar webpage offering the Open Q computer, which rus Mac OS X

Leopard, for sale, and asked if they believed that Psystar needed to get permission from
the maker of

Mac OS X to offer this system. Respondents were then asked why they gave

the answer they did, i.e., either that Psystar needed permission or it did not. Next,
respondents were presented with a list of four common computer problems and asked for

each one if they thought that the problem would likely be due to (i) the particular

hardware sold by Psystar, (ii) the paricular operating system running on the computer,
i.e., Max OS X, or (iii) a combination of

both the hardware and the operating system.

Respondents were asked whether or not they would be eligible for technical support from

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the company that makes Mac OS X if they purchased a computer from Psystar and

experienced diffculties with it. Finally, respondents were asked to rate themselves on a
four-point scale regarding their proficiency with computers. All responses were entered

online by the interviewers. A copy ofthe complete questionnaire is provided in Exhibit
17, and a copy of

the Instructions to Interviewers in Exhibit 9.

A total of22 respondents indicated that they had heard ofPsystar prior to the

surey and were eliminated from fuher analysis, leaving a total sample of320.l9
Complete tabulated results for these respondents is found in Exhibit 10-4. As shown in
this exhibit, most consumers are aware of the companies that make the Mac OS X and
Windows operating systems. Approximately 71.6% (229) of

the respondents correctly

named Apple or Mac as the company or companies that make the Mac OS X operating
system. This compares with 219 (68.4%) of

respondents who said that the Windows

operating system is made by Microsoft, a Microsoft named operating system such as

Vista, or Windows operating system, and with 46 respondents (14.4%) who said that

Linux, Open Source, Red Hat, or Ubuntu make the Linux operating system. Only 23
respondents or 7.2% thought that the relatively unfamiliar Linux operating system is

made by Apple or Mac, and only 16 (5.0%) thought that Windows is made by Apple or
Mac.

A large majority of consumers believed that there must be a relationship between
Psystar and Apple. In particular, 76.6% of

the respondents stated that they believed that

19 Consumers who have heard ofPsystar may also have heard about ths litigation, and thus not be ideal

candidates for an unbiased surey. In addition, some of these consumers might have purchased Psystar computers or known people who did which could also affect how they viewed the website after the fact of purchase. In addition some comments about what these consumers had heard about Psystar reflects a
potential bias against Psystar. In any event, an analysis of these respondents indicates that none of the conclusions in my report would be changed if their responses were included and the results for them are available in Appendix A.

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Psystar needed Apple's permission in order to sell the Mac OS X operating system on its
computers. There were many reasons for this belief, but the most frequently offered

reasons were that (1) there were issues involving copyrghts, patents, or licensing
(23.3%) (2) Apple's name is being used and that Apple has the right to control its own
name, software or goodwill (20.0%), (3) legal issues would arse ifPsystar did not have

permission (13.1%); and (4) that Mac OS X does not belong to Psystar (27.8%).
Perhaps because they feel that Apple has given its permission for Psystar to sell the Mac

os X operating system, a large majority of consumers, 229 respondents or 71.6% of the
sample, felt that they would be eligible for technical support from the maker of the Mac
OS if

they experienced any difficulties with it.20

D. To the extent that consumers experience technical problems with a Psystar computer, Apple's reputation wil be harmed as consumers are
likely to believe that those problems are due, at least in part, to the Mac

OS X operating system.
Apple is known for its satisfied and extremely loyal customer base.2l The recently
reported quarterly American Customer Satisfaction index, for example, once again shows

Apple to have the highest level of customer satisfaction of any personal computer

manufactuer.22 For the sixth year in a row, Apple has bested second place Dell, and this
year's gap between Apple and Dell is the largest differential between a first and second
place company in any industry category. Authors of

the study note that Apple's high

ratings can be traced to the high quality of its products and to the high quality of customer

service and support. Similarly, marketing research done by Apple shows that "Is reliable
20 Apple has seen evidence of actual confusion of this tye. At least 14 consumers have called or written to
Apple to get support with a Psystar computer rug as x Leopard. APP _PSY0050592-607 and

APP PSY0054794-795. 21 Se~ for example, "Mac Installed Base Study: United States" a quantitative market research report prepared
for Apple, November 2006, by Liebermn Research Worldwide, and the sections on Irreparable Harm in the Expert Report of Matthew R. Lynde, PhD filed in this litigation, dated August 21, 2009. ee WW.t eacsi.org.

22 S h'

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and of a high quality" is the most important featue in making the decision to purchase a
Macintosh computer.23

The results of my third consumer study, described above, indicate the harm that

problems with Psystar computers wil do to Apple's brand and its excellent reputation. To
the extent that consumers experience problems with computers purchased from Psystar,
they are likely to blame the maker of

the Mac OS X operating system.24 According to Dr.

John Kelly, plaintiffs techncal expert, numerous problems with Psystar computers have
been encountered, and these are the types of problems that my study shows wil be
attributed, at least in part, to Apple and Mac OS X Leopard.

Consumers in my third study described above in support of opinion C were asked to imagine that they had purchased a Psystar computer and that they experienced, in turn,
each of four different computer problems: (1) some of the softare programs designed for

Mac OS X won't work, (2) the computer freezes or crashes often, (3) the computer runs

very slowly, and (4) the computer just won't tur on. Only for this last problem, where the
computer simply wil not turn on, did the majority of consumers (170 respondents, or

53.1 %) blame the Psystar computer. Even so, 28