Apple Inc. v. Psystar Corporation

Filing 200

Reply to Opposition re 181 MOTION for Summary Judgment ON COPYRIGHT INFRINGEMENT, DMCA VIOLATIONS AND PSYSTAR'S AFFIRMATIVE DEFENSES Apple Inc.'s Reply in Support of its Motion for Summary Judgment filed byApple Inc.. (Chung, Megan) (Filed on 10/29/2009)

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Apple Inc. v. Psystar Corporation Doc. 200 Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page1 of 20 TOWNSEND AND TOWNSEND AND CREW LLP JAMES G. GILLILAND, JR. (State Bar No. 107988) 2 MEHRNAZ BOROUMAND SMITH (State BarNo. 197271) MEGAN M. CHUNG (State Bar No. 232044) 3 J. JEB B. OBLAK (State Bar No. 241384) Two Embarcadero Center Eighth Floor 4 San Francisco, CA 94111 Telephone: (415) 576-0200 5 Facsimile: (415) 576-0300 Email: jggiiiiland~townsend.com 6 mboroumand~townsend.com mmchung~townsend.com 7 jboblak~townsend.com 8 O'MEL VENY & MYERS LLP GEORGE RILEY (State Bar No. 118304) 9 Two Embarcadero Center, 28th Floor San Francisco, CA 94111 10 Telephone: (415) 984-8700 Facsimile: (415) 984-8701 11 Email: griley~omm.com 12 Attorneys for Plaintiff and Counterdefendant APPLE INC. 13 14 15 UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION 16 17 18 APPLE INC., 19 Case No. 08-3251 WHA Plaintiff, 20 21 v. APPLE INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT Hearing Date: Hearing Time: PSYSTAR CORPORATION, a Florida corporation, Defendant. November 12, 2009 2:00 p.m. 22 23 AND RELATED COUNTERCLAIMS. Courtroom: Judge: Trial Date: 9 Hon. William Alsup January 11,2010 24 25 26 27 28 PUBLIC VERSION (REDACTED) townsend. APPLE INC'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-3251 WHA Dockets.Justia.com Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page2 of 20 TABLE OF CONTENTS 2 3 Page I. INTRODUCTION ..........................................................................................................1 4 II. ARGUMENT ..................................................................................................................2 5 A. 6 The Softare License Agreement Confirms That Apple Does Not Authorize Psystar's Infringement ................................................................2 B. 7 8 Neither Section 117 Nor Section 109 Authorizes Psystar's Mac OS X...............................................4 Copying, Adapting And Reselling Of 1. Psystar Is Not Entitled To A Section 1 17 Defense .................................4 9 2'. Psystar Is Not Entitled To A Section 109 Defense .................................7 10 11 c. D. Psystar Seeks To Unduly Limit The Exclusive Right To Create Derivative Works From Copyrighted Software.......................................7 12 13 Psystar Has Not Opposed Apple's Motion For Summary Judgment For Contributory Copyright Infringement Claim ............................. 10 E. 14 15 Apple Is Entitled To Judgment On Psystar's Copyright Misuse Defense And Counterclaim. ..............................................................................1 0 Apple Is Entitled To Judgment On Its DMCA Claims ..................................... 11 F. 16 G. Apple Seeks Only to Enforce Its Intellectual Property And Protect The Fru its Of Its Labor ............ ................ ................................. ............13 17 II. CONCLUSION .............................................................................................................14 18 19 20 21 22 23 24 25 26 27 28 APPLE INC'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-325 i WHA townsend. Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page3 of 20 TABLE OF AUTHORITIES 2 3 Page CASES 4 5 Apple Computer, Inc. v. Formula Int'l, Inc., 562 F. Supp. 775 (C.D. CaL. 1984) ("Formula l') .................................................................... 5 6 7 8 Apple Computer, Inc. v. Formula Int'l, Inc., 594 F. Supp. 617 (C.D. CaL. 1984) ("Formula Il')............................................................... 5, 6 Apple Inc. v. Psystar Corp., 586 F. Supp. 2d 1190 (N.D. CaL. 2008) .................................................................................. 10 9 Cadence Design Sys., Inc. v. Avant! Corp., 10 11 125 F .3d 824 (9th Cir. 1 997)................................................................................................... 13 Concrete Machinery Co. v. Classic Lawn Ornaments, Inc., 843 F.2d 600 (1 st Cir. 1 988) ................................................................................................... 13 12 13 Dun & Bradstreet Software Services, Inc. v. Grace Consulting, Inc., 307 F.3d 197 (3rd Cir. 2002) ................................................................................................ 8, 9 Evolution, Inc. v. Sun 14 15 Trust Bank, 342 F. Supp. 2d 943 (D. Kan. 2004) .........................................................................................6 16 17 18 19 Freeman v. Lasky, Haas & Cohler, 410 F.3d 1180 (9th Cir. 2005)................................................................................................. 11 Graham v. James, 144 F.3d 229 (2d Cir. 1998)......................................................................................................3 Krause v. Titleserv, Inc., 402 F.3d 119 (2d Cir. 2005)..............................................................................................4,5,6 20 21 22 23 Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 518 F. Supp. 2d 1197 (C.D. CaL. 2007) .................................................................................. 13 Microsoft Corp. v. BEC Computer Co., Inc., 818 F. Supp. 1313 (C.D. CaL. 1992)........................................................................................ 11 Midway Mfg. Co. v. Strohon, 564 F. Supp. 741 (N.D. III. 1983) ............................................................................................. 8 24 25 26 27 28 Pro!'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49,113 S. Ct. 1920 (1993)....................................................................................... 11 s.o.s., Inc. v. Payday, Inc., 886 F.2d 1081 (9th Cir. 1989)................................................................................................... 3 APPLE INC'S REPL Y BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-325 I WHA II townsend. Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page4 of 20 TABLE OF AUTHORITIES ( continued) 2 3 Page 4 5 SAS Institute, Inc. v, S & H Computer Systems, Inc., 605 F. Supp. 816 (D. Tenn. I 985) ............................................................................................ 8 Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1992)...................................................................................................4 Silverstein v. Penguin Putnam, Inc., 6 7 8 368 F.3d 77 (2d Cir. 2004)........................................................................................................ 8 Sony Computer Entm 't Am., Inc. v. Divineo, Inc., 457 F. Supp. 2d 957 (N.D. CaL. 2006) ....................................................................................12 9 Sony Computer Entm 't Am. Inc. v. Gamemasters, 10 11 87 F. Supp. 2d 976 (N.D. CaL. 1 999) ...................................................................................... 11 12 13 Storage Tech. Corp. v. Custom Hardware Eng 'g & Consultng, Inc., 421 F.3d 1307 (Fed. Cir. 2005)...............................................................................................12 Stuart Weitzman, LLC v. MicroComputer Res., Inc., 510 F. Supp. 2d 1098 (S.D. Fla. 2007) ..................................................................................... 5 14 15 Sun Microsystems, Inc. v. Microsoft Corp., 188 F. 3d 1115 (9th Cir. 1999)..................................................................................................3 Torah Soft Ltd. v. Drosnin, 16 17 18 19 136 F. Supp. 2d 276 (S.D.N.Y. 2001)....................................................................................... 8 Triad Systems Corp. v. Southeastern Express Co., 64 F.3d 1330 (9th Cir. 1 995)................................................................................................... 11 Universal City Studios, Inc. v. Corley, 20 21 273 F.3d 429 (2nd Cir. 2001 ).................................................................................................. 12 Universal City Studios, Inc. v. Reimerdes, 111 F. Supp. 2d 294 (S.D.N.Y. 2000)..................................................................................... 12 22 23 Wall Data Inc. v. Los Angeles County Sherif's Dept., 447 F.3d 769 (9th Cir. 2006).....................................................................................................4 24 Wells Fargo & Co. v. WhenU.com, Inc., 25 293 F. Supp. 2d 734 (E.D. Mich. 2003).................................................................................... 9 26 27 28 STATUTES 17 U.S.C. 101 ................................................................................................................................ 9 - III townsend. CASE NO. 08-3251 WHA Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page5 of 20 TABLE OF AUTHORITIES ( continued) 2 3 Page 17 U.S.C. 107 ................................................................................................................................ 7 4 5 17 U.S.C. 109(a) ........................................................................................................................... 7 17 U.S.C. 117(a)(1)....................................................................................................................... 5 6 7 8 17 U.S.C 117(a)-(b) ......................................................................................................................6 17U.S.C117(b)............................................................................................................................6 9 OTHER AUTHORITIES 10 Copyrighted the National Commission on New Technological Uses of Final Report of 11 Works (1978) ("CONTU Report")........................................................................................ 5, 6 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - iv - townsend. CASE NO. 08-3251 WHA Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page6 of 20 I. 2 3 INTRODUCTION Without the protections afforded by copyright laws, innovative companies such as Apple Inc. will not invest the decades of effort and hundreds of millions of dollars required to develop a 4 5 product such as Mac OS X. Psystar seeks to appropriate to its own uses Apple's proprietary work, arguing that the law allows it to do so. Psystar is wrong. Apple has submitted undisputed facts showing that Psystar infringes Apple's copyrights in 6 7 8 9 Mac OS X and circumvents Apple's technological protection measures to do so. Psystar, in response, presents no evidence demonstrating a triable issue of fact and, indeed, concedes the facts establishing its liability. Though Apple need only show that Psystar infringes one of the exclusive 10 11 rights protected by the Copyright Act, Psystar admits the factual bases for three separate violations: (1) unauthorized copying of Mac OS X; (2) unauthorized distribution of Mac OS X; 12 13 and (3) the creation of unauthorized derivative works. Psystar concedes that it makes multiple copies of Apple's copyrighted Mac OS X while making each Psystar computer and that it 14 15 distributes and sells those computers loaded with copies of Apple's software. (Response at 1012.) Psystar also "confirms" the description provided by Apple's expert of the changes to 16 17 18 Mac OS X engineered by Psystar to force that software to run on non-Apple hardware. (ld. at 13.) Psystar advances various legal arguments intended to excuse its copying, modifying, and distributing of Mac OS X. None has merit. Psystar argues that even if it violates the express 19 provisions of Apple's Software License Agreement ("SLA") prohibiting copying, modification, and distribution of 20 21 Mac OS X on non-Apple hardware, it still is not liable for copyright infringement. (Response at 8.) Psystar contends that the SLA provisions it violates are "mere covenant(s)" and not "conditions" limiting the scope of 22 23 the license, so Apple has breach of contract, not copyright infringement, claims against Psystar. This argument is wrong. Psystar's activities violate the Copyright Act and also breach Apple's SLA. Psystar's attempt to defend its unauthorized copying of 24 25 Mac OS X under section 117 (the 26 "essential step" doctrine) and under section 109 (the "first sale" doctrine) of the Copyright Act 27 28 also is meritless. Section 1 17 permits only copies that are necessary for "internal use." It does not authorize Psystar's mass copying of Mac OS X for the ultimate purpose of resale to end users. townsend. APPLE INC'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-325 i WHA Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page7 of 20 Likewise, Psystar's claim that section 109 permits it to make unlimited copies of Mac OS X and 2 install them onto Psystar's computers simply because Psystar allegedly "owns" the original copy 3 is incorrect. (Response at 12- 13.) Section 109 authorizes only the resale of one's particular copy 4 of Mac OS X. Nothing in the Copyright Act condones Psystar's mass reproduction and 5 distribution of Apple's copyrighted work. 6 Psystar concedes the facts which establish that it has violated the Digital Mil1enium 7 Copyright Act ("DMCA"). Psystar admits that it developed technology to circumvent Apple's 8 technological protection measures and distributes this technology to others; these admissions 9 prove that Apple is entitled to judgment on its DMCA claims. Although Psystar offers pages of 10 irrelevant discussion of open-source Apple software code called Darwin, Psystar ultimately 11 admits, as it must, that "Mac OS X includes many things which are not released as part of 12 Darwin" and that "Apple introduced into OS X specific technical measures not present in 13 Darwin." (Response at 3,6.) That others may have used Apple's software development tools for 14 permissible purposes does not excuse Psystar's circumvention of Apple's technological protection 15 measures. (ld. at 5.) 16 Finally, Psystar acknowledges that it is not offering "theories of antitrust violations" to 17 support its copyright misuse defense and counterclaims, but instead offers the unsupported 18 proposition that Apple per se engages in misuse by using "copyright law to enforce the tethering 19 of OS X to Apple hardware." (Response at 20-21.) There is no support in the law for Psystar's 20 novel proposition that copyright law prohibits licensing practices that do not restrain competition 21 or creativity and are common throughout the software industry. 22 23 II. ARGUMENT A. The Software License Agreement Confirms That Apple Does Not Authorize 24 Psystar's Infringement 25 Apple seeks summary judgment that Psystar has violated the Copyright Act and the 26 DMCA. In its opposition, Psystar claims that Apple's summary judgment motion "focuses almost 27 entirely on alleged breaches ofthe SLA" and therefore fails to establish that Psystar has "violated 28 an exclusive right granted to Apple by the Copyright Act." (Response at 8.) Contrary to Psystar's APPLE INC'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-3251 WHA townsend. 2 Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page8 of 20 argument, Apple does not rely on the SLA to establish that Psystar infringes Apple's copyrights. 2 Psystar engages in copyright infringement, independent of the existence ofthe SLA. (See Apple's 3 SJ Br. at 8-9.) Apple refers to the SLA only to demonstrate that it does not otherwise permit I Therefore, Psystar's assertion that certain provisions of 4 Psystar's infringement. the SLA the license is not only 5 prohibiting its conduct are "mere covenants" rather than "conditions" of 6 incorrect, but irrelevant. 7 Psystar does not dispute that it violates the SLA's prohibitions against the unauthorized use 8 of Mac OS X on non-Apple hardware, as well as its prohibitions against redistributing the 9 software, and also its limitations on transferring, modifying and copying Mac OS X. (See SLA 10 2A, 3, 2C and 2F.) Rather, Psystar argues that it is free to ignore the SLA altogether, mistakenly 11 citing Sun Micro!'ystems, Inc. v. Microsoft Corp., 188 F. 3d 1115 (9th Cir. 1999), for the 12 proposition that copyright infringement and license breaches can be overlooked, so long as the 13 terms breached are mere "covenants." (Response at 8-9.) However, neither Sun Microsystems, 14 nor the cases it relies upon, support the unprecedented limitation on copyright protection that 15 Psystar posits. Sun stands only for the proposition that breaching license provisions that regulate 16 rights enumerated in the Copyright Act also constitutes infringement; but breaching license terms 17 that do not govern rights enumerated in the Copyright Act does not constitute infringement. The 18 Sun decision specifically affirmed that "(iJf ... a license is limited in scope and the licensee acts 19 outside the scope, the licensor can bring an action for copyright infringement." Sun Micro!'ystems, 20 Inc., 188 F.3d at 1121; see also Graham v. James, 144 F.3d 229, 236 (2d Cir. 1998); s.o.s., Inc. v. 21 Payday, Inc., 886 F.2d 1081, 1087 (9th Cir. 1989). Here, Psystar's activities were forbidden by 22 Apple's SLA; there is neither a covenant nor a condition that provides otherwise. Moreover, 23 Apple has shown that Psystar violates the Copyright Act, irrespective of its breach of the terms of Mac OS X. 24 the SLA, through its copying, distribution and modification of 25 26 27 28 i Psystar correctly acknowledges that this is a proper understanding ofa license's role in copyright action. "A license agreement can be relevant to determining whether a defendant has committed copyright infringement, but only ifthe defendant has first violated an exclusive right granted by the Copyright Act. This is because a lieense can permit what would otherwise be a violation." (Response at 8.) APPLE INC'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-325 i WHA townsend. 3 Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page9 of 20 B. Neither Section 117 Nor Section 109 Authorizes Psystar's Copying, Adapting And Resellng Of Mac OS X 2 3 Psystar admits that it makes three types of copies of Mac OS X "in the course of the 4 imaging process by which Psystar installs copies of Mac OS X on the computers that it sells to 5 end users" (Response at 10), but argues that sections 117 and 109 authorize this infringing 6 conduct. Even ifPsystar were an "owner of a copy" for the purpose of applying section 117 or 7 section 109 (and it is not),2 neither of these sections absolves Psystar ofliability for infringing 8 Apple's copyrights. 9 10 11 1. Psystar Is Not Entitled To A Section 117 Defense "a copy" (i.e., one Section 117, the "essential step" doctrine, only permits the making of copy) of a copyrighted work when "essential" for an owner's internal use. Section 1 1 7, which 1'2 Psystar admits only permits "a narrow category of copying," does not authorize Psystar's conduct for several reasons. (Response at 17.i First, Psystar does not make only a single copy of Mac 13 14 15 OS X. It makes one copy on a Mac mini, a second copy on its imaging station, and then reproduces unlimited copies onto Psystar computers using its imaging station. (Response at 1011.) See Wall Data, Inc. v. Los Angeles County Sherif's Dept., 447 F.3d 769, 786 (9th Cir. 2006) 16 17 18 (holding that hard drive imaging done in "an effort to save time and preserve flexibility" is not permitted by section 117). All of these copies are different from the retail upgrade DVD of Mac 19 OS X that Psystar allegedly distributes with its computers. Second, Psystar makes these copies not for its internal use, but for resale to others, thereby violating section 1 ITs mandate that copies 2 A complete discussion of why Psystar is not an "owner" of copies of 20 21 Mac OS X is set forth in 22 23 24 25 Apple's Motion for Summary Judgment (Docket No. 181) ("Apple's SJ Br.") at 1 9-22, and Apple's Opposition to Psystar's Motion for Summary Judgment (Docket No. 196) ("Apple's Opp. Br.") at 7-16. That discussion is incorporated herein by reference. 3 Psystar argues in its opposition that it did not need to plead section 117 as an affirmative defense because (1) its interrogatory responses put Apple on notice that it would assert section 117; and (2) section 117 need not be pleaded as an affirmative defense. (Response at 17.) Both arguments are incorrect. Psystar's interrogatory responses (Nos. 7,10) say nothing about section 117's "essential step" defense. (See Psystar Ex. F.) Sega Enterprises Ltd. v. Accolade, Inc., 26 27 28 977 F .2d 1510, 1520-21 (9th Cir. 1992), does not address or support Psystar's argument that section 117 need not be pleaded as an affirmative defense. Wall Data Inc. v. Los Angeles County Sherif's Dept., 447 F.3d 769, 776, 784-86 (9th Cir. 2006) (section 117 pleaded as affirmative defense); Krause v. Titleserv, Inc., 402 F.3d 119, 120 (2d Cir. 2005) (same). Consequently, Psystar has waived this defense and should be precluded from asserting it now. APPLE INC. 's REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-3251 WHA townsend. 4 Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page10 of 20 made for internal use must be "used in no other manner." 17 U.S.C. i 17(a)(1 ). 2 Moreover, Psystar's adaptations of Mac OS X are not permitted by section 117, which 3 allows only "changes necessary to enable the use for which (the software J was both sold and 4 purchased. . . ." Final Report of the National Commission on New Technological Uses of 5 Copyrighted Works (1978) at 13, available at http://digital-law6 online.Info/CONTU/PDF/index.html (hereinafter cited as the "CONTU Report") (emphasis 7. added); see also Krause v. Titleserv, Inc., 402 F.3d 119,129 (2d Cir. 2005); Stuart Weitzman, 8 LLC v. MicroComputer Res., Inc., 510 F. Supp. 2d 1098, 1 109 (S.D. Fla. 2007), vacated on other 9 grounds, 542 F.3d 859 (1Ith Cir. 2008). As the SLA expressly provides, Mac OS X is licensed 10 exclusively for use on Apple computers. (Apple's SJ Br. at 3.) Psystar's copying and adaptation 11 of Mac OS X are directly contrary to that purpose since they are done in order to permit use of 12 Mac OS X on non-Apple computers. Consequently, Psystar's adaptations do not fit within 13 section 117's requirements. 14 Trying to salvage its claim that section 117 permits it to copy Mac OS X and resell it to 15 end users, Psystar attempts to distinguish Apple v. Formula. (Response at 18-19.) But its efforts 16 are unavailing. See Apple Computer, Inc. v. Formula Intl, Inc., 562 F. Supp. 775 (C.D. CaL. 17 1984) ("Formula l'), afJ'd 725 F .2d 521 (9th Cir. 1984); Apple Computer, Inc. v. Formula Int 'i, 18 Inc., 594 F. Supp. 617 (C.D. CaL. 1984) ("Formula Il'). Psystar argues that defendant Formula's 19 copying of Apple's software for use in its "Pineapple" computers is different than Psystar's 20 copying because the Formula court addressed "whether purchasing a lawful copy of Apple 21 software then copying that software not onto a computer, but onto silicon chips that can be 22 plugged into a computer by the end user, is protected by 117." (Response at 18.) But Psystar 23 does not explain how, nor does it cite any case to support why, this distinction is relevant. Nor 24 could it; making either type of copy - on to a ROM chip or on to a hard drive - is equally 25 unlawfuL. Moreover, the court in Formula 11 rejected the argument that defendant's copies were 26 permissible under section 117 because they were made for others' "internal use," holding instead 27 that the one copy "made by the owner-user cannot be made accessible to others." Formula II, 28 594 F. Supp. at 622 (emphasis added). townsend. APPLE INC'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-325 I WHA 5 Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page11 of 20 Psystar again tries to distinguish the Formula decisions by making the baseless assertion 2 that "it is not clear whether the defendant owned legitimate copies of Apple's software or, instead, 3 owned pirated copies, in which case 117 would not apply." (Response at 18.) But the reported 4 opinions make clear that Formula, just like Psystar, started with original, authorized copies of 5 Apple's operating system software. Formula II, 594 F. Supp. at 620 (describing the "Wong 6 diskettes" possessed by Formula as storage media containing Apple's copyrighted software and 7 produced under a license from Apple). The court squarely rejected Formula's argument that since 8 it was the "rightful owner" of the Wong diskettes it could copy that software onto computer 9 hardware (i.e., ROM sets) and resell it. Id. The court described the exact legal theory that Psystar 10 posits now and rejected it. Formula II, 594 F. Supp. at 622-23 (finding "Formula's claimed 11 justification to be a mere pretext and to be outside the protection of Section 117" and refusing to 12 construe section 117 "in a manner that would effectively emasculate the protections for computer 13 programs contained in other sections of the Copyright Act"). 14 Moreover, any copy that is not an "exact copy" constitutes an "adaptation" for the purpose 15 of section 1 1 7(b)' s prohibition against transfer without permission. 17 U .S.C 1 17(a)-(b). 16 Psystar impermissibly "adapts" Mac OS X to make it run on Psystar computers and transfers the 17 "adaptation" in violation of section 11 7(b)'s requirement that adaptations "may be transferred 18 only with the authorization of the copyright owner." 17 U.S.C 11 7(b). Adding "capabilities" 19 and desired features, "conversion of a program from one higher-level language to another," and 20 the addition of "features to the program that were not present at the time of rightful acquisition" 21 all constitute adaptations under section 117. Krause, 402 F.3d at 125; Evolution, Inc. v. SunTrust 22 Bank, 342 F. Supp. 2d 943 (D. Kan. 2004); CONTU Report at 13. Psystar admits that it adapts 23 Mac OS X by adding features "to increase (Mac OS X's) functionality," taking "steps" to make 24 Mac OS X "work on a wider range of computers than simply Apple Macintoshes" and "porting" 25 Mac OS X to work on Psystar's hardware. (Psystar Br. at 10-11.) 26 Finally, section 1 17(b) requires that an owner who wishes to transfer any "exact copies" 27 that it made for its internal use transfer the original "copy from which such copies were 28 prepared." 17 U .S.c. 117(b). Psystar does not meet this requirement because it keeps the townsend. APPLE INC'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-325 I WHA 6 Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page12 of 20 original copy of Mac OS X on its imaging station and repeatedly uses that copy to continue its 2 mass duplication of Mac OS X onto additional Psystar computers. Psystar never addresses this 3 explicit limitation of section 1 17. 4 2. Psystar Is Not Entitled To A Section 109 Defense Mac OS X, section 1 09's "first 5 Even if Psystar were an owner, not a licensee, of a copy of 6 sale" doctrine also would not excuse Psystar's conduct because section 109 does not permit 7 copying of any kind, for any purpose. 17 U .S.c. 109(a). Rather, section 109 permits the owner 8 of a copy only to transfer possession ofthe one copy of software it bought; it does not allow 9 Psystar's repeated copying or adaptation of Mac OS X in making and selling its computers. 10 (Apple's SJ Br. at 21 -22; Apple's Opp. Br. at 11-12.) 11 Rather than address the actual requirements of sections 109 or 1 17, Psystar simply states 12 that it "owns" an original copy of the Mac OS X DVD, that it allegedly distributes a Mac OS X 13 DVD with Psystar computers, and that its activities are for the "internal use" of others. (Response 14 at 10-12, 18- 1 9.) But neither section 109, nor section 117, nor any other copyright doctrine,4 15 permits an "owner" to make unlimited unauthorized copies of another's copyrighted work and, in 16 turn, sell those copies for use by others. Such an interpretation, if adopted, would vitiate the 17 copyright laws, condone wholesale software piracy and gravely harm the entire software industry. 18 This cannot be the correct interpretation of sections 109, 117, and the Copyright Act. Copyright 19 law simply does not sanction the commercial reproduction of copyrighted software for others' 20 use. 21 C. 22 23 Psystar Seeks To Unduly Limit The Exclusive Right To Create Derivative Works From Copyrighted Software Apple also is entitled to prevail on its alternative ground for copyright infringement that 24 25 Psystar creates an infringing derivative work. Psystar does not dispute the facts underlying this 4 Psystar briefly mentions "fair use" but makes no argument, and submits no evidence, purporting to justify its conduct under fair use principles. See 17 U.S.c. 1 07. If it were seriously 26 27 28 attempting to prove fair use then Psystar would have been required to submit evidence regarding: (1) "the purpose and character" of its use of Mac OS X, including whether its use was "of a commercial nature"; (2) "the nature of the copyrighted work"; (3) "the amount and substantiality of the portion used in relation to the copyrighted work as a whole"; and (4) "the effect of the use upon the potential market for or value of' Mac OS X. Id. It submitted no such evidence. APPLE INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-3251 WHA townsend. 7 Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page13 of 20 claim. Psystar agrees with Apple's technical expert, Dr. John Kelly, 2 3 (Response at 7 i 4 Case law establishes that modifications, such as those Psystar concedes, create a derivative 5 work. Dun & Bradstreet Software Services, Inc. v. Grace Consultng, Inc., 307 F.3d 197 (3rd Cir. 6 2002) (finding derivative work where the defendant Grace modified the plaintifts software); 7 Midway Mfg. Co. v. Strohon, 564 F. Supp. 741, 762 (N.D. III. 1983) (defendant's addition to the 8 ROM code and replacement of a small fraction of the existing programming instructions created a 9 derivative work); 6 SAS Institute, Inc. v, S & H Computer Systems, Inc., 605 F. Supp. 816, 819-20, 10 831 (D. Tenn. 1985) (the "conversion" of a piece of software from a program that would run on an 11 IBM computer, to one that would run on a VAX computer is "well within the statutory definition 12 of a derivative work"). 13 Psystar argues, however, that "adding to or replacing parts of OS X without modifying the 14 OS X source or object code" is insuffcient to create a derivative work because it is like the 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 That the altered code in Strohon was functional - altering the appearance and sequence of game events - did not, as Psystar suggests it should, prevent the court from holding that a derivative work had been created. Psystar cites to Silverstein v. Penguin Putnam, Inc., 368 F.3d 77 (2d Cir. 2004), and Torah Soft Ltd. v. Drosnin, 136 F. Supp. 2d 276 (S.D.N.Y. 2001), for the premise that functional changes do not result in a derivative work. Silverstein, however, held only that an author was estopped from copyright protection based merely on copyediting. 368 F.3d at 83 (questioning but not deciding whether copyediting created an original work). Torah Soft held that where a program must read bible text by one oftwo methods, selection of one did not satisfy the originality requirement for copyright protection of a compilation of non-original works. 136 F. Supp. 2d at 289-90. Neither case pertains here. APPLE INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-3251 WHA townsend. 8 Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page14 of 20 programming activities of developers who write code to enable various software applications to 2 interoperate with Mac OS X. (Response at 13-16.) Psystar's argument is without merit. Contrary 3 to Psystar's assertion, Dun & Bradstreet does not hold that only changes to a program's source 4 code constitute a derivative work. In Dun & Bradstreet, the defendant created a new software 5 program that incorporated the plaintifts copyrighted code and added the defendant's command 6 codes. The Third Circuit held that this new program was an infringing derivative work: "the 7 inclusion ofthe Copy and Call command makes (defendant's) W-2 programs infringing, 8 derviative works of(plaintifts) copyrighted software." Dun & Bradstreet, 307 F.3d. at 212. 9 Similarly, Psystar's modification of Mac OS X can and does form the basis for a finding that 10 Psystar has infringed Apple's right to create derivative works of Mac OS X. See 17 U.S.c. 101, 11 106. 12 Deleting and replacing the component software of Mac OS X is not, as Psystar argues, 13 analogous to the loading of separate applications software to run on top of an operating system. 14 Psystar does not cite any case holding that one can replace entire fies within a piece of software 15 without creating a derivative work.7 Psystar's actions are akin to ripping several chapters out of a 16 book, inserting new pages in the place of those removed, and then reselling that altered book. 17 Psystar would have the Court accept that it is merely reselling Apple's book in its entirety along 18 with a set of separate Psystar booklets.8 But Psystar's false analogy fails. In the normal course 19 one can add word processing software to a computer, and then uninstall that software without 20 impairing the operating system on which it was installed. 21 22 23 7 Wells Fargo & Co. v. WhenU.com, Inc., 293 F. Supp. 2d 734, 769 (E.D. Mich. 2003), does not support Psystar's claim that its modifications to Mac OS X do not create a derivative work. Wells Fargo considered whether a pop-up advertising window created a derivative work of an 24 25 underlying web-browser window. Unlike the pop-up ads in Wells Fargo, which were merely temporary alterations to the screen displays seen by the user, Psystar alters the code needed to boot Mac OS X. (Kelly Decl. at ~~ the operating system and execute the user interface components of 16-17,29,31.) 8 While Psystar's Response expounds at some length about open source software including, for that discussion matters to this case. example, Darwin and the "Mach" micro-kernel, none of Psystar does not contend, or try to prove - because it cannot do so - that A Ie's bootloader code, which Ps star re laces, is not ro rIetar to A Ie. 26 27 28 Thus, Psystar's "open source" discussion is nothing more than a red herring. APPLE INC'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-3251 WHA townsend. 9 Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page15 of 20 2 3 (Kelly Decl. at ~~ 16- 17, 31.) D. 4 5 Psystar Has Not Opposed Apple's Motion For Summary Judgment For Contributory Copyright Infringement Claim 6 Apple has moved for summary judgment on its claim for contributory infringement, and 7 included with its motion evidence and argument supporting this claim. (See Apple SJ Br. at 15-16 8 and evidence cited therein.) Psystar has neither introduced any admissible evidence nor made any 9 argument to rebut this claim. Accordingly, Apple is entitled to judgment on its claim for 10 contributory copyright infringement. 11 E. Apple Is Entitled To Judgment On Psystar's Copyright Misuse Defense And Counterclaims 12 13 Psystar repeatedly has changed the alleged basis for its copyright misuse defense and 14 counterclaims, but at no point has it presented any evidence or legal support for its allegations. 15 Psystar does not contest Apple's evidence that it lacks market power in a relevant market and 16 confirms that its copyright misuse contention is not based on "recycled theories of antitrust 17 violations." (Response at 20.) But Psystar offers no other basis for its misuse claim. Nor can it. 18 Psystar presents no evidence and does not even argue that Apple undermines the policy of the 19 Copyright Act by suppressing others' creativity. Nor does Psystar present any evidence or 20 argument to show that Apple has stopped Psystar or anyone else from developing operating 21 system software. 22 What remains ofPsystar's misuse claim, as reflected in its Response, is Psystar's 23 insistence that simply because Apple seeks to "enforce the tethering of OS X to Apple hardware," 24 Apple per se is engaged in copyright misuse. For the many reasons discussed in Apple's 25 opposition to Psystar's summary judgment motion, this argument fails. (Apple's Opp. Br. at 1726 18.) This Court already has stated that Apple "is certainly entitled" "to ask its customers to 27 purchase Mac OS knowing that it is to be used only with Apple computers." Apple Inc. v. Psystar 28 Corp., 586 F. Supp. 2d 1190, 1201 (N.D. CaL. 2008) (also Docket No. 33 at 14). Furthermore, APPLE INC'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-3251 WHA townsend. 10 Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page16 of 20 Apple has a constitutional right to enforce its copyrights in federal court unless the lawsuit is both 2 objectively baseless and fied for an improper purpose, and this suit most certainly is not. Prof'l 3 Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60-61, 113 S. Ct. 1920, 4 1928 (1993); Freeman v. Lasky, Haas & Cohler, 410 F .3d 1180, 1183-85 (9th Cir. 2005). Psystar 5 provides no legal support for the view that seeking to enforce a restriction on the use of licensed 6 software is per se copyright misuse. Nor can it; that notion is contradicted by the many cases that 7 have upheld licensing arrangements that prohibit running software on unauthorized platforms. 8 See, e.g., Sony Computer Entm 't Am. Inc. v. Gamemasters, 87 F. Supp. 2d 976, 987 (N.D. CaL. 9 1999); Microsoft Corp. v. BEC Computer Co., Inc., 818 F. Supp. 1313, 1316-17 (C.D. CaL. 1992).9 10 The facts are uncontested. Apple integrates its software with its hardware to provide its 1 I customers with high quality products that are easy to use, reliable, and operate optimally. (See 12 Apple SJ Br. at 2-6.) Apple ensures this customer experience by conducting extensive testing and 13 customization of its software to its hardware and vice versa. This approach and effort has yielded 14 great success and customer satisfaction. (See Apple SJ Br. at 2-3.) Apple has done nothing to 15 suppress creativity or preclude Psystar or other competitors from creating their own operating 16 systems. (See Apple SJ Br. at 18- 19.) That Apple protects its integrated products through 17 technical and legal means does not constitute copyright misuse. 18 F. Apple Is Entitled To Judgment On Its DMCA Claims 19 Psystar concedes there are no factual disputes concerning Apple's DMCA claims. Psystar 20 admits that Mac OS X contains technological protection mechanisms that prevent its use on non- 21 Apple hardware and that Psystar circumvents these protections, again adopting the description of 22 Psystar's circumvention contained in the report of Apple's expert, Dr. Kelly. (Response at 6-7.) 23 24 25 26 9 To support its misuse claim, Psystar relies on the portion of Triad Systems Corp. v. Southeastern Express Co., 64 F.3d 1330, 1333 (9th Cir. 1995), in which Triad conceded that under its first contract (Regime 1, covering 1976-1985), it "sold" rather than licensed software to consumers. In that context, the Ninth Circuit never addressed misuse. Moreover, when Triad licensed and restricted use of its software, the Ninth Circuit affrmed the district court's finding of no copyright misuse. Id. at 1337 ("Triad did not attempt to prohibit (anyone) from developing its 27 28 own service software to compete with Triad."). The Ninth Circuit's decision in Triad supports Apple's position here. Mac OS X is licensed, not sold, to consumers and Apple's choice to limit the software to its hardware does not limit competitors from creating their own operating systems or selling their own computers. APPLE INC'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-325 I WHA townsend. 11 Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page17 of 20 In its opposition Psystar introduces no new argument to contest its liability under the DMCA and, 2 instead, simply incorporates the arguments set forth in its motion for summary judgment. 3 Psystar's argument that its circumvention does not "facilitate infringement" both misstates 4 the law and ignores the undisputed facts. Apple need not prove copyright infringement to succeed 5 on its DMCA claims. The DMCA "targets the circumvention of digital walls guarding 6 copyrighted material (and trafficking in circumvention tools), but does not concern itself with the 7 use ofthose materials after circumvention has occurred." Universal City Studios, Inc. v. Corley, 8 273 F.3d 429, 443 (2nd Cir. 2001) (emphasis in original). At most Apple need only show - which 9 it has done - that its protection measures bear a "reasonable relation" to the interests of the 10 Copyright Act because they protect access to, and copying of, a copyrighted work, Mac OS X. Cf 11 Storage Tech. Corp. v. Custom Hardware Eng'g & Consulting, Inc., 421 F.3d 1307, 1318 (Fed. 12 Cir. 2005) (denying preliminary injunction under DMCA when plaintifts "rights under copyright 13 law are not at risk"). Moreover, even if proof of copyright infringement were required, Psystar's 14 conceded unauthorized copying of Mac OS X amply shows that infringement. 15 Psystar repeatedly has conceded that Apple's encryption mechanism is "effective" by 16 acknowledging that it prevents use of Mac OS X on non-Apple hardware.IO Moreover, as a matter 17 of law, the alleged availability of decryption code on the Internet does not undermine the 18 effectiveness of Apple's technological protection measures. Sony Computer Entm 't Am., Inc. v. 19 Divineo, Inc., 457 F. Supp. 2d 957, 965 (N.D. CaL. 2006); Universal City Studios, Inc. v. 20 Reimerdes, 111 F. Supp. 2d 294,317-318 (S.D.N.Y. 2000). (See Apple's Opp. Br. at 18-21.) 21 For these reasons, as well as the additional reasons set forth in Apple's motion for 22 summary judgment, and in Apple's opposition to Psystar's motion for summary judgment, Apple 23 is entitled to judgment that Psystar has violated the DMCA. i i 24 III 25 26 10 Chung Decl. Ex. 9 at 21 :24-22:12, Ex. 24 at No. 25, Ex. 41 at PS009264. 27 28 i i Psystar apparently has decided not pursue a 1201 (f) "reverse engineering" defense under the DMCA either because Psystar has waived the defense or for the unrebutted reasons stated in pages 25-27 of Apple's SJ Brief. Consequently, Apple is entitled to summary judgment on that defense as welL. APPLE INC'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-3251 WHA townsend. 12 Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page18 of 20 G. Apple Seeks Only to Enforce Its Intellectual Property And Protect The Fruits Of Its Labor 2 3 Psystar argues that its blatant pirating of Apple's Mac OS X software, and its 4 circumvention of the technological protection measures that Apple created to maintain the quality 5 and reputation of its integrated computer products, should be overlooked because Psystar is a 6 "family business" that Apple supposedly is "trying to destroy." (Response at 22.) This rhetoric 7 should be ignored. Apple is not trying to harm a legitimate business. Rather, Apple seeks only to 8 stop Psystar from mis-appropriating the enormous investment of time, talent and resources made 9 by Apple and its engineers in Mac OS X and to stop Psystar from harming Apple's hard-won 10 reputation for excellence by selling an inferior, infringing product. Cadence Design Sys., Inc. v. 11 Avant! CO/p., 125 F.3d 824, 829-30 (9th Cir. 1997) ("a defendant who knowingly infringes 12 another's copyright 'cannot complain of the harm that will befall it when properly forced to desist 13 from its infringing activities"'); Concrete Machinery Co. v. Classic Lawn Ornaments, Inc., 843 14 F.2d 600, 612 (1 st Cir. 1988) ("We see little reason why an entity should be allowed to establish 15 and continue an enterprise based solely on what is in all likelihood copyright infringement, simply 16 because that is its only business."); Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 518 F. 17 Supp. 2d 1197, 1221 (C.D. CaL. 2007) (proper to issue an injunction, despite hardship caused to 18 defendants when its business model, like Psystar's, was set up to induce infringement). 19 Psystar argues that it is trying to "embody the spirit of innovation and hard work of which 20 all of us, as Americans, are so justly proud." (Response at 22.) But Psystar's pirating of Apple's 21 software does not constitute hard work or promote innovation. Psystar infringes Apple's 22 copyrights and violates the DMCA. It should be precluded from continuing to do so. 23 III 24 III 25 III 26 III 27 III 28 III townsend. APPLE INC'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-325 I WHA 13 Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page19 of 20 II. 2 CONCLUSION Apple respectfully requests that for the foregoing reasons and those set forth in Apple's 3 motion, the Court grant summary judgment for Apple and enter an order finding that Psystar has 4 both infringed Apple's copyrights and violated the DMCA. 5 DATED: October 29,2009 Respectfully submitted, 6 7 8 TOWNSEND AND TOWNSEND AND CREW LLP By: Is'! James G. Gililand, Jr. JAMES G. GILLILAND, JR. Attorneys for Plainti ff and Counterdefendant APPLE INC. 62288274 vI 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 APPLE INC'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-3251 WHA townsend. 14 Case3:08-cv-03251-WHA Document200 Filed10/29/09 Page20 of 20 CERTIFICATE OF SERVICE 2 I, Victoria Hopper, declare I am employed in the City and County of San Francisco, California in the offce of a member of the bar ofthis court at whose direction this service was 3 made. I am over the age of eighteen and not a party to this action. My business address is Townsend and Townsend and Crew LLP, Two Embarcadero Center, Eighth Floor, San Francisco, 4 California, 94111. 5 I served the following documents exactly entitled: REPLY BRIEF TO PSYSTAR CORPORATION'S OPPOSITION TO APPLE INC.'S MOTION FOR SUMMARY 6 JUDGMENT on the interested parties in this action following the ordinary business practice of Townsend and Townsend and Crew LLP, as follows: 7 K.A.D. Camara 8 Kent Radford Eugene Action 1780 E. Barstow A venue, #5 9 10 11 Camara & Sibley LLP 2339 University Boulevard Houston, TX 77005 Phone: 713-893-7973 Fax: 713-583-1131 Email: camara(acamarasibley.com Fresno, CA 93710 Email: eugeneaction~hotmaii.com 12 13 i: (By First Class Mail) I am readily familiar with my employer's practice for 14 15 collecting and processing documents for. mailing with the United States Postal Service. On the date listed herein, following ordinary business practice, I served the within document(s) at my place of business, by placing a true copy thereof, enclosed in a sealed envelope, with postage thereon fully prepaid, for collection and mailing with the United States Postal Service where it would be deposited with the United States Postal Service that same day in the ordinary course of business. D (By Overnight Courier) I caused each envelope to be delivered by a commercial carrier service for overnight delivery to the offces of 16 17 18 the addressee(s). to be delivered by courier this date. D (By Hand) I directed each envelope to the party(ies) so designated on the service list transmission to the fax number indicated for the party(ies) listed above. D (By Facsimile Transmission) I caused said document to be sent by facsimile i: (By Electronic Transmission) I caused said document to be sent by electronic 19 transmission to the e-mail address indicated for the party(ies) listed above via the court's ECF 20 21 notification system. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct, and that this declaration was executed on October 29, 2009, at San Francisco, California. 22 23 lsi Victoria I-Iopper 24 25 Victoria Hopper 26 27 28 townsend. CERTIFICATE OF SERVICE. CASE NO. 08-325 I WHA

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