Apple Inc. v. Psystar Corporation

Filing 201

MOTION Motion to Seal filed by Psystar Corporation. (Attachments: # 1 Proposed Order)(Camara, Kiwi) (Filed on 10/29/2009)

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: [phone]
5 Facsimile: [phone]

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: [phone]
Facsimile: [phone]

11 Email: griley~omm.com

12 Attorneys for Plaintiff and Counterdefendant APPLE INC.
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UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION

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18 APPLE INC.,
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Case No. 08-3251 WHA
Plaintiff,

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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.

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AND RELATED COUNTERCLAIMS.

Courtroom: Judge: Trial Date:

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Hon. William Alsup
January 11,2010

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PUBLIC VERSION (REDACTED)

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TABLE OF CONTENTS
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I. INTRODUCTION ..........................................................................................................1
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II. ARGUMENT ..................................................................................................................2
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A.
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The Softare License Agreement Confirms That Apple Does

Not Authorize Psystar's Infringement ................................................................2
B.

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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

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2'. Psystar Is Not Entitled To A Section 109 Defense .................................7

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c.
D.

Psystar Seeks To Unduly Limit The Exclusive Right To Create Derivative Works From Copyrighted Software.......................................7

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Psystar Has Not Opposed Apple's Motion For Summary Judgment For Contributory Copyright Infringement Claim ............................. 10

E.
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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.

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G.

Apple Seeks Only to Enforce Its Intellectual Property And Protect The Fru its Of Its Labor ............ ................ ................................. ............13

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II. CONCLUSION .............................................................................................................14
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TABLE OF AUTHORITIES
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Page
CASES

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5

Apple Computer, Inc. v. Formula Int'l, Inc., 562 F. Supp. 775 (C.D. CaL. 1984) ("Formula l') .................................................................... 5

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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

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15

Trust Bank, 342 F. Supp. 2d 943 (D. Kan. 2004) .........................................................................................6

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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

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21

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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

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25

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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
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II

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TABLE OF AUTHORITIES
( continued)
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Page

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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

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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
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Sun Microsystems, Inc. v. Microsoft Corp., 188 F. 3d 1115 (9th Cir. 1999)..................................................................................................3
Torah Soft Ltd. v. Drosnin,

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17
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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,

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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

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Wall Data Inc. v. Los Angeles County Sherif's Dept., 447 F.3d 769 (9th Cir. 2006).....................................................................................................4

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Wells Fargo & Co. v. WhenU.com, Inc., 25 293 F. Supp. 2d 734 (E.D. Mich. 2003).................................................................................... 9
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STATUTES

17 U.S.C. §101 ................................................................................................................................ 9

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TABLE OF AUTHORITIES
( continued)
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Page

17 U.S.C. §107 ................................................................................................................................ 7

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17 U.S.C. §109(a) ........................................................................................................................... 7 17 U.S.C. §117(a)(1)....................................................................................................................... 5

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17 U.S.C §117(a)-(b) ......................................................................................................................6

17U.S.C§117(b)............................................................................................................................6

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OTHER AUTHORITIES
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Copyrighted the National Commission on New Technological Uses of Final Report of 11 Works (1978) ("CONTU Report")........................................................................................ 5, 6
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I.
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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

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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

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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

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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;

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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

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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

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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

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provisions of Apple's Software License Agreement ("SLA") prohibiting copying, modification,
and distribution of

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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

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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

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Mac OS X under section 117 (the

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"essential step" doctrine) and under section 109 (the "first sale" doctrine) of

the Copyright Act

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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.

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APPLE INC'S REPLY BRIEF IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT, CASE NO. 08-325 i WHA

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.
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II.

ARGUMENT
A.

The Software License Agreement Confirms That Apple Does Not Authorize

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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
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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

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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.)
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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.

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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

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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)

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(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

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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

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Mac OS X is set forth in

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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.,

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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.
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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).

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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

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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.

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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

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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

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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.
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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
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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.
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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.
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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,
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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

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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.
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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.

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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.
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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
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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

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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: [phone] Fax: [phone] 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

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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

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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

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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

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25

Victoria Hopper

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townsend.

CERTIFICATE OF SERVICE. CASE NO. 08-325 I WHA