In Re Sony PS3 "Other OS" Litigation

Filing 76

AMENDED COMPLAINT (Consolidated Class Action Complaint) against Sony Computer Entertainment America LLC. Filed byAntal Herz, Anthony Ventura, Jonathan Huber, Jason Baker, Elton Stovell. (Rivas, Rosemary) (Filed on 7/30/2010)

1 James A. Quadra (SBN 131084) Email: [e-mail] 2 Rebecca M. Coll (SBN 184468) Email: [e-mail] 3 CALVO & CLARK, LLP One Lombard Street, Second Floor 4 San Francisco, California 94111 Telephone: [phone] Facsimile: [phone] 6 Rosemary M. Rivas (SBN 209147) Email: [e-mail] 7 Tracy Tien (SBN 253930) Email: [e-mail] 8 FINKELSTEIN THOMPSON LLP 100 Bush Street, Suite 1450 9 San Francisco, California 94115 Telephone: [phone] Facsimile: [phone] 11 Interim Co-Lead Counsel and Counsel for Plaintiffs 12 [Additional Counsel Listed On Signature Page] 13 14 15 16 IN RE SONY PS3 "OTHER OS" LITIGATION 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiffs Anthony Ventura, Jonathan Huber, Antal Herz, Jason Baker, and Elton Stovell, on behalf of themselves and all others similarly situated, based on personal knowledge, the investigation of their counsel, and on information and belief, allege the following against Defendant Sony Computer Entertainment America LLC: 1 CONSOLIDATED CLASS ACTION COMPLAINT CASE NO. CV-10-1811-RS CONSOLIDATED CLASS ACTION COMPLAINT DEMAND FOR JURY TRIAL UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA James Pizzirusso (Pro hac vice) Email: [e-mail] HAUSFELD LLP 1700 K. Street NW, Suite 650 Washington, DC 20006 Telephone: [phone] Facsimile: [phone]

1 2 1.

NATURE OF ACTION Defendant Sony Computer Entertainment America LLC, formerly Sony Computer

3 Entertainment America, Inc. ("Defendant" or "SCEA"), is one of the world's leading 4 manufacturers of advanced video gaming and computer entertainment systems. Defendant's Sony 5 6 7 8 PlayStation® 3 video game console (hereinafter referred to as the "PS3") has been purchased by approximately 35.7 million consumers across the globe. 2. Since it first introduced the PS3 in 2006, Defendant has engaged in an extensive

9 advertising campaign in an effort to beat out competitors in the game console and video game 10 markets. Defendant has advertised, promoted, marketed, warranted, and sold the PS3 as more than 11 12 13 14 just a video game console. It specifically advertised the PS3's "Other OS" feature as an essential and important characteristic, which enabled users to install Linux or other operating systems on the PS3 and use the PS3 as a personal computer. Defendant also specifically advertised the unified

15 online gaming service called the PlayStation Network ("PSN"). The PSN enables online gaming, 16 access to the PlayStation Store, PlayStation Home and other services. Defendant has consistently 17 18 19 20 21 used the PS3's ability to serve as a personal computer, in addition to its other advanced features such as the PSN and the capability of playing Blu-ray discs, to market the PS3 and distinguish it from its competitors, such as Microsoft's X-box 360 and Nintendo's Wii. 3. The ability to run other operating systems, such as Linux, allowed PS3 users to

22 operate the PS3 not simply as a gaming console, but also as a personal computer. For example, if 23 PS3 users install other operating systems like Linux, they have the ability to browse the Internet, 24 install media unsupported by the PS3's native operating system, and make their own computer 25 programs. 26 27 28 2 CONSOLIDATED CLASS ACTION COMPLAINT

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4.

On April 1, 2010, Defendant released a Firmware version 3.21 software update

2 (hereinafter referred to as the "Update 3.21") for the PS3, intentionally disabling the entire "Other 3 OS" feature that enabled the PS3 to be operated as a personal computer. Defendant offered this 4 firmware update for purported "security reasons." Defendant could have taken other less intrusive 5 6 7 or extreme measures, other than disabling the "Other OS" feature, to address its purported "security" concerns. Defendant's removal of the "Other OS" feature eviscerated one of the PS3's

8 primary purposes, i.e., its use as a personal computer, and constitutes breaches of Defendant's 9 express and implied warranties, conversion, and violations of California and federal consumer 10 protection laws as alleged herein. 11 12 13 14 5. Defendant's decision to implement Update 3.21 placed Plaintiffs and Class

members in an untenable position. PS3 owners who did not install Update 3.21 could no longer access many of the important PS3 features including the PSN, play games online, access online

15 features, or play PS3 games and/or Blu-ray discs that require Update 3.21. On the other hand, PS3 16 owners who did install Update 3.21 lost all access to the "Other OS" feature and were effectively 17 18 19 20 locked out from accessing a substantial portion of the memory on their PS3's internal hard drive, as well as information and data that users installed on that portion of the hard drive. 6. Plaintiffs and other purchasers paid for the advertised features of the PS3, including

21 the "Other OS" feature, but Update 3.21 prevents such purchasers from using all of these 22 advertised features. 23 24 25 26 27 28 3 CONSOLIDATED CLASS ACTION COMPLAINT 7. Defendant intentionally accessed PS3 systems and intentionally transmitted Update

3.21 with the knowledge and intent of disabling its advertised "Other OS" feature.

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8.

Plaintiffs paid for PS3 features and functions that Defendant has rendered

2 inoperable as a result of Update 3.21. Plaintiffs have suffered injury in fact and have lost money 3 and property as a direct result of Defendant's acts. 4 5 6 7 9. Plaintiffs bring this action on behalf of a nationwide class of all similarly situated

individuals and entities who purchased any new PS3 model containing the "Other OS" feature. Plaintiffs, on behalf of themselves and the proposed Class, hereby seek damages and other relief

8 the Court deems just. 9 10 11 12 13 14 10. PARTIES Plaintiff ANTHONY VENTURA is a citizen of California and resides in Santa

Clara, California. Mr. Ventura purchased a PS3 in or around July 2007 for $499.00 plus tax. He uses the PS3 for personal, family and household uses. Before purchasing the PS3, Mr. Ventura performed extensive research on the Internet. Among other things, Mr. Ventura reviewed and

15 relied on the statements on Defendant's website with regard to the PS3's "Other OS" feature, as 16 well as the PS3's other advertised features such as the ability to access the PSN, play video games, 17 18 19 20 watch movies, and listen to music, among other things. Defendant's representations about the PS3's features, including the "Other OS" feature, played a substantial factor in influencing Plaintiff's decision to purchase a PS3 over the Xbox 360 and Wii. Prior to the release of Update

21 3.21, Mr. Ventura not only used his PS3 to play games, watch Blu-ray discs and access the PSN, 22 but he also extensively used his PS3 as a computer, including browsing the Internet, using the Blu23 ray data drive, and playing Linux-specific games. 24 11. Mr. Ventura has not installed Update 3.21 so that he can continue to use the "Other 25 OS" functions. As a result, he is no longer able to play online games, access the PSN, or play new 26 27 28 4 CONSOLIDATED CLASS ACTION COMPLAINT

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games or Blu-ray discs. As a result of Defendant's actions, Mr. Ventura has suffered injury in fact

2 and has lost money and property. 3 12. Plaintiff JONATHAN HUBER is a citizen of Tennessee and resides in Knoxville,

4 Tennessee. Mr. Huber purchased a PS3 on or around December 26, 2006 for $599.00 plus tax. He 5 6 7 uses the PS3 for personal, family and household uses. Before purchasing the PS3, Mr. Huber performed extensive research on the differences between PS3 and Xbox 360. Among other things,

8 Mr. Huber reviewed and relied on Defendant's statements with regard to the PS3's "Other OS" 9 feature, as well as the PS3's other advertised features such as the ability to access the PSN, play 10 video games, watch movies, and listen to music, among other things. Defendant's representations 11 12 13 14 about the PS3's features, including the "Other OS" feature, played a substantial factor in influencing Plaintiff's decision to purchase a PS3 over the Xbox 360 and Wii. Prior to the release of Update 3.21, Mr. Huber not only used his PS3 to play games, watch Blu-ray discs and access

15 the PSN, but he also extensively used his PS3 as a computer, including by browsing the Internet on 16 his main television. 17 18 19 20 13. Mr. Huber downloaded and installed the Update 3.21 as he was not able to play

games online or otherwise access PSN unless he did so. This installation, as was Defendant's intention, caused him to be unable to access the "Other OS" feature and the Linux operating

21 system he had installed. As a result of Defendant's actions, Mr. Huber has suffered injury in fact 22 and has lost money and property. 23 24 25 26 14. Plaintiff ANTAL HERZ is a citizen of California and resides in San Francisco,

California. Mr. Herz purchased a PS3 on October 11, 2008 for $399 plus tax. He uses the PS3 for personal, family and household uses. Before purchasing the PS3, Mr. Herz performed extensive

27 research on the Internet. Among other things, Mr. Herz reviewed and relied on the statements on 28 5 CONSOLIDATED CLASS ACTION COMPLAINT

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Defendant's website with regard to the PS3's "Other OS" feature, as well as the PS3's other

2 advertised features such as the ability to access the PSN, play video games, watch movies, and 3 listen to music, among other things. Defendant's representations about the PS3's features, 4 including the "Other OS" feature, played a substantial factor in influencing Plaintiff's decision to 5 6 7 purchase a PS3 over the Xbox 360 and Wii. Prior to the release of Update 3.21, Mr. Herz not only used his PS3 to play games, watch Blu-ray discs and access the PSN, but he also extensively used

8 his PS3 as a computer, including to browse the Internet, run word processor software, spreadsheet 9 software, email software, other productivity applications, and make his own programs. 10 11 12 13 14 15. Mr. Herz downloaded and installed the Update 3.21 as he was not able to play

games online or otherwise access PSN unless he did so. This installation, as was Defendant's intention, caused him to be unable to access the "Other OS" feature and the Linux operating system he had installed. As a result of Defendant's actions, Mr. Herz has suffered injury in fact

15 and lost money and property. 16 17 18 19 20 16. Plaintiff JASON BAKER is a citizen of North Dakota and resides in Grand Forks,

North Dakota. Mr. Baker purchased a PS3 the weekend of March 15-16, 2007 for $599.99 plus tax. He uses the PS3 for personal, family and household uses. Before purchasing the PS3, Mr. Baker performed extensive research on the Internet. Among other things, Mr. Baker reviewed and

21 relied on the statements on Defendant's website with regard to the PS3's "Other OS" feature, as 22 well as the PS3's other advertised features such as the ability to access the PSN, play video games, 23 watch movies, and listen to music, among other things. Defendant's representations about the 24 PS3's features, including the "Other OS" feature, played a substantial factor in influencing 25 Plaintiff's decision to purchase a PS3 over the Xbox 360 and Wii. Prior to the release of Update 26 27 28 6 CONSOLIDATED CLASS ACTION COMPLAINT

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3.21, Mr. Baker not only used his PS3 to play games, watch Blu-ray discs and access the PSN, but

2 he also extensively used his PS3 as a computer, including browsing the Internet. 3 17. Mr. Baker has not installed Update 3.21 so that he can continue to use the Other OS

4 functions. As a result, he is no longer able to play online games, access the PSN, play new games 5 6 7 or Blu-ray discs that require Update 3.21, nor can he access any of the funds that he has deposited into his PSN wallet, among other things. As a result of Defendant's actions, Mr. Baker has

8 suffered injury in fact and lost money and property. 9 18. Plaintiff ELTON STOVELL is a citizen of California and resides in Springs Valley,

10 California. Mr. Stovell purchased a PS3 on November 24, 2007 for $499 plus tax. He used the 11 12 13 14 PS3 for personal, family and household uses. Before purchasing the PS3, Mr. Stovell performed extensive research on the Internet. Among other things, Mr. Stovell reviewed and relied on the statements on Defendant's website with regard to the PS3's "Other OS" feature, as well as the

15 PS3's other advertised features such as the ability to access the PSN, play video games, watch 16 movies, and listen to music, among other things. Defendant's representations about the PS3's 17 18 19 20 features, including the "Other OS" feature, played a substantial factor in influencing Plaintiff's decision to purchase a PS3 over the Xbox 360 and Wii. Prior to the release of Update 3.21, Mr. Stovell used his PS3 to play games, watch Blu-ray discs and access the PSN. While Mr. Stovell

21 did not use the "Other OS" feature at the time of the release of Update 3.21, he bought it for the 22 purpose of doing so. 23 24 25 26 19. Mr. Stovell downloaded and installed the Update 3.21 as he was not able to play

games online or otherwise access PSN unless he did so. This installation, as was Defendant's intention, caused him to be unable to access the "Other OS" feature. As a result of Defendant's

27 actions, Mr. Stovell has suffered injury in fact and lost money and property. 28 7 CONSOLIDATED CLASS ACTION COMPLAINT

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20.

Defendant Sony Computer Entertainment America, LLC is a wholly-owned

2 subsidiary of Sony Computer Entertainment, Inc. Defendant designs, markets, and sells 3 PlayStation video game consoles throughout the United States, including the PS3 at issue here. 4 Defendant is a Delaware entity with its principal place of business in Foster City, California. 5 6 7 21. JURISDICTION AND VENUE This Court has subject matter jurisdiction over this action pursuant to the Class

8 Action Fairness Act of 2005, 28 U.S.C. § 1332(d), because at least one Class member is of diverse 9 citizenship from the Defendant; there are more than 100 Class members nationwide; and the 10 aggregate amount in controversy exceeds $5,000,000. This court has personal jurisdiction over the 11 12 13 14 15 parties because Defendant conducts substantial business in this State, has had systematic and continuous contacts with this State, and has agents and representatives that can be found in this State. 22. Venue is proper in this District under 28 U.S.C. § 1391(a) because a substantial part

16 of the events or omissions giving rise to the claims occurred within this District, Defendant has 17 18 19 20 21 23. caused harm to Class members residing within this District, and Defendant maintains its headquarters in this District. INTRADISTRICT ASSIGNMENT Pursuant to Local Rules 3-2(c) and 3-5(b), this action should be assigned to the San

22 Francisco Division of California because Defendant resides in the County of San Mateo. 23 24 25 26 27 28 24. CHOICE OF LAW California law governs the state law claims asserted herein by Plaintiffs and the

Class Members. 25. Upon information and belief, SCEA's acts and omissions alleged herein were 8 CONSOLIDATED CLASS ACTION COMPLAINT

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orchestrated and implemented at Defendant's headquarters in California. 26. California has a substantial interest in protecting the rights and interests of

3 California and other U.S. residents against wrongdoing by a company based business in California, 4 which interest is greater than that of any other State. 5 6 7 27. Application of California law with respect to Plaintiffs' and the Class Members'

claims is neither arbitrary nor fundamentally unfair because California has significant contacts and

8 a significant aggregation of contacts that give California a substantial interest in the claims of the 9 Plaintiffs and the Nationwide Class. 10 11 12 13 14 28. FACTUAL ALLEGATIONS SCEA and PS3 Background Defendant, Sony Computer Entertainment America LLC, was founded in 1994 as

the North American division of Sony Computer Entertainment Inc. ("SCEI") and according to its

15 website, is responsible for the "continued growth of the PlayStation® market in the United States 16 and Canada." 17 18 19 20 21 29. In 1995, the original PlayStation game console was introduced in the United States.

More than 100,000 units were sold during its debut weekend and more than one million units were sold within the first six months. 30. On November 17, 2006, Defendant introduced the PS3, touting it as "the most

22 advanced computer system that serves as a platform to enjoy next generation computer 23 entertainment." Defendant advertised, marketed, and sold PS3 systems as including a built-in Blu24 25 26 27 28 9 CONSOLIDATED CLASS ACTION COMPLAINT

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ray disc player, the ability to go online to access the PSN and play against other players, and the

1 2 ability to install other operating systems.

3

31.

The manufacturer's suggested retail price for the PS3 has ranged from

4 approximately $300 to $600, considerably higher than many of its competitors. Defendant has 5 6 7 reportedly sold approximately 23 million PS3 systems in the United States. 32. The video game console and game industry is a multi-billion dollar market. Game

8 console manufacturers such as Defendant fiercely compete with one another to market their game 9 consoles with the latest features to consumers and to bring lucrative games to the market. The PS3 10 competes with other video game consoles such as Microsoft's Xbox 360 and the Nintendo Wii. 11 12 13 14 The ability to install other operating systems is unique to the PS3 among other video game consoles. 33. Defendant periodically releases software updates to the PS3, called "firmware." On

15 Defendant's website, it represents that system software updates add new features "so you don't 16 have to worry about your PlayStation®3 system becoming outdated or missing out on cool new 17 18 19 20 34. features." SCEA Markets PS3 and Its "Install Other OS" Feature From the time Defendant introduced the PS3 in November 2006 through 2010, it

21 has consistently and aggressively advertised the PS3 as the most advanced computer entertainment 22 system in the industry. Indeed, Defendant advertised, promoted, marketed, warranted, and sold the 23 PS3 as more than just a video game console. Ken Kutaragi, former President of SCEI, stated 24 25
1 Open Platform for PLAYSTATION®3, http://www.playstation.com/ps326 openplatform/index.html

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before the PS3's release, "Speaking about the PS3, we never said we will release a game console.

2 2 It [the PS3] is radically different from the previous PlayStation. It is clearly a computer."

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35.

In remarks made to Japanese website Impress Watch, Ken Kutaragi has commented

4 in more detail on the concept that the PlayStation 3 is a computer, rather than a game console. 5 6 7 Kutaragi pointedly commented, "We don't say it's a game console (*laugh*) - PlayStation 3 is clearly a computer, unlike the PlayStations [released] so far." He went on to outline a scenario

8 where many parts of the PS3 were upgradable, much more like a PC, noting, "[s]ince PS3 is a 9 computer, there are no `models' but `configurations.'" The Sony CEO gave another example in 10 the interview: "As PS3 is a computer . . . it also wants to evolve."3 11 12 13 14 36. An important feature of the PS3 was its "Open Platform" or "Install Other OS"

feature. As Defendant's website provides, "[t]here is more to the PLAYSTATION®3 (PS3TM) computer entertainment system than you may have assumed. In addition to playing games,

15 watching movies, listening to music, and viewing photos, you can use the PS3TM system to run the 16 Linux operating system. By installing the Linux operating system, you can use the PS3TM system 17 18 19 20 21 not only as an entry-level personal computer with hundreds of familiar applications for home and office use, but also as a complete development environment for the Cell Broadband EngineTM (Cell/B.E.)."4 37. The "Other OS" feature allowed Plaintiffs and other PS3 users to run a number of

22 web browsers, which provide more functionality than the one browser Defendant has in its native 23 PS3 operating system. For example, users could also run word processor software, spreadsheet 24 25 26 27 28
2 3 4

http://playstationlifestyle.net/2010/04/17/sony-refuses-ps3-linux-reimbursment/ http://www.gamasutra.com/php-bin/news_index.php?story=9642 http://www.playstation.com/ps3-openplatform/index.html 11 CONSOLIDATED CLASS ACTION COMPLAINT

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software, and email software on other operating systems, and media programs. The "Other OS"

5 2 feature also allowed Cell programming and the operation of supercomputer clusters. The "Other

3 OS" feature essentially allowed users to operate the PS3 like a computer rather than simply a 4 gaming console. 5 6 7 38. Defendant touted this as a major feature of the PS3. In June 2006, Ken Kutaragi,

Sony's CEO, stated that "[the PS3] is radically different from the previous PlayStation. It is

8 clearly a computer. Indeed, with a game console, you need to take out any unnecessary elements
6 9 inside the console in order to decrease its cost. . . . This will of course apply to the PS3 as well."

10 He also stated that while ""[l]owering costs is important but more important is its capacity to 11 12 13 14 15 evolve." Id. "Everything has been planned and designed so it will become a computer. The previous PlayStation had a memory slot as its unique interface. In contrast, the PS3 features PC standard interfaces. Because they are standard, they are open." Id 39. In February 2007, Phil Harrison, the President of Sony Computer Entertainment

16 Worldwide Studios at the time, stated in an interview with Newsweek videogame journalist, N'Gai 17 18 19 20 21 22 23
5

Croal, that "[o]ne of the most powerful things about the PS3 is the `install Other OS' option."7 40. The ability to install other operating systems was a built-in component of the core

functionality of the PS3 system and users were able to use this feature out of the box.

Cell is a microprocessor which facilitates software development. The PS3 is the most accessible Cell platform.
6

Kutaragi Details PS3 `Computer' Claim, http://www.edge-online.com/news/kutaragi-details-ps324 computer-claim 25 20 Questions With Phil Harrison At DICE, http://kotaku.com/235049/20-questions-with-philharrison-at-dice; DICE 2007 Phil Harrison Keynote Pt. 4, 26 http://www.gametrailers.com/video/dice-2007-sony/17006. 27 28 12 CONSOLIDATED CLASS ACTION COMPLAINT
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41.

Defendant's affirmative representations about the PS3's features, including the

2 "Other OS" function, triggered Defendant's duty to disclose or adequately disclose that it reserved 3 the right to disable or remove advertised functions. At the point of sale, however, Defendant failed 4 to disclose, and/or adequately disclose, to Plaintiffs or Class members that it reserved the right to 5 6 7 remove an advertised, built-in feature, like the ability to run other operating systems through a remote firmware update. Defendant's right to remove the "Install Other OS" feature is not

8 specifically disclosed in Defendant's Terms of Service or System Software License Agreement. 9 42. The "Install Other OS" feature was an important and material tool that many

10 consumers valued when purchasing a PS3. It gave consumers all of the functions of a personal 11 12 13 14 computer, including web browsing, storage, video and media entertainment, and word processing capabilities. 43. Defendant's promises, representations, warranties and advertising regarding the

15 various features available with the PS3, including the "Other OS", were material to consumers in 16 deciding to purchase the PS3. The falsity of SCEA's promises, representations, warranties, and 17 18 19 20 advertising were material to Plaintiffs and Class members and have injured Plaintiffs and the Class. 44. Defendant knew that the ability to run other operating systems was considered to be

21 important and material to users. On or around August 18, 2009, Defendant announced the release 22 of the PS3 "slim" model available on September 1, 2009. The PS3 slim did not include the ability 23 to install other operating systems. However, Defendant's PS3-Linux maintainer, Geoffrey Levand, 24 assured users via email that "SCE [Sony Computer Entertainment] is committed to continue the 25 26 27 28 13 CONSOLIDATED CLASS ACTION COMPLAINT

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support for previously sold models that have the `Install Other OS' feature and that this feature

8 2 will not be disabled in future firmware releases."

3 4 5 6 7

SCEA Consistently Advertises and Promotes the PS3's Unique Attributes 45. Since introducing the PS3 in November 2006, Defendant (through its agents,

employees, subsidiaries, parent and sister companies and other representatives acting on its behalf) has made numerous public statements promoting the "Other OS" feature as well as the PS3's other

8 unique attributes: 9 PS3 Open Platform, 2006-2010: "In addition to playing games, watching movies,

10 listening to music, and viewing photos, you can use the PS3TM system to run the Linux operating 11 12 13 system. By installing the Linux operating system, you can use the PS3TM system not only as an entry-level personal computer with hundreds of familiar applications for home and office use, but

14 also as a complete development environment for the Cell Broadband EngineTM (Cell/B.E.)." 15 http://www.playstation.com/ps3-openplatform/index.html 16 17 18 19 PS3 Manual, 2006-2010: "Install other system software on the hard disk. For

information on types of compatible system software and obtaining the installer, visit Open Platform for PlayStation®3."

20 http://manuals.playstation.net/document/de/ps3/current/settings/osinstall 21 PS3 Knowledge Center, 2006-2010: "The PlayStation 3 provides an option for

22 third-party system software to be installed on the PS3TM system instead of the system software 23 24 25 Levand's email, as posted by a user on Defendant's blog: Posting of jayyy91, to http://blog.us.playstation.com/2010/03/28/ps3-firmware-v3-21-update/comment-page-33/ (March 26 29, 2010, 2:50 pm). 27 28 14 CONSOLIDATED CLASS ACTION COMPLAINT
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provided by Sony Computer Entertainment Inc. Such third-party system software is referred to as

2 an 'Other OS'." http://us.playstation.com/support/answer/index.htm?a_id=469 3 On the PS3's product packaging, Defendant also touted the PS3's features through

4 affirmative representations and symbols. Defendant represented that the PS3 had a built-in Blu5 6 7 8 access to the PSN, among other things. Ken Kutaragi, June 2006: "Speaking about the PS3, we never said we will release a ray Disk drive for high-definition games and entertainment, and broadband connectivity with

9 game console. It is radically different from the previous PlayStation. It is clearly a computer." 10 http://www.edge-online.com/news/kutaragi-details-ps3-computer-claim 11 12 13 Phil Harrison, President of Sony Computer Entertainment Worldwide Studios 2005-

2008, May 2006: "We believe that the PS3 will be the place where our users play games, watch

14 films, browse the Web, and use other computer functions. The PlayStation 3 is a computer. We 15 do not need the PC." 16 http://www.gamasutra.com/view/news/9547/Harrison_We_Do_Not_Need_The_PC.php 17 18 19 20 Phil Harrison, February 2007: "One of the most powerful things about the PS3 is

the 'Install Other OS' option." http://kotaku.com/235049/20-questions-with-phil-harrison-at-dice PS3 Linux Distributor's Starter Kit, 2006-2009: "The Linux Distributor's Starter Kit

21 provides information, binary and source codes to Linux Distribution developers who wants to 22 make their distro support PS3." http://www.kernel.org/pub/linux/kernel/people/geoff/cell/ps323 linux-docs/ps3-linux-docs-08.06.09 24 Izumi Kawanishi, head of Sony's Network System Development Section, May 25 26 2006: "Because we have plans for having Linux on board [the PS3], we also recognize Linux 27 programming activities . . . Other than game studios tied to official developer licenses, we'd like to 28 15 CONSOLIDATED CLASS ACTION COMPLAINT

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see various individuals participate in content creation for the PS3."

2 http://www.gamasutra.com/php-bin/news_index.php?story=9290 3 Geoffrey Levand, Principal Software Engineer at Sony Corporation, August 2009:

4 "Please be assured that SCE is committed to continue the support for previously sold models that 5 6 7 8 releases." Mailing list to PS3 customers using Linux. Even when it decided to remove the "Other OS" functionality from the new Slim have the `Install Other OS' feature and that this feature will not be disabled in future firmware

9 PS3, Defendant reiterated its commitment to supporting the "Other OS" function in existing PS3 10 models. In an interview with arstechnica.com in August, 2009, John Koller, SCEA's director of 11 12 13 14 can do so." 46. Unlike an Xbox or Wii, the PS3 offered the "Other OS" feature as well as the hardware marketing, stated that "[i]f anyone wants to use previous models and change the OS, they

15 unique PS3 features (such as the ability to play Blu-ray discs and access the PlayStation Network). 16 As a result, the PS3 was substantially more expensive than these other gaming consoles. 17 18 19 20 47. The Other OS Function Is A Valuable PS3 Feature. When running the Linux software system, the PS3 can serve as a fully functional

home computer, loaded with more than 1,000 applications. But instead of having a suite of

21 applications, the computer offers users a choice of multiple mail clients, word processing 22 programs, spreadsheets, office applications, music and video players and games. 23 24 25 26 48. As a result, the "Other OS" function was extremely valuable to PS3 purchasers. As

Kai Staats, CEO of Terra Soft, a third party that developed Linux applications for the PS3, stated, "[t]he PlayStation 3 places a supercomputer in the home . . . Yellow Dog Linux provides a

27 complete Linux OS for the PlayStation 3 resulting in a very powerful computing platform. We are 28 16 CONSOLIDATED CLASS ACTION COMPLAINT

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thrilled to be working with RapidMind to make this platform more accessible for professional

2 developers and hobbyists alike . . . With our operating system, the Playstation could very easily be 3 your home CD player, DVD player, MP3 player and home computer, as well as a great game box . 4 . . This is not an application-limited appliance. This is a full-blown computer. There is no issue of 5 6 7 'can it do this or that?' It can do everything." 49. Moreover, the ability to run Linux on the PS3 provides users with an excellent

8 platform to develop applications for the PS3 or as a jumping off point for deployments to other 9 products, including those from IBM, Sony, or Mercury. 10 11 12 13 14 50. Perhaps more important, the ability to use Linux on a PS3 saves consumers money.

Consumers who load a Linux operating system do not need to buy many additional electronic devices or applications. 51. Many consumers utilized the "Other OS" feature in order to use their PS3s as

15 computers, including browsing the Internet, using the Blu-ray data drive, and playing Linux16 specific games. 17 18 19 20 Defendant Disables the "Install Other OS" Feature And Other PS3 Functions 52. On or around March 28, 2010, Patrick Sebold, Defendant's Senior Director of

Corporate Communications and Social Media, announced on Defendant's blog that Update 3.21

21 would be released on April 1, 2010 and its installation would disable the "Install Other OS" feature 22 that was available on the PS3 systems prior to the current slimmer models, launched in September 23 2009. 24 25 26

53.

On or about April 1, 2010, Defendant released Update 3.21. Defendant stated that

Update 3.21 would disable the "Install Other OS" feature. PS3 owners were not "required" to

27 install Update 3.21, but were essentially forced to do so or they would risk losing other important 28 17 CONSOLIDATED CLASS ACTION COMPLAINT

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features of the PS3. For example, if a user failed to download Update 3.21, he or she would lose

2 the following features: (1) the ability to sign in to the PSN; (2) the ability to use online features 3 that require a user to sign in to the PSN, such as chat; (3) the ability to use the online features of 4 PS3 format software; (4) playback of new PS3 software or Blu-ray discs that require Update 3.21 5 6 7 8 or later; (5) playback of copyright-protected videos that are stored on a media server; (6) use of new features and improvements that are available on PS3 Update 3.21 or later.9 54. Since the ability to play Blu-ray discs and play games online through the PSN were

9 features unique to the PS3 console and important to users, installing Update 3.21 was not optional 10 for users wishing to retain those features. Even Defendant's console games are increasingly reliant 11 12 13 14 on online updates, online content, and online play. Defendant did not present PS3 users with a choice. Rather, users would either lose the ability to use other operating systems, an advertised and important feature if they installed Update 3.21, or they would lose the ability to access online,

15 Blu-ray, and gaming features if they did not install Update 3.21. In other words, installing Update 16 3.21 renders the PS3 inoperable for its use as a computer; on the other hand, the failure to install 17 18 19 20 Update 3.21 renders a users' PS3 inoperable for its intended purpose as a gaming and Blu-ray disc console. 55. Moreover, when consumers send a defective PS3 console to Defendant for repair,

21 Defendant's repair service automatically installs Update 3.21. As Defendant states on its website: 22 23 24 25 26 27 28 18 CONSOLIDATED CLASS ACTION COMPLAINT Q: "I was using Linux and now my PS3 needs service. Can I use Linux after it comes back from repair? A: No, we repair the PS3 system with the latest system software. Users will not be able to use Linux after the repair."
9

http://us.playstation.com/support/systemupdates/ps3/ps3_321_update1/index.htm

1 http://us.playstation.com/support/answer/index.htm?a_id=469 2 3 4 56. Additional Injuries Caused By the Release of Update 3.21 Users that chose to install Update 3.21 lost any data stored in the "Other OS"

5 partition if they do not back up that data on another medium. Defendant did not adequately notify 6 its customers that all such data would be lost once they installed the update. 7 8 9 10 11 57. In addition, when Defendant originally sold the PS3s, the hard drive was partitioned

such that part of the hard drive was dedicated to the "Other OS" function. When consumers installed Update 3.21, they not only lost whatever data was stored in that partition, they lost access to that portion of the hard drive originally partitioned for the "Other OS" function. In other words,

12 an additional consequence of Defendant's disablement of the "Other OS" function was to reduce 13 the hard drive space available on the PS3 for which users had originally paid. 14 15 16 17 18 58. Many users purchased peripheral devices specifically for use with the "Other OS"

function, such as wireless keyboards and mice and external hard drives. Such devices are rendered superfluous to users that install Update 3.21. 59. Users who chose not to install Update 3.21 were also damaged in that they lost

19 access to many attributes of PS3 including their PSN purchases other than gaming. For example, 20 21 22 23 Defendant offers Qore, an online service that offers a variety of content and news concerning PS3 functions. Users pay $24.99 for an annual subscription. However, users that purchased Qore prior to the release of Update 3.21 and who did not install the update are denied the benefit of their

24 annual subscription. Similarly, users who do not install Update 3.21 lose access to any prepaid 25 PSN account balances. 26 27 28 19 CONSOLIDATED CLASS ACTION COMPLAINT

1

60.

Similarly, many consumers use their PS3 to watch streaming video from Netflix,

2 and they often pre-pay for an annual subscription. However, those users that do not install Update 3 3.21 are no longer able to stream Netflix using their PS3, and therefore they are damaged in the 4 amount of their pre-paid Netflix subscription. 5 6 7 61. Many users who do not install Update 3.21 purchase new games for their PS3,

unaware that new games cannot be played without the update. Users only become aware of that

8 fact when they open the package and try to play the game. Retailers do not accept returns on 9 games that are not in their original packaging, and thus users are damaged in the amount they paid 10 for such games. 11 12 13 14 62. Since Defendant released Update 3.21, thousands of users have written complaints

on Internet websites and message boards, including the message board Defendant maintains on its website, regarding Update 3.21 and its removal of the "Install Other OS" feature. Users complain

15 that Defendant's actions are similar to a bait and switch, where users purchased a product with a 16 specific feature and later had it taken away. Simply put, PS3 users paid for a product that included 17 18 19 20 21 22 23 24 25 26 27 28
10

certain features and regardless of whether they install Update 3.21, they will lose advertised and paid-for features and full functionality of their PS3 consoles. Typical of those numerous complaints are the following: I bought a PlayStation 3 for $600 US Dollars on November 17, 2006 advertised as a Computer Entertainment System with a feature that allowed consumers to install Linux as an operating system. This feature was called Other OS from system menu which allowed users to use the machine not just as a console but also as a computer. On April 1, 2010 Sony updated the console's firmware and removed this feature and no longer can the console be used as a computer. The console which I bought for 600 US dollars has now the same features as the newer cheaper low end models. . . .I am seeking a new firmware which will put back the promised feature that was once advertised as being part of the product or a refund.10 http://forums.gametrailers.com/thread/why-are-people-so-pissed-about/1045716?page=4 20 CONSOLIDATED CLASS ACTION COMPLAINT

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

I'll start by saying I have been a loyal sony customer and have bought all their systems at launch since the ps1. they have done a few dirty things but it wasn't until today until my eyes finally opened to see what an evil company full of liars sony really is. i mean this isn't the first time sony has lied to us, but to me this is the same as theivery. i bought a ps3, waited a week in freezing rain and paid 600 dollars for it under the impression i would have a system that could use linux, i've spent YEARS learning and playing with linux on my ps3, and 3 years later sony steals it back. A FEATURE THAT THEY ADVERTISED. I feel like I've been stabbed in the back by my best friend. i was the one who was defending the ps3 from all the haters during its first couple years when it had pretty much no games. I hope sony realizes they have pulled a benedict arnold and have betrayed the most loyal of their consumers with this move. now i have to buy a new ps3 to keep the feature? HA! no more, sony. enough is enough. I'm contacting the better business bureau today to see what can be done about this treason. also I'm not updating my system and i plan on selling it in the very near future if something isn't done.11 *** I don't know how you figure. It absolutely entered my cost benefit analysis when choosing between PS3 and Xbox360. The PS3 needed every advantage it could get at launch and running linux was something the others could not claim. Remember, at the time there was no reason to believe that Blu Ray was going to be the standard. The only real advantage the PS3 had over the Xbox was Other OS. Xbox had more gamers and more games, still does. Xbox was already established in the market and many people had friends who were already using it. Both do High def 720p vs 1080p big deal, regardless image quality has been proven exactly the same time and again at all the review sites.Both have online features, Xbox is paid but the PS3 cost twice as much for the machine. Xbox had and still has the advantage with developers, see Carmack's latest statement on PS3 development. PS3 could run Linux, Xbox had no answer. It factored into my decision and you'd be silly to think that it didn't factor into other people's decision as well since the PS3 had many disadvantages.12

http://boardsus.playstation.com/t5/PlayStation-3-Updates/Former-Sonysupporters/tdp/45468864/page/9;jsessionid=5CDBFE6684B1F4FE71318BCE7D0D7352 24 25 http://boardsus.playstation.com/t5/PlayStation-3-Updates/conclusion-about-Other-OS26 removal/td-p/45482145/page/4;jsessionid=C4EA02F5E4DC23A3D2BE40112FC6E8D7 (message 36; at 04-05-2010 01:30 PM) 27 28 21 CONSOLIDATED CLASS ACTION COMPLAINT
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11

1

63.

Defendant originally informed users that the release of Update 3.21 ­ in particular,

2 the disabling of the "Other OS" feature ­ was intended to protect the "security" of users systems. 3 In emails to PS3 users, Defendant later admitted that the update was released in order to "protect 4 the intellectual property of the content offered on the PS3 system." This is an admission that 5 6 7 8 64. Update 3.21 was released for Defendant's benefit at the expense of its customers. RULE 9(b) ALLEGATIONS WHO: Defendant made material misrepresentations and failed to disclose, or

9 adequately disclose, material facts as alleged herein. Except as provided herein, Plaintiffs are 10 unaware of, and therefore unable to identify, the true names and identities of those individuals at 11 12 13 14 SCEA who are responsible for such material misrepresentations and omissions. 65. WHAT: Defendant made affirmative material representations that the PS3 could be

used as a computer and that users could install other operating systems such as Linux. Defendant

15 also made affirmative, material representatives that the PS3 could be used to access the PSN, play 16 video games, watch movies, and listen to music, among other things. Defendant further 17 18 19 20 represented that firmware updates were for the purposes of providing new features. Defendant's representations were untrue by virtue of Defendant's implementation of Update 3.21. Defendant knew and intentionally failed to disclose or adequately disclose, the material facts as alleged

21 herein, such as that it reserved the right to unilaterally disable or remove the advertised PS3 22 features, including the "Other OS" feature to protect its intellectual property. Based on 23 Defendant's affirmative representations about the PS3's functions and firmware updates, 24 Defendant had a duty to disclose the material information alleged herein. 25 66. WHEN: Defendant made the affirmative material misrepresentations and non26 27 disclosures beginning in November 2006 through sometime around April 2010. 28 22 CONSOLIDATED CLASS ACTION COMPLAINT

1

67.

WHERE: Defendant's affirmative, material misrepresentations and non-disclosures

2 were made on the Internet, including on its website at www.usplaystation.com, in press releases, 3 on the product's packaging, in the PS3 owner's manual, and in its email communications with PS3 4 users, among other places. 5 6 7 68. HOW: Defendant heavily marketed the PS3's features, including the

ability to install other operating systems such as Linux, and the ability to access the PSN, play

8 video games, watch movies, and listen to music, among other things. Defendant, however, failed 9 to disclose or adequately disclose material information to Plaintiffs and Class members. 10 Defendant failed to disclose or adequately disclose in its advertising and marketing that it retained 11 12 13 14 15 the unilateral right to disable or remove the PS3's advertised functions. Defendant did not make adequate disclosures sometime around April 2010 when Plaintiffs and Class members were already locked into their PS3 purchases. 69. WHY: Defendant made the affirmative material misrepresentations and

16 omissions for purposes of inducing Plaintiffs and Class members to purchase the PS3 and its video 17 18 19 20 70. games over the game consoles and video games of its competitors. CLASS ACTION ALLEGATIONS Plaintiffs bring this suit as a class action pursuant to Rule 23 of the Federal Rules of

21 Civil Procedure, on behalf of themselves and all other similarly situated persons. The Class is 22 initially defined as follows: 23 24 25 26 27 28 23 CONSOLIDATED CLASS ACTION COMPLAINT All persons who purchased, in the United States and its territories, a new PS3 with the Open Platform feature for personal use and not for resale and continued to own the PS3 on March 27, 2010.

1

71.

Excluded from the class are Defendant and its subsidiaries and affiliates, as well as

2 Defendant's executives, board members, legal counsel, and their immediate families. Also 3 excluded are all governmental entities and any judicial officers assigned to hear any aspect of this 4 case. 5 6 7 8 72. Plaintiffs reserve the right to amend or modify the Class definition with greater

specificity or further division into subclasses or limitation to particular issues. 73. Numerosity. The proposed Class is sufficiently numerous, as Defendant has sold

9 millions of PS3 systems to consumers and required those consumers to download the update at 10 issue or forego the other advertised features. The members of the Class are so numerous and 11 12 13 14 dispersed throughout the United States that joinder of all members is impracticable. The Class members can be identified through Defendant's and/or Class members' records. 74. Common Questions of Fact and Law. Common questions of fact and law exist as to

15 all members of the Class and predominate over any questions affecting solely individual members 16 of the Class, pursuant to Federal Rule of Civil Procedure 23(b)(3). Questions of fact and law that 17 18 19 20 21 22 23 24 25 26 27 28 24 CONSOLIDATED CLASS ACTION COMPLAINT predominate over any individual issues include: a. Whether Defendant breached its express warranties when it removed the "Install Other OS" feature; b. Whether Defendant advertised the PS3 as a computer and as having the ability to install and use other operating systems such as Linux, among other things; c. Whether Defendant had a duty to disclose material facts, such as that it reserved the right to disable or remove the PS3's advertised features, such as the "Other OS" feature;

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 75.

d. Whether Defendant failed to disclose or adequately disclose material facts to users, such as that it reserved the right to disable or remove the PS3's advertised features, such as the "Other OS" feature; e. Whether Defendant represented that firmware updates would not disable the "Install Other OS" feature; f. Whether Defendant knowingly transmitted Update 3.21 with the specific intent of disabling the "Other OS" feature; g. Whether Defendant's conduct violated the Consumers Legal Remedies Act, California Civil Code sections 1750, et seq. ("CLRA"); h. Whether Defendant's conduct violated the Computer Fraud and Abuse Act, 18 U.S.C. § 1030; i. Whether Defendant's conduct violated California's Unfair Competition Law, California Business and Professions Code sections 17200, et seq. ("UCL"); j. Whether Defendant's actions violated other common law and statutory duties; k. Whether Plaintiffs and the members of the Class sustained damage and ascertainable loss as a result of Defendant's conduct as alleged herein; l. The amount of relief to which the Class is entitled; and m. The amount of attorneys' fees, prejudgment interest, and costs of suit to which the Class is entitled. Typicality. Plaintiffs' claims are typical of the claims of Class members because

Plaintiffs and the Class bought PS3s and sustained damages arising out of the Defendant's wrongful conduct as detailed herein. Specifically, Plaintiffs and Class members' claims arise from

25 CONSOLIDATED CLASS ACTION COMPLAINT

1

Defendant taking away advertised features of the PS3, such as the "Other OS" feature, through

2 Update 3.21. 3 76. Adequacy. Plaintiffs will fairly and adequately protect the interests of the Class and

4 has retained counsel competent and experienced in class action lawsuits. Plaintiffs have no 5 6 7 8 interests antagonistic to or in conflict with those of Class members and therefore will be adequate as representatives for the Class. 77. Superiority. A class action is superior to other available methods for the fair and

9 efficient adjudication of this controversy since joinder of all the members of the Class is 10 impracticable. Furthermore, the adjudication of this controversy through a class action will avoid 11 12 13 14 15 16 17 18 19 20 herein. 79. Defendant expressly warranted via its advertising, statements, brochures, website 78. the potentially inconsistent and conflicting adjudications of the claims asserted herein. There will be no difficulty in the management of this action as a class action. CAUSES OF ACTION COUNT I Breach of Express Warranty Plaintiffs incorporate by reference and reallege all paragraphs previously alleged

21 information, public statements, owner's manuals, and other representations that the functionality of 22 the PS3 would include both the "Other OS" and the various other advertised functions. 23 Specifically, Defendant disseminated information to the general public, including Plaintiffs and the 24 Class, that the PS3 could be used as a personal computer using the "Other OS" function. The 25 statements made by Defendant are affirmations of fact that became part of the basis of the bargain 26 27 and created an express warranty that the goods would conform to the stated promise. Plaintiffs 28 26 CONSOLIDATED CLASS ACTION COMPLAINT

1 2

placed importance on Defendant's representations. 80. Upon application of the Update 3.21 and the disabling of the "Other OS" feature,

3 the PS3 no longer conformed to these express representations of Defendant. Defendant produced 4 and sold the PS3 based upon the representations that it was capable of performing both specified 5 6 7 gaming and "Other OS" functions. Defendant currently maintains, by contrast, that the product cannot perform all functions and the user must choose between gaming on the PSN or the "Other

8 OS" function. The inability of the PS3 to perform the PSN gaming and "Other OS" functions 9 promised by Defendant constitutes a breach of warranty. 10 11 12 13 14 15 16 herein. 17 18 19 20 83. Defendant is a merchant as defined by applicable Uniform Commercial Code 82. 81. injured. COUNT II Breach of the Implied Warranty of Merchantability Plaintiffs incorporate by reference and reallege all paragraphs previously alleged As a result of SCEA's breach of the express warranty, Plaintiffs and the Class were

("U.C.C.") provisions and sold PS3 consoles to Plaintiffs and members of the Class. 84. Defendant impliedly warranted to Plaintiffs and members of the Class that the PS3

21 was merchantable and fit for personal or business computing. Specifically, Defendant impliedly 22 warranted that the PS3 could utilize other operating systems (such as Linux) and be used as 23 personal computer. 24 85. Plaintiffs and the Class were in privity with Defendant as a result of Defendant's 25 express written warranties, or by Defendant acting in concert with other agents, servants, partners, 26 27 aiders and abettors, co-conspirators and/or joint venturers that were direct sellers, such as sister 28 27 CONSOLIDATED CLASS ACTION COMPLAINT

1 2

company Sony Electronics, Inc. and Defendant's authorized retail stores. 86. As alleged herein, Defendant's Update 3.21 breached the implied warranty of

3 merchantability because it eliminated the "Other OS" feature and the ability to use the PS3 as a 4 personal computer. In addition, without Update 3.21, Plaintiffs and the Class lose access to the 5 6 7 8 PSN which includes playing online games and access to other online features. Defendant's actions have rendered the PS3 unmerchantable and unfit for its intended purpose. 87. Defendant's conduct in eliminating the "Other OS" functionality and failure to

9 adequately disclose to the Plaintiff and the Class that the Update 3.21 would eliminate the "Other 10 OS" feature, is a breach of SCEA's obligation of good faith and fair dealing. 11 12 13 14 88. Defendant knew or should have known that the Update 3.21 had the aforesaid

properties and would render the PS3 unmerchantable and unfit for its intended use or purpose. 89. Defendant had reasonable and adequate notice of the Plaintiff and the Class

15 Members' claims for breach of implied warranty of merchantability via the publicly available 16 consumer complaints predating the filing of this pleading, and failed to cure. 17 18 19 20 21 22 23 24 herein. 25 92. Defendant is a merchant as defined by applicable Uniform Commercial Code 91. 90. As a result of Defendant's breaches of implied warranty, Plaintiff and members of

the Class have been injured and are entitled to equitable/injunctive relief and/or damages in a measure and amount which are to be determined at trial. COUNT III Breach of the Implied Warranty of Fitness for a Particular Purpose Plaintiffs incorporate by reference and reallege all paragraphs previously alleged

26 ("U.C.C.") provisions and sold PS3 consoles to Plaintiffs and members of the Class. 27 28 93. Defendant impliedly warranted to Plaintiffs and members of the Class that the PS3 28 CONSOLIDATED CLASS ACTION COMPLAINT

1

fit for personal or business computing. Specifically, Defendant impliedly warranted that the PS3

2 could utilize other operating systems (such as Linux) and be used as personal computer. 3 94. Plaintiffs and the Class were in privity with Defendant as a result of Defendant's

4 express written warranties, or by Defendant acting in concert with other agents, servants, partners, 5 6 7 8 aiders and abettors, co-conspirators and/or joint venturers that were direct sellers, such as sister company Sony Electronics, Inc. and Defendwant's authorized retail stores. 95. As alleged herein, Defendant's Update 3.21 breached the implied warranty of

9 fitness for particular purpose because it eliminated the "Other OS" feature and the ability to use the 10 PS3 as a personal computer. In addition without Update 3.21, Plaintiffs and the Class lose access 11 12 13 14 to the PSN which includes playing online games and access to other online features. Defendant's actions have rendered the PS3 unmerchantable and unfit for its intended purpose. 96. Defendant's conduct in eliminating the "Other OS" functionality and failure to

15 adequately disclose to the Plaintiffs and the Class that Update 3.21 would eliminate the "Other 16 OS" feature, is a breach of Defendant's obligation of good faith and fair dealing. 17 18 19 20 97. Defendant knew or should have known that the Update 3.21 had the aforesaid

properties and would render the PS3 unmerchantable and unfit for its intended use or purpose. 98. Defendant had reasonable and adequate notice of the Plaintiffs and the Class

21 Members' claims for breach of implied warranty of merchantability via the publicly available 22 consumer complaints predating the filing of this pleading, and failed to cure. 23 24 25 26 27 28 29 CONSOLIDATED CLASS ACTION COMPLAINT 99. As a result of Defendant's breaches of implied warranty, Plaintiffs and members of

the Class have been injured and are entitled to equitable/injunctive relief and/or damages in a measure and amount which are to be determined at trial.

1 2 3 4 5 6 7 herein. 101. 102. 100.

COUNT IV Violation of the California Consumers Legal Remedies Act Plaintiffs incorporate by reference and reallege all paragraphs previously alleged

Defendant is a "person," as defined by Cal. Civil Code § 1761(c). Plaintiffs and the Class members are "consumers," within the meaning of Cal. Civil

8 Code § 1761(d). 9 10 11 103. 104. The PS3 is a "good," within the meaning of Cal. Civil Code § 1761(a). Each Plaintiffs' purchase of the PS3 constituted a "transaction," as that term is

12 defined in Cal. Civil Code § 1761(e). 13 105. Before purchasing the PS3, Plaintiffs each reviewed and relied on Defendant's

14 affirmative representations about the PS3's features and omissions of material facts, including that 15 16 17 18 Defendant would disable the "Other OS" feature. Defendant's acts and omissions, as alleged herein, violated the California Consumers Legal Remedies Act ("CLRA") and Cal. Civ. Code § 1770(a)(5)'s proscription against representing that goods have uses, characteristics, or benefits

19 they do not actually have; Cal. Civ. Code § 1770(a)(7)'s proscription against representing that 20 goods are of a particular standard, quality, or grade when they are of another; and Cal. Civ. Code § 21 22 23 24 1770(a)(9)'s proscription against advertising goods with an intent not to sell them as advertised. 106. Since the 2006 introduction of the PS3 by Defendant, it advertised, promoted,

marketed, warranted, and sold this system as a personal computer. This practice continued up to

25 the release of the Update 3.21 which disabled the "Other OS" feature and the ability to use the PS3 26 as a personal computer. 27 28 107. Further, Defendant failed to adequately disclose, at the time of purchase, that it 30 CONSOLIDATED CLASS ACTION COMPLAINT

1

might disable the "Other OS" feature. Defendant also failed to adequately disclose that the Update

2 3.21 would disable the "Other OS" feature when installed on a PS3, or give consumers a viable 3 option of not installing the Update 3.21. 4 5 6 7 108. For those Class members who became aware of the crippling effect of the Update

3.21, and had the ability to choose whether or not to install the update, Defendant left them without much of a choice. If the PS3 is not updated, many of the other promoted PS3 features are disabled,

8 such as: (1) the ability to sign into the PSN to play games online and use other online features; (2) 9 playback of PS3 software titles or Blu-ray discs that require version 3.21 or later; (3) playback of 10 the copyrighted protected videos that are stored on a media server; and (4) use of new features and 11 12 13 14 improvements that are available on version 3.21 or later. 109. The facts that Defendant had a duty to disclose but failed to disclose or adequately

disclose, concealed, and/or misrepresented are material in that reasonable consumers would

15 consider them important in deciding whether or not to purchase (and/or pay the same price for) the 16 PS3. Had Plaintiffs and the Class known that Defendant was going to disable the "Other OS" 17 18 19 20 feature and thereby preclude the PS3's use as a personal computer, they would not have purchased the PS3 or would have paid less for it. 110. In failing to disclose this information, Defendant has knowingly and intentionally

21 concealed material facts and breached its duty not to do so. 22 111. Defendant knew that it might disable the "Other OS" feature and that Update 3.21

23 would cripple the PS3. 24 112. Defendant's concealment and deceptive practices, in violation of the CLRA, were 25 designed to and did induce Plaintiffs and the Class to purchase the PS3. 26 27 28 113. Defendant performed the acts herein alleged in connection with the design, 31 CONSOLIDATED CLASS ACTION COMPLAINT

1

marketing, advertising, warranty, and/or sale of the PS3 with a knowledge and intent to defraud

2 and deceive Plaintiffs and the Class. 3 114. Defendant also violated Civil Code §1770(19) by inserting one or more

4 unconscionable provisions into a contract. Defendant's insertion of the following clauses into the 5 6 7 8 9 10 11 12 13 14 15 System Software License Agreement was unconscionable to the extent that SCEA attempts to use this provision as a basis upon which to remove core features of the PS3s at issue: "Some services may change your current settings, cause a loss of data or content, or cause some loss of functionality." "SCE, at its sole discretion, may modify the terms of this Agreement at any time, including any terms in the PS3TM system documentation or manual, or at http://www.scei.co.jp/ps3license/index.html. Please check back on this website from time to time for changes to this Agreement. Your continued access to or use of the System Software will signify your acceptance of any changes to this Agreement." 115. Defendant used its superior bargaining strength to impose those terms upon

customers, and customers had no meaningful choice whether to accept or reject these provisions.

16 Thus, the System Software License Agreement was the product of oppression and the lack of 17 negotiation, not any meaningful choice. SCEA's use of this provision to justify its removal of the 18 "Other OS" feature would be similar to SCEA stating that it was removing the feature that allowed 19 20 21 116. After entering into the contract for the purchase and sale of a PS3, Plaintiffs and 22 other Class members had no ability to negotiate the System Software License Agreement's terms, 23 which was only provided to them after they purchased their PS3s, including the terms allowing 24 Defendant to remove functions at will, allowing it to unilaterally change the System Software 25 26 27 28 License Agreement at will and forcing customers to either accept any changes in the System Software License Agreement or cease their use of their PS3. 32 CONSOLIDATED CLASS ACTION COMPLAINT consumers to play PS3 games on the PS3.

1

117.

In addition, Defendant included these provisions within its small-type, prolix form;

2 disguised them under nebulous headings; and buried them among sundry other unrelated 3 contractual terms. 4 5 6 7 118. 119. These provisions are, accordingly, procedurally unconscionable. In imposing these terms, Defendant sought to create for itself an unlimited ability to

alter the System Software License Agreement and the functions of the PS3 as it saw fit and without

8 any consideration to Plaintiffs or other Class members. 9 120. These provisions are one-sided and unreasonably favorable to Defendant. It

10 uniquely favors Defendant at the expense of customers, and Defendant clearly hid these terms in 11 12 13 14 its standard-form contract to gain unfair advantage over its consumers. 121. These terms are, as outlined above, substantively oppressive because they reallocate

risk between consumers and Defendant in an objectively unreasonable and unexpected manner by

15 permitting Defendant to change the System Software License Agreement and the PS3 16 functionalities to protect its interests in complete derogation of the rights of consumers. 17 18 19 20 122. Both procedurally and substantively, therefore, these provisions are unduly

oppressive and unconscionable. 123. Therefore, if Defendant asserts in this action a defense related to these provisions,

21 by reason of the foregoing, Plaintiffs and other Class members seek injunctive relief requiring 22 Defendant to cease enforcement of the foregoing unconscionable contract provisions. 23 24 25 26 124. Plaintiffs, on behalf of themselves and all others similarly situated, demand

judgment against Defendant under the CLRA for injunctive relief, restitution and/or disgorgement of funds paid to Defendant to purchase the PS3, and/or an injunction requiring Defendant to enable

27 the "Other OS" feature of the PS3, free of charge, and an award of attorneys' fees and costs. 28 33 CONSOLIDATED CLASS ACTION COMPLAINT

1

125.

Plaintiffs' counsel put Defendant on notice that it was in violation of the Consumers

2 Legal Remedies Act. Attached hereto as Exhibit A are true and correct copies of demand letters 3 from Plaintiffs Ventura, Huber, and Herz. As the thirty (30) day period has expired and Defendant 4 failed to cure, Plaintiffs Ventura, Huber, and Herz seek actual and statutory damages on behalf of 5 6 7 8 9 10 11 12 13 14 15 16 17 129. Defendant knowingly caused the transmission of software and intentionally caused 127. 128. The PS3 is a "computer" within the meaning of 18 U.S.C. § 1030(e)(1). Plaintiffs' and Class members' PS3 consoles are used in interstate commerce or herein. themselves and the Class. Plaintiffs Stovell and Baker will serve notice on Defendant and therefore do not seek damages at this time, but will do so and amend the complaint as appropriate. COUNT V Violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, et seq. 126. Plaintiffs incorporate by reference and reallege all paragraphs previously alleged

communication, and are "protected computers" within the meaning of 18 U.S.C. § 1030(e)(2)(B).

18 damage without authorization to Plaintiffs' and Class members' PS3 consoles; and/or intentionally 19 accessed Plaintiffs' and Class members' PS3 consoles without authorization an