Coupons, Inc. v. Stottlemire

Filing 12

Motion to Dismiss for Failure to State a Claim on Which Relief can be Granted, or in the Alternative, for Summary Judgment; Memorandum of Points and Authorities in Support Thereof filed by John Stottlemire. Motion Hearing set for 11/13/2007 10:00 AM. (bw, COURT STAFF) (Filed on 9/24/2007)

Coupons, Inc. v. Stottlemire

Doc. 12

1 ROBERT J. YORIO (SBN 93178) [e-mail] 2 COLBY B. SPRINGER (SBN 214868) [e-mail] 3 CHRISTINE S. WATSON (SBN 218006) [e-mail] 4 CARR & FERRELL LLP 2200 Geng Road 5 Palo Alto, California 94303 Telephone: [phone] Facsimile: [phone] 7 Attorneys for Defendant/Counterclaimant PSYSTAR CORPORATION 8 9 10 11 12 13 14 15 16 17 18 PSYSTAR CORPORATION, 19 20 v. Counterclaimant, JURY TRIAL REQUESTED v. PSYSTAR CORPORATION, Defendant. COUNTERCLAIMS FOR VIOLATIONS OF THE SHERMAN, CLAYTON, AND CARTWRIGHT ACTS, AND STATE AND COMMON UNFAIR COMPETITION LAW UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION APPLE INC., a California corporation, Plaintiff, ANSWER AND AFFIRMATIVE DEFENSES OF PSYSTAR CORPORATION CASE NO. CV-08-03251-WHA

21 APPLE INC., a California corporation, 22 23 24 Through its undersigned counsel, Defendant and Counterclaimant Psystar Corporation Counterdefendant.

25 (hereinafter PSYSTAR) responds to the July 3, 2008 Complaint for Copyright Infringement etc. 26 (hereinafter "Complaint") of Plaintiff and Counterdefendant Apple Inc. (hereinafter PLAINTIFF or 27 APPLE) as follows: 28 -1Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)
Dockets.Justia.com

1 2 3 1.

BACKGROUND ALLEGATIONS

PSYSTAR admits that PLAINTIFF is a California corporation with its headquarters and

4 principal place of business at 1 Infinite Loop, Cupertino, California. PSYSTAR admits that 5 PLAINTIFF sells hardware, software, and services including the Macintosh computer, the iPod 6 music player, and the iPhone. PSYSTAR admits that the PLAINTIFF was founded in 1976 and 7 that PLAINTIFF has been referred to as "one of the most innovative companies in the world." 8 PSYSTAR lacks information or knowledge as to the number of persons employed by the 9 PLAINTIFF; PSYSTAR likewise lacks information or knowledge as to the number of stores 10 operated by the PLAINTIFF and on that basis denies those allegations; PSYSTAR admits that 11 PLAINTIFF sells a number of products online. PSYSTAR admits that in 2008, Fortune Magazine 12 named the PLAINTIFF "America's Most Admired Company." 13 2. PSYSTAR admits that PLAINTIFF launched the Macintosh line of computers in 1984 but

14 otherwise denies the allegation that PLAINTIFF is "[a] pioneer of the personal computer 15 revolution." On information and belief, PSYSTAR admits that the Macintosh (or "Mac") utilized a 16 mouse, computer icons, and graphical user interface but lacks information or knowledge as to 17 whether said components and functionality were novel and on that basis denies the remainder of the 18 allegation. PSYSTAR admits that the Macintosh line of computers has included those particular 19 models identified in the third sentence of paragraph 2 of the Complaint but denies the un-cited 20 reference that said line of computers is "perennially praised" and on that basis denies the remainder 21 of the allegation. PSYSTAR lacks information or knowledge as to the number of Macintosh 22 computers sold by the PLAINTIFF since 2001 and on that basis denies the allegation. 23 3. PSYSTAR admits the allegation that Macintosh computers are considered "famous" and

24 that Macintosh computers are generally considered to be reliable and to enjoy ease-of-use as it 25 pertains to the operating system. PSYSTAR, on information and belief, denies the allegation that 26 development teams of the PLAINTIFF "have seamlessly integrated the hardware and software 27 features of the Macintosh computer[]" and that the Macintosh "is simpler to service, update and 28 -2Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 maintain." PSYSTAR is without information or knowledge as to Consumer Reports' ranking of 2 technical support for or by the PLAINTIFF and on that basis denies the allegation. 3 4. PSYSTAR admits that version 10.0 of the Mac OS X was released in 2001. PSYSTAR

4 admits the allegations of the second sentence of paragraph 4 of the Complaint. PSYSTAR is 5 without information or knowledge as to whether the unidentified reviewers referenced by the 6 PLAINTIFF in the third and fourth sentences of the paragraph 4 of the Complaint actually made 7 such statements and on that basis denies the remaining allegations as set forth in paragraph four of 8 the Complaint. 9 5. PSYSTAR admits that the "color, transparency and animation" and "overall arrangement"

10 of the Mac OS X interface are "unique and creative" with respect to their operative functionality. 11 PSYSTAR admits that the combined Apple mark as purportedly found in the Finder toolbar is 12 "famous" for its functionality and that the Finder toolbar is combined with "a distinctive three13 dimensional applications bar" thereby offering additional functionality for the benefit of the user of 14 the Mac OS X. PSYSTAR denies that the "combination of elements" in the Mac OS X interface is 15 "distinctive," "nonfunctional" and "well known to consumers"; PSYSTAR is without information 16 or knowledge as to whether the aforementioned elements are "associated with the PLAINTIFF and 17 Mac OS X Leopard" and on that basis denies the remainder of the allegation. PSYSTAR admits 18 that the PLAINTIFF refers to the aforementioned combinations as the PLAINTIFF's "Trade Dress" 19 but denies that any legal protections offered by any associated theory are available and/or valid. 20 6. PSYSTAR admits that the Mac OS X has been the subject of media discussion and that the

21 Mac OS X--if the PLAINTIFF means to refer to the same as "[t]he product"--has received 22 "significant acclaim." PSYSTAR is without information or knowledge as to whether the sale of 23 Mac computers has "surged," whether the growth of any such sales is "at a faster pace than the 24 personal computer market in general," and whether any such sales are related to the Mac OS X and 25 on that basis denies the assertion. 26 7. PSYSTAR admits that the PLAINTIFF manufacturers and sells a product known as the

27 Xserve rack-mount server. PSYSTAR admits that the Xserve uses an iteration of one or more 28 -3Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 components referenced as the Mac OS X Leopard Server. PSYSTAR admits that the Mac OS X 2 Leopard Server has been the subject of media discussion. 3 8. PSYSTAR admits that the PLAINTIFF alleges ownership in certain registered trademarks

4 as identified in the first sentence of paragraph 8 of the Complaint and that certain marks and brands 5 of the PLAINTIFF have been referenced by others as being "one of the most famous brands in the 6 world." PSYSTAR admits that the PLAINTIFF promotes, offers, and sells computers, goods, and 7 services in interstate commerce but is without information or knowledge as to the time and effort 8 corresponding to such promotions, offers, and sales and/or the specific trademarks used with such 9 promotions, offers, and sales and on that basis denies the allegation. PSYSTAR is without 10 information or knowledge as to the promotional expenditures of the PLAINTIFF and whether such 11 expenditures are related to the trademarks identified in the third sentence of paragraph 8 of the 12 Complaint and on that basis denies the allegations. PSYSTAR denies the allegation that the 13 PLAINTIFF's brand, unidentified marks, and purportedly distinctive trade dress (if any) are 14 "synonymous" with anything and on that basis denies the allegation. PSYSTAR admits that 15 BusinessWeek Magazine has identified the PLAINTIFF as the "World's Most Innovative 16 Company." PSYSTAR is without information or knowledge as to whether the unidentified 17 independent research organizations referenced by the PLAINTIFF in the final sentence of 18 paragraph 8 of the Complaint actually made such determinations and on that basis denies the 19 allegation. 20 9. PSYSTAR is without information or knowledge as to what the consuming public

21 nationwide associates with or understands any marks or trade dress of the PLAINTIFF to identify 22 and on that basis denies the allegation. PSYSTAR is without information or knowledge as to the 23 quality of any goods or services of the PLAINTIFF and any good will established with respect to 24 the same and on that basis denies the allegations. 25 10. PSYSTAR is without information or knowledge as to the exclusivity and frequency of use

26 of any mark of the PLAINTIFF and on that basis denies the allegation; PSYSTAR expressly denies 27 that it is infringing said marks. PSYSTAR admits that certain marks of the PLAINTIFF may be 28 famous but deny that any alleged trade dress enjoys such fame, in part because the alleged trade -4Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 dress of the PLAINTIFF is functional and on that basis denies the allegation; PSYSTAR expressly 2 denies that it is infringing the same. PSYSTAR is without information or knowledge as to what the 3 PLAINTIFF considers its "most important assets" and on that basis denies the allegations; 4 PSYSTAR likes denies the assertion that any trade dress is distinctive and again notes the 5 functionality of the same. 6 11. PSYSTAR admits that it is a corporation organized and doing business under the laws of the

7 State of Florida with its principal place of business at 10475 NW 28th Street, Doral, Florida. 8 12. PSYSTAR admits that for a period of several hours on one day that PSYSTAR colloquially

9 referred to certain computers by the name of `OpenMac' but denies that it currently sells any 10 computer referred to by that name; PSYSTAR denies that it sells any computer under any name that 11 runs a modified, unauthorized version of the Leopard operating system. PSYSTAR admits 12 currently selling a computer referred to as the `Open Computer' and that said computer may 13 include the Leopard operating system; PSYSTAR denies that any such computer runs a modified, 14 unauthorized version of the Leopard operating system. PSYSTAR admits that it offers the Open 15 Computer for sale online and that PSYSTAR ships said computer throughout the United States 16 including into the Northern District of California. PSYSTAR admits that it has made statements 17 concerning the number of computers sold. PSYSTAR denies the allegations in the final sentence of 18 paragraph 12 of the Complaint, specifically: that PSYSTAR makes copies of the Leopard software; 19 that PSYSTAR offers downloads of `updates' to the Leopard software from the website 20 www.psystar.com; that PSYSTAR copies any "updates" generated by the PLAINTIFF; and/or that 21 PSYSTAR generates unauthorized, modified versions of software updates from the PLAINTIFF. 22 13. PSYSTAR admits that it sells a rack-mounted server referred to as the OpenServ.

23 PSYSTAR otherwise denies each and every allegation of paragraph 13 of the Complaint. 24 14. PSYSTAR is without information or knowledge as to the allegations of paragraph 14 of the

25 Complaint and on that basis denies each and every allegation therein. 26 15. PSYSTAR admits that the PLAINTIFF seeks an injunction against the alleged

27 misappropriation and alleged infringement of the PLAINTIFF's allegedly proprietary software and 28 alleged intellectual property; PSYSTAR denies that it has misappropriated any such proprietary -5Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 software or intellectual property. PSYSTAR denies that its actions have harmed the consuming 2 public, sells a poor product, and/or has advertised and promoted any such product in a manner that 3 falsely and unfairly implied an affiliation with the PLAINTIFF. PSYSTAR denies that its action 4 have and/or continue to cause harm to the PLAINTIFF; PSYSTAR likewise denies that its actions 5 constitute a misuse of PLAINTIFF's intellectual property. PSYSTAR admits that the PLAINTIFF 6 seeks an award of actual damages (while concurrently denying that any exist), treble damages 7 (while concurrently denying that any such relief is appropriate,), and attorneys' fees and costs 8 (while concurrently denying that any such relief is appropriate); PSYSTAR denies that it has 9 engaged in any action that is unfair, unlawful, exploitive, or that otherwise causes consumer 10 confusion and injury nor that any such action has ever existed. 11 12 13 14 16. PSYSTAR admits that the Northern District of California has jurisdiction of the present JURISDICTION AND VENUE

15 action in that the PLAINTIFF has brought the action pursuant to¸ inter alia, the copyright laws of 16 the United States. PSYSTAR denies that it has caused the PLAINTIFF any harm. 17 17. PSYSTAR admits that venue is proper in the Northern District of California in that

18 PSYSTAR has done business in this judicial district. PSYSTAR otherwise denies the allegations of 19 paragraph 17 including that PSYSTAR has committed infringement of copyright and/or trademark 20 infringement, breached a contract, engaged in unfair competition, and/or continues to commit such 21 acts in this or any district. PSYSTAR admits that the present action is an Intellectual Property 22 Action and is therefore exempt from the intra-District venue provisions of Local Rule 3-2(c). 23 24 25 26 27 28 -6Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 2 3 18.

GENERAL ALLEGATIONS

PSYSTAR admits that the PLAINTIFF claims to license the use of the Mac OS for use only

4 on Apple-labeled hardware although PSYSTAR is without information or knowledge as to what 5 this otherwise vague and ambiguous terminology (i.e., Apple-labeled hardware) refers. PSYSTAR 6 is without information or knowledge as to what is meant by an "original version of the Mac OS" 7 and on that basis denies the allegations of the second sentence of paragraph 18 of the Complaint 8 and believes that the Mac OS may be purchased online and/or from any number of resellers such as 9 Amazon, AsenaShop, FadFusion, and SoftwareMedia.com. PSYSTAR admits that the PLAINTIFF 10 states that upgrades to the Mac OS may be licensed separately and, further, that the PLAINTIFF 11 states its license prohibits the use of the Mac OS or upgrades on non-Apple hardware. 12 19. PSYSTAR admits that a license agreement is attached as Exhibits 1 and 2 to the Complaint

13 but is without information or knowledge with respect to whether those agreements are provided 14 with each version of the Mac OS X or Max OS X Server and on that basis denies the allegations of 15 the first sentence of paragraph 19 of the Complaint. PSYSTAR admits that the quoted language 16 matches that language as provided in the exhibit attached to the Complaint claiming to be the Mac 17 OS X license and, further, that said quoted language also corresponds to that language in the exhibit 18 purporting to be the Max OS X Leopard Server License Agreement; PSYSTAR otherwise denies 19 all remaining allegations of paragraph 19 of the Complaint including whether or not said terms are 20 valid and/or enforceable. 21 20. 22 21. PSYSTAR admits the allegations of paragraph 20. PSYSTAR admits the allegations of paragraph 21 but only to the extent that PSYSTAR has

23 never engaged in any discussion concerning the allegations of paragraph 21 with the PLAINTIFF; 24 PSYSTAR similarly notes that the PLAINTIFF has never denied PSYSTAR the authorization to 25 install, use, or sell the Mac OS software on any non-Apple-labeled hardware until the filing of the 26 present action. 27 28 -7Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 2 3 4 22.

FIRST CLAIM FOR RELIEF (Copyright Infringement)

PSYSTAR repeats and incorporates by reference its admission and denials as set forth in

5 paragraphs 1-21 of the present Answer. 6 23. PSYSTAR denies that Max OS, Mac OS X, Mac OS X version 10.5, and Mac OS X Server

7 all constitute "an original work of authorship" "constituting copyrightable subject matter" as those 8 terms are defined by the United States copyright laws and on that basis denies the allegations; 9 PSYSTAR is without information or knowledge as to who contributed to the purported works of 10 authorship identified in paragraph 23 of the Complaint and on that basis denies the allegations of 11 paragraph 23. 12 24. PSYSTAR admits that the PLAINTIFF claims to be the owner of the copyright registrations

13 identified in paragraph 24 of the Complaint. PSYSTAR is without information or knowledge as to 14 whether registrations should have been granted as to the aforementioned works and on that basis 15 denies the remaining allegations in paragraph 24. PSYSTAR denies the allegation that PSYSTAR 16 has infringed any valid copyright held by the PLAINTIFF. 17 25. PSYSTAR denies the allegations of paragraph 25 including the allegation that PSYSTAR

18 has in anyway infringed any of the PLAINTIFF's exclusive rights under the Copyright Act. 19 26. 20 27. 21 28. 22 29. 23 30. 24 31. 25 26 27 28 -8Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA) PSYSTAR denies the allegations of paragraph 26 of the Complaint. PSYSTAR denies the allegations of paragraph 27 of the Complaint. PSYSTAR denies the allegations of paragraph 28 of the Complaint. PSYSTAR denies the allegations of paragraph 29 of the Complaint. PSYSTAR denies the allegations of paragraph 30 of the Complaint. PSYSTAR denies the allegations of paragraph 31 of the Complaint.

1 2 3 4 32.

SECOND CLAIM FOR RELIEF (Contributory and Induced Copyright Infringement)

PSYSTAR repeats and incorporates by reference its admissions and denials as set forth in

5 paragraphs 1-31 of the present Answer. 6 33. 7 34. 8 35. 9 36. 10 37. 11 38. 12 39. 13 40. 14 15 16 17 18 41. PSYSTAR repeats and incorporates by reference its admissions and denials as set forth in THIRD CLAIM FOR RELIEF (Breach of Contract) PSYSTAR denies the allegations of paragraph 33 of the Complaint. PSYSTAR denies the allegations of paragraph 34 of the Complaint. PSYSTAR denies the allegations of paragraph 35 of the Complaint. PSYSTAR denies the allegations of paragraph 36 of the Complaint. PSYSTAR denies the allegations of paragraph 37 of the Complaint. PSYSTAR denies the allegations of paragraph 38 of the Complaint. PSYSTAR denies the allegations of paragraph 39 of the Complaint. PSYSTAR denies the allegations of paragraph 40 of the Complaint.

19 paragraphs 1-40 of the present Answer. 20 42. PSYSTAR denies the allegations of paragraph 42 of the Complaint in that the software disk

21 is not sealed or shrink-wrapped. 22 43. 23 44. 24 45. 25 26 27 28 -9Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA) PSYSTAR denies the allegations of paragraph 43 of the Complaint. PSYSTAR denies the allegations of paragraph 44 of the Complaint. PSYSTAR denies the allegations of paragraph 45 of the Complaint.

1 2 3 4 46.

FOURTH CLAIM FOR RELIEF (Inducing Breach of Contract)

PSYSTAR repeats and incorporates by reference its admissions and denials as set forth in

5 paragraphs 1-45 of the present Answer. 6 47. PSYSTAR admits that it is aware of the existence of the License Agreement governing the

7 use of the Max OS X software and certain conditions and terms thereof but lacks information or 8 knowledge as to what particular terms and conditions are referred to by the PLAINTIFF and for 9 that reason denies the allegation. 10 48. PSYSTAR denies that it has advised, encouraged, and assisted others to breach the License

11 Agreement; PSYSTAR has not advised consumers to acquire Mac OS X software and install, use, 12 and run it on non-Apple-Labeled computers. PSYSTAR denies that it has unlawfully induced 13 breach of the License Agreement by others. 14 49. 15 16 17 18 19 50. PSYSTAR repeats and incorporates by reference its admissions and denials as set forth in FIFTH CLAIM FOR RELIEF (Trademark Infringement) PSYSTAR denies the allegations of paragraph 49 of the Complaint.

20 paragraphs 1-49 of the present Answer. 21 51. PSYSTAR admits that registered marks exist as attached to the Complaint as Exhibit 3 but

22 is without information or knowledge as to what goods and service those marks pertain and on that 23 basis denies the remaining allegations of paragraph 51. 24 52. PSYSTAR admits that the PLAINTIFF has never expressly consented to the use of any

25 trademark of the PLAINTIFF but alleges that PSYSTAR has never engaged in any discussion 26 concerning the allegations of paragraph 52 with the PLAINTIFF; PSYSTAR further alleges that the 27 PLAINTIFF has never denied PSYSTAR the authorization to use any mark of the PLAINTIFF. 28 -10Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 PSYSTAR denies that any valid mark has been infringed and on that basis denies the remaining 2 allegations of paragraph 52. 3 53. PSYSTAR admits that it is aware of the PLAINTIFF and its business but denies that

4 PSYSTAR has infringed any valid mark of the PLAINTIFF. 5 54. PSYSTAR denies the allegation that it has engaged in an unauthorized use of any trademark

6 of the PLAINTIFF; PSYSTAR further denies that any action of PSYSTAR has caused deception or 7 confusion or mistake amongst consumers as to the origin, sponsorship, approval, affiliation, 8 connection, or association between the PLAINTIFF and PSYSTAR and on that basis denies the 9 remaining allegations of paragraph 54. 10 55. 11 56. 12 57. 13 58. 14 59. 15 16 17 18 19 60. PSYSTAR repeats and incorporates by reference its admissions and denials as set forth in SIXTH CLAIM FOR RELIEF (Trademark Infringement) PSYSTAR denies the allegations of paragraph 55 of the Complaint. PSYSTAR denies the allegations of paragraph 56 of the Complaint. PSYSTAR denies the allegations of paragraph 57 of the Complaint. PSYSTAR denies the allegations of paragraph 58 of the Complaint. PSYSTAR denies the allegations of paragraph 59 of the Complaint.

20 paragraphs 1-59 of the present Answer. 21 61. PSYSTAR is without information or knowledge as to the existence of the unidentified

22 common law trademark rights of the PLAINTIFF and on that basis denies the allegations of 23 paragraph 61 of the Complaint. 24 62. PSYSTAR is without information or knowledge as to the nature of existence of the

25 unidentified "various marks or . . . [purportedly] distinctive trade dress" referenced in paragraph 26 sixty-two of the Complaint and on that basis denies those allegations. 27 28 -11Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 63.

PSYSTAR denies the allegations of paragraph 63 because PSYSTAR has never sought to

2 cause confusion or mistake, or to deceive the public as to the origin, sponsorship, association or 3 approval of goods or services of PSYSTAR or to imply an association with the PLAINTIFF. 4 64. 5 65. 6 66. 7 67. 8 68. 9 69. 10 70. 11 71. 12 72. 13 14 15 16 17 73. PSYSTAR repeats and incorporates by reference its admission and denials as set forth in SEVENTH CLAIM FOR RELIEF (Trade Dress Infringement) PSYSTAR denies the allegations of paragraph 64 of the Complaint. PSYSTAR denies the allegations of paragraph 65 of the Complaint. PSYSTAR denies the allegations of paragraph 66 of the Complaint. PSYSTAR denies the allegations of paragraph 67 of the Complaint. PSYSTAR denies the allegations of paragraph 68 of the Complaint. PSYSTAR denies the allegations of paragraph 69 of the Complaint. PSYSTAR denies the allegations of paragraph 70 of the Complaint. PSYSTAR denies the allegations of paragraph 71 of the Complaint. PSYSTAR denies the allegations of paragraph 72 of the Complaint.

18 paragraphs 1-72 of the present Answer. 19 74. PSYSTAR is without information and belief as to whether the PLAINTIFF is the owner of

20 the alleged Trade Dress and on that basis denies the allegations of paragraph 74. 21 75. PSYSTAR is without information and belief as to what is well-known among consumers

22 and what has become exclusively associated with the PLAINTIFF and the Leopard version of the 23 Mac OS X and on that basis denies the allegations of paragraph 75. 24 76. PSYSTAR denies that PLAINTIFF's alleged Trade Dress is distinctive with respect to the

25 Max OS X Leopard operating system and whether the same distinguishes PLAINTIFF's goods and 26 services and on that basis denies the allegations of paragraph 76. 27 77. PSYSTAR denies that PLAINTIFF's purported Trade Dress is distinctive and on that basis

28 denies the allegations of paragraph 77. -12Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 78. 2 79.

PSYSTAR denies that PLAINTIFF's purported Trade Dress is non-functional. PSYSTAR denies that it has engaged in an unauthorized use of PLAINTIFF's purported

3 Trade Dress and that any activity of PSYSTAR is likely to cause confusion, mistake, or deception 4 with respect to the source of goods and services or as to the affiliation, connection, association, 5 sponsorship or approval of such goods and services and on that basis denies the allegations of 6 paragraph 79. 7 80. 8 81. 9 82. 10 83. 11 84. 12 85. 13 14 15 16 17 86. PSYSTAR repeats and incorporates by reference its admissions and denials as set forth in EIGHTH CLAIM FOR RELIEF (Trademark Dilution) PSYSTAR denies that it has violated Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). PSYSTAR denies the allegations of paragraph 81 of the Complaint. PSYSTAR denies the allegations of paragraph 82 of the Complaint. PSYSTAR denies the allegations of paragraph 83 of the Complaint. PSYSTAR denies the allegations of paragraph 84 of the Complaint. PSYSTAR denies the allegations of paragraph 85 of the Complaint.

18 paragraphs 1-85 of the present Answer. 19 87. 20 88. 21 89. 22 90. 23 91. 24 92. 25 26 27 28 -13Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA) PSYSTAR denies the allegations of paragraph 87 of the Complaint. PSYSTAR denies the allegations of paragraph 88 of the Complaint. PSYSTAR denies the allegation of paragraph 89 of the Complaint. PSYSTAR denies the allegations of paragraph 90 of the Complaint. PSYSTAR denies the allegations of paragraph 91 of the Complaint. PSYSTAR denies the allegations of paragraph 92 of the Complaint.

1 2 3 4 93.

NINTH CLAIM FOR RELIEF (State Unfair Competition)

PSYSTAR repeats and incorporates by reference its admissions and denials as set forth in

5 paragraphs 1-92 of the present Answer. 6 94. 7 95. 8 9 10 11 12 96. PSYSTAR repeats and incorporates by reference its admissions and denials as set forth in TENTH CLAIM FOR RELIEF (Common Law Unfair Competition) PSYSTAR denies the allegations of paragraph 94 of the Complaint. PSYSTAR denies the allegations of paragraph 95 of the Complaint.

13 paragraphs 1-95 of the present Answer. 14 97. 15 98. 16 17 18 19 99. PSYSTAR expressly denies that the PLAINTIFF is entitled to any of the relief requested in PRAYER FOR RELIEF PSYSTAR denies the allegations of paragraph 97 of the Complaint. PSYSTAR denies the allegations of paragraph 98 of the Complaint.

20 the Claims for Relief. 21 22 23 24 100. PSYSTAR further denies each and every allegation set forth in the Complaint to which GENERAL DENIAL

25 PSYSTAR has not specifically admitted, controverted, or denied. 26 27 28 -14Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 2

AFFIRMATIVE DEFENSES

3 PSYSTAR asserts the following affirmative defenses and reserve the right to allege additional 4 defenses as they are discovered. 5 6 7 8 9 The PLAINTIFF has failed to state a claim upon which relief can be granted. 10 11 12 13 14 The PLAINTIFF's claims are barred, in whole or in part, by the doctrine of estoppel. 15 16 17 18 19 The PLAINTIFF's claims are barred, in whole or in part, by the doctrine of waiver. 20 21 22 23 24 The PLAINTIFF's claims are barred, in whole or in part, by the doctrine of unclean hands. 25 26 27 28 -15Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA) Fourth Affirmative Defense (Unclean Hands) Third Affirmative Defense (Waiver) Second Affirmative Defense (Estoppel) First Affirmative Defense (Failure to State a Claim)

1 2 3

Fifth Affirmative Defense (Failure to Mitigate)

4 The PLAINTIFF's claims are barred, in whole or in part, by its failure to mitigate any alleged 5 injury and/or its failure to mitigate any alleged damages. 6 7 8 9 10 The PLAINTIFF cannot satisfy its burden of demonstrating that the PLAINTIFF suffered any 11 injury in fact, nor did the PLAINTIFF suffer any such injury. 12 13 14 15 16 The PLAINTIFF cannot satisfy its burden, in whole or in part, of demonstrating that the present 17 case is a special case. 18 19 20 21 22 The PLAINTIFF lacks standing to assert a claim of infringement of any alleged copyright and/or 23 trademark including, but not limited to, lack of right, title, and interest to bring an action related to 24 the same. 25 26 27 28 -16Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA) Eighth Affirmative Defense (Lack of Standing to Assert Copyright / Trademark) Seventh Affirmative Defense (Special Case) Sixth Affirmative Defense (Lack of Injury in Fact)

1 2 3

Ninth Affirmative Defense (Lack of Infringement of Copyright / Trademark)

4 PSYSTAR has not directly or indirectly--by contribution or inducement--infringed any alleged 5 copyright and/or trademark of the PLAINTIFF. 6 7 8 9 10 PLAINTIFF's alleged copyrights lack protectable subject matter in that they lack original 11 expression as required by 17 U.S.C. § 102(a) and/or encompass an idea, procedure, process, 12 system, method of operation, concept, principle, or discovery as prohibited by 17 U.S.C. § 102(b). 13 14 15 16 17 Any reproduction, display, derivation, or distribution of any valid copyright of the PLAINTIFF by 18 PSYSTAR is a fair use protected by the provisions of 17 U.S.C. § 107. 19 20 21 22 23 Any distribution of any valid copyright of the PLAINTIFF by PSYSTAR is subject to the first sale 24 doctrine. 25 26 27 28 -17Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA) Twelfth Affirmative Defense (First Sale / Exhaustion of Copyright) Eleventh Affirmative Defense (Fair Use of Copyright) Tenth Affirmative Defense (Lack of Copyrightable Subject Matter)

1 2 3

Thirteenth Affirmative Defense (Express License of Copyright)

4 Any reproduction, display, derivation, or distribution of any valid copyright of the PLAINTIFF by 5 PSYSTAR is subject to an express license by and between the parties including but not limited to 6 the Apple Public Source License and/or one or more other Open Source licenses. 7 8 9 10 11 Any reproduction, display, derivation, or distribution of any valid copyright of the PLAINTIFF by 12 PSYSTAR is subject to an implied license by and between the parties. 13 14 15 16 17 PLAINTIFF is prohibited from bringing action against PSYSTAR for the alleged infringement of 18 one or more of PLAINTIFF's copyrights for failure to register said copyrights with the Copyright 19 Office as required by 17 U.S.C. § 411. 20 21 22 23 24 PSYSTAR has not willfully infringed--directly or indirectly--any copyright and/or trademark of 25 the PLAINTIFF. 26 27 28 -18Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA) Sixteenth Affirmative Defense (Lack of Willfulness) Fifteenth Affirmative Defense (Failure to Register Copyright) Fourteenth Affirmative Defense (Implied License to Copyright)

1 2 3

Seventeenth Affirmative Defense (Functionality of Trademark)

4 One or more of PLAINTIFF's trademarks and/or trade dress is functional as prohibited by 15 5 U.S.C. § 1052(e)(5). 6 7 8 9 10 One or more of PLAINTIFF's trademarks are not associated with any good or service of the 11 PLAINTIFF nor are the trademarks indicative of source of any good or service. 12 13 14 15 16 One or more of PLAINTIFF's trademark and/or trade dress are descriptive and lack requisite 17 secondary meaning within the relevant consuming public as prohibited by 15 U.S.C. § 1052(e)(1). 18 19 20 21 22 One or more of PLAINTIFF's alleged trademarks are generic terms that do not warrant protection. 23 24 25 26 27 28 -19Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA) Twentieth Affirmative Defense (Generic Term) Nineteenth Affirmative Defense (Lack of Secondary Meaning of Trademark) Eighteenth Affirmative Defense (Lack of Association / Lack of Indicia of Source)

1 2 3

Twenty-First Affirmative Defense (Lack of Actual Confusion)

4 There has been no actual confusion with respect to any activity of PSYSTAR and one or more of 5 the trademarks and/or trade dress of the PLAINTIFF. 6 7 8 9 10 There is no likelihood that any members of the relevant consuming public will be confused with 11 respect to any activity of PSYSTAR and one or more of the trademarks and/or trade dress of the 12 PLAINTIFF. 13 14 15 16 17 The use of any trademark of the PLAINTIFF by PSYSTAR is a nominative fair use in that the 18 PLAINTIFF's product or service is not readily identifiable without the use of the trademark; 19 PSYSTAR only uses as much of the trademark as is reasonably necessary to identify the 20 PLAINTIFF's products or services; and PSYSTAR does nothing that would, in conjunction with 21 the trademark, suggest to the relevant consuming public a sponsorship or endorsement by the 22 PLAINTIFF. 23 24 25 26 27 28 -20Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA) Twenty-Third Affirmative Defense (Nominative Use of Trademark) Twenty-Second Affirmative Defense (Lack of Likelihood of Confusion)

1 2 3

Twenty-Fourth Affirmative Defense (Fair Use of Trademark)

4 The use of any trademark of the PLAINTIFF by PSYSTAR is protected by the Fair Use Doctrine 5 and/or the First Amendment including but not limited to parody, non-commercial use, product 6 comparison, and/or non-competing/non-confusing use. 7 8 9 10 11 There is no contract by and between PSYSTAR and the PLAINTIFF whereby PSYSTAR could 12 allegedly breach the same. 13 14 15 16 17 PLAINTIFF's claims are wholly or partially barred because of a failure of consideration. 18 19 20 21 22 PLAINTIFF's claims are wholly or partially barred because the contract is preempted in whole or 23 in part by federal law. 24 25 26 27 28 -21Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA) Twenty-Seventh Affirmative Defense (Preemption) Twenty-Sixth Affirmative Defense (Partial Failure of Consideration) Twenty-Fifth Affirmative Defense (Lack of Privity)

1 2 3

Twenty-Eighth Affirmative Defense (Illegality)

4 PLAINTIFF's claims are wholly or partially barred because the contract is unenforceable on the 5 grounds illegality. 6 7 8 9 10 PLAINTIFF's claims are wholly or partially barred in that the contact is unenforceable as being 11 contrary to the public policy of the law of the State of California. 12 13 14 15 16 PLAINTIFF's claims are wholly or partially barred in that the contract is unenforceable in that it is 17 procedurally and/or substantively unconscionable. 18 19 20 21 22 The alleged contract utilizes vague, ambiguous, and otherwise unintelligible terms thereby 23 preventing a meeting of the minds as to the scope, rights, and reservations of the alleged contract. 24 25 26 27 28 -22Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA) Thirty-First Affirmative Defense (Vague, Ambiguous, and Otherwise Unintelligible Contract) Thirtieth Affirmative Defense (Unconscionability) Twenty-Ninth Affirmative Defense (Public Policy)

1 2 3

Thirty-Second Affirmative Defense (Lack of Independently Actionable Claim)

4 PLAINTIFF's unfair competition claims fail to identify a requisite and independently actionable 5 activity of PSYSTAR giving rise to any alleged unfair competition. 6 7 8 9 10 Certain provisions of the alleged contract are unenforceable and therefore severable from any 11 otherwise valid provisions of the contract. 12 13 14 15 16 Enforcement of the alleged contract by and between the PLAINTIFF and PSYSTAR as alleged by 17 the PLAINTIFF would frustrate and cause the alleged contract to operate in a manner contrary to 18 the purpose of the same. 19 20 21 22 23 PSYSTAR has delivered on its consideration in full and the PLAINTIFF, notwithstanding said 24 consideration, now seeks to repudiate the contract. 25 26 27 28 -23Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA) Thirty-Fifth Affirmative Defense (Consideration Paid in Full) Thirty-Fourth Affirmative Defense (Frustration of Purpose) Thirty-Third Affirmative Defense (Severability)

1 2 3

Thirty-Sixth Affirmative Defense (Failure to Act in a Commercially Reasonable Manner)

4 PLAINTIFF's actions are unreasonable in light of one or more provisions of the California 5 Commercial Code. 6 7 8 9 10 The PLAINTIFF has attempted to leverage the rights granted under any valid copyright to areas 11 outside the exclusive rights granted by the Copyright Act. The PLAINTIFF has engaged in certain 12 anticompetitive behavior and/or other actions that are in violation of the public policy underlying 13 the federal copyright laws including, but not limited to, a failure to abide by the fair use and first 14 sale doctrines. 15 16 The PLAINTIFF has further engaged in copyright misuse through the use of an illicit trying 17 provision in its end-user license agreement for the Mac OS X with respect to only utilizing the Mac 18 OS X software on Apple-Labeled Computer Hardware Systems and as is further detailed in 19 PSYSTAR's counterclaims for violations of the Sherman Act, Clayton Act, and Cartwright Act, 20 which are incorporated herein by reference. By attempting to enforce this illicit tying provision, 21 the PLAINTIFF is attempting to obtain, maintain, and/or enjoy rights not granted by the Copyright 22 Act including, but not limited to, destroying competition in the Mac OS Capable Computer 23 Hardware Systems market, which is wholly unrelated to any valid copyright. 24 25 The PLAINTIFF has further engaged in copyright misuse by utilizing any valid copyright in the 26 Mac OS to maintain its monopoly in the Apple-Labeled Computer Hardware System market and is 27 further detailed in PSYSTAR's counterclaims for violations of the Sherman Act, Clayton Act, and 28 Cartwright Act, which are incorporated herein by reference. By attempting to enforce its End User -24Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA) Thirty-Seventh Affirmative Defense (Copyright Misuse)

1 License Agreement as it pertains to any valid copyright, PLAINTIFF aims to maintain the 2 aforementioned monopoly, the PLAINTIFF is attempting to obtain, maintain, and/or enjoy rights 3 not granted by the Copyright Act including, but limited to, maintaining its monopoly in the Apple4 Labeled Computer Hardware Systems submarket, which is wholly unrelated to any valid copyright. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -25Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 2 3 4 5 1.

COUNTERCLAIM

Nature of this Action

This is an action under Sections 1 and 2 of the Sherman Act, Section 3 of the Clayton Act,

6 Section 16700 of the California Business and Professions Code (the Cartwright Act), Section 17200 7 of the California Business and Professions Code, and state common law with respect to the unfair 8 and anticompetitive conduct by counterdefendant APPLE (collectively referred to as the 9 "Counterclaim"). 10 11 12 13 2. The First Claim for Relief of this Counterclaim is brought pursuant to 15 U.S.C. § 1 (the Jurisdiction and Venue

14 Sherman Act) to seek redress for APPLE's illegal tying of the Mac OS to Apple-Labeled Computer 15 Hardware Systems as those products and markets are defined below. 16 3. The Second Claim for Relief of this Counterclaim is brought pursuant to 15 U.S.C. § 2 (the

17 Sherman Act) to seek redress for APPLE's attempts to maintain its monopoly and control prices in 18 the Apple-Labeled Computer Hardware Systems submarket and to destroy competition in the Mac 19 OS Capable Computer Hardware Systems market as those markets (and submarkets) are defined 20 below. 21 4. The Third Claim for Relief of this Counterclaim is brought pursuant to 15 U.S.C. § 14 (the

22 Clayton Act) to seek redress for APPLE's illegal requirements of its customers to exclusively deal 23 with APPLE as it pertains to the Mac OS and Apple-Labeled Computer Hardware Systems in 24 domestic, interstate commerce. 25 5. The Court has jurisdiction over the First, Second, and Third Claims for Relief pursuant to

26 35 U.S.C. §§ 1331 and 1337. 27 28 -26Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 6.

The Fourth Claim for Relief of this Counterclaim is brought pursuant to the California

2 Cartwright Act, California Business and Professions Code § 16700 et seq. to seek redress for 3 APPLE's unlawful conduct in violation of state law. 4 7. The facts underlying the Fourth Claim for Relief share a common nucleus of operative facts

5 and law with the first, second, and third claims for relief in this Counterclaim. This Court, 6 therefore, has supplemental subject matter jurisdiction pursuant to 28 U.S.C. § 1367. 7 8. The Fifth Claim for Relief of this Counterclaim is brought pursuant to California unfair

8 competition law, California Business and Professions Code § 17200 et seq. to seeks redress for 9 APPLE's unfair and unlawful conduct in violation of state law. 10 9. The facts underlying the Fifth Claim for Relief share a common nucleus of operative facts

11 and law with the first, second, third, and fourth claims for relief in this Counterclaim. This Court, 12 therefore, has supplemental subject matter jurisdiction pursuant to 28 U.S.C. § 1367. 13 10. The Sixth Claim for Relief of this Counterclaim is brought pursuant to the California

14 common law of unfair competition. 15 11. The facts underlying the Sixth Claim for Relief share a common nucleus of operative facts

16 and law with the First, Second, Third, and Fourth Causes of Action in this Counterclaim. This 17 Court, therefore, has supplemental subject matter jurisdiction pursuant to 27 U.S.C. § 1367. 18 12. This Counterclaim is a compulsory counterclaim brought in accordance with Federal Rule

19 of Civil Procedure 13(a)(1) in that the aforementioned causes of action arise out of the transaction 20 or occurrence that is the subject matter of APPLE's claim and does not require adding another party 21 over which the Court cannot acquire jurisdiction. 22 23 24 25 26 27 28 -27Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 2 3 13.

The Parties

APPLE is a California Corporation with its principal place of business at 1 Infinite Loop,

4 Cupertino, California 95014. APPLE markets the Macintosh Computer and the OS X Operating 5 System (the "Mac OS"). 6 14. Counterclaimant PSYSTAR is a Florida Corporation with its principal place of business at

7 10475 NW 28th Street, Doral, Florida, 33172. 8 15. PSYSTAR manufactures and distributes computers tailored to customer choosing. As a part

9 of its devotion to supporting customer choice, PSYSTAR supports a wide range of operating 10 systems including Microsoft Windows XP and XP 64-bit, Windows Vista and Vista 64-bit, Linux 11 (32 and 64-bit kernels), and the Mac OS. PSYSTAR generally refers to this custom tailored line of 12 computers as Open Computers. 13 16. Open Computers are personal computers that, in the case of the Mac OS, work like a

14 Macintosh including the latest Macintosh operation system--OS X.5 (a.k.a. Leopard). PSYSTAR 15 Open Computers, again in the case of the Mac OS, run the OS X like that of a Macintosh from 16 APPLE albeit on a computer hardware system offered at a considerably lower price and with 17 considerably higher performance. For example, one of the least expensive Macintosh machines on 18 the market is for the Mac Mini, which PSYSTAR is informed and believes, and thereon alleges, 19 costs more than that of an Open Computer from PSYSTAR. PSYSTAR is informed and believes, 20 and thereon alleges, that the Mac Mini offers poorer performance, smaller storage space, and RAM. 21 Furthermore, the Mac Mini does not have the option for an alternative video card such as an 22 NVIDIA GeForce 8600, which is supported by the PSYSTAR Open Computer. 23 24 25 26 27 28 -28Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 2 3 The Relevant Markets 4 17.

General Allegations

For the purposes of the present Counterclaim, PSYSTAR is informed and believes, and

5 thereon alleges, that there are two relevant product markets. The first product market is that of the 6 Mac OS. The second product market is that of computer hardware capable of executing the Mac 7 OS ("Mac OS Capable Computer Hardware Systems"). Within the Mac OS Capable Computer 8 Hardware Systems market is a subsidiary market artificially created, dominated, and maintained by 9 APPLE--the Apple-Labeled Computer Hardware Systems submarket. The relevant geographic 10 market is, in both instances, the United States of America. 11 12 13 18. The Mac OS The Mac OS is a graphical user interface-based operating system that is operable

14 exclusively on the Macintosh line of computer hardware and other computer hardware made by and 15 available only from APPLE. On information and belief, PSYSTAR alleges that APPLE is the 16 exclusive manufacturer and master licensor of the Mac OS. Operating systems like the Mac OS 17 control and direct the interaction between software applications such as word processors, Internet 18 browsers, and applications and the central processing unit of the computer and its various hardware 19 components. 20 19. APPLE, as noted above, is the exclusive manufacturer and/or licensor of the Mac OS.

21 APPLE, therefore, possesses monopoly power in the Mac OS market. As addressed herein, 22 PSYSTAR is informed and believes, and thereon alleges, that the Mac OS market is distinct and 23 unique as compared to other operating systems in the marketplace including but not limited to the 24 Windows operating system from Microsoft Corporation. As such, PSYSTAR alleges on 25 information and belief that the Windows operating system is not and cannot be considered an 26 effective substitute for the Mac OS; the same holds true for any other operating system. 27 PSYSTAR, in that regard, is informed and believes, and thereon alleges, that other operating 28 systems are not reasonably interchangeable by consumers with respect to the Mac OS. -29Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 20.

PSYSTAR is informed and believes, and thereon alleges, that there are substantial barriers

2 to entry in the market for operating systems, including the Mac OS market. It is prohibitively 3 difficult, time-consuming, and expensive to create any operating system much less one that would 4 offer substantially identical functionality, security, stability, and other aspects offered by the Mac 5 OS. As such, a potential new operating system entrant faces an almost insurmountable barrier to 6 successful entry to the operating system market, in general, but specifically the Mac OS market. 7 8 9 21. Mac OS Capable Computer Hardware Systems Computer hardware systems, in general, perform central processing unit functions.

10 Operating systems--like the Mac OS--manage the interaction between various pieces of hardware 11 such as a monitor or printer. The operating system also manages various software applications 12 running on a computing device. 13 22. A seemingly infinite list of manufacturers may be found in the computer hardware system

14 marketplace. These manufacturers construct entire hardware systems (i.e., computers) marketed 15 and sold to the consumer either directly or via an authorized re-seller. The participants in the 16 computer hardware system marketplace include Dell, Acer, Lenovo, Sony, and Hewlett-Packard to 17 name but a few. 18 23. Any number of companies dedicated to manufacturing and sourcing various components

19 used by the aforementioned manufacturers (e.g., hard drives (Western Digital), processors (Intel 20 and AMD), graphics processing cards (NVIDIA)) also exist. 21 24. PSYSTAR is informed and believes, and thereon alleges, that one or more of these

22 manufacturers of computer hardware systems are capable and desirous of manufacturing computer 23 hardware systems that host, execute, and run the Mac OS. PSYSTAR is informed and believes, and 24 thereon alleges, that there is no compelling technological reason that any one of the aforementioned 25 computer hardware system manufacturers could not manufacture and sell computer hardware 26 systems capable of hosting, executing, and running the Mac OS. PSYSTAR, therefore, is informed 27 and believes, and thereon alleges, that these entities constitute a market that PSYSTAR hereinafter 28 refers to as the Mac OS Capable Computer Hardware Systems market. -30Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 25.

PSYSTAR is informed and believes, and thereon alleges, that competition amongst

2 members of the Mac OS Capable Computer Hardware Systems market exists notwithstanding the 3 Mac OS and APPLE's otherwise exclusionary conduct as detailed below. PSYSTAR is informed 4 and believes, and thereon alleges, that the Mac OS Capable Hardware Systems market is separate 5 and distinct from the Mac OS market. 6 26. On information and belief, PSYSTAR alleges that there is no technical reason that a third-

7 party could not accumulate and assemble the hardware components in an Apple-Labeled Computer 8 Hardware System such that said system would be capable of running the Mac OS, that is, such that 9 the system would constitute a Mac OS Capable Computer Hardware System. On information and 10 belief PSYSTAR alleges that but for the exclusionary conduct of APPLE and other conduct 11 amounting to unfair competition, as set forth in greater detail herein, and as exemplified by the 12 activities of PSYSTAR, a third-party could and would assemble the hardware components capable 13 of running the Mac OS. 14 15 16 27. Apple-Labeled Computer Hardware Systems PSYSTAR is informed and believes, and thereon alleges, that notwithstanding such diverse

17 competition amongst computer hardware manufacturers, none of the aforementioned companies 18 currently manufacture computer hardware systems that support the Mac OS. APPLE is the only 19 manufacturer of systems operating the Mac OS. APPLE's exclusive line of hardware systems that 20 support the Mac OS include the Mac Pro, the Mac Mini, the MacBook, the MacBook Air, 21 MacBook Pro, and iMac. For the purposes of this Counterclaim, the exclusive line of APPLE 22 hardware systems that support the Mac OS are referred to as Apple-Labeled Computer Hardware 23 Systems. PSYSTAR is informed and believes, and thereon alleges, that but for the anticompetitive 24 conduct of APPLE as outlined herein, Apple-Labeled Computer Hardware Systems would 25 otherwise be a competing member of the otherwise diverse Mac OC Capable Computer Hardware 26 Systems market. That is, APPLE's anticompetitive conduct has created a subsidiary market within 27 the Mac OS Capable Computer Hardware Systems market of which APPLE is the only member and 28 wields monopoly power. -31Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 28.

On information and belief, PSYSTAR alleges that by virtue of APPLE's own End User

2 License Agreement (EULA), and various other anti- and unfair competitive conduct as set forth in 3 greater detail herein, there is no viable alternative to Apple-Labeled Computer Hardware Systems 4 for users who wish to use the Mac OS, for a prospective buyer of the Mac OS, or for a user of an 5 older version of the Mac OS other than the forced purchase of an Apple-Labeled Computer 6 Hardware System. Without an operating system, a computer hardware system can perform 7 virtually no useful tasks thus making the installation of the Mac OS a necessity. In light of the 8 importance of an operating system, the potential benefit to a monopolist and the potential economic 9 and social cost of monopolization in a second market--the Apple-Labeled Computer Hardware 10 Systems submarket vis-à-vis the Mac OS Capable Computer Hardware Systems market--is very 11 high. 12 29. On information and belief, PSYSTAR alleges that the Mac OS, Apple-Labeled Computer

13 Hardware Systems, and Mac OS Capable Computer Hardware Systems that are denied operability 14 (technologically or contractually) with the Mac OS are all sold in domestic, interstate commerce. 15 16 The Mac OS Market is Distinct From and Lacks Interchangeability with Other OSs 17 30. On information and belief, PSYSTAR alleges that there is a recognized and distinct product

18 market in the Mac OS. APPLE has taken great efforts to define the Mac OS as a separate and 19 distinct market especially with respect to any and all other operating systems. APPLE's efforts are 20 not in vain as consumers and merchants have come to recognize the Mac OS as a separate and 21 distinct market with respect to any and all other operating systems, especially the Windows 22 operating system from Microsoft. 23 24 25 31. "Think Different" PSYSTAR is informed and believes, and thereon alleges, that APPLE's efforts to define the

26 Mac and Mac OS as an environment of its own began no later than 1997 when APPLE released its 27 Think Different advertising campaign. APPLE used the Think Different campaign in both print and 28 television mediums. In this campaign, APPLE sought to distinguish itself as a significant, -32Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 historical differentiator by placing the company in the context of the likes of Albert Einstein, Bob 2 Dylan, Thomas Edison, Mahatma Gandhi, Frank Lloyd Wright, and Pablo Picaso among others. 3 The television advertisement was accompanied by a voice over stating inter alia: 4 5 6 7 8 9 32. "[h]ere's to the crazy ones. The misfits. The rebels. The troublemakers. . . . You can praise them, disagree with them, quote them, disbelieve them, glorify or vilify them. About the only thing you can't do is ignore them. Because they change things. . . . While some see them as the crazy ones, we see genius. Because they people who are crazy enough to think they can change the world, are the ones who do." APPLE utilized a print advertisement campaign, as well, wherein APPLE computers and

10 consumer electronic devices were pictured alongside the Think Different slogan. Another series of 11 print advertisements utilized a portrait of historical innovators that changed the world alongside the 12 APPLE logo without reference to any particular product. 13 33. On information and belief, PSYSTAR alleges that APPLE sought to establish a counter-

14 culture image--including and especially with respect to the traditional Windows based computing 15 environment--through its Think Different campaign. PSYSTAR is informed and believes, and 16 thereon alleges, that this campaign was successful in that the Think Different campaign has been 17 referred to as `The Ad Campaign That Restored Apple's Reputation.' 18 19 20 34. "Get a Mac" PSYSTAR is informed and believes, and thereon alleges, that APPLE continued to

21 distinguish the Mac OS from the Windows operating system in its Get a Mac campaign, which 22 commenced in 2006 and continues to the present. Through this campaign, actor Justin Long, in 23 casual dress, introduces himself as a Mac while another actor, John Hodgman, identifies himself as 24 a PC running the Microsoft Windows operating system; the PC character is dressed in formal, 25 stuffy attire. The Mac and the PC then `act out' and describe how their capabilities and attributes 26 differ. While the vignettes differ from commercial-to-commercial, they all convey an identical 27 message--a Mac is not a Windows-Based PC and a Windowed-Based PC is certainly not a Mac. 28 The Mac OS and Windows operating system are not merely differing operating systems with no -33Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 interchangeability but cultural icons representative of different lifestyles, markets, and that the 2 computing devices of each environment are used for wholly different audiences. 3 35. PSYSTAR is informed and believes, and thereon alleges, that APPLE intends to convey the

4 message that a Mac user would not use a Windows-Based PC and a Windows-Based PC user would 5 not use a Mac, lending credence to the cultural adage `once you've had Mac, you never go back.' 6 InsideCRM has, in fact, directly referenced APPLE's I'm a Mac advertising campaign with respect 7 to APPLE attempting to create "a hip brand" and "strong identification" wherein "[t]he Mac guy is 8 smooth and confident, while [the] PC appears uptight and old." The message is, "[o]nce you've 9 become smooth, would you want to go back to uptight?" PSYSTAR is informed and believes, and 10 thereon alleges, that APPLE intends to convey the message that Mac users--users of the Mac OS-- 11 do not nor will they ever switch to a PC and the Windows operating system environment. 12 13 14 36. Lack of Cross-Elasticity and SSNIP PSYSTAR is informed and believes, and thereon alleges, that marketplace economics

15 likewise support the assertion that the Windows operating environment is not a viable substitute for 16 the Mac OS. For example, the MacBook is one of the cheapest Macintosh products commercially 17 available that includes the Mac OS and traditional computer components (e.g., a monitor and a 18 keyboard). A MacBook with a 2.1GHz Intel Core 2 Duo processor, 1GB memory, 120GB hard 19 drive, and combo drive sells for approximately $1,099.00 from the apple.com website. A similarly 20 configured computer running an operating system other than the Mac OS retails at dell.com for 21 approximately $674.00, which is nearly $500 less than that of its Mac OS and Apple-Labeled 22 Computer Hardware System counterpart. 23 37. PSYSTAR is informed and believes, and thereon alleges, that a top of the line MacBookPro

24 with 2.5GHz Intel Core 2 Duo processor, 2GB memory, 250GB hard drive, Double-layer 25 SuperDrive, and 512MB NVIDIA GeForce 8600M GT graphics card sells for approximately 26 $2,799.00 from the apple.com website. A similarly configured computer (albeit with superior 27 hardware components versus that of the MacBookPro) and running an operating system other than 28 -34Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 the Mac OS retails at dell.com for approximately $2,300.00, which is nearly $500 less than that of 2 its Mac OS and Apple-Labeled Computer Hardware System counterpart. 3 38. PSYSTAR is informed and believes, and thereon alleges, that there is a substantial, upward

4 price differentiation between the Mac OS / Apple-Labeled Computer Hardware Computer System 5 and that of a Mac OS Capable Computer Hardware System running a non-Mac OS variant and, in 6 some instances, with superior hardware. Notwithstanding the consistent upward differentiation in 7 price across a broad spectrum (i.e., from the least expensive Apple-Labeled Computer Hardware 8 System to the most expensive Apple-Labeled Computer Hardware System) by and between a 9 Computer Hardware System without a Mac OS and a Apple-Labeled Computer Hardware System 10 with the Mac OS, studies by Satmetrix Systems found that Apple is known for its "market 11 performance and brand leadership" and that APPLE "far outranks its closest competitor." Further, 12 APPLE is "well known for its passionate and dedicated customer base." 13 39. PSYSTAR is informed and believes, and thereon alleges, that APPLE's customer loyalty is

14 well-established notwithstanding the higher prices of an Apple-Labeled Computer Hardware 15 System versus those of a similarly situated non-APPLE product. APPLE customers have, in fact, 16 been referred to by Seeking Alpha as "zealots" and "fanboys" in addition to "Mac loyalists." These 17 customers, accordingly to Seeking Alpha, will "defend the company and its products in any debate 18 going on around them." 19 40. PSYSTAR is informed and believes, and thereon alleges, that customers of APPLE and

20 users of the Mac OS would not consider any other operating system, including but not limited to 21 the Windows operating system from Microsoft, to be a reasonably interchangeable alternative much 22 less one that serves the same purpose as the Mac OS. 23 41. PSYSTAR is informed and believes, and thereon alleges, that any other operating system,

24 including but not limited to the Windows operating system lacks the potential or ability to deprive 25 APPLE of its customers, especially at a significant level of business as it concerns the Mac OS. 26 42. PSYSTAR is informed and believes, and thereon alleges, that there is insufficient cross-

27 elasticity of demand with respect to the Mac OS and any other operating system, including but not 28 limited to the Windows operating system. PSYSTAR is informed and believes, and thereon -35Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 alleges, that APPLE has made a conscious and successful effort to create inelasticity of demand 2 through product differentiation in its Mac OS and with respect to its advertising and perception to 3 consumers in the marketplace. PSYSTAR is informed and believes, and thereon alleges, that 4 APPLE seeks to embed in the mind of consumers and the marketplace as a whole that there is no 5 substitute for the Mac OS, including but not limited to the Windows operating system or Linux. 6 PSYSTAR is informed and believes, and thereon alleges, that APPLE attempts to distinguish the 7 Mac OS from any other operating systems in the market through, at the least, its user interface, 8 which APPLE admits in its Complaint with respect to novelty (¶ 2); ease-of-use and pleasure (¶¶ 3, 9 8); speed and stability (¶ 4); visual appearance and elegance (¶¶ 4, 8); careful, powerful, and 10 polished conception (¶ 5); uniqueness and creativity (¶ 5); and acclaim in the market (¶ 6). 11 43. PSYSTAR is informed and believes, and thereon alleges, that a percentage change in price

12 of one product, namely the Mac OS, will not result in a change in quantity that consumers will 13 demand of another product as is evidenced by the price differentiations and allegations as made by 14 APPLE in its Complaint and as otherwise set forth above. 15 44. PSYSTAR is further informed and believes, and thereon alleges, that a `small but

16 significant non-transitory increase in price' (SSNIP), including one of at least five percent in the 17 Mac OS, will not result in a change in demand for the Mac OS. PSYSTAR is informed and 18 believes, and thereon alleges, that such a SSNIP would not likely result in consumers of the Mac 19 OS or Apple-Labeled Computer Hardware Systems or potential purchasers of the Mac OS or 20 Apple-Labeled Computer Hardware Systems electing to purchase another operating system, such as 21 the Windows operating system. PSYSTAR is informed and believes, and thereon alleges, that 22 APPLE, as a monopolist in the Mac OS market, could profitably impose a SSNIP with respect to 23 the Mac OS and not suffer a material loss of customers choosing a substitute product, such as the 24 Windows operating system. The nearly $500 price differentiation as illustrated above is, at the 25 least, suggestive of the same. 26 45. PSYSTAR, on information and belief, therefore alleges that the Windows operating

27 system--and any other third-party operating system for that matter--does not constitute a viable 28 substitute product and should not be included in defining the relevant market. In that regard, -36Answer and Counterclaim of Psystar Corporation (Case No. CV-08-03251-WHA)

1 PSYSTAR, on information and belief, alleges that the first relevant market is that of the Mac OS to 2 the exclusion of other operating systems. 3 4 Apple's Anticompetitive Conduct 5 46. PSYSTAR, on information and belief, alleges that APPLE is content with the knowledge of

6 having monopoly power in the Mac OS market and that nearly insurmountable barriers exist with 7 respect to any other entity introducing a Mac OS-like operating system. PSYSTAR is informed 8 and believes, and thereon alleges, that the most significant potential threat to APPLE and the Mac 9 OS market is, therefore, not from a new operating system but from computer hardware system 10 manufacturers that may offer a hardware platform upon which to run the Mac OS--Mac OS 11 Capable Computer Hardware Systems. Any such hardware platform could compete directly with 12 Apple-Labeled Computer Hardware Systems, which are manufactured by APPLE and available for 13 purchase only from APPLE and/or its authorized resellers. 14 47. PSYSTAR is informed and believes, and thereon alleges, that in order to protect its valuable

15 monopoly in the Mac OS market and, by extension, Apple-Labeled Computer Hardware Systems 16 from potential competitive threats, and to potentially extend its Mac OS monopoly into other 17 markets, APPLE has engaged in a series of anticompetitive activities. PSYSTAR is further 18 informed