Apple Looks to Finish Off Mac Clone Maker Psystar

Having won summary judgment against the Mac clone maker, Apple now looks to put the company permanently out of business.

November 25, 2009
By Andy Patrizio: More stories by this author:

While thousands of retailers around the country are gearing up for Black Friday and the start of the holiday shopping season, Mac clone seller Psystar may not be among them if Apple gets its way.

Apple (NASDAQ: AAPL) is winding up to deal the firm a knockout blow, asking a court for a permanent injunction against Psystar in the wake of a favorable ruling last week.

The ruling, issued in the Northern District Court of California last week, found in favor of the Mac, iPhone and OS X giant, which had charged Psystar with copyright infringement and violations to the Digital Millennium Copyright Act. Those charges stemmed from the firm's white-box PCs that it sold loaded with Mac OS.

Judge William Alsup found for Apple on every count in which he ruled, including that Psystar had violated Apple's copyrights in making unauthorized copies of Mac OS X, distributing it with cloned PCs, and creating derivative works from it. (A number of other claims will be held for trial, however.)
A "white-box vendor" is a PC retailer that buys the basic components of a PC, many of which can also be found in brand name PCs, and builds it in their own facilities. There are thousands around the U.S. serving their local community. Before it went into business against Apple, Psystar was just another such vendor in its native Miami.

Apple filed suit against the firm in July 2008 after Psystar had begun shipping PCs with Mac OS X installed, through a product lineup that it branded "Open Computers." Psystar countersued, alleging antitrust behavior on Apple's part in refusing to license Mac OS X to clone makers such as itself. That was tossed out early on.

Psystar has argued that it had the right to sell OS X as part of the first-sale doctrine, a limitation on copyright law that allows the purchaser of a product to transfer a particular, lawfully made copy of the copyrighted work without permission once it has been obtained.

The company had said it sold PCs with "backup copies," which were copies of original Mac OS X discs. But the judge found that in some cases, the installed versions of OS X on Open Computers did not even match up with the copies sold with the computers.
In last week's ruling, Alsup noted that Apple has not formally asked for an injunction against the sale of Psystar's products, so he didn't offer one at the time. However, Apple has now has filed for a permanent injunction against Psystar, seeking to bar the firm from offering any more of its Mac OS-based products.

A hearing to determine the damages Apple can ask for will be held on Dec. 14, and Apple wants blood.

"Money damages alone could never compensate for the irreparable injury that Apple has suffered," the company said in its filing.

Apple's certainly been doing well for itself despite whatever impact Psystar may have had on its business. In the third quarter ended Sept. 30, Apple sold 3.05 million Macintosh computers, the most ever in one quarter. It also reported its most profitable quarter in the company's history.

Still, there's more at stake, Apple said.

"A failure to enjoin Psystar from continuing its unlawful activities would constitute an involuntary license of Apple's immensely valuable intellectual property and encourage others to follow Psystar's pattern of deliberate disregard of well-established law," the company said in its filing. "Accordingly, this court should grant a permanent injunction of a scope that will unequivocally end Psystar's unlawful conduct."

Apple's financial expert projects (here in PDF format) that Psystar will owe "between $1,500 and $300,000 and the statutory damages to Apple as a result of Psystar's violations of the [Digital Millennium Copyright Act] are between $449,500 and $4,495,000."
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