The Psystar Drama Continues

The Psystar drama continues - first with Apple winning on the issue of being a monopoly. It isn't. If you don't like the price of a Mac, you can buy a cheaper PC and go about your computing needs. There are plenty of PC vendors and the sales of Macs do not dominate, so Apple does not have a monopoly.

Psystar doesn't agree, but they can't argue with the judge.

Apple re-filed its claims against Psystar after this victory and added a request to seek damages against any hidden party funding Psystar's legal campaign. I said it before, you need to have deep pockets for this kind of fight, and Apple just took it to the next level by threatening whoever is funding this fiasco.

Now come the amended claims by Psystar: If Apple isn't a monopoly, at the least Apple is abusing its copyright. Psystar claims it is unfair for Apple to restrict its operating system software to its own hardware. Anyone should be able to negotiate a deal with Apple to use the Mac OS X.

On top of this, everyone keeps bringing up the EULA (enduser license agreement). The EULA that Apple has is "bad". What a surprise to find out that Psystar also has a EULA - and that it restricts distribution just like Apple. Here we have the pot calling the kettle black. While this looks bad, it doesn't prevent Psystar from making its claims in court.

Operating Without a License

The problem isn't exactly the EULA, but that Psystar has no license to use the Mac OS X. Apple hasn't agreed to other terms, nor is it likely to want to change the terms. Apple does not want to license its operating system to a third party. Psystar claims this is abuse; Apple claims the opposite. Psystar cannot go around the EULA without a general license, and Apple isn't going to give them one.

Let's say that General Electric and Rolls Royce both sell jet engines for airplanes, but that Rolls Royce has an exclusive contract to provide Boeing with engines. Now Airbus comes along and wants to buy Rolls Royce jet engines, but it can't because of the exclusive contract. This is legal. Rolls Royce gets to decide who it wants to sell its products to. This is fair and legal, so long as Rolls Royce doesn't have a monopoly on similar products. Airbus can buy engines from someone else, General Electric, so there is no restriction on the market for airplane engines.

Restricting sales of a product is nothing new. The Apple iPhone can only be used on AT&T's network in the US. If Sprint or Verizon were to start selling unlocked iPhones for their networks, you can bet that both Apple and AT&T would have them in court.

Personal or Business Use?

It is one thing for an individual to unlock your own iPhone, but something completely different for a company to do the same thing.

What happens if Airbus goes out and buys old Boeing airplanes, strips out the motors, and uses them on their planes. That is probably okay. But what if Airbus starts to advertise that all of its planes come with Rolls Royce engines? Rolls Royce didn't give them permission to use its engines or brand name; it has an exclusive contract with Boeing not to sell its engines to anyone else.

It would look bad for both Boeing and Rolls Royce to have Airbus using the same engines. Rolls Royce would likely sue for use of its brand in any advertisements by Airbus and request that Airbus stop using its engines. Airbus' advertisement would be harming Rolls Royce even if Airbus purchased the engines fairly on the used market.

A generic jet engine would not have these problems, nor would using engines not licensed to specific vendors. Once a brand name is involved, purchasing and marketing decisions affect the brand. A company has both the right and requirement to protect its brand names.

The problem is that Psystar cannot use Mac OS X as a generic part. Imagine if they simply sold a generic PC for $499. Imagine if they didn't list the operating system to avoid using the Apple or Mac brand and tried to treat the operating system as a generic item. People would buy this computer, turn it on, and discover that it has Mac OS X on it. Psystar would have a lot of surprised customers, some who may be upset over getting a Mac when expecting a PC with Windows XP or Vista.

Once the customer complaints ended, word would leak out that the Mac OS X was on these machines. Blogs and other news reports would pick up the story. This would then take the place of advertising. These stories would tie the computer with the Apple or Mac brand names, and Psystar would again be in trouble for free-riding on someone else's brands. Any obvious use of a brand name product can affect the original owners of the brand. Psystar is on dangerous grounds using an unlicensed, highly visible brand name product.

Potential Cost to Apple

Let's turn our attention to Apple.

Everyone wants to compare Mac OS X to Windows or Linux and claim how much better off Apple would be to open up its operating system. Here's a recent clip from the Inquirer:

The real problem, adds one industry source, is that, Psystar "said some very true things about the EULA", and therein lies Apple's problem. Apple, "should realize by now that they are a big company, and that they should open up," he said.

These people are wrong on several counts.

It would cost more for Apple to support a wider range of hardware than it does now. Microsoft spends ten times as much on development as Apple does. Who is going to cover these costs? Some clone manufacturer who is operating on razor thin margins? I don't think so.

That leaves Apple to fund the clone project. I don't want to hold any Apple stock when Apple's margins start dropping like a rock to cover these expenses.

The value of licensing has to outweigh the cost to Apple in lost sales. Apple is currently dominating the over $1,000 computer market. A bunch of idiots want us to believe that lost revenues are going to be made up by increased volume. These people haven't looked at the math.

Supporting other hardware is not always easy. Apple has already had troubles with external FireWire drives being connected during system updates. Having more hardware problems is likely to happen with various clone computers. More problems are going to hurt the Mac's reputation much more than the clone company. Just look at Microsoft to see how bad a reputation can get when you screw up over hardware support decisions.

Apple has its good name and reputation. Apple wants to protect it and avoid needless expenses. Psystar wants to cash in on Apple's reputation to sell its own computers. Psystar isn't big enough to carry the costs Apple will suffer if it's forced to open their software license.

Psystar probably didn't even ask before running off to cash in on the Apple name. It is simply not being fair to Apple or its own customers by selling unlicensed products. The more Psystar sells, the more it hurts Apple.

If Apple wins and gets an injunction against Psystar to both stop selling and recall existing computers, Apple then has a small crowd of people angry at Apple, even though it was Psystar who acted alone in this deal. Apple has the burden of all the hidden costs to its reputation for the whole ordeal.

If Apple loses, the consequences will be worse. Not every new PC sold today will switch to the Mac OS, so revenues won't match losses. Apple will have more support problems to deal with, so its costs will go up. It would be a double loss for Apple, while Psystar gets to trot off to the bank with high sales.

Don't Tick Off Microsoft

Microsoft is not going to be happy, and Apple still wants Microsoft as a software supplier. (Yes, Microsoft's Office suite is an important resource to the Mac.) It won't be the end of the world, but don't think that it will be easy or cheap for Apple to make this change.

Psystar comes out the temporary winner until Dell or HP crushes it in the low-end market when they start selling cheap Mac clones.

Psystar is pretending that it doesn't have a choice but to steal Mac OS X and use it as its own - what a load of crap. Psystar has a wide range of operating system options: Windows, Linux, BSD, OpenSolaris, etc. Any one of these operating systems will run the computers it sells, and they all have licensing plans that Psystar can use.

No one is forcing Psystar to choose Mac OS X. Apple has no monopoly control of the market. Apple only claims to control its own software products.

Overall, the whole thing is stupid for both Apple and Psystar. Whoever is funding this is hoping for continued turmoil or uncertainty with Apple. It is easy to see why Apple is looking for a hidden player behind the scenes. I am also curious to find out how a small company like Psystar is paying for all this wasted litigation over its misappropriation of Apple's products and brand name.