Stop the Noiz

The Apple vs. Psystar Letters

Frank Fox - 2008.07.22 - Tip Jar

Apple vs. Psystar Could Open Floodgates for Mac Clones

From Steve:

Frank Fox wrote:

You don't take Pepsi, rebottle it, and try to sell it as your own product - unless you're crazy. There is so much case law against you that unless Pepsi gives you permission, you're done.

Actually, there are absolutely no laws to prevent someone from doing exactly that.

After Pepsi sells its product to you, you own it. You can resell it, you can alter it in any way what so ever you please, and yes, you could rebottle it and sell it under a different name. Nothing Pepsi could do would prevent you from being able to do those things. You own it; it's your bottle of Pepsi. Pepsi could only pursue you if you produced your own beverage and called it Pepsi and used their trademarks.

Apple would be wise to proceed with caution. Should they lose, they may end up opening the floodgates on Mac clones.

Steve,

Not exactly, if anywhere in your advertising or label or product, you advertised that it was made with "real Pepsi inside" or such. You can bet that Pepsi would go after you, which is what Psystar did wrong. They should have avoided using the Apple and Mac names. You can do whatever you like with your own product, just don't attach anyone else's brand to it in any fashion. That is why I think you should be fine installing Mac OS on your own PC, but don't put it up for sale that way. I'll bet eBay would pull your auction off if they were to know about it.

for example, Harley Davidson successfully sued someone for using the word "Hogs" in their motorcycle business. They claimed that it was a common use word that meant Harley, and they convinced a judge that they had been wronged.

You simply don't want to mess around with someone else's brand in reference to your own product. You can't rebottle the brand. Stick whatever you want into your own product; just don't think you can list all the name brand products you used in making it without the brand owner's permission. If there is anything they don't like about your product, they can sue you for damaging their reputation by association. The crappier your product is, the easier it will be to prove their case in court.

- Frank

follow up:

One correction, Harley Davidson did lose the suit over the use of the word Hogs, but they did win against the website using the Harley logo. Still it is a good example of other company's suing over trademark issues we might commonly not think of as important.

- Frank

I'd Bet on Psystar!

From Al Feldzamen:

One of these days Apple's arrogance will come back to bite it. Psystar's poor quality - if it really is poor - is a matter to be determined by the marketplace, not the courts. Apple has a sad history of going to court, perhaps in an effort to burden others with high legal expenses, even when a rudimentary glance at law clearly shows it has no likelihood of success. for example, in the past Apple sued Microsoft for adopting the "look and feel" of the Mac, which Apple had in turn taken from Xerox, demanding bloggers provide sources via subpoenas for their speculations about forthcoming Apple products, and so on. I write as a long-term Mac user, since 1984 in fact, saddened by such puerile behavior by what should be a proud and lofty business enterprise.

Years ago, as a first year law student I had a course called contracts, because that is a basic part of the law that all law students must take . . . indeed, the US Constitution contains a specific provision that the government cannot impair the common law of contracts. One of the key concepts in this area is that for a contract to be valid, it must be the result of bargaining between the parties. Without that, a contract is invalid on its face.

How much "bargaining" is there in these printed provisions that come with some purchases? Little or none in most cases, I would think. If I sell you something with a disclaimer that you can only use the product on Mondays and you buy it, I doubt whether my lawsuit against you for using it on Tuesdays would succeed in court.

A contract where all the power lies on one side - and there is no legitimate bargaining - is called a contract of "adhesion" and is invalid. So much for the restrictions on the sale of an operating system that say it can only be used on a certain type of computer. So I can take my purchased copy of OS X, dip it in the bathtub, set it afire, install it on another computer, etc. No?

Apple cannot win against Psystar on that ground. And if I don't "copy" it, there is no copyright violation.

Now it is said that the End User License Agreement (EULA) that comes with the disk containing an operating system forbid usage other than dictated by the manufacturer. And that it states the buyer has a "license" only in the product, and not actual ownership.

But Wikipedia notes:

The enforceability of an EULA depends on several factors, one of them being the court in which the case is heard. Some courts that have addressed the validity of the shrink-wrap license agreements have found some EULAs to be invalid, characterizing them as contracts of adhesion, unconscionable, and/or unacceptable pursuant to the U.C.C. - see, for instance, Step-Saver Data Systems, Inc. v. Wyse Technology (939 F.2d 91), Vault Corp. v. Quaid Software Ltd. (at harvard.edu) and Rich, Mass Market Software and the Shrinkwrap License (23 Colo. Law 1321.17). Other courts have determined that the shrink-wrap license agreement is valid and enforceable: see ProCD, Inc. v. Zeidenberg (at findlaw.com), Microsoft v. Harmony Computers (846 F. Supp. 208, 212, E.D.N.Y. 1994), Novell v. Network Trade Center (at harvard.edu), and Arizona Cartridge Remanufacturers Association Inc. v. Lexmark International Inc. may have some bearing as well. No Court has ruled on the validity of EULAs generally; decisions are limited to particular provisions and terms.

The 7th Circuit and 8th Circuit subscribe to the "licensed and not sold" argument, while most other circuits do not[citation needed]. In addition, the contracts' enforceability depends on whether the state has passed the Uniform Computer Information Transactions Act (UCITA) or Anti-UCITA (UCITA Bomb Shelter) laws. In Anti-UCITA states, the Uniform Commercial Code (UCC) has been amended to either specifically define software as a good (thus making it fall under the UCC), or to disallow contracts which specify that the terms of contract are subject to the laws of a state that has passed UCITA.

[So until the Supreme Court rings in, I guess the legal validity of EULA restrictions is a matter of conjecture . . . no?]

Al,

That is the point I was trying to make. The EULA is questionable for enforcement in this case. Psystar's problem is using the Apple and Mac brands in any way. Because they advertise being Mac OS X compatible and they even loaded it for you, they were effectively free-riding on Apple's good brand name to encourage people to buy. Question for you: Would Psystar computers have sold as well without advertising using the Apple and Mac names?

I've written before about the need for any company including Apple to protect their brand. Sure, it is for the courts to decide if Psystar hurt Apples brand, but the online reviews are against them. (Please note, none of these reviews were written by me, I am only pointing out that they exist and that Apple's lawyers will use them to point out Psystar's flaws.)

The best way to flaunt Apple's EULA is to install Mac OS X on the computer of your choice. The dumb thing to do is try to sell it that way - and worse is to advertise what you are doing.

As for the other suits you mention. Apple suing Microsoft was doomed since they had licensed parts earlier when Sculley needed Microsoft to deliver Word. But I wouldn't cry too many tears about the suit being a financial burden on Microsoft.

By the way, Apple is reported to have paid off Xerox for use of the interface. That is why Xerox didn't sue them; don't think it was out of charity. Xerox has sued Apple over some implementations and lost.

The only thing that Apple's lawsuits cost them was money to license if they failed. Don't fool yourself that the brief bad publicity has ever amounted to much in the long run compared to the financial risks of not suing.

All of this doesn't mean that I think it is "right" or "good" they sue. I am simply stating how things are, and opinion isn't going to change it. We'd need new laws to make any serious change in the way business handles these disagreements. Apple is a business, not some proud and lofty enterprise.

- Frank

If you haven't seen it yet, thought you might be interested in this recent Comments posting to the NY Times' article on the Apple-Psystar lawsuit. Seems to me that the reasoning is basically correct, and the Sony question below is indeed relevant . . . .

First, if Psystar has effectively said they are challenging the EULA, that is not the same as willful infringement. In fact, it hardly has anything to do with infringement - it's a statement regarding a contract.

Related: Are you sure you read the complaint? Apple did not assert any patent claims - apparently even Apple couldn't pull those out of thing air.

Second, you can redistribute a CD. You cannot make copies of CD and distribute them. Purchasing a CD is very similar to purchasing software: in neither case are you purchasing the copyrighted work itself, only a copy of the work embedded in a physical object. The first sale doctrine (which permits resale) is codified in the Copyright Act at 17 U.S.C sec. 109. Apple should not be permitted to circumvent a provision of the Copyright Act through an overreaching EULA.

The first sale doctrine is also why Psystar does not need a license to resell Apple's software or other intellectual property. Apple sells copies of their software, just a record company sells copies of a song - calling it a license does not change that. (This is not to say that Psystar may use one software package to install Mac OS on multiple computers because that would be copying in violation of the Copyright Act.)

Third, I don't believe Apple alleged that Psystar purchased one copy and installed in on many computers. Apple's EULA has a provides [provision?] that the license automatically terminates if it is violated, meaning that the user no longer has permission to use the software and is an infringer. That is the source of the copyright claims.

This kind of provision is acceptable when the parties have negotiated the terms of the license but that is clearly not the case with any EULA. Instead, Apple is using its software EULA to force people to buy another Apple product: computers. How would you feel if Sony could sue you for playing a CD on a non-Sony stereo?

Finally, Apple is not protecting its reputation. No one thinks that Psystar's computers came from Apple. If anything, Psystar's supposedly crummy product should help Apple's reputation.

- Posted by Jane

Al,

Thanks for pointing out the issues with enforcing the EULA. Again I agree that Apple will have a hard time proving this issue.

I disagree about Apple's claims against Psystar. Psystar is clearly using the Mac OS X product as a means to sell its computers. You can see the Mac OS X logo next to their models of computer. Go to their website and see for yourself. Apple can then use the numerous reviews and websites to show how Psystar associated its name with the Mac OS. No one would give a darn about Psystar if they hadn't used the Mac name to give them some value. All their publicity and fame has come from using the Mac name.

Do you think you can sell cookies that claim to be made with real Hershey chocolate chips without permission from Hershey? You can use whatever you want for ingredients, but claiming someone else's brand name in association with your product is a no-no. You are using the good name of Hershey to make your cookies sound better. You can't use someone else's brand or logo to sell your product without permission. The value of the EULA is that it clearly shows that Apple did not give this permission.

There are many things that Apple is clearly not disputing. You can resell your copy of Mac OS X install discs, just look on eBay. You can put Mac OS on your own PC; the OSx86 project has run with little or no interference from Apple. There is no serial number or authorization for using a copy of Mac OS X. You can resell your Mac with whatever operating system you want, e.g., wipe the hard drive and install Vista before reselling is okay. The only real limitation that Apple has enforced is that you can't sell a non-Apple computer with Mac OS X.

It will be interesting if this case goes to court to hear how the arguments go. I don't think Apple is too worried about loosing this one.

- Frank

BTW - Sony could sue you for using music bought from them in the wrong way. The argument below with the CD is flawed because the CD has no DRM associated with it. But if they sold music with DRM that locked it to their brand of player and then you removed the DRM to distribute on your website or openly showed that you were going around removing the DRM, then Sony could definitely sue you. But that has nothing to do with this case.

On Jul 20, 2008, at 1:51 PM, Frank Fox wrote:

Thanks for pointing out the issues with enforcing the EULA. Again I agree that Apple will have a hard time proving this issue.

I disagree about Apple's claims against Psystar. Psystar is clearly using the Mac OS X product as a means to sell their computers. You can see the Mac OS X logo next to their models of computer. Go to their website and see for yourself.

I tried this, as you suggest, but couldn't see it. Perhaps they removed the offending material.

Apple can then use the numerous reviews and websites to show how Psystar associated its name with the Mac OS. No one would give a darn about Psystar if they hadn't used the Mac name to give them some value. All their publicity and fame has come from using the Mac name.

Perfectly legal, as far as I know. Dell, HP mention Windows in their advertising, no?

Do you think you can sell cookies that claim to be made with real Hershey chocolate chips without permission from Hershey? You can use whatever you want for ingredients, but claiming someone else's brand name in association with your product is a no-no. You are using the good name of Hershey to make your cookies sound better. You can't use someone else's brand or logo to sell your product without permission. The value of the EULA is that it clearly shows that Apple did not give this permission.

When I go to the supermarket I see lots of house brand products, whose label says "comparable to XXX," where XXX is the name of a well-known, highly advertised product, such as Hershey . . . . Not a violation of the branded product's trademark apparently. And the validity of the EULA, as I wrote, is very questionable.

There are many things that Apple is clearly not disputing. You can resell your copy of Mac OS X install discs, just look on eBay. You can put Mac OS on your own PC, the OSx86 project has run with little or no interference from Apple. There is no serial number or authorization for using a copy of Mac OS X. You can resell your Mac with whatever operating system you want, e.g., wipe the hard drive and install Vista before reselling is okay. The only real limitation that Apple has enforced is you can't sell a non-Apple computer with Mac OS X.

I do not see how Apple can enforce this. But we will all find out when the matter goes to court, I guess. My money is on Psystar. Apple tries this bullying legal business too readily. I wrote a letter once (on paper) to Jobs, harshly critical of him for doing this, and he actually telephoned me at home to defend Apple's actions!

It will be interesting if this case goes to court to hear how the arguments go. I don't think Apple is too worried about loosing this one.

- Frank

BTW - Sony could sue you for using music bought from them in the wrong way.

Don't understand what is the "wrong way" to buy something.

The argument below with the CD is flawed because the CD has no DRM associated with it. But if they sold music with DRM that locked it to their brand of player, and then you removed the DRM to distribute on your website or openly showed that you were going around removing the DRM. Sony could definitely sue you. But that has nothing to do with this case.

But Leopard does not have any lock on it to prevent its use on a non-Apple computer, unlike the case of DRM, which does not lock to a particular type of player, which in turn does not exist, and perhaps could not exist, for technical reasons, as far as I know.

Al Feldzamen

Al,

I attached a sample of the image from Psystar's webpage. It shows up in my browser. I'm not sure why it doesn't for you.

Here is a good link to read about trademarks and infringement. http://www.iusmentis.com/trademarks/crashcourse/rights/

It is an interesting area of law. You can easily surf the Web for other examples of trademark infringement to see what has been allowed and when companies got into trouble. Sorry my article didn't go into all the details of this area, but there is plenty of related materials on the Web. Here is an excerpt from that webpage.

Of course, the more famous a trademark becomes, the bigger the chance that the public's opinion would change. The trademark Coca Cola for example appears on many different products, ranging from T-shirts to duvets. Given this information, the public would easily think that somebody selling pillows with the Coca Cola trademark on it had something to do with the Coca Cola company. Based on this, the trademark holder can act against such use of his trademark.

Product licensing is big business. Why pay for a license if you could advertise for free? The reason is because you'll end up in court. Apple has been sued several times over the Apple name by Apple Records. While most of us wouldn't confuse an Apple computer with a Beatles album, Apple Records did win both money and restriction on Apple's use of the trademark. Apple has learned about trademark protection the hard way, in court. My money is on the Apple in this fight.

I think we agree on most issues except for what relates to trademark and such. I doubt we'll change the other's opinion. We'll all have to wait and see what happens next.

- Frank

P.S. for me the "wrong way" to buy something is to have it come with DRM attached, that is what the example was illustrating. I prefer CDs because there is no DRM to interfere with my use of the product. Even then there are limits in how I can use the music, like public broadcasting and such.

Right of First Sale vs. Use of Trademark

From Joe:

for 1 thing they fixed the fan noise and they also put in a low end real video as part of the base system.

The EULA parts need to go to court and maybe all the way up to the Supreme Court.

There is more to it then just Psystar VS apple. What is to stop M$, EA, or others for trying there own lock down like apple does with there os?

What if EA coded there games to only work with over priced EA joysticks and then sueing the people who make joysticks that are just about the same but cost less?

Make games for windows only work with the pay to play online M$ LIVE but making a very easy to by pass thing and then sueing any one who tells how to do it?

I can go on and on but the thing is apple maybe pushing things by locking there os to there own hardware Didn't IBM get sued over this and lost in past?

EA has also tried to take away the right of first sale as well and With Psystar you are paying for the OS vs having build in to the cost of the hardware like how system from APPLE, DELL and other sell it.

Psystar is selling the hardware + the os + a build / os install fee with there systems other PC shops that sell hardware do the same thing and offer PC build / OS install as a add on fee so how is Psystar braking the law by selling this system?

As for the damaging its trademark maybe but they are offer hardware that apple dose not offer and apple lack of it is bad for the trademark as well. M$ will be able to get way with stuff like this so way should apple get a free pass?

Some people are looking at buying a Psystar system VS an unpowered and over priced mini or getting a over the top mac pro. The Imac would be ok if it had a better screen for pro work the older imac did have one so why did apple drop it? At least keep it as choice.

1 more thing there may be some dirt on apple that has some thing to do with this that may come up in the AMD VS INELT lawsuit about the apple Intel deal about why apple dose not have a good desktop system. Is there someing in there about keeping amd out of apple and that is holding up apple form coming out with mac os x for all pcs and apple does not want amd to find out about it?

Joe,

There are many things you can do that Apple does not stop.

  1. You can resell your copy of Mac OS X install discs, just look on eBay.
  2. You can put Mac OS on your own PC, the OSx86 project has run with little or no interference from Apple for 3 years.
  3. There is no serial number or authorization for using a copy of Mac OSBX.
  4. You can reselll your Mac with whatever operating system you want, e.g., wipe the hard drive and install Vista before reselling is oakk.
  5. There is an open source version, called Darwin, that let's you do all sorts of things, like develop new features, etc.

The only real limitation that Apple has enforced is you can't sell a non-Apple computer with Mac OS X. You are turning your computer into a Mac clone without permission. No permission was given in the EULA, and no separate license was granted by Apple. Just because you think the EULA is no good is not the same as saying Apple granted them any rights to resell. Psystar has been taking a free ride on the Mac name every time they sell a computer.

If you think that Macs are overpriced, you can try to build your own for your own use, just don't go around selling them.

- Frank

BTW - Sony did get sued for vibration in their game controller. They failed to license someone's patent, and they lost in court. Patents, trademarks, and copyright are three things you don't go around borrowing without written permission and clear definition of what you are allowed to do in a contract.

And, yes, companies can restrict how and where their products are used. Just think about music and DRM. You can't take songs purchased with DRM and play them on any device that is not authorized. Sure it sucks, but that didn't mean they couldn't do it. That is why I still buy CDs that don't have DRM on them.

The right of first sale stops apple from saying that you can't resell Mac OS X.

You don't need rights to resell software EA and others have tried to do the same thing as well.

As for companies restricting how and where their products are used. There have been court cases saying that they can't do that 100% like Printer locking 3rd party ink. Lexmark tried to use the dmca to do that And they lost the case.

Joe,

We agree: Apple does allow you to resell your copy of Mac OS X. I listed it as my number 1 option of things you can do.

Do you own a Psystar computer, or were you planning to install OS X on a PC?

I know some one who has old g4 macs and is thinking about getting a new one but the mac pro price is high for then and the screen in the imacs is not good from them as well.

I also want a mac as well but I can build my own tower for a lot less and apple should be more open with there os to let people do that.

Selling a system with software is the same thing as selling the software in a box the right of first sale gives you that right.

Joe,

I disagree that selling a system is the same as selling the software alone.

Here is an extreme example. Let's say that you go to McDonalds and buy some hamburgers. They sit around for a day, and you decide to sell them at your own restaurant. The next day you advertise McDonald hamburgers for $1. They sell out quickly, because everyone likes the low price, but because you let them sit around for a day everyone who ate them gets food poisoning. Now everyone thinks you cheated them, and McDonald hamburgers get a bad reputation.

You would argue that first sale gave you the right to do with the hamburger as you choose. You could eat them, resell them, package them up into a different product, etc. I will give you the benefit of the doubt and agree that you can do all of these things, but if you advertise using the McDonalds name you are free riding on their reputation to sell your product. If anything goes wrong or is perceived as wrong, it hurts not just you but McDonalds. That is why McDonalds can sue you - and Apple can sue Psystar.

Another choice instead of a Mac clone is to buy used off eBay. That is both legal and saves you a few dollars. I would also stop into a Mac store before saying the iMac screens are not good.

The Screen are not good for photo work. Also you are forced to buy a better cpu, better video card, and a bigger HD jus to get a bigger screen.

Reselling food is not the same as reselling software. Software is dose not go stale and make you sick if you let sit around for a day.

Psystar was also making you pay full price + an install fee for mac os. Vs you going to the store and buying mac os X and trying to install it on your own.

There are lots of small pc shops that do the same thing with windows and M$ does not go after them for giving windows a bad name.

Joe,

The starting screen is 20" or you can get the 24" model.

food is an example. The issue is affecting the brand name.

Yes, Psystar did install it for you.

Yes, Microsoft is sold differently. Even Microsoft will set limits, just search the Web.

food is not that good of an example vs software and pc systems.

The issue is affecting the brand name is one thing but apple winning on that can be bad thing for as if apple can win this what is there from stopping HP and others form saying the 3rd part ink and refill kits affect the brand name and suing them for making it or software making saying the people who resell software do the same thing as well.

Joe,

But the question of reselling an item - food, electronic, or furniture - is the same. You claim the right to resell any way you want to. Instead of making someone sick, what if your computer is faulty and electrocutes someone? Could your bad design not hurt Apple's reputation?

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