Apple files motion for dismissal of Psystar counterclaims

Posted:
in General Discussion edited January 2014
Apple has filed a motion with U.S. District Court seeking to dismiss the claims of Psystar, which allege that Apple has used a monopoly position as the manufacturer of Mac computers to cause restraint of trade, unfair competition, and other violations of antitrust law.



After Apple sued Psystar for selling generic PCs bundled with the company's Mac OS X operating system, Apple was countersued by Psystar over claims that the company had monopolized sales of the Mac.



A month ago, in a press conference held at its Palo Alto, California office, Colby Springer of Carr & Ferrell LLP, the law firm representing Psystar, stated, ?We?re alleging restraint of trade, among other things. We?re going to let the court decide.?



Apple has fired back with a 23 page filing [PDF by way of ZDNet] that asks the court to dismiss Psystar's countersuit "with prejudice," which means that Psystar as the plaintiff would be barred from bringing another action on the same claim.



Apple's Dismissal Case



"Defendant Psystar Corporation is knowingly infringing Apple?s copyrights and trademarks, and inducing others to do the same," Apple stated in the filing. "Psystar makes and sells personal computers that use, without permission, Apple?s proprietary operating system software. In an obvious attempt to divert attention from its unlawful actions, Psystar asserts deeply flawed antitrust counterclaims designed to have this Court force Apple to license its software to Psystar, a direct competitor. The Court should reject Psystar?s efforts to excuse its copyright infringement, and dismiss these Counterclaims with prejudice."



Apple's filing states that "Psystar?s very business model is premised on the fact that Apple?s computers compete directly with personal computers using different operating systems. In its Counterclaims Psystar admits computers with the Macintosh operating system (?Mac OS?) are one of many types Psystar sells to consumers," citing a number of different versions of Windows and Linux as examples. "Customers are choosing between these computer systems, the systems necessarily compete with one another. For these reasons and others, Psystar?s effort to assert antitrust claims premised on the existence of a relevant product market restricted solely to Apple?s products fails as a matter of law."



"Moreover," Apple charges, "the ultimate goal of Psystar?s Counterclaims is an order from this Court compelling Apple to help competitors, like Psystar, by forcing Apple to license its proprietary software to those competitors for use on their own computer hardware. Psystar?s effort is contrary to law and must be rejected. Neither the federal nor the state antitrust laws require competitors to stop competing with, and instead to start helping, each other."



"No such thing as a Mac OS market"



"As shown below," Apple noted in its filing, "Psystar?s single-brand relevant market definitions are irremediably flawed. Psystar?s own allegations establish that there is no such relevant market as the 'Mac OS market.' Those allegations also show there is no such thing as a Mac OS Capable Computer Systems market. Consequently, there is no basis for Psystar to claim Apple has market power in any market. As a result, all of Psystar?s claims collapse, since 'failure to identify a[n economically-meaningful] relevant [product] market is a proper ground for dismissing a Sherman Act claim.'"



"Psystar?s effort to define a single-brand relevant market contravenes well-known principles of antitrust law," the filing notes. "Relevant markets generally cannot be limited to a single manufacturer?s products. As the Supreme Court recognized in the United States v. E.I. DuPont de Nemours & Co., 351 U.S. 377, 76 S.Ct. 994 (1956), the ?power that, let us say, automobile or soft-drink manufacturers have over their trademarked products is not the power that makes an illegal monopoly. Illegal power must be appraised in terms of the competitive market for the product.'"



"Most recently, in Spahr, supra, the court rejected almost identical allegations as those made here," Apple stated in the filing, citing an example where the plaintiff "claimed that Leegin?s brand of women?s accessories, called the 'Brighton' brand, was a separate market because the products are unique, they are marketed as 'one of a kind,' customers would not consider other accessories as 'suitable substitutes,' and there was an 'inelasticity of demand' for these products. 2008 WL 3914461, at pp. 3, 8. Applying the Supreme Court?s decision in Twombly, the District Court dismissed the complaint without leave to amend because its definition of the relevant market was implausible 'from the face of the complaint?.' Id., at 8."



"The right of a manufacturer to exercise independent discretion with whom he will deal"



"Ultimately," Apple's filing states, "Psystar seeks to force Apple to license its software to competitors, like Psystar, so they can use Mac OS to create Mac 'clones.' Psystar undeniably can sell, and is selling, its Open Computers running Windows or Linux in direct competition with Apple?s Mac. Nevertheless, it also wants to sell computers running Apple?s Mac OS in direct competition with Apple?s Mac. However, one of the bedrock principles of antitrust law is that a manufacturer?s unilateral decision concerning how to distribute its product and with whom it will deal cannot violate the Sherman Act:"



The Sherman Act "does not restrict the long recognized right of a trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal. And, of course, he may announce in advance the circumstances under which he will refuse to sell."



James Gilliland Jr., serving as Apple's legal representative in filing the motion for dismissal, concluded, "Psystar?s attempt to direct attention from its infringing conduct should fail. It cannot plausibly define a relevant market in which Apple has market power, so Psystar cannot prove any unfair competition by Apple. Nor can Psystar use the antitrust laws to force Apple to help its direct competitor. Therefore, Psystar?s Counterclaims all should be dismissed with prejudice."



Comparison to previous monopoly claims



Ten years ago, Apple assisted the US Department of Justice in pursuing a claim against Microsoft, which argued that Microsoft had monopolized the market for PC desktop operating systems. The claim in that case was that there were no 'suitable alternatives' for the vast majority of desktop PC users because software incompatibility effectively prevented users from choosing between Windows and other competing operating systems. In Microsoft's case, the software being sold not only lacked any suitable competition, but was also bundled with more than 95% of the PCs sold, with none of the major PC manufacturers able or willing to offer any alternatives.



The judge ruling in that case wrote in 2000 'conclusions of law' that Microsoft had committed monopolization, attempted monopolization, and tying in violation of Sections 1 and 2 of the Sherman Act, and his remedy was that Microsoft must be broken into two separate units, one to produce the operating system, and one to produce other software components.



While the conclusions of law were never challenged, the original remedy was later watered down to a settlement that only required that Microsoft share its application programming interfaces with third-party companies and appoint a panel of three people who will have full access to Microsoft's systems, records, and source code for five years in order to ensure compliance. Objections from the nine states involved with the DoJ were thrown out, while the consent decree for oversight of Microsoft's monopoly has been extended into 2009.



In a second monopoly claim, Apple was accused of monopolizing the European market for online music with iTunes. That claim was brought in France at the urging of Virgin. The US DoJ supported Apple, stating that iTunes' success came in a healthy market with open competition. PC World noted that "the [EU] Commission's main target is not Apple but the music companies and music rights agencies, which work on a national basis and give Apple very little choice but to offer national stores."
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Comments

  • Reply 1 of 86
    crebcreb Posts: 276member
    The whole damn world is either about a monopoly or an oligopoly. At least Apple provides quality products in its share of the pie. This case will flop as Psystar is simply a leech of a company.
  • Reply 2 of 86
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by CREB View Post


    This case will flop as Psystar is simply a leech of a company.



    I never saw how Psystar had a case to begin with. I honestly look forward to reading the comments here that will state how Apple has a monopoly by offering unison of HW and SW and how Psystar will win against Apple.
  • Reply 3 of 86
    lkrupplkrupp Posts: 6,783member
    Quote:
    Originally Posted by solipsism View Post


    I never saw how Psystar had a case to begin with. I honestly look forward to reading the comments here that will state how Apple has a monopoly by offering unison of HW and SW and how Psystar will win against Apple.



    And they will come from the same clowns who clamor for OS X on any old hardware one can cobble together. Oh, and the headless, non-desrcript Mac-in-a-box crowd too.
  • Reply 4 of 86
    bowserbowser Posts: 89member
    Quote:
    Originally Posted by lkrupp View Post


    And they will come from the same clowns who clamor for OS X on any old hardware one can cobble together. Oh, and the headless, non-desrcript Mac-in-a-box crowd too.



    What he said...



    The quote above from Apple's filing states it clearly and succinctly... there is no such thing as a "Mac market".
  • Reply 5 of 86
    cory bauercory bauer Posts: 1,286member
    What Pystar is trying to sue Apple for is the equivalent of me trying to sue Pepsi Co. because Pepsi Co. won't let me sell rebottled Mountain Dew, and trying to claim that Pepsi Co. has a monopoly on Mountain Dew. You can't have a monopoly on your own unique product.
  • Reply 6 of 86
    Quote:
    Originally Posted by Cory Bauer View Post


    What Pystar is trying to sue Apple for is the equivalent of me trying to sue Pepsi Co. because Pepsi Co. won't let me sell rebottled Mountain Dew, and trying to claim that Pepsi Co. has a monopoly on Mountain Dew. You can't have a monopoly on your own unique product.



    I think you are wrong. I can go down and buy OS X but cant install it on non apple hardware? Can I go buy just the Mountain Dew syrup? sure you can, then you can get some water and carbonation and make some dew. But were talking about different things. One is tangible hard to compare.
  • Reply 7 of 86
    Quote:
    Originally Posted by Cory Bauer View Post


    You can't have a monopoly on your own unique product.



    That's the exact thought that came to my mind when reading this article. (I like your Pepsi analogy too.) Pystar seems to be claiming that Apple has a monopoly simply because Apple is the only one that makes Apple computers. Hello Captain Obvious...no kidding! Just like Nike is the only one that makes Nike shoes! Why doesn't someone go and sue them too! Pystar has no chance.
  • Reply 8 of 86
    cory bauercory bauer Posts: 1,286member
    Quote:
    Originally Posted by W00dyW00d View Post


    I think you are wrong. I can go down and buy OS X but cant install it on non apple hardware? Can I go buy just the Mountain Dew syrup? sure you can, then you can get some water and carbonation and make some dew. But were talking about different things. One is tangible hard to compare.



    No, my analogy is exactly the same. Apple's lawyers even reference the same concept:



    Quote:

    "Relevant markets generally cannot be limited to a single manufacturer?s products. As the Supreme Court recognized in the United States v. E.I. DuPont de Nemours & Co., 351 U.S. 377, 76 S.Ct. 994 (1956), the ?power that, let us say, automobile or soft-drink manufacturers have over their trademarked products is not the power that makes an illegal monopoly. Illegal power must be appraised in terms of the competitive market for the product.'"



    I can't rebottle and resell Mountain Dew. Pystar can't rebottle and resell Mac OS X.
  • Reply 9 of 86
    SpamSandwichSpamSandwich Posts: 30,837member
    Quote:
    Originally Posted by emoney35 View Post


    That's the exact thought that came to my mind when reading this article. (I like your Pepsi analogy too.) Pystar seems to be claiming that Apple has a monopoly simply because Apple is the only one that makes Apple computers. Hello Captain Obvious...no kidding! Just like Nike is the only one that makes Nike shoes! Why doesn't someone go and sue them too! Pystar has no chance.



    Maybe Apple will be awarded treble damages.
  • Reply 10 of 86
    nizynizy Posts: 24member
    Quote:
    Originally Posted by Cory Bauer View Post


    No, my analogy is exactly the same. Apple's lawyers even reference the same concept:







    I can't rebottle and resell Mountain Dew. Pystar can't rebottle and resell Mac OS X.



    I think the point you're trying to make is that repackaging then selling on someone else's product is the illegal activity that Pystar has committed.



    Like if you took Pepsi's drink, put it in a new bottle and sold it for a profit. Then Pepsi would have a case against you for infringing their copyright, patents and possibly trademarks.
  • Reply 11 of 86
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by W00dyW00d View Post


    I think you are wrong. I can go down and buy OS X but cant install it on non apple hardware? Can I go buy just the Mountain Dew syrup? sure you can, then you can get some water and carbonation and make some dew. But were talking about different things. One is tangible hard to compare.



    It is comparable. You can buy Mountain Dew syrup an authorized distributor, but you can't legally repackage it as OpenDew claiming that Pepsi has an illegal monopoly on the Mountain Dew market.



    edit: This has been already answered multiple times now
  • Reply 12 of 86
    ivladivlad Posts: 739member
    Microsoft needs to be sued on many bases. I can't wait for their dramatic and tragic end.
  • Reply 13 of 86
    ivladivlad Posts: 739member
    Quote:
    Originally Posted by solipsism View Post


    It is comparable. You can buy Mountain Dew syrup an authorized reseller, but you can't legally repackage it as OpenDew claiming that Pepsi has an illegal monopoly on the Mountain Dew market.



    Pepsi will never sell its recipe like that. Sure you can buy water and other parts but not the secret formula.
  • Reply 14 of 86
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by iVlad View Post


    Pepsi will never sell its recipe like that. Sure you can buy water and other parts but not the secret formula.



    Fountain drinks are done that way. You by the bags of syrup from the companies and then buy the carbonation from another source. Then you have a fountain tech(?) make sure the balance is correct.



    PS: McDonald's Restaurant has the best tasting Coke for some reason.





    edit: Distributor would have been a better word than reseller.
  • Reply 15 of 86
    It's not as simple as rebottling Mountain Dew. It's Pepsi selling you the syrup (OS X) and saying you can only use it with Pepsi-brand carbonated water (Apple's hardware). The argument is that Apple is leveraging OS X to acquire hardware sales that they didn't "earn" (by the hardware's own merit).



    This is a more complex case than most think. It will set a strong precedent for the legality of vertically integrated systems.



    One analogy a while back comes to mind: Razors, razor blades, and blade refills. Shick makes the bulk of their money selling blade refills which are designed to fit their razors. Would it be legal, for example, for Shick to demand a user only use Shick-brand razor blades with their Shick razor even though Home Best makes blade refills that fit the razor perfectly?



    That's the question this case will answer.



    -Clive
  • Reply 16 of 86
    nizynizy Posts: 24member
    As I understand it, the reason Microsoft's case is different (in the case of Internet Explorer anyway) is because they used their dominant market position in the OS sector to force hardware manufacturer's to pre-install it on new machines. In other words they were using their huge market share and colluding with their friends in order to force Netscape etc. out of the marketplace.



    For an antitrust case to be successful, Apple would need to be working with other companies to restrict competition. Apple operates a closed loop system, producing both the hardware and OS, so how is there any Antitrust? If, like MS, they had worked with another company, then you could argue antitrust, but as it is, its impossible as Apple states in the filling.
  • Reply 17 of 86
    Quote:
    Originally Posted by solipsism View Post


    PS: McDonald's Restaurant has the best tasting Coke for some reason.



    +1 on that! I don't know what they do, but there is a difference for sure. They made bank off of me this summer with their $1 large drink promotion.
  • Reply 18 of 86
    nizynizy Posts: 24member
    Quote:
    Originally Posted by Clive At Five View Post


    It's not as simple as rebottling Mountain Dew. It's Pepsi selling you the syrup (OS X) and saying you can only use it with Pepsi-brand carbonated water (Apple's hardware). The argument is that Apple is leveraging OS X to acquire hardware sales that they didn't "earn" (by the hardware's own merit).



    This is a more complex case than most think. It will set a strong precedent for the legality of vertically integrated systems.



    One analogy a while back comes to mind: Razors, razor blades, and blade refills. Shick makes the bulk of their money selling blade refills which are designed to fit their razors. Would it be legal, for example, for Shick to demand a user only use Shick-brand razor blades with their Shick razor even though Home Best makes blade refills that fit the razor perfectly?



    That's the question this case will answer.



    -Clive



    The problem with what you say is that Pystar is making a profit by hacking Apple's OS, putting it in a new box and selling it on. If they sold a box that was capable of running OSX but didn't supply it pre-installed they would be in a better position legally.



    Although the mac is a generic device underneath its os x that separates Apple from every other computer. As Apple owns the code, it is able to decide what to do with that code. It could, like MS sell it to device makers, but Apple chooses to use it themselves. It's like if BMW invented a new type of car brakes and patented the design. They could opt to use this design on their cars only, making them unique. However they could also license the technology to other manufacturers. THEY HAVE A CHOICE!



    Also, since when does a business have to "earn" sales based on its products performance. If that was the case surely Microsoft would be bankrupt by now! Your point is flawed because OSX makes the mac unique - its Apple's unique selling point over their competitors. Its the same with the Pepsi analogy, they have a USP - their secret recipe, but that doesn't make them a monopoly over pepsi drinks. If it did, there wouldn't be any competition at all.



    The razor case is quite different. If, for example Shick had a patent on the particular design of that attachment, then they could sue Home Best for infrigment. If they don't or its a standard design, or they just don't care, then Home Best is free to do as it wishes. The point being: Apple has patents and copyright over OSX and wishes to protect those copyrights/patents.
  • Reply 19 of 86
    Quote:
    Originally Posted by CREB View Post


    The whole damn world is either about a monopoly or an oligopoly. At least Apple provides quality products in its share of the pie. This case will flop as Psystar is simply a leech of a company.



    Yea Yea yahooooooo. We finally have an Apple store in New Orleans..well Metairie, anyway, Open today I'll check it out tomorrow. At last civilization has arrived.
  • Reply 20 of 86
    hmurchisonhmurchison Posts: 12,215member
    This case really isn't all that difficult or complex.



    Apple has every right to protect their investment in software and hardware by mandating that their SW run on their hardware.



    Psystar seems to think that just because a platform is based on ubiquitous hardware they should be able to circumvent any protections and EULA and actually profit from this.



    Pray tell what is the incentive for manufactures to develop new technologies when other companies can simply modify their product and resell without license?



    My view is that Apple has not thwarted attempts to run Windows, BSD or Linux on their Intel machines so they have in no way restricted consumers rights unfairly. In fact Apple has gone above and beyond to ensure compatibility (Bootcamp).



    Leechstar's case is without merit. OS X development is subsidized by their hardware profits. I don't think leeches should be allowed to come and eat Apple's lunch simply because they think they can.
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