Will Psystar Represent A Key Case Concerning Enforceability Of EULAs?

from the let-the-lawsuits-begin! dept

Mon, May 5th 2008 8:16am — Mike Masnick

A few weeks back, a company named Psystar made some news by offering to sell PCs with Mac OS X installed. This raised questions about how legit this offer was. After all, when Steve Jobs returned to Apple years back, he killed off all licensing deals that allowed any kind of Mac clones. However, the company has been showing off the clones it's created. Now, the questions are all about whether or not Psystar's actions are legal. The company (of course) says it is legal, and that it's buying a legal copy of the operating system and installing it on PC hardware. However, the end user license agreement (EULA) includes the following:

"This License allows you to install, use and run one (1) copy of the Apple Software on a single Apple-labeled computer at a time. You agree not to install, use or run the Apple Software on any non-Apple-labeled computer, or to enable others to do so."

That would seem to preclude what Psystar is doing. The News.com article above does an excellent job laying out the legal issues here. While the courts have found various clickthrough EULAs enforceable (even though no one -- including the companies themselves seem to read through them), it's possible that Psystar could attack the EULA from other directions. As the article notes, it could try to use the first sale doctrine (which allows you to resell copyrighted products you've bought) but that likely won't fly. What may be most effective (even if it's still a long shot under the law) is to claim that the EULA illegally "ties" the software to Apple's own hardware. However, making a claim about tying is quite complicated, and it seems unlikely that Psystar would prevail. This seems unfortunate for the market -- as getting some additional competition into the market would only help drive innovation. But, under the current law, it's difficult to see how Psystar can win.

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Filed Under: apple os, eulas, first sale, license agreement, tying
Companies: apple, psystar

42 Comments

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Ajax 4Hire, 5 May 2008 @ 8:33am

Apple is on a slippery slope...
Tying (sale of one product/service to another) can be illegal in the USA.

As an example, ticket scalper never sell the ticket for higher price, they will sell a ticket (at face price) along with a blah-blah for $100. The blah-blah can be anything like a ballpoint pen, home-made mp3, whatever. This is a way to skirt the face-value resell laws.

The key issue is are you REQUIRED to buy ancillary items or can you use your own or nothing at all.

I buy a Budwiser, pour it into a glass of my own design and re-sell it at an increase in cost.
I can buy a "Flaming Chipmunks" CD and play it on any player of my choice for my own enjoyment; or not play it at all again for my own enjoyment.

For Apple to Force you to use their equipement (Mac for OS-X) or their service (iTunes for iPod) would be considered tying/linking.
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Mike (profile), 5 May 2008 @ 8:42am

Re: Apple is on a slippery slope...
Tying (sale of one product/service to another) can be illegal in the USA.

But, in some sense, every product is "tying." Every product is a bundle of other products. That's why I have trouble with rules against tying. Is it illegal for Honda not to just sell the tires off a car? No, because that would be silly. You have to buy the car with tires...
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Freedom, 5 May 2008 @ 8:50am

Mistake....
Apple/Steve Jobs is already getting a bad reputation by some due to his intense need to control the Apple experience.

By putting legal pressure on this company that wants to do nothing but promote your OS and get it into more hands will ultimately do nothing but hurt Apple - think Creative Labs going after the guy making a better driver and what that did to their reputation.

SJ should look at this as an opportunity and release that there are only so many people that will buy a package deal from Apple and the best way to continue adding market share is to expand and let others help you. If I was SJ, I would call this company and offer them a license deal to sell the OS instead of trying to stop them.

My hunch though is that SJ will do what he always does, control freak himself to ensure he stays in the #2 position for life.

Freedom

P.S. Maybe this company should just say that while not supported by Apple that their hardware will load the Apple OS with little to no tweaks required. This way, they aren't directly selling the Apple OS, but giving people a platform that will work with the Apple OS without having to deal with the crazy driver search that is often necessary if using a standard PC.
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James Riley, 5 May 2008 @ 9:07am

Re: Re: Apple is on a slippery slope...
Yes but what he's getting at is different. Honda not allowing you to buy a tire off their car isn't the same because you can turn around and buy a compatible tire for the same car (probably at a lower price) from another company.

For Apple, if they only allowed the iPod to sync with iTunes, that would be illegal linking - right now, you can use the iPod with any syncing software, Apple just encourages you to use iTunes and people tend to use what the manufacturer says anyway.

Psystar, I think, has a case here - for Apple to sell their closed-source version of Darwin (yes, that's all it is, just with lots of GUI extras on top) and then tell you that you can't use it on your choice of system is just as wrong as Honda telling you that while you can certainly buy the car, or the tires, you can only use them on roads that Honda either owns and has sold you, or has constructed on their own and restricts to their cars only.
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one thing, 5 May 2008 @ 9:14am

Re: Re: Apple is on a slippery slope...
No, because that would be silly. You have to buy the car with tires...

Exactly.You NEED the tires to run the car.Pystar is saying you DON'T NEED a mac pro or imac or macbook to run OS X you can run it on their machine. The OS X EULA is saying the opposite. It sounds like tying to me.
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Bryan Whitlock, 5 May 2008 @ 9:42am

Re: Re: Re: Apple is on a slippery slope...
I don't necessarily agree with the whole "Honda telling you you can't drive on certain roads" argument. Apple sells their systems as a whole unit. You buy the software with the hardware, and new releases of software are "upgrades." Apple isn't saying you can't buy its system and install it where you want, they're saying you can't buy HALF of it's product and use it where you want.

It's what's separated them from Windows, and while most PC users out there just refuse to give Jobs any credit, the guy's stock has skyrocketed since he's taken over in the late 90's.

He has his own business model, and it's working well for him. If people don't agree with it, don't support the product...or start your own company and run it houw you want.
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Quantity Surveyor Man, 5 May 2008 @ 10:07am

Why does Crapple care?
If you own an iPod or have Quicktime those jackasses shove their software down your throat like Aspirin, every hour on the hour whether you need it or not. And now they've started pushing their Safari crap in the same bitter pill.

They need to make up their bloody minds; do they want non-mac users to use their software or not? Personally I prefer NOT.

My fave quote about the pc/mac debate: One thing PC users can do that mac users can't: STFU!!
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darkpixedl, 5 May 2008 @ 10:19am

Re: Re: Apple is on a slippery slope...
Honda doesn't FORBID the buyer from selling the tires... Nor does it say the tires can only be used on HONDA branded cars.....
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plutofly, 5 May 2008 @ 10:31am

Re: Re: Re: Apple is on a slippery slope...
Yes, Honda doesn't forbid the buyer from selling the tires, the buyer already bought the car. I'm sure Apple wouldn't mind much either if Psystar bought a Mac for every computer they sold.
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Kilgore Trout, 5 May 2008 @ 10:52am

Re: Re: Re: Re: Apple is on a slippery slope...
Actually.... Apple is *precisely* saying you can't buy your system and install it anywhere you want. If I buy a new MacBook, and take the CD and install it in my VMWare virtual machine for testing, I have violated the EULA.
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Jason, 5 May 2008 @ 10:56am

Re: Re: Re: Re: Apple is on a slippery slope...
Bryan,

I agree with you for the most part. However, when Apple releases a new OS X version (see Leopard), people can buy that separate from the physical hardware. While it's true that if you buy a laptop/desktop, you will get the OS bundled, you can still buy the OS separate from the hardware. This, at least in my opinion, is where the tying argument would come into affect. It isn't bundling an OS with hardware (OEMs do this all the time), this is saying that this software you buy from me can only work on hardware you have to buy from us.
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slimcat (profile), 5 May 2008 @ 11:01am

work-arounds?
They could give the customer the legal copy of OS X to install themselves or put it in an install partition on the HDD (not technically 'installed') with a first time start-up/install script such as HP (others?) does/did with the Windows XP backup partition.
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shasbarg, 5 May 2008 @ 11:06am

OK this car anology is bothering me a bit as each way you look at it seems to not be the best fit. So below is my attempt to correct the logic already described.

Honda(Apple) sells cars with tires. Owners are allowed to upgrade a Honda car with tires from different manufacturers.
Honda also sells upgrades to those tires. But before a user can install the tire that they already bought from Honda they have to warrant that they will install it only on Honda licensed cars. The only Honda licensed cars are those made by Honda.
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Brooks, 5 May 2008 @ 11:17am

What if they didn't agree
Given that the EULA is kind of a "gotcha!" piece of paper or clickthrough, what if Psystar simple devised a way to install OSX without agreeing to the EULA? They could, for instance, create a modified image of an installation disk that doesn't require agreement (of course, creating that disk itself might violate the EULA, so it would be done on a Windows computer).

There are probably other approaches, too. But as much as the courts seem to favor restrictive IP laws, wouldn't it be a bit of a stretch for Apple to argue that by bypassing the EULA, Psystar was implicitly agreeing to it? Or that people are bound by there mere presence of an EULA even if they don't take the slightest affirmative action to agree to it?
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GeneralEmergency (profile), 5 May 2008 @ 11:32am

The meaning of the word 'is' is attack...
Before recently building an intel based "Hackentosh" computer at home I too read this provision in Apple's EULA.

So I went to the box my iPhone came in and I pulled out the Apple Logo sticker they included, and I slapped it on the side of the Shuttle case. "There!", I exclaimed, "An Apple-labeled computer if ever I saw one."

I think the language of the EULA is deliberately imprecise because the lawyer who wrote it likely was thinking of the IBM anti-trust kerfuffle that prevented hardware and software tying. An EULA more precisely worded would say Apple-manufactured. But see, he was clever because he realised there was a greater pitfall here in trying to produce a computer that complies with the SW license (Apple-labeled), yet still avoids Trademark infringement, which is easier to attck legally.

PsyStar is sidestepping this strategy and forcing the issue on the EULA's weak tying.

Another thought:

If copies of OS-X come with an Apple Logo sticker too, PsyStar could sell the PC with a naked HDD, a retail OS-X and a bootloader DVD and the following instructions:

1) Open Retail OS-X box, remove Apple Logo Sticker and apply to computer case. Write "Apple" on logo sticker.

2) Insert Bootloader DVD, start computer.

3) Face Cupertino, Raise middle finger.
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Overcast, 5 May 2008 @ 11:44am

"This License allows you to install, use and run one (1) copy of the Apple Software on a single Apple-labeled computer at a time. You agree not to install, use or run the Apple Software on any non-Apple-labeled computer, or to enable others to do so."

Precisely the reason I've never been interested in buying a MAC.
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chris (profile), 5 May 2008 @ 11:49am

you guys, including jobs, are missing the point
the reason windows sucks is it has to support arbitrary hardware with poorly written drivers.

limiting the hardware platform is how companies like sun microsystems can deliver super reliable systems. they control the hardware and the software and should make money off both. macs are seriously expensive compared to PCs, and sun hardware is ridiculously expensive compared to macs.

a mac clone made from more or less commodity parts is not going to be the same as a real mac. it's a knockoff.

all apple has to do is let these systems ship as they are. the psystar website even says there are issues with macOSx and some stuff doesn't work:
http://www.psystar.com/can_i_run_updates_on_my_openmac.html
http://www.psystar.com/how_do_i_ eject_a_cd_without_an_apple_keyboard.html

any mac fanboy will tell you that everything on an apple "just works". if there are issues, then it doesn't "just work". that's the thing with knockoffs, you always get what you pay for.

now, if apple is taking a loss on leopard in the hopes that it will spur the sale of mac hardware, then apple needs to "fix the glitch" and stop taking a loss on an obviously viable standalone product.
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Rick, 5 May 2008 @ 12:06pm

Re: Mistake....
A pretty enviable and profitable No. 2, don't you think?
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Brooks, 5 May 2008 @ 12:07pm

Re: you guys, including jobs, are missing the point
Er, actually you're missing the point. This discussion isn't about whether white-box computers running OSX are a good idea, or about the relative merits of a controlled hardware/software ecosystem.

This discussion is about the legality (or lack thereof) of Psystar's operation, and the implications for EULA's in general and the OSX EULA in particular. Whether or not it's a good idea to buy a knockoff Mac clone is neither here nor there.
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Bryan, 5 May 2008 @ 12:17pm

Re: Re: Re: Re: Re: Apple is on a slippery slope...
I also see your side of the argument. Now, I ask this out of complete ignorance...doesn't Dell, HP, etc have to get permission from Microsoft to install their OS? Or is Windows completely open at this point for anyone to install and sell on whatever they please?
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Old Guy, 5 May 2008 @ 12:54pm

Legality, Shmegality
People seem to forget what came about from tasting that first apple...It's been downhill ever since.
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Anonymous Coward, 5 May 2008 @ 1:05pm

Re: Re: Re: Re: Re: Re: Apple is on a slippery slope...
Yes, Dell, HP, etc. pay to install Windows (granted, it's an OEM copy and costs less). But, the difference between Windows and Mac OS X is that Windows can be run on any hardware platform as long it meets the hardware requirements. You don't need special hardware from Microsoft.
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Anonymous Coward, 5 May 2008 @ 1:23pm

Re: What if they didn't agree
In that scenario, Psystar would be distributing unauthorized derivative works instead of an honest-to-God copy of OSX. A EULA may make as much sense as "pinky swear, no backsies", but selling a hacked version of a software product is a bad idea.
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anwar, 5 May 2008 @ 1:44pm

There must be a difference...
There has to be a difference in how individuals and companies treat contracts of any sort including EULAs, no?
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Anonymous Coward, 5 May 2008 @ 1:57pm

Everyone focuses on Steve. While that is the short-term issue, what about whoever is going to succeed him? Apple's Board of Directors supposedly has a succession plan, but one has to wonder if it is anything more than projecting a hologram of Steve on the stage at MacWorld once a year.
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Anon, 5 May 2008 @ 2:11pm

Beyond the EULA violation. (Not that it matters) My opinion is that Apple products are good and very useful. But I find other platforms, be they MS or Linux, much better. Oh and you don't have to buy proprietary Apple hardware, so things are much cheaper and easier to replace.

Does this mean that I cannot install OS X on my Dell then? Or can I buy an Apple sticker and fulfill the EULA?
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Lonny Paul, 5 May 2008 @ 2:29pm

Use a darn label stating 'APPLE'
That's it. I'd slap a label with the word APPLE on it. Apple-labeled, huh? Mine has a label? What, you can't see what it says? It says A-P-P-L-E
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Mr. Blankpage, 5 May 2008 @ 2:29pm

Re:
Did you not get Apple stickers with your iPod? :-)
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Anonymous Coward, 5 May 2008 @ 2:32pm

Re: Re: What if they didn't agree
How is it a derivative work of the installed copy of OSX is identical to what would be installed by the original OSX installed? And how is it distributing hacked software if they don't distribute the hacked installer?

But regardless of the specific means employed, my broader suggestion was that they may have found a way to install OSX without agreeing to the EULA.
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JS Beckerist, 5 May 2008 @ 3:27pm

Re: Re: Re: Apple is on a slippery slope...
I thought the idea wasn't that "if you do this then you are breaking the law" but that "if you do this then you are voiding all contracts we have with you including warranties and service agreements."
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Bah who needs one, 5 May 2008 @ 3:46pm

Everyone (esp. Mike) needs to check out USC Title 17 Section 107(a)(1), which explicitly permits "normal use" of copyrighted software that produces personal copies, such as installation and running it. This bit of the Code makes such copies non-infringing, and therefore:

You do not need the copyright holder's permission to make these copies, and thus to install and use the software, once you've legitimately obtained a copy.

Of course, if you buy a shrink-wrapped box containing a copy from a store, you have now legitimately obtained a copy. As a result:

The EULA offers nothing in return for your accepting it.

It purports to give you the right to install and use the software, in exchange for agreeing that it's "licensed, not sold" and agreeing to all kinds of limitations on its use that have nothing to do with copyright law. But you already have the right to install and use the software, per the above, once you've paid for a copy at the store.

That, combined with its non-negotiability, makes the EULA a completely one-sided "contract of adhesion" that provides no consideration to the consumer, and such "contracts" are null and void under most states' laws. (Virginia and Maryland seem to be the exceptions.)

Psystar's defense should therefore be to attack:
* Any claim of copyright infringement with a reference to USC 17 section 107(a)(1); and
* Any claim of breach of contract with the above argument attacking the validity of the contract itself.

The sticky area is in installing the software, then selling the computer to a customer, which might be seen as distributing the normally-noninfringing copy made by installation. They need to give the copy's original media to the customer to have a defense here; in transferring all of the copies they made from the one copy they bought to the same customer they can use first sale as a defense.

Any argument that they need to abide by the EULA to be noninfringing because the EULA says so is, of course, circular.
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Anonymous Coward, 5 May 2008 @ 4:27pm

Re:
Thats an interesting argument. I've never heard it before.
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Anonymous Coward, 5 May 2008 @ 4:33pm

I prefer to look at the issue this way: they are being dicks for not letting you do what you want with your stuff.

You cant eat these cheeseburgers unless you say a prayer first.

You can't use this deodorant unless you play football.

You can't read this magazine unless you vote for the specified political party.

You may not study or reverse engineer the mechanism used to dispense product through a straw which might lead you to understand how to insert another liquid (say, water) into the container and shake in order to obtain access to a diluted form of the remaining product.

The first sale doctrine was made to keep people from being dicks in ways that nobody wants to be vulnerable to; and every sane person, no matter how meek or mild mannered, when confronted with that dickery will use their middle finger to show their contempt.

So forget the first sale doctrine technicalities. EULAS are _dickish_ in all circumstances and ought to be banned just like first sale doctrine violations.
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G-azy, 5 May 2008 @ 5:02pm

Re: Bah who needs one
"...once you've legitimately obtained a copy."

How do you legitimately obtain a copy without agreeing to the EULA?

You cite a law that grants a user the right to make copies of shrink wrapped software, and imply that that law also grants the user the right to install to use shrink wrapped software.

Copyright law deals with the right to copy, use of the software falls under contract law.

"... and thus to install and use ..."

This is the foundation of your case.
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Washii (profile), 5 May 2008 @ 8:44pm

Re:
@Bah who needs one (post 31):

At the same time, they'd have to find a way to balance these with some of the numerous DMCA provisions that effectively break such provisions as USC Title 17 Section 107(a)(1).

Then again, I'm no lawyer. But my first thought after reading the first two paragraphs of your post? The DMCA will get shoved down Psystar's throat at some point with this argument.
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Rekrul, 5 May 2008 @ 8:59pm

I agree that EULAs are BS, however Apple is a large company with enough cash to pay expensive lawyers. I fear that Psystar may lose. Not because they're wrong, but because I feel that Apple may just be able to get a court to side with them.

Of course that's bad news, since a precedent here could help make other EULAs binding.
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Bah who needs one, 6 May 2008 @ 4:18am

Re: Re: Bah who needs one
How do you legitimately obtain a copy? Same as with a book or a CD: you plonk down some money in the store and walk out with a copy and a receipt.

Section 107(a)(1) specifically allows the copies made in the course of normal use of software, e.g. transient copies in memory or the copy on a hard drive made by installing it, so that users do not need additional permission or negotiation with the copyright holder after they buy a copy and bring it home. In other words, the entire EULA thing is based on a deception.

Now, if you had to sign some document agreeing to certain restrictions before you could get it, say at the store and then they'd bring a copy out from around back, that would be legally binding. But that isn't what happens. Instead, you buy a copy at the store, and only when you first go to actually use it are you asked to "agree" to restrictions. But by that time you already have a lawfully-obtained copy, and by first sale the copyright holder no longer has any say in what happens with it, except if you wanted to make copies that would be infringing without their explicit permission. The copies made by normal installation and use do not count according to section 107(a)(1)!

Use of software doesn't inherently fall under contract law any more than use of lawnmowers or deckchairs does. You buy one and you use it. Sheesh!
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Rootman, 6 May 2008 @ 6:10am

Will this be an even more slippery slope?
I just downloaded Virtualbox version 1.6 yesterday and notice it has FULL OSX compatibility. Who needs Hackintosh - or even a real Mac if they can emulate the entire thing?

Me thinks this would be GOOD for their business, full copies of the OS coming off the shelves and real Macs being bought once the user decides they want full performance rather than the limited emulated performance. Then again Apple never was one to look at the entire picture were they?
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Nasch, 6 May 2008 @ 1:42pm

Re: Re: Re: Re: Apple is on a slippery slope...
The analogy (whether it's a good one or not) is Honda selling Honda tires, on the condition that you sign a contract agreeing to install the tires only on a Honda vehicle. I don't know if Apple's terms are legal or illegal, but it seems fishy. What right should they have to tell me where I install the operating system I buy from them? I'm hoping this clause gets struck down, for more competition and more freedom for consumers.
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Nasch, 6 May 2008 @ 1:49pm

Re: Re: you guys, including jobs, are missing the point
So what, we're not allowed to discuss related issues? Who made you the blog police? If *this* discussion (the one you're participating in by replying to the above comment) doesn't interest you, then just don't reply. There is no reason to criticize someone for examining another angle of the story.
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Brad Stewart, 21 May 2008 @ 3:05pm

Looking at it the wrong way?
Who's to say that it will come to a lawsuit? What if this is an apple skunkworks project to see how the system handles out in the wild? How is it received? The perceptions? What will people put up with? Conspiracy theory? Sure, but given apple's proclivity for anything legal it makes you wonder why they haven't pulled the trigger yet. I set up a prediction market at RealityMarkets.com on the topic if people are interested in following along: http://realitymarkets.com/index/168/When-will-Psystar-Computers-Be-Sued-By-Apple?
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googoo, 16 Jul 2008 @ 7:35pm

i think there is precedence, ever since microsoft's "bundling" antitrust lawsuit. psystar will argue that EULA is itself illegal. I think they probably have a good case since microsoft lost. you can run windows on mac's, but you can't run os on pc's? sounds like a winner to me.
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