Apple, Psystar strike deal in copyright case

Mac clone maker to pay Apple unspecified damages, but may be able to keep selling systems

Apple and Mac clone maker Psystar agreed Monday to settle a 17-month lawsuit that will effectively stop Psystar from preinstalling Apple's Mac OS X on the Intel-based computers it sells.

It may not prevent the small Florida computer maker from selling Mac clones, however. Instead, Psystar laid out an argument that would shift responsibility for installing Apple's operating system onto its customers.

Settlement details were not available, although Psystar indicated in a motion submitted Monday that additional information would be filed today in federal court in San Francisco with Judge William Alsup.

The settlement, which requires Psystar to pay Apple an as-yet-unspecified amount of damages, would not be awarded until Psystar has exhausted all appeals.

"Psystar and Apple today entered into a partial settlement that is embodied in a stipulation that will be filed with the Court tomorrow," Psystar's motion of Monday began. "Psystar has agreed on certain amounts to be awarded as statutory damages on Apple's copyright claims in exchange for Apple's agreement not to execute on these awards until all appeals in this matter have been concluded. Moreover, Apple has agreed to voluntarily dismiss all its trademark, trade-dress, and state-law claims. This partial settlement eliminates the need for a trial and reduces the issues before this Court to the scope of any permanent injunction on Apple's copyright claims."

The injunction Psystar referred to was requested by Apple only last week, when the Cupertino, Calif. computer maker asked Alsup to grant it a permanent injunction that would shutter Psystar's Mac clone business and require it to pay $2.1 million in damages. Apple's demand for an injunction was prompted by an Alsup ruling in November that said Psystar violated Apple's copyright as well as the Digital Millennium Copyright Act (DMCA) when it installed Apple's operating system on the systems it sells.

In the request for an injunction, Apple demanded that Alsup ban Psystar not only from installing the older Mac OS X 10.5, also known as Leopard -- the only version sold when the case began -- but also include the follow-on upgrade, Mac OS X 10.6, or Snow Leopard. Snow Leopard is the only version of Apple's operating system that Psystar currently preinstalls on its clones before they're shipped to customers.

"Psystar's admission that it has moved on to infringing subsequent versions of Mac OS X confirms that any injunction must extend beyond Mac OS X Leopard," Apple said in its motion last week.

However, in the Monday filing, Psystar argued to exclude Rebel RFI, a $50 utility that the company started selling in October, from any potential injunction. Rebel EFI lets owners of generic PCs -- like the ones that Psystar sells -- install and run Apple's Snow Leopard operating system.

"Psystar argues only that any injunction from this Court should not extend to Rebel EFI, a Psystar product that is presently the subject of litigation in the Florida case, that is composed exclusively of Psystar software, that is not sold in conjunction with any hardware, and that is sold entirely apart from any copy of Mac OS X or any computer running Mac OS X," Psystar said.

By excluding Rebel EFI from any injunction, Psystar seems to be conceding Apple's copyright victory, and that it can live with a ban on preinstalling Snow Leopard. If that tactic works, Psystar's plan appears to be to shift the responsibility of installing Mac OS X onto customers. Psystar would presumably sell Rebel EFI to customers without a corresponding copy of Mac OS X, require those customers to obtain a copy of the operating system elsewhere, and then use the utility to install and run the purchased copy of Snow Leopard.

Psystar spelled out its argument for letting it continue to market Rebel EFI, and presumably Snow Leopard-ready computers that, with Rebel EFI's help, could be configured to run Mac OS X.

"The summary judgment in this case turned on the manner in which Psystar assembled its Open Computers," stated Psystar, referring to the November ruling by Alsup that granted Apple's motion for summary judgment . "It turned on such things as the use of the Psystar imaging station and what this Court found to be the creation of multiple copies and derivative works of Mac OS X along the way. None of these same facts is involved in Rebel EFI. Rebel EFI is entirely a software product. It does not involve the assembly by Psystar of any computers. Nor does Rebel EFI contain or include Mac OS X. Rebel EFI consists solely of Psystar software available for sale and download through Psystar's website."

According to Psystar's reasoning, its customers would not be open to legal attack by Apple for using Rebel EFI. "Psystar's end users do not engage in commercial use of Mac OS X and their use would qualify as use for 'internal purposes' even under the standards articulated by Apple in its summary-judgment briefing," Psystar said.

Psystar and Apple have been tangling in court since July 2008, when Apple sued the clone maker over copyright and software licensing violations. Psystar started selling Intel machines with Mac OS X preinstalled in April 2008.

As of 6 a.m. ET today, Psystar's Web site continued to offer clones with Snow Leopard preinstalled.

Apple and Psystar were not available for comment early today.

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