Psystar Loses Big To Apple

from the and-so-it-goes dept

When Psystar first started selling PCs with Apple OS's installed on them, we knew there would be a lawsuit -- though it took a bit more time than we expected. Originally, Psystar tried to claim that Apple was violating antitrust law, which seemed like a wasted path for exploration -- and, indeed, a court rejected that claim. Then Psystar went back to more reasonable defenses... or so we thought.

The court hearing the case didn't seem to think any of Psystar's main lines of defense had any validity at all and granted summary judgment to Apple on all of the major points, saying that a trial wasn't even necessary. The "fair use" claim was already weak, and the judge noted that Psystar didn't even try to discuss any of the four factors generally used in determining fair use. The two (I thought) stronger claims were that (a) the right of first sale applied, and once Psystar purchased OSX legally, it could resell it, provided it was only installed on that one computer, and (b) that Apple went too far in its EULA terms, which demanded that OS X could only work on a Mac. Unfortunately, the judge didn't agree to either one, though I find the judge's reasoning perplexing and hardly convincing.

On the issue of first sale, here's what the ruling said:

The copies at issue here were not lawfully manufactured with the authorization of the copyright owner. As stated, Psystar made an unauthorized copy of Mac OS X from a Mac mini that was placed onto an "imaging station" and then used a "master copy" to make many more unauthorized copies that were installed on individual Psystar computers. The first-sale defense does not apply to those unauthorized copies.

Perhaps I'm missing something here, because earlier reports had suggested that Psystar legally purchased each copy of OS X and then installed the legally purchased copy on the new machine (which it then included with the sold machine). But from the description above, it sounds like part of the problem is that a single "master copy" was used to make multiple installations. Of course, that raises a whole host of separate issues. If Psystar legally purchased a separate license for each one, but still used a single master copy, is that really infringing? After all, the code is identical, and it seems positively ridiculous to say that even though you bought, say, 20 licenses, you can't just use one master copy to install 20 times. It seems like this could use additional clarification. Because, the other way one could interpret this is that there is no right of first sale if the company says a copy is unauthorized -- which would have troubling implications.

On the EULA front, the court again basically just takes Apple's position, and insists it did nothing wrong. I'm not surprised by the outcome at all, but I would have expected at least a more complete response to the First Sale doctrine rights issues. Even ignoring that a "copy" was being made -- with the physical copy, it really is a matter of first sale. The company is selling something it legally purchased.

Psystar will likely appeal, though I still have little faith that will get anywhere.

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Hyperlinked Contract Terms Are Enforceable

from the even-if-not-visited? dept

There have been plenty of questions over the years about the enforceability of online contracts, especially of the "clickwrap" variety. However, a recent ruling apparently says that contract terms are acceptable even if hidden behind a hyperlink. Apparently, the court found that because the link to the terms is "highlighted" in a different color, it's consider conspicuous enough that a reader should have clicked on it and read it.

Now, that's interesting to me, because I'd just been reading law professor Peter Friedman's blog post for his first year Contracts law class, where he talks about how few people actually read online agreements, and how many people probably agree to things they didn't think they had agreed to:

65 out of my 66 students (law students in a contracts class!) admitted in our first class they rarely or never read the online agreements they "agree" to. The only empirical survey I am aware of regarding consumer behavior in connection with online agreements found the following 7 years ago:

• 50% of the respondents said that they sometimes read online agreements and 40% never read them;
• Thus, only 10% of the respondents always read the online agreements that they encountered;
• Well over half of the respondents (64%) always click the Accept button and most of the others (35%) some times Accept;
• More than half of the respondents (55%) didn't believe that they were entering into a legally binding and enforceable contract even after clicking I Accept;
• Most (79%) never ever kept a copy of any click-wrap agreement that they entered into;
• The majority of respondents (90%) indicated that they never completely read shrink-wrap agreements;
• 38% of the total respondents came from the IT/Internet/E-commerce industries.

Andrew Gatt, "Electronic Commerce -- Click-Wrap Agreements: The Enforceability of Click-Wrap Agreements," doi:10.1016/S0267-3649(02)01105-6 (2002).

We've seen similar things in experiments that offered prizes within the clickwrap agreements, to see if anyone claimed them -- and it took four months and 3,000 downloads for anyone to claim the prize. In many ways, this actually reminds me of an old story about Van Halen's concert contracts with local promoters and venues, that was getting lots of attention last month, after it was featured on an episode of This American Life. Many people have heard the story of how the band had a rider in its contract demanding a bowl of M&M's backstage with all the brown ones removed. And most people who heard that story assumed it was a sign of rockstar divas with ridiculous demands. However, the true story is that it was actually in there to see if the people setting things up had actually read the details of the contract:

Van Halen was the first band to take huge productions into tertiary, third-level markets. We'd pull up with nine eighteen-wheeler trucks, full of gear, where the standard was three trucks, max. And there were many, many technical errors -- whether it was the girders couldn't support the weight, or the flooring would sink in, or the doors weren't big enough to move the gear through.

The contract rider read like a version of the Chinese Yellow Pages because there was so much equipment, and so many human beings to make it function. So just as a little test, in the technical aspect of the rider, it would say "Article 148: There will be fifteen amperage voltage sockets at twenty-foot spaces, evenly, providing nineteen amperes . . ." This kind of thing. And article number 126, in the middle of nowhere, was: "There will be no brown M&M's in the backstage area, upon pain of forfeiture of the show, with full compensation."

So, when I would walk backstage, if I saw a brown M&M in that bowl . . . well, line-check the entire production. Guaranteed you're going to arrive at a technical error. They didn't read the contract. Guaranteed you'd run into a problem. Sometimes it would threaten to just destroy the whole show. Something like, literally, life-threatening.

And, indeed, what the band found out is that the contract is just as enforceable whether or not you read the contract -- and that appears to be the result online too. While I have heard of a few cases of courts rejecting clickwrap agreements, it certainly sounds like more and more are considering them to be viable, legally-binding contracts.

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Serious Questions Raised About CNN's Use Of Stealthy P2P Video For The Inauguration

from the security-risks-abound dept

CNN got a lot of attention on inauguration day as being the online site of choice for people to watch the streaming video of the events. However, as reader Jim Wood alerts us, many people are probably unaware that they agreed to do so by sharing their bandwidth via a P2P application. Now, first off, I actually think this is a good general use of P2P and have wondered in the past why more streaming apps don't make use of bandwidth sharing P2P in a similar manner. However, it does appear that there are many, many issues with how this was implemented. CNN told people they had to install Octoshape Grid Delivery to watch the video -- and it turns out that wasn't true. You only had to install it if you wanted to make use of the more efficient bandwidth sharing. Also, it doesn't appear that it was clearly explained to users at all what they were agreeing to. This is especially problematic at a time when more and more ISPs are using broadband caps that often include upstream traffic. Users might not realize at all that they were giving up a significant amount of their bandwidth.

Separately, the EULA for the software contains some totally ridiculous clauses, including: "You may not collect any information about communication in the network of computers that are operating the Software or about the other users of the Software by monitoring, interdicting or intercepting any process of the Software." Yes, if you install the software, you can no longer monitor your own traffic usage, at least according to those terms.

There are also serious concerns about potential security problems associated with the software, since the software can automatically be activated by visiting any "Octoshape-enabled" website. That seems like a zombie-scammer's dream setup: a secretive P2P network that people don't even know they have that can use up a ton of bandwidth, can't be sniffed (legally) and uses an unexpected port.

Again, there are definite useful ways to make use of P2P to spread out the bandwidth, but it needs to be done in a much more transparent, reasonable and safe manner. Unfortunately, this implementation doesn't seem to have done that -- and millions of trusting CNN users may now run into problems because of that.

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Psystar Back To A First Sale Defense Against Apple: Software Was Legally Purchased...

from the and-we-can-do-what-we-want-with-it dept

Psystar tried and failed to pin an antitrust case on Apple in its fight over whether or not Psystar can install MacOS on non-Apple hardware. Now, it appears that the company is back to where we thought it would originally focus: on whether or not a software license agreement can preclude the first sale doctrine that allows you to resell software you legally purchased. It's still a long shot -- but a few recent rulings suggest the courts are at least more open to these discussions. Of course, if Psystar wins, it could severely limit the power of end user license agreements (EULAs) that software companies often use to limit uses of software.

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Judge Rejects Psystar's Antitrust Claims Against Apple

from the not-looking-good-for-psystar dept

Back when Apple first sued Psystar, we were afraid that the smaller company wouldn't have much of a legal leg to stand on, even if it claimed antitrust violations by Apple -- which it did. However, the judge in the case is apparently unconvinced, dismissing Psystar's counterclaims, noting that Psystar did not do a very good job establishing that Apple has a monopoly, noting that the relevant market is not just the Macintosh operating system. Psystar can file an amended complaint, but it seems unlikely that the judge is going to buy any antitrust claims. That means the lawsuit, assuming it continues, will probably focus on the enforceability of certain end user license agreements, which could be more interesting anyway.

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Psystar Apple Case Goes To Arbitration; Results May Be Secret

from the hopefully-not dept

As we noted before there even was a lawsuit, a legal battle between Apple and Mac-clone maker Psystar could represent a key legal battle in determining the enforceability of certain provisions in an end user license agreement (EULA). And, indeed, the case was looking interesting, as Apple sued and Psystar hit back with antitrust charges. However, as a bunch of readers have sent in, it appears that the case has moved to "Alternative Dispute Resolution" (ADR). Basically, rather than going through a lawsuit, the two sides have agreed to first take it to an arbitrator, who may be able to work out a settlement. There are many, many good reasons to go this route (many of them have to do with saving money on the lawsuit), but the fear is that any settlement then isn't a binding legal precedent at all, and the actual results may even be kept secret. I can understand why both sides would do this, but it may deprive the world of a useful precedent.

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Grapes With An EULA

from the what-the-world-is-coming-to dept

In the ongoing trend of adding EULAs to tangible goods, Boing Boing points us to a photo highlighting the fact that certain bags of grapes apparently come with an effective EULA forbidding reproducing or propagating "any portion of the produce, including (but not limited to) seeds, stems, tissue and fruit." Perhaps this is no surprise given the (in our opinion, awful) Supreme Court ruling earlier this year that EULAs on seeds were legit. However, at least in that case, it involved a farmer buying seeds specifically for planting purposes. Putting an EULA on grapes you pick up at the local grocery store just seems extreme. Plus, given the tiny print on the bottom of the bag, I'd imagine that the grape growers who put the EULA there would have a hard time enforcing it, as most buyers could credibly claim not to have even thought to read it, let alone "agreed" to it.

That said, I have to admit that, prior to this, I never once had considered reproducing or propagating the seeds, stems, tissues or fruit of grapes I had bought. I've got a couple bags of grapes in my fridge right now, though, and now I'm curious about figuring out what it would take to do such "propagating" just for the hell of it. Of course, I checked and they don't seem to have been the kind that came with EULAs, so that takes all the fun out of the propagating.

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Psystar Looking To Charge Apple With Antitrust Violations

from the this-will-get-interesting dept

Once "unauthorized" Apple clone maker, Psystar, was sued by Apple, we fully expected it to challenge the legality of Apple's EULA (end user license agreement) which forbade putting the software on non-Apple hardware (a provision that even Apple has been known to ignore). The comments to our post suggested that a more likely option would be for Psystar to claim that Apple was violating antitrust laws in requiring the software and hardware be bundled that way.

Indeed, it looks like both of those predictions were correct. Psystar's response is likely to focus on both the legality of the EULA and whether or not Apple violated antitrust law. As predicted, this case may be very interesting to watch -- and the end result could be very important for many other companies in the tech space.

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Apple Finally Sues Psystar For Selling Mac Clones

from the bring-up-the-eula dept

Apple has finally sued clone maker Psystar. This was widely expected, so the most surprising part is that it took so long. Psystar, of course, is the company that came on the scene a few months back claiming to sell Apple's operating system on non-Apple hardware. At first, many people thought it was a hoax, but then Psystar actually started showing machines. Then the question turned to whether or not this is legal. While some say that this is almost certainly the end for Psystar, the company has insisted that what it's doing is perfectly legal. That may be quite debatable, but if this does go to court, it could put to the test the question of just how enforceable end user license agreements (EULAs) really are. Apple's EULA prevents buyers from putting its OS on a non-Apple machine -- but as we've pointed out, even Apple has been known to ignore this provision. While chances are Apple will prevail, if Psystar is willing to put up the fight, it has the potential to limit the power of click-through agreements. Update: This just gets better and better. Not only is Apple suing, but it's demanding that all Psystar machines that have already been sold need to be recalled.

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Can A Company Ban Retailers From Selling Its Products On eBay?

from the bad-for-your-market dept

Right on the heels of the awful court decision in France saying that eBay can be barred from selling even legitimate products, it appears some companies in England are shooting for a similar ruling. Jon Pyser writes in to let us know that a bunch of baby stroller companies in the UK are pushing hard to stop retailers from selling their legitimately purchased products on eBay. Effectively, they're trying to put EULAs on baby strollers suggesting that the retailer buyers don't actually have the right to resell what they've legally purchased. Not only is this questionable from a legal standpoint, it's dumb from a business standpoint. A healthy secondary market for products increases the value of the product itself, since buyers intrinsically recognize the potential resale market in determining the value of purchasing the original. In fact, one retailer notes that in taking away eBay sales, it's made selling that brand of stroller unprofitable. You would think, after 200+ years of economists explaining how protectionism hurts your own market, that people would understand this concept by now.

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Courts Should Reject Blizzard's Assault on the First Sale Doctrine

from the contract-or-copyright? dept

We've written before about the ongoing fight over the legal status of end-user license agreements. Many software companies have tried to claim that breaking an EULA is copyright infringement, which often carries harsher penalties and stronger remedies than mere breaches of contract. The courts have generally resisted these arguments, holding that a copyright holder cannot expand the scope of copyright simply by attaching a "license" to its products. The Electronic Frontier Foundation points to the latest skirmish in this debate: Blizzard has taken the position that using a piece of software called Glider to cheat in World of Warcraft is not only contrary to the game's license agreement but is copyright infringement as well. Indeed, on Blizzard's theory, any violation of the license agreement would constitute copyright infringement.

Public Knowledge has submitted a brief in the case pointing out the real problems the courts would cause if they accepted Blizzard's argument. For example, among the terms of the World of Warcraft license are rules about what you can name your in-game characters. Blizzard's theory would mean that if you choose a name that violates those rules (such as naming your character after a "popular culture figure, celebrity, or media personality"), you would not only get kicked out of the game, but you would be liable for copyright infringement too! This is plainly not how copyright is supposed to work, and PK rightly urges the court to reject Blizzard's over-reaching argument. Perhaps most troubling, accepting Blizzard's argument would mean that software vendors would have the power to dictate who may make software that interoperates with their products. Outside of the much-reviled DMCA, copyright law has never given software vendors this kind of control, and there's no good reason to start now.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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How Do You Enforce An EULA On Malware?

from the honor-among-thieves? dept

We've written about all sorts of crazy things that software companies do in their EULAs (End User License Agreement), but it really says something about how ingrained the concept of an EULA has become that malware companies are starting to offer such draconian EULAs on their products (found via Ars Technica). Among the more amusing features of the EULA is a guarantee to buy any future upgrades. How's that for lock-in? Of course, EULAs are barely enforceable as is, and when you're selling to scammers and crooks they become even less so. Most EULAs are backed up via the power of copyright law, but that obviously doesn't work in this case. So how are the malware authors enforcing it? In typical organized crime fashion: with threats to destroy everything else you've got. Specifically, if it catches anyone violating the terms, it promises to send their botnet code to various antispyware companies -- effectively handing over the location of their secret hideout to the malware police. Who knew that honor among thieves now has taken on an EULA angle? Of course, we already know that almost no one reads normal software EULAs, so I somehow doubt that the online scammers using this software are bothering with the fine print either.

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