PSYSTAR HIT WITH $5K FINE FOR DISCOVERY ABUSE (Apple Computer)

Psystar Hit with $5K Fine for Discovery Abuse
August 25th, 2009 at 11:03 AM
by Jeff Gamet

Unauthorized Mac clone maker Psystar was slapped with a US$5,000 fine for discovery abuse, indicating the company's "guns blazin'" legal strategy may have misfired. The ruling came as part of Apple's case against the company for selling PCs with Mac OS X pre-installed.

"The $5,000.00 penalty means that judge Alsup has found that Psystar has violated the rules of discovery," an attorney familiar with this type of case told The Mac Observer. "That indicates that Psystar is in trouble with the court. However, it is impossible to determine, because the proceedings are under seal, exactly on what Judge Alsup is focusing."

The judge overseeing the case in U.S. District Court in Northern California, Judge William Alsup, also ordered supplemental briefs to be filed by Thursday, August 27 -- an indication that he likely isn't finished dealing with Psystar for its actions in the discovery process.

Apple filed its lawsuit against Psystar claiming the company was violating the Mac OS X end user licensing agreement, and that it was violating the Digital Millennium Copyright Act with the steps it used to install the Mac operating system on PCs. Psystar countered that it is within its rights to build and sell PCs with Mac OS X pre-installed and that Apple is overstepping its bounds by blocking companies from selling Mac clones.

Judge Alsup's ruling comes after Apple filed a brief with the court alleging Psystar intentionally destroyed evidence by deleting the code it uses to install Mac OS X on generic PCs. According to Apple's brief, Psystar CEO Rudy Pedraza admitted that his company deleted the code instead of turning it over to Apple's legal team, violating a requirement to preserve evidence.

Apple asked the court to order Psystar to produce the missing code as part of its brief. It also asked for court-imposed sanctions if Psystar isn't able to produce the requested software, and for a court order requiring the company to admit to destroying the evidence along with sanctions for discovery misconduct.

If Judge Alsup's fine is related to Psystar's alleged destruction of evidence, the company could find itself in a serious legal bind with the court. "Destroying evidence could be referred to the U.S. Attorney as possible obstruction of justice and/or perjury, both of which are federal felonies," TMO's legal contact said.

Should the court follow that path, Psystar's top brass -- namely Mr. Pedraza -- could be facing criminal charges, too, and considering his company's track record in court so far, that's probably a path he doesn't want to go down.

Psystar is going to be better known as "Psycho-star" soon... :-)

On their website, Psystar was inviting their customers to submit questions to ask a list of Apple luminaries under oath... which Psystar would then share with the world after the close of the case. The obvious hint was that it was an opportunity to ask questions under oath about issues unrelated to the legal issues at hand and then Pedraza would publish these corporate secrets to the world. That is a big no-no.

Apparently, during the questioning of Phil Shiller, the attorney for Psystar went beyond the agreed bounds of his field of established expertise and the purpose of the discovery, into areas that Shiller refused to answer stating that they were irrelevant and proprietary corporate data unrelated to the issues at hand.

Apple, once they saw the direction of the questions relating to individual product profit margins and price points, stated that given Psystar's financial health (or lack there-of) that they would forgo recovery of financial loss damages... but would, if more evidence of hidden finances were uncovered, still reserve the right to resurrect those damages.

I don’t know... it seems that the average computer user is not going to run into problems with the EULAs (End-User License Agreements)

Software license agreement
http://en.wikipedia.org/wiki/Software_license_agreement

I would be more inclined to make it so that the DMCA wasn’t as far-reaching as it is....

DMCA - Digital Millennium Copyright Act.
http://en.wikipedia.org/wiki/Digital_Millennium_Copyright_Act

It’s the DMCA that is the real problem and is way too far-reaching and restrictive (for the average consumer, that is...).

The whole purpose of most EULAs is to take away the rights you normally would have under copyright. They even go further than you might think. I consider many of these to be abuse of copyright and unenforceable. Copyright was meant to foster creation of works, not this.

If you wonder whether a EULA goes too far, just think about it being applied to a book you bought. Would you have to get prior approval from the publisher for a review? You can’t loan a book to a friend, sell it, or trade it in at a used book store for credit? The book is tied to your home, and you lose the right to that book if you move? Do they have a mechanism to remotely destroy your book, and make it against the EULA to protect your book from said destruction? Can they force you to destroy your book if you violated any of these terms?

If any of that doesn’t sound right to you, then you have a problem with most EULAs.

Some more info...

Court orders Psystar to pay Apple $5,000 for baseless discovery motion
Wed, Aug 26, 2009

As a result of filing a motion that Judge Alsup found to be completely baseless, Psystar was ordered earlier this week to pay Apple $5,000 in attorneys fees and, perhaps, to send a message to the beleaguered clonemaker that its antics are starting to wear thin.

Here’s what went down.

The discovery process between Psystar and Apple is in full swing, and it wasn’t too long ago that Psystar bragged on its website that it would soon be deposing some of the higher ups at Apple, with the most notable name on the list being that of Phil Schiller, Apple’s Senior VP of Worldwide Product Marketing.

After deposing Schiller, Psystar filed a motion with the court alleging that Schiller “appeared at his deposition wholly unprepared and unwilling to testify” when questioned about how Psystar’s clone business hurt Apple’s bottom line.

Apple soon responded with its own motion arguing that the information sought by Psystar at Schiller’s deposition was completely outside the scope of what Schiller was qualified and legally expected to answer. Schiller is a marketing guy, and as Apple points out, Psystar’s line of questioning about Apple’s lost profits and gross margins are typically reserved for a designated expert witness.

From the outset, Psystar’s counsel disregarded the scope of testimony for which Mr. Schiller was designated. Despite Apple’s objections, Psystar’s counsel sought testimony on the quantification of damages - the subject of expert testimony - rather than the injury suffered by Apple. Mr. Schiller was fully prepared to discuss the non-quantifiable, irreparable injury to Apple but Psystar’s counsel chose not to ask those questions and terminated the deposition instead.

Even more intriguing was Apple’s assertion that Psystar’s motion was misleading and purposefully left out a number of key facts.

After hearing both sides of the story, Judge Alsup issued a minute entry requiring Psystar to pay Apple $5,000 and requesting that both parties file supplemental briefs with the court by Thursday, August 27.

The ruling from Judge Alsup is somewhat unusual, and suggests that Psystar’s conduct in filing its motion to compel was particularly egregious. Our guess is that Psystar either filed a misleading brief which left out important facts (as Apple claims), or that Psystar’s questioning of Schiller was so unreasonably broad that its motion to compel the court for yet another deposition was a waste of time and a blatant misuse of the court’s resources. Either way, Psystar may soon realize that it’s strategy to take on Apple guns blazin’ might not be the best idea when your legal case is tenuous at best.

http://www.edibleapple.com/court-orders-psystar-to-pay-apple-5000-for-baseless-discovery-motion/

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