Ninth Circuit Again Rejects Copyright Misuse Defense in Connection With Apple's Copyright Infringement Claim
The primary point of interest in this case is the Ninth Circuit's rejection of the copyright misuse defense to a claim of copyright infringement alleged by Apple. With this rejection, there is still only a single case in which the Ninth Circuit has upheld the use of the defense, Practice Mgmt. Info. Corp. v. Am. Med. Ass'n, 121 F.3d 516 (9th Cir. 1997), amended by 133 F.3d 1140 (9th Cir. 1998).
Beginning in April 2008, Psystar began manufacturing and selling personal computers originally named "OpenMac" and later renamed "Open Computers," on which Psystar had installed a copy of Mac OS X through use of imaging (details of the exact process are described in the Ninth Circuit's opinion). Psystar shipped its Open Computers with an unopened copy of Mac OS X purchased from Apple or third party vendors. "The unopened copy enabled Psystar to maintain it had purchased a copy of Mac OS X for each computer it sold, but the computer actually was to run on the copy of the altered Mac OS X installed in the Psystar computer."
Apple then sued Psystar for, among other things, copyright infringement and Psystar counterclaimed for a declaratory judgment that "Apple was misusing its copyright in Mac OS X by requiring purchasers to run their copies only on Apple computers." Specifically challenged was the following provision of Apple's Software License Agreement ("SLA"):
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.
On cross motions for summary judgment, the district court concluded, in relevant part, that Psystar had infringed Apple's exclusive right to create derivative works and that Apple's SLA was not unduly restrictive and was therefore not copyright misuse.
The Ninth Circuit affirmed that conclusion
principally because [Apple's] licensing agreement was intended to require the operating system to be used on the computer it was designed to operate, and it did not prevent others from developing their own computer or operating systems. These licensing agreements were thus appropriately used to prevent infringement and control use of the copyrighted material.
In reaching that conclusion, the Ninth Circuit opined a bit about the proliferation of license agreements, rather than sales, in the software industry, which it stated was a result of the first sale doctrine. The court also cited to its (relatively) recent opinion in Vernor v. Autodesk, Inc., 621 F.3d 1102 (9th Cir. 2010) (previously blogged here) in which it upheld a license agreement and rejected the first sale defense. In particular, the Ninth Circuit cited the three-factor test adopted in Vernor to distinguish between a software license and a sale of a copy of copyrighted software:
[A] software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user's ability to transfer the software; and (3) imposes notable use restrictions.
Under this test, the Ninth Circuit readily concluded that those, like Psystar, who purchased copies of Mac OS X were licensees not owners of those copies because Apple's SLA states that the software is licensed, not sold (which still seems like a non-factor to me as most if not all owners of copyrighted software will characterize the transaction as a license) and imposed significant use and transfer restrictions with respect to the copies of the software.
Thus, because Apple's SLA was a valid license agreement that reasonably restricted use of the software without preventing the development of competing products, Psystar's copyright misuse defense failed.
The case cite is Apple Inc. v. Psystar Corp., No. 10-15113 (9th Cir. Sept. 28, 2011).
