Worms in the Apple

Two rebels take on America's most beloved computer company.

On a larger scale, the Pedrazas' legal team pitches the case against Apple as a battle for the future soul of the computer world. If the brothers win, Apple might be forced to allow its programs to run on any computer on the market. "This isn't just about some Florida startup versus Apple," says Kiwi Camara of the Houston law firm Camara & Sibley, which represents Psystar. "It's about recognizing a future where anything can be connected to anything else."

Apple's attorneys, of course, see things differently. Filings clearly lay out their reasoning. Whenever people buy copies of Mac OS X, they assent to a licensing agreement that pops up when the program is installed. Users promise not to alter the software or run it on anything but Apple hardware. Psystar clearly violated both promises, the lawyers contend.

What's more, Apple holds that consumers who purchase an operating system don't actually own the software. Instead, they purchase the disc and then are "licensed" to use the system. It's a dubious-sounding arrangement that courts, at least so far, have upheld. Many lawyers refer to a 1996 appeals decision, ProCD, Inc. v. Zeidenberg, which found that click-through computer contracts were, in fact, binding.

"Apple feels that if it doesn't go after Psystar, it leaves the door open to all these other companies who want to do the same thing," says Jim Dalrymple, a blogger at Macworld.com. "They want to control the whole product, from software to hardware to advertising, because they present themselves as the one company that can give you everything you need. They don't want to lose that."

So the case, in essence, comes down to whether Apple's licensing agreement trumps the Pedrazas' rights as consumers. Both Apple and Psystar have asked the judge to bypass a trial by issuing a summary judgment.

"There's a lot at stake in this case," the Electronic Frontier Foundation's von Lohmann says. "If Psystar loses, it could set the stage for companies to have a lot more leeway to demand that you use their hardware."

It's not an impossible argument to win, experts say. "They've already put some really good arguments forward," says Randy Friedberg, an intellectual property lawyer following the case in New York. "There's essentially one really interesting question here, and it's whether that licensing agreement holds up."

Apple also claims Psystar is selling an inferior product that diminishes the company's standing in the marketplace. But several tech Web sites have reviewed Psystar's computers and say the company delivers quality. "It was nothing special visually, but from a performance standpoint compared to the price, it was great," says Rich Brown, a writer for CNET who checked out a Psystar last year. "We were pretty surprised. A few of our Web guys upstairs actually bought one after trying the review model."

Derek Rohaly, a Penn State student, nabbed a $1,300 Psystar desktop that would have cost $3,500 if it were a comparable Apple model. A music major, Rohaly uses complex mixing programs. "It felt risky, but I ended up with a really great product at a really low price," he says.

Apple scored a brief victory in May, when Psystar filed for Chapter 11 bankruptcy. The company, Rudy says, "needed some breathing room" as it worked to develop new models and fight off the legal onslaught. But the company quickly emerged from bankruptcy in August.

Psystar's filing did make a few things clear. One is that the company was selling a significant number of computers. Among its listed debtors was DHL, with a pending $12,793 bill for shipping the computers. The company also owed about $25,000 to credit-card processing companies handling the orders.

But the filing also shows the deep personal risk Rudy Pedraza is running by taking on Apple. The bankruptcy listed a $120,000 personal loan from the 25-year-old programmer — and Rudy admits that is just a fraction of the debt he has incurred fighting Apple in court. Psystar, at the time, owed its first law firm, Carr & Ferrell, $88,464 in back fees. "There's no question I'm investing a lot of money," he says.

The immense cost of fighting Apple in court has led to conspiracy theories on the Web that Mac rivals such as IBM and Microsoft secretly fund Psystar. Not true, Rudy says: "I'm the secret funder. It's just me."

But Psystar has no plans to fold. From the firm's tiny headquarters, tucked next to a T-shirt-filled warehouse in a bland industrial complex in Doral, Fla., Rudy and fewer than a dozen other employees still churn out new computers.

Last month, when Apple released its Snow Leopard operating system, Psystar responded the very next day with Snow Leopard–enabled clones.

The defiant move came a little more than a month after Psystar filed its own lawsuit against Apple, an antitrust claim in U.S. District Court in Miami arguing that Apple, in essence, runs an illegal monopoly.

The case argues that because Apple sells a unique, "premium computer," it shouldn't be allowed to corner the market on its operating system by requiring purchases of the company's hardware. "By tying its operating system to Apple-branded hardware, Apple restrains trade in personal computers that run Mac OS X, collects monopoly rents on its Macintoshes, and monopolizes the market for 'premium computers,'" Psystar argues.

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