Psystar's New Strategy: the Florida Complaint(Groklaw)

I happen to believe that Psystar does have the right to sell hardware that can run the Apple operating systems. And it is clear that Apple is trying its best to preclude anyone from competing in any way with their hardware sales. That is clear enough.

The questions that remain evolve around whether copyrights on software can be used to secure a monopoly market in hardware. Or, whether a EULA can be used to secure a monopoly market in hardware. And the answer to both of those questions is perhaps “no”.

And the reason is simple: Contract law or copyright law does not provide an exemption for antitrust violations.

Certainly copyright law does provide a form of a monopoly if you will but only in the product itself not in secondary markets. And generally speaking you can do anything you want in a contract (EULA) provided it is not an illegal act.

And that is the problem facing Apple here. Apple is trying to secure for itself a monopoly marketplace using contracts (EULAs) and software copyrights. And in the final analysis that will most likely fail. It certainly should fail.

Apple has no right to be the exclusive provider of hardware that works with their software. That violates the very tenets of antitrust law. Certainly Microsoft can not violate antitrust law simply by contracts with its OEMs.

But, the real reason I favor the attempt here by Psystar is simply because consumers should be given the choice to run software (any software) on any hardware they wish regardless of manufacturer.

It is one thing to permit Apple not to warrant or support their software except in certain circumstances. But, it is another to claim that copyrights or contracts can establish monopoly markets elsewhere. Neither copyrights nor contracts provide an exemption to antitrust violations.

All of that having been said, I do not use any Apple products nor do I intend to. Frankly, I do not approve any of their efforts to control and manipulate consumers. They do so with many of their products. And, as a consumer, I am never interested in buying any products from companies that attempt to control their customers in that way.

And, certainly if Apple thinks that they have an advantage in providing both the hardware and the software, that is fine by me. And it is most likely true that they do have an advantage. But, having an advantage is far different that abusing copyright and contract law to establish secondary monopoly markets.

Now whether this second complaint by Psystar is sufficient to open up the market for Mac compatible hardware is uncertain. Personally I think they need to focus more upon the specif nature of what an operating system is and does. And how an operating system (any operating system) does in fact create its own monopoly market if you will. That may not be true for open source or Linux in particular because of the very nature of the Linux distributions. With Linux anyone can be a distributor of their own version. Or, the same version for that matter. So Linux or any GPL product could never be classified as a monopoly product.

As I understand the earlier Psystar complaint the charge as far as antitrust law was concerned focused upon whether the Apple OS was a monopoly product simply cause it had a particular brand attached to it. But, brand names do not necessarily create monopoly markets. Operating systems do. Or, certainly can. However, I do not see how this second complaint fully addresses the issue of how an operating system can in fact create a monopoly marketplace. A marketplace that Apple can use to establish a monopoly in a secondary marketplace.

In the case of an operating system, Apple clearly establishes monopoly power over any applications that might be developed for the OS. And, in this case, at least Apple thinks it has established monopoly power over hardware that can run the OS. In part that explains the premium prices charged by Apple. And it also explains some terms of the EULA.

Apple is not the first company that has tried to establish a monopoly in hardware by restrictive marketing terms of software. Data General tried that in the 70's. And Data General was denied the ability to restrict the sale of its OS for minicomputers to hardware it made. HP also tried a similar approach in the 70's with its data base software. Although in that case HP tried to force the sale of its data base software and a pile of compilers bundled with its minicomputers. Certainly Oracle complained since it was trying to sell its SQL data base to the HP customer base. And, other Cobol compiler companies also wanted to sell to the HP base as well. Did HP hold a monopoly in minicomputer hardware or software? No. And clearly no. DEC was there. Data General was there. And IBM was there. So were a number of other companies. So while none of the minicomputer companies held a monopoly in operating systems for minicomputers, each of them did in fact hold monopoly power within the market as defined by their respective operating systems. And that in fact restricted the ability of HP, Data General, IBM, DEC and others from using the power of their OS and the marketplaces they created to restrict competition in those markets.

It is all in the market definition. But, I am not sure that Psystar can carve out a different market simply based up a price range. That is a bit arbitrary and too convenient. Rather it needs to focus upon the market as defined by the specific nature of an operating system. All operating systems. Linux is the exception in this regard. And perhaps there are other exceptions too. But, almost all operating systems create a monopoly market just because of its very nature. And that is true for the iPhone, Microsoft's Oss, the old MP 3000, the old DG OS, RSTS and most if not all of IBM's operating systems over the years.

Just because the OS itself is not the first monopoly OS that comes to mind does not mean that operating systems do not possess monopoly power. They clearly do. Here, Apple is using that monopoly power to control the hardware marketplace. Microsoft is using it to force the sale of IE. Hp was using it to sell the Image/Query data base system. And Data General was using it to require the purchase of Data General hardware.

Interestingly enough I had a short conversation with Gil Amelio a few years ago. You may recall he is a former CEO for Apple. Well, to no surprise, Mr. Amelio was very familiar with the antitrust actions brought against Data General in their day. Data General wanted to force all its OS customers to buy their hardware from DG. And did DG have competitors for its OS. Certainly. HP, DEC, IBM to name only the major ones. Yet DG was restricted from forcing the sale of DG hardware for running the DG minicomputer OS. And rightly so.

You simply do not get the whole antitrust picture by looking or even reading published cases. Many cases are in fact settled. And, as in the case of the DOJ action against Microsoft, while Microsoft was found to have violated the federal antitrust laws and remains in violation of those very laws to this day, the settlement lets Microsoft continue illegal conduct.

It is true that settlements do not make the law. They simply do not do that.

But, it is also true that the entire body of law is not contained in those prior cases that everyone likes to refer to as “precedents”. There are very few cases that have established the law related to open source software. We all know that. There are actually very few cases that even relate to terms in a EULA which can in fact be enforced. Or, do not violate the antitrust laws. And, clearly the general premise is true that neither contract nor copyright law is a general exemption for antitrust violations.

Is anyone confused that Apple fully intends to use a EULA and a copyright to establish a monopoly in Mac Compatible hardware? I do not think so. And the only question is whether or not a EULA and/or a copyright can be used to establish or maintain a monopoly. And, I have to conclude that is not the case.

I am not fully convinced however that the attorneys for Psystar have brought the necessary legal action to prevent Apple from doing so.