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You are here: Home / Business Briefing / Mac Cloner Loses Antitrust Shield
Psystar Loses Antitrust Shield in Mac Clone Battle
Psystar Loses Antitrust Shield in Mac Clone Battle
By Jennifer LeClaire / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
PUBLISHED:
NOVEMBER
19
2008
A federal judge on Tuesday dismissed charges from Mac clone maker Psystar accusing Apple of running a monopoly. Psystar sued Apple in U.S. District Court claiming violations of the Sherman Antitrust Act and the Clayton Antitrust Act.

The Doral, Fla.-based Psystar accused Apple of forcing a tie between the Mac OS X operating system and Apple's hardware in the end-user licensing agreement. Psystar argued that Apple's EULA unlawfully restrained trade by barring users from installing its operating system on non-Apple hardware.

Psystar sells computers that run Apple's operating system for a fraction of the cost of Apple computers.

Contradictory Allegations

Judge William Alsup ruled that Apple did not violate federal and state antitrust laws. Psystar's claim did not meet the requirements of law, the judge said.

"Indeed, Psystar's allegations are internally contradictory. Psystar alleges that Mac OS is, by definition, an independent and unique market. That is, Mac OS, by definition, admits no reasonable substitutes," Judge Alsup wrote in his ruling.

"Psystar further avers, however, that Apple engages in the alleged anticompetitive conduct 'in order to protect its valuable monopoly in the Mac OS market and, by extension, Apple-labeled computer hardware systems from potential competitive threats,'" the judge wrote, "and that Apple's 'unreasonable restraints on trade allow Apple to maintain its monopoly position with respect to the Mac OS and Apple-labeled computer hardware systems submarket.'"

Not a Narrow Market

Ilan Barzilay, an intellectual-property attorney at Wolf Greenfield in Boston, wasn't surprised by the judge's ruling. The critical determination in any antitrust claim is the definition of the market, he explained. Antitrust plaintiffs want to define the market as narrowly as they can and the defendant wants to define it broadly. Psystar failed to define it narrowly.

"Psystar's only way of succeeding was to define the market as Apple products because Apple owns less than 10 percent of the overall PC market -- and that's not a monopoly. You have to face the sniff test on that," Barzilay said.

"Psystar had to convince the court that Apple computer is a subset of the PC market that, by itself, is a separate market that ought to be considered for antitrust purposes," he said. "The court disagreed. Psystar had an uphill battle to begin with."

Major Blow for Psystar

Psystar has 20 days to amend its complaint and argue its case before the judge. Psystar's suit is a countermove against a suit by Apple that claims Psystar is violating copyright laws and Apple's EULA by selling clones running Mac OS X.

Apple sued Psystar in July after the company started selling Apple clones. Apple's suit seeks to shut down the company, and Alsup's decision puts Apple in a stronger position as that case progresses. Indeed, Barzilay called the judge's ruling a major blow to Psystar.

Psystar's battle plan, in part, was to push the monopoly message and use it as a shield against Apple, Barzilay explained. The court took that shield away early in the legal process.

"It would not surprise me if Apple's suit did not run its course," Barzilay said. "It could be cut off early somehow by a settlement from Apple or Psystar, or Psystar just folding under the pressure because they can't get enough product out the door."

Read more on: Mac, Psystar, Apple, Monopoly, EULA, Mac OS X
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