Apple wins battle to restrict how its operating systems are sold

Apple owns registered copyrights for each OS it sells and has established a licensing agreement that prohibits users from using the software on anything other than its own Mac computers. Rival computer manufacturer Psystar bought "unopened copies" of Apple's OS X and installed the software for use on the computers it sold using decryption software.

Apple sued Psystar for breach of its copyrights and won a district court ruling against its rival in 2009. That court issued Psystar with a permanent injunction banning it from selling computers with Mac-exclusive software installed. Psystar appealed, claiming that Apple's licence agreement was unenforceable and "an unlawful attempt to extend copyright protection to products that are not copyrightable," but the US Court of Appeals disagreed, and has affirmed the earlier district court's ruling.

"Since Psystar has failed to demonstrate that Apple has misused its copyright in Mac OS X, we affirm the district court’s grant of summary judgment on Psystar’s copyright misuse defence," the US Court of Appeals ruling (22-page / 102KB PDF) said.

Psystar had argued that it was entitled to re-sell Apple's OS on its own computers because Apple's licensing agreement "impermissibly extends the reach of Apple’s copyright and constitutes misuse".

Under US copyright laws copyright owners are not allowed to create conditions around their copyrights that stifle competition. The US Court of Appeals said Apple did not misuse its copyrights because there was nothing in its licence agreement that prevented others from manufacturing their own computers and software.

"The copyright misuse doctrine does not prohibit using conditions to control use of copyrighted material, but it does prevent copyright holders from using the conditions to stifle competition," the ruling said.

"We conclude that the district court correctly ruled that Apple had not engaged in copyright misuse," it said.

"This is principally because its 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," it said.

Psystar claimed that Apple did not have the right to control how software was subsequently re-used by those who bought it under another exemption in US copyright law.

Under US copyright law copyright owners have exclusive distribution rights to their works, but under the 'first sale doctrine' those who subsequently buy a legitimate copy of a copyrighted work and sell it on are exempt from the original owners' claims of infringement. However, the doctrine's exemption does not apply to licensing agreements so Psystar's argument failed, the ruling said.

"Psystar argues that Apple ... attempts to control the use of Mac OS X software after it has been sold, because Psystar purchased retail packaged copies of the operating software," the ruling said.

"Psystar contends that while the copyright owner can refuse to sell copies, it cannot control their subsequent use. This argument falsely assumes that Apple transferred ownership of Mac OS X when it sold a retail-packaged DVD containing software designed to enable Apple’s existing customers to upgrade to the latest version of the operating system. The buyers of that DVD purchased the disc. They knew, however, they were not buying the software. Apple’s [licensing agreement] clearly explained this," the ruling said.

The judge said that the district court had legitimately issued a permanent court order banning the sale of Psystar computers with Apple software installed because Apple had "suffered an irreparable injury" for which there was no suitable "remedies" under law to compensate it. The judge also ruled that the district court had correctly weighted "the balance of hardships" of the two companies before coming to its decision and agreed that it would not "disserve" the public issue to issue the ban.