Late last week, we discussed the Apple vs. Psystar case (again), and in that article several points were raised which would be handled during a hearing Friday morning. Right after publishing said article, the law firm working for Psystar sent a general email to members of the press (including Groklaw and OSAlert, among others) which contained the court order which resulted from this hearing. So to finalise these issues, let’s walk through them so we can put the lid on this case for a while.
The court order sent to the press by Psystar’s law firm is relatively useless because it lacks any details or contextual information. Without this, the order is very hard to understand. Thanks to a Groklaw reader who attended the hearing, we can now put the court order in perspective and understand what it’s all about.
The most important issue was a discovery dispute between the two companies about Phil Schiller’s deposition, which was not satisfactory according to Psystar’s lawyers. This issue was resolved – but not before public eyes. The matter was handled behind closed doors, so what exactly transpired will most likely never be known.
Another discovery dispute revolved around the lack of metadata for Apple’s discovery documents. This metadata-less method was agreed upon with Psystar’s previous law firm, but this was an oral agreement and no written record was kept. The judge was dissatisfied with Psystar for raising this issue so late in the game, and dissatisfied with Apple for not keeping a written record. It is now resolved by having both companies redo the 50 most important documents in Psystar’s preferred method by Tuesday.
Another issue revolved around an engineer Apple hadn’t listed who Psystar wanted to depose, but since Apple wasn’t planning on listing him, Psystar couldn’t depose him. This matter was resolved quickly.
This leaves us with the new lawsuit filed in Florida about Snow Leopard. Apple wants the two cases combined, but Judge Alsup was not very keen on that idea. Judge Alsup said combining the two cases, which should involve 30 days of additional discovery, including Psystar handing over source code regarding Snow Leopard, would postpone the trial date of coming January. In addition, Judge Alsup was afraid Apple could use it as an unfair delaying tactic. Still, if the Florida courts want to transfer the new case, Alsup said he would seriously consider it.
That’s more or less it. A few interesting tidbits: Psystar’s lawyer used an iPhone and a 13″ MacBook. After the hearing, lawyers from both sides went out for a cup of coffee together.
Your follow-up is appreciated.
I guess they would like Psystar to clone those too. LOL. This reminds me of a Vista presentation where the MS employee was using a MacBook.
This is not unheard of. Even though their clients are enemies, they can still be friends. I’m sure they don’t discuss details of the case though.
I would love to see this charade be over and have Psystar be able to sell the clones with OS X. This would just be better for everyone. Apple will most likely make more money by selling OSX even if it has to modify pricing a little.
“I would love to see this charade be over”
Me too… but probably not with the same outcome that you’re hoping for.
“I would love to see this charade be over and have Psystar be able to sell the clones with OS X.”
If it were beneficial for Apple… then yes.
“This would just be better for everyone.”
Well, not really, I don’t believe it would be beneficial for Mac users or Mac software developers… and certainly not Apple. Developers appreciate the consistent platform, users benefit from a profitable Apple under the current single platform governership and of course Apple benefits from a platform they built by reaping the rewards of that ecosystem. If that changes all that goes away.
“Apple will most likely make more money by selling OSX even if it has to modify pricing a little.”
To achieve the same profit, Apple would need to receive a comparable profit relative to the hardware they would have otherwise sold. The price of the average Mac sold is approximately $1,300. Granted not all that is profit but much of it is. Let’s assume $500 of it is. I think it would only be beneficial (to Apple… mind you this excludes developers and users in the scenario I just suggested) if Apple could sell OS X for roughly $630.
If they did that, they could receive the same profit margin.
Edited 2009-09-08 07:13 UTC
Your profit calculation is probably mistaken. One you’re using gross margin. Two you’re assuming total volume of sales stay the same.
If they make 500 per box by selling the hardware, remember that there are costs associated with being in the hardware business – the stores, the geniuses, the warranty, all that stuff. Profit on boxes is not the same as margin on systems.
The margin on the box includes the margin on a copy of the OS. So if they make 500 on the sale, and they sell a copy of the OS instead, they need to make an additional 370 not an additional 630, because they’d get the 130 anyway, without selling the box.
Suppose they sold two more copies of the OS? Then total margin would be another 260 – it costs almost nothing extra to produce the stuff. The extra would be eaten, probably more than eaten, by the indirect costs of delivering and supporting the hardware.
Suppose also that they did not lose any hardware sales at all. Why should they? Its true that back in the last century they did, but then they were selling ridiculously overpriced hardware. Its different now, isn’t it?
It still seems likely that it is an intrinsically inefficient way to realize the profit potential of the OS, in the face of demand for it, by insisting people buy hardware they do not really want, so as to take the margin on that. It loses you sales, and it dilutes the margin. Its more likely that in the scenario where they permit installations on other hardware that they sell as much hardware as ever, and get extra margin from extra sales of the OS.
I also think, incidentally, they should realize the potential for their hardware by freeing it – sell it with Windows preinstalled. There probably might be a big demand for designer boxes with Windows from Apple.
Now as to why this should be a difficult development environment, why? It will just be the same hardware as Apple uses, just not bought from Apple. Why should it make any difference to developers where the buyer acquired his Core 2? Or his main board chipset? Or graphics card? Its the OS they are developing for. The hardware in Macs is just standard PC hardware. Unless you are develping for EFI, but how many are?
This is not about function, its just about an emotional attachment to their lockin business model by Apple, and it may well be hurting rather than helping profits.
They may not sell ridiculously overpriced hardware, but the product cycle at Apple is much slower than most, nay, all PC manufacturers. Apple is also slower is reducing prices on older hardware, usually only doing it when new versions in that product line is released.
For example, a new MacBook may be priced competitively upon release, but a few months, its the same MacBook with the same specs and same price tag competing against newer laptops with better specs and better value.
And for desktops (i.e. Mac Pro – there isn’t really a direct competitor to the iMac), Apple’s disadvantage will be even more severe. The traditional consumers of Mac Pros (design houses, advertising agencies, creative departments, video editors, etc.) will have no incentive to buy Mac Pros when there are cheaper, better clones (hardware design doesn’t really matter: how many of them have overpriced Apple displays?).
I honestly don’t think Apple can compete in an hardware market without something completely differentiated from its competitors. Like, uhm, an operating system.
Except my MacBook (late 2008 “Santa Rosa”) feels faster than my work laptop, a Dell Lat D830, purchased in the same timeframe. The Dell has better graphics hardware (NVidia based) and more memory (2GB as opposed to 1GB om my MacBook – must get round to upgrading that.. lol)
I wonder what’s the main difference between your Dell and your Mac… something must explain the difference in speed and resource requirement… something like.. Oh, the operating system?
And that’s precisely the point. Apple will find it hard to compete against Dell (or Sony or Lenovo or …) if they had the same operating system as Apple.
So you’re saying that there is no value a Mac has over a Dell, other than the operating system?
Okiedook.
i guess the bigger idea here is that apple is charging alot for a little, which is acceptable in business. In my shop we build Athlon II 2.9s with 2 gigs of ram, dvd burner and 250 sata hd. we charge xxx something for them, and they work great! dell on the other hand has the same system at a xxx something price point. why do we charge as much as we do?
support: you know how many times people will call you because AOL stopped working?
warranty: not everything goes as planned.
cost: we pay a price for theses parts, and we refuse to just break even after selling it, our techs are not in india where the pennies on the dollar mark up is more successful.
Dell may have the upper hand when buying units of 1000’s plus, but our local customers have LOCAL support and LOCAL depot repair.
How this relates to the above coment by JayDee
I think if i were apple id be happy. its a successful business plan, and it works for them. Charging the same as dell for similar hard ware is only going to:
Make apple’s dev costs skyrocket to insure hardware releases and refreshes because of new hardware kexts drivers, and of course buying new gear and marketing the shit every month. it would also end up being a support disaster: as new hardware is released, different service releases of leopard would have to be pressed every time a new IDE / SATA controller entered the ecosystem.
Why can dell do this?
Dell has the support of manufacturers behind them, while they use Windows (much as it sucks) they virtually pay nothing in development costs for drivers and OS releases, they just get the tax from uncle bill ever so often.
Support? yeah good luck, dell has always been a pain in the ass. With apple its not bad. and they will warranty apple care nicely. its worth it.
I guess the real question is, is what apple selling really worth what we pay for it?
“i guess the bigger idea here is that apple is charging alot for a little, which is acceptable in business.”
That may be true if you’re pricing JUST the hard drive, processor, ram and graphics card and optical drive. But Apple includes a lot more. When price comparisons are made equally in all areas of hardware, equal bundled software and equal operating system the Mac typically is less. A PC has greater options to choose from. Because of that strength on the PC side, the needs to meet the limited configuration options on the mac to make a fair comparison. When that’s done, the Mac is a HUGH bargain. Unfortunately, it also means you may be buying hardware that you don’t need. That means that the PC is more flexible but the Mac is less expensive.
Support? yeah good luck, dell has always been a pain in the ass. With apple its not bad.
I’ve owned several PCs and several Macs. And the support options from PCs are typically marginal at best. The strength of the PC is in the fact you can get it repaired almost anywhere. Apple support is really good. Often times fantastic. Unfortunately you have to mail it out for service if something goes wrong. At least they pay for next day delivery.
“I guess the real question is, is what apple selling really worth what we pay for it?”
Considering the fact that Apple gear is typically regarded as high-end and because a PC with equal parts in hardware software and OS is typically equal at best or more at worst… I’d say that Apple gear is very much worth what you pay for it.
Lets cut to the chase. A buyer wanting to save money by running Apple software on cheaper non Apple hardware is perfectly reasonable. However trying to justify it by claiming without evidence that this will benefit Apple’s profits is not only unbelievable but insulting to a very successful Apple management.
“Your profit calculation is probably mistaken. One you’re using gross margin. Two you’re assuming total volume of sales stay the same.”
I believe they do.
“If they make 500 per box by selling the hardware, remember that there are costs associated with being in the hardware business – the stores, the geniuses, the warranty, all that stuff.”
I believe the warranty is inclusive of that margin. As far as the stores and the geniuses are concerned… the stores are profitable all by themselves without talking margins away from the computers. So you’re wrong here. Not only are the stores profitable without taking profit away from hardware, they are among the highest profit margin per square foot throughout the world.
“The margin on the box includes the margin on a copy of the OS.”
Keep in mind that they’re only able to do this BECAUSE they are also selling a computer. So that point is negated.
“Suppose they sold two more copies of the OS?”
The alternative would be that they would have sold two more computers so your point is moot here as well.
“Then total margin would be another 260 – it costs almost nothing extra to produce the stuff.”
True but the hardware is still more profitable.
“Suppose also that they did not lose any hardware sales at all.”
Then they would only be maintaining their hardware sales rather than growing them. That’s not publicly traded companies are supposed to do.
” but then they were selling ridiculously overpriced hardware. Its different now, isn’t it?”
There was a time that Apple’s hardware was priced out of sync with the rest of the industry but I’ve found that the average OS News reader and editor thinks this was much more recently than is true. They typically compare Mac hardware to a comparably equipped PC with the exclusion of so many of the added hardware benefits that are often times included on the Mac. An equal OS and equal bundled software also need to be compared. These typically aren’t in such comparisons. Apple computers aren’t more expensive however there are fewer options to buy less and spend less which fuels this belief.
“It still seems likely that it is an intrinsically inefficient way to realize the profit potential of the OS, in the face of demand for it, by insisting people buy hardware they do not really want, so as to take the margin on that. It loses you sales, and it dilutes the margin.”
I’ll agree that it does cause a company to lose sales but it does cause the company to increase margins. Its the reason why Apple can sell 1/3 the computers that Dell or HP does in a quarter yet pull in 5x the profit. It’s why Apple sells 90% of all the computers on the market that are more than $1,200. Apple’s maintains a highly coveted position to be in as compared to the rest of the industry’s race to the bottom as far as margins are concerned.
“Its more likely that in the scenario where they permit installations on other hardware that they sell as much hardware as ever, and get extra margin from extra sales of the OS.”
That forces Apple to be int he same “race to the bottom” market place that the rest of the PC industry suffers from. If consumers want that, they can get it in Windows and a PC. There are many of us that prefer the controlled environment and the rapid innovation that comes from it. Yes, we may have to buy more than what we originally anticipated, but we know this and realize this when we buy into it.
“I also think, incidentally, they should realize the potential for their hardware by freeing it – sell it with Windows preinstalled.”
In doing so they would be losing their primary advantage.
“There probably might be a big demand for designer boxes with Windows from Apple.”
People can already install Windows on a Mac. If the damned is there (and I suppose there is) Apple is already benefiting from it without adding yet one more item to the equation that consumers would ned to buy when buying a Mac that they may not necessarily want.
“Why should it make any difference to developers where the buyer acquired his Core 2?”
It’s Apple’s Platform so its not about benefit to the developers. It’s an issue about benefit to Apple. By giving up their platform they would be giving up all the advantages I just referenced.
A somewhat larger market is what would be created, with part of that market simply not receiving Apple’s direct support.
This in no-way can be harmful! Larger markets are exactly what developers want!! More apps, more bug fixes.
The reality, however, is that Apple will simply try to stay ahead of the cloners with increasingly complex hoops. That is not wise, Apple really should gently, yet “offishly,” enable MacOS X to run with a minimal number of hacks – regardless of the machine’s maker.
Then, they should sell access to an Apple-Approved badge, with a reduced OS X OEM price and greater freedoms than Microsoft allows with Windows. THEN, Apple should release a FULL retail version which has a Windows Pro price tag ( $400 ), then release Upgrade versions for the normal price $169. The upgrade will only install on a system that currently has MacOS X installed – any version. Upgrade routes are available as normal.
That would appease most everyone – except Microsoft ( who probably has a limited no-compete clause with Apple ).
Not exactly. Apple has only, maybe, $15-45 into each retail box made, if they are selling copies at $169, they are making money. Then, the more copies they sell, the lower the cost per unit sold ( as the CD and box itself is CHEAP ).
The only costs that would go up would be support costs, but it would be rather easy to ensure that only those who purchased Apple brand computers could utilize the support as free-loaders. Those purchasing full retail copies should be given access to best-effort support – and it should say, ON THE BOX, that installation is only supported on Apple Brand computers, others should get support from their respective OEMs.
This is to say, Apple would be in two businesses with one product with minimal additional cost. The problem is that the Apple brand must remain stronger than hell in the face of competition as Apple is not a competitive company ( which is un-American and possibly illegal ).
Apple’s stock-holders won’t care if the many comes from selling OS X or from the machines, only Jobs cares. And perhaps Apple’s lawyers even care ( if there is a Microsoft no-compete clause ).
It seems obvious something behind the scenes is driving decisions at Apple. Something is preventing Apple from taking a near freebie revenue stream readily!
–The loon
lol, seriously? Apple doesn’t have any competition in the personal computer market? Why the hell are they spending all this money on advertising and high-priced retail space then?
Apple, by their own claims, is not in the personal computing market. They ARE their own market. This is their legal rationale for being able to violate anti-trust laws.
Apple considers themselves to be in the elite computing market, which has only one lord: Apple. iPhones are, then, the elite cell-phone market.
If you don’t agree with ‘elite’ then just replace it with ‘Apple.’
These claims were made by Apple in the Apple v. Psystar case in the original case complaint and again in subsequent documentation.
Almost every company needs to advertise, and almost every company wants the best locations. Apple does so because they can afford to do so in a profitable fashion ( increased sales ).
The only REAL competition is between operating systems. Even Apple’s marketing acknowledges this. A Mac *IS* a P.C., after-all. Same parts, different BIOS and software.
–The loon
Building a proprietary operating system to differentiate their computer hardware from other systems, and choosing to not license it to others OEMs is a violation of anti-trust law?
You have evidence of this claim, or are you just making it up?
No, but selling a product on the shelf that has restrictions beyond what the law itself provides does. Apple cannot sell you a copy of a copyrighted work and then tell you can’t do something with it!
They could make you sign an agreement, or even re-label that product so that it is easily understood from the title of the product that it is not supported, but support is all they can remove. They can NOT tell you than you can’t do something with your copy ( it is like saying a gun maker can sue you if you shoot a 3-point buck with their gun ).
Apple is claiming Psystar “breached a contract” by installing MacOS on unsupported hardware. Yet, there is no valid contract. EULA are very weak documents, merely capable of reiterating laws and sometimes saying under which laws a product operates. No EULA ( legally known as Terms Of Use ) in software ( generally referred as a “Copy Of A Copyrighted Work” – such as a book, DVD, or audio CD ) can take away rights or dictate how you use the “Copy Of A Copyrighted Work” after purchase. Doing so is outright banned in anti-trust law ( in addition to copyright law ).
The author of a book cannot sue you because you bought a book, wrote a few extra words, then resold the same copy ( being COMPLETELY honest about what you did – making certain the buyer knew what they were getting ).
What Psystar did: they bought MacOS X ( often from Apple directly ) and installed it on a computer they designed to run it. They then told people what they did ( though had a few bad moves at first, naming the first few machines “OpenMacs” a move that SHOULD upset Apple ( but that is **trademark** law ). ) and sold them the results.
One area where Psystar may have been out of bounds is in the re-packaging of updates. This area is VERY cloudy to me, legally speaking. It really depends on how much those updates legally constitute “support.” It also depends on the hoops Psystar needed to take to get the updates in the very first place. Being freely available ( at cost to Apple, even ), Apple is likely not required by any means to provide those to Psystar ( under any terms ). But that depends on the language of the EULA ( being that updates may be treated differently than standard support ).
As you see, the EULA isn’t always invalid. It *IS* binding when it comes to Apple promising value-added goodness ( such as technical support, updates, special access, etc… ). An EULA cannot tell you you can’t do something with the base product, however – you OWN your copy. If you licensed it, Apple would have the right to REQUIRE you to return the MacOS product disc whenever they wanted it back. Do you think they have such a right?
Can Intuit sue you for running Quicken under WINE? Seriously – same issue! If you say ‘yes,’ then why did congress even make an effort to protect / provide / ensure interoperability rights? Indeed, you you think Intuit has such a right, I think you need to take some serious time envisioning yourself being the one being sued for using something you bought in a way in which it was not intended ( like a screw driver as a chisel ).
Another way to tell if you licensed something instead of bought it is to recall whether or not you signed a license agreement prior to, and as a condition of, purchase ( a classical legal requirement ). Agreeing, after purchase, that you licensed something something rather than bought it, will, in every other case, require you to sign an agreement. Clicking an ‘I Agree’ button doesn’t qualify as a ‘digital signature.’ The identity of the person MUST be verified!
That is a one-way street, however. A business merely needs to TELL you that they will provide something to be legally required to do so. It should be in writing, but no signatures are generally required. If a company says you can have access to *all* product updates, free of charge, then they try to charge you for a ‘special’ update, you can sue them.
Apple’s complaint ( ch 21, original complaint ):
“Apple has never authorized Psystar to install, use, or sell the Mac OS software on any non-Apple-labeled hardware.”
And nothing requires Psystar to ask Apple for authorization. Unless you believe software isn’t like a book simply because the instructions are read by a computer instead of a human. How would you like an author telling you can’t read a book using incandescent lighting? THEN, they decided they would use a special coating so that you had to use a SPECIAL light bulb just to read the book? And then, you found a way to read the book with a regular light bulb… but then author sues you! How would you like that?
Later Apple claims Psystar “has reproduced, distributed, and/or displayed the Copyrighted Works” Fact is that this is not true. Apple produced the works and then sold them to Psystar, or made them available for sale without a legal pre-condition, Psystar merely installed on a machine capable of properly reading the words.
The list of obviously false allegation continues, but on to the next part…
Well, you got me to do a lot of re-reading… so I found the area which apparently led me to a bit of confusion for that little statement:
The case’s 16th document “APPLE INC.’S NOTICE OF MOTION AND MOTION TO DISMISS PSYSTAR’S COUNTERCLAIMS” Page 7, starting with line 14.
The argument, in brief, is that Psystar must have alleged that Apple is dominant in a virtual market that Apple claims doesn’t exist ( contrary to my statement and prior belief, so thank you for the chance to be corrected! ).
Apparently, Apple thought that anti-trust law only applies to monopolies. The judge, denying the motion to dismiss, seems likely to think otherwise ( as does previous case law I don’t feel like finding ).
–The loon
would you pay $455* for a copy of mac os x ?
*what windows 7 ultimate costs here with tax
Edited 2009-09-08 09:25 UTC
Maybe Apple should do the following:
If you, the individual, can produce a reference number (serial for hardware or maybe from some other source) you get the “Mac priced” software, else you have to pay a ridiculously high premium. I would subscribe to this. You can then sell the $29/$129 version to legitimate Mac owners and the $500 version to cloners. This is fair – if you *really* want Mac OS X on unsupported hardware, sure – but you pay through the nose for the pleasure.
They’d have to support $500 version then. Not something Apple wants to do.
outsource support to the cheapest place on this planet (=
Edited 2009-09-09 10:51 UTC
desktop with optional commercial support is much better than MAC and the OS comes for free. Psystar also sells Linux and it should also sell BSDs
What is the unique feature of the Mac that none of the above have? OK possibly printing is problem. Why not bundle a printer. Possibly 3D? Use a supported GFX card. I think not many problems exist.