Apple Inc. v. Psystar Corp.

A copyright misuse defense is invalid when a licensing agreement restricts the use of its own software and not the development of competing software.

Apple Inc. brought an action against Psystar Corp., a small computer manufacturer, for copyright infringement because Psystar was installing Apple’s software in their own computers and selling a packaged version accompanying the computer. Psystar alleged that Apple misused its copyright by prohibiting the use of their operating system software on any non-Apple computers after it had been sold. The district court granted summary judgment in favor of Apple, and Psystar appealed the court’s rejection of the "copyright misuse defense”. The Ninth Circuit affirmed the summary judgment ruling. First, the Court found that the “first sale doctrine” did not apply because Apple’s licensing agreement satisfies Verner’s three-factor test and by purchasing the software, Psystar became licensees not owners. As a licensee, Psystar is prohibited from re-selling Apple’s software installed in or with their own computers. Second, Psystar’s copyright misuse defense is invalid because Apple’s licensing agreement only controls the use of its own copyrighted software, but does not “stifle competition” by preventing Psystar from developing its own operating systems. AFFIRMED in part, REMANDED in part.