PsyStar’s Suit Against Apple Gets Booted

A California district judge on Tuesday granted Apple’s motion to dismiss claims of anticompetitive behavior by PsyStar, the Florida system builder that has been selling computers with Mac OS preinstalled.

PsyStar charged Apple (NASDAQ: AAPL) with violating antitrust laws through its vehement opposition to third-party hardware makers looking to sell their own computers with Mac OS X preloaded.

Apple has only once allowed Mac clones to be sold, back in the mid-1990s. In 1997, Steve Jobs returned to the company he co-founded and immediately put the kibosh on those clones.

Until recently, PsyStar had been an unknown PC clone system builder in south Florida, one of thousands across the country. It came to national attention for selling computers that had been designed to run a hacked version of the Mac OS X operating system without Apple’s authorization.

Apple sued and PsyStar countersued, charging that Apple violated federal and state antitrust laws by attempting to shut down any and all rivals to Mac OS-based PCs.

But Judge William Alsup rejected PsyStar’s claims and granted Apple’s motion to have the countersuit thrown out of court unless the clone maker can come up with a better argument by Dec. 8.

PsyStar had complained that Apple is engaged in anticompetitive practices to protect its monopoly in the Mac OS market, a market that comprises single-digit (albeit fast-growing) share of the overall PC market.

PsyStar’s claims of anticompetitive activity hinged on defining a market by one brand, Apple’s own — a definition that was neither legally nor factually plausible, Apple had argued.

In a 19-page ruling, Alsup agreed, writing that a relevant market must include “the group or groups of sellers or producers who have actual or potential ability to deprive each other of significant levels of business.”

Alsup further wrote that PsyStar’s claims “fail to allege facts plausibly supporting the counterintuitive claim that Apple’s operating system is so unique that it suffers no actual or potential competitors … [PsyStar] admits that market studies indicate that, although Apple computers with Mac OS enjoy strong brand recognition and loyalty, they are not wholly lacking in competition.”

The judge also dismissed the remainder of PsyStar’s stated claims for a lack of sufficient evidence to back them up, including allegations that Apple is violating the common law of unfair competition, California’s antitrust Cartwright Act and the California Business and Professions Code.

“For the above-stated reasons, PsyStar’s claim that Mac OS-compatible computer hardware systems constitute a distinct submarket or aftermarket contravenes the pertinent legal standards, and Apple’s motion to dismiss PsyStar’s federal counterclaims is therefore granted,” he wrote.

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