Issue
When you place a PSD or open a file that contains a link to a PSD, Illustrator returns the following error:
"The file is not readable."
The PSD has spot channel defined with a color book that is not installed in your instance of Illustrator.
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Solutions
Solution 1: Change to a non-color book definition in Photoshop
Work with the file creator to determine which color books were used in the definition of spot channels. Then, install those color books on your system. Alternatively, the file creator can edit the image as described below, using a color book that you both have in common.
Open the PSD in an instance of Photoshop that contains the necessary color books.
Open the Channels panel and double-click the Spot channel.
Click the color in the Spot Channel Options dialog box.
Write down the LAB values, then choose a common color book from the Books pop-up menu.
Click the Picker button and adjust the LAB values if necessary.
Click OK twice to exit from the Spot Channel Options dialog box.
Save As and save a version of the file, or replace the existing file.
Solution 2: Embed the PSD file in Illustrator configured with the color book
If you want to be sure that others can open your Illustrator file regardless of which color books they have installed, embed the image rather than maintain a link to it. Place the image again and choose deselect the Link option, or use the following method:
Select the image.
From the Links panel pop-up menu, choose Embed Image.
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Additional information
One of the most common causes of this issue is the use of the new PANTONE® PLUS Digital Libraries for Adobe® CS. Make sure that when you define spot channels with these libraries that other users who work with the files also install them. For more information, see New PANTONE® PLUS Digital Libraries available | Creative Suite (cpsid_85803).
See Also
New PANTONE® PLUS Digital Libraries available | Creative Suite
Pantone color books dont' toggle between CMYK, RGB | Illustrator CS5 | Dutch
Error, "Could not complete your request because the specified color book cannot be found." | Photoshop
Silent PDF export failure, or error, "Internal Error" placing PSD or printing with linked PSD | InDesign