Psystar bankruptcy dismissal sets stage for Apple suit

[AppleInsider]

As promised, knock-off Mac creator Psystar has emerged from Chapter 11 bankruptcy, but the judge who granted the order has also taken steps to ensure the Florida company won't use the same route to fend off Apple.

The new ruling, as reported by The Mac Observer, ensures that Psystar will not be able to file for Chapter 11 bankruptcy for six months, and will not be able to file for Chapter 7 bankruptcy to avoid its lawsuit with Apple in California. Chapter 11 bankruptcy in the U.S. grants a company the ability to reorganize, while Chapter 7, also known as "straight bankruptcy," is when the business is dissolved and its assets are liquidated.

Psystar's Chapter 11 filing was dismissed in a Florida court, enabling the company to come back and sell new products, as it previously said it would. Last month, the company promised it would marry Mac OS X with Intel's Nehalem Xeon chips to yield the company's "fastest and most quiet computing configuration" yet.

The Doral, Fla.-based solutions provider also used the same e-mail to inform those following its legal proceedings with Apple that its decision to file for Chapter 11 in May was "critical" to maintaining its daily operations, but that the company now sees itself "ready to emerge" from bankruptcy and "again battle Goliath."

Translating the legal-ese of the latest twist in the ongoing Psystar saga, The Unofficial Apple Weblog summarizes the judge's ruling as follows: "Hey, Psystar! You can't use bankruptcy to weasel out of Apple's case against you."

Apple has a lawsuit against Psystar scheduled to start on January 11, 2010. When the company first filed for bankruptcy, the case was put on hold, until Apple had a stay on the case dismissed. Weeks ago, the clone-Mac-maker brought on a new legal team to continue its efforts.

Psystar was forced to file for bankruptcy protection thanks, in part, to its legal bills. The Mac Observer reports that the company owed its former legal team over $88,000.

Last week, Apple sent lawyers to Psystar's Florida headquarters for discovery in the upcoming case in 2010. Calling the event a "circus," the company's official blog invited supporters to attend and show their support.

"They will observe the building process from start to finish, including the installation of OS X on our machines," the company said of Apple's legal team. "We believe the only thing they will discover is what we have been open about from the start, and of course the scorching Florida heat."

[ View this article at AppleInsider.com ]

[Hudson1]

Memo to Prystar:

Attempts at mixing legal proceedings with humor don't work. The only thing it achieves it making you look like idiots (or worse).

[jazzguru]

Let the games begin...er...resume!

[appleuser10145]

Pystar will never become a viable company even if left alone. The best they will ever do is hack together some drivers that will never play consistently with the rest of the OS. They will end up like EmperorLinux, turning out crappy expensive machines that will break with every software update. Apple has nothing to worry about.

[c4rlob]

I can see Apple's legal team just drooling to really sink their teeth into this lawsuit now.

[melgross]

This whole thing would be a joke if it weren't such a serious issue.

[Quadra 610]

A comment on MDN sums it up well:

Comment from: Shadowself

Psystar tried to use the bankruptcy system to get a minimum of six month delay in Apple's suit against them while they continued to sell boxes. That got foiled. Now Psystar wants to drop the bankruptcy proceedings since it did not produce the effect they wanted.

The judge involved has now stated they will not be allowed to re-file bancruptcy under any mode other than chapter 7 -- liquidation. Psystar will not be allowed to use the bankruptcy system to avoid creditors or to restructure. They can file for liquidation, but that is all. In that case the investors in Psystar are last in line to get any money back. They would be way behind Apple in any payout.

Additionally, even if they file for liquidation under bankruptcy they will NOT be allowed a delay in Apple's suit against them. This keeps them from filing, getting a hold put on Apple's suit and then dragging out the liquidation over six months or more while they contiue to sell "clones" (i.e., "liquidate their inventory"). If they try to liquidate Apple will push for an expedited trial or judgement and there will be nothing Psystar can really do to stop it.

Bottom line: Psystar is toast.

[Dr Millmoss]

I'm confused. The article says Psystar's Chapter 11 filing was "dismissed" by the court. Usually in legal lingo, that means it was not allowed. Unless I'm missing something, I think the correct term is "emerged" from Chapter 11.

[Maximara]

It looks like both the Florida and California courts are getting tired of Psystar's antics. There has been something weird as people had a devil of a time finding this company back in April 2008 and there was plenty of bizarreness there--the where is it now nonsense with the addresses, Powerpay dumping them like a hit potato, and other fun things.

Something was bizarre about Psystar from the get go and it just get more Wonderlandish as things go on. I agree with Apple that they are likely a stalking horse and somebody is bankrolling them.

[Dr Millmoss]

Originally Posted by Maximara

I agree with Apple that they are likely a stalking horse and somebody is bankrolling them.

I don't think Apple has ever said such a thing. The source of this idea has been third party speculation.

[JeffDM]

Originally Posted by Maximara

Something was bizarre about Psystar from the get go and it just get more Wonderlandish as things go on. I agree with Apple that they are likely a stalking horse and somebody is bankrolling them.

If someone is bankrolling Psystar, then why do they still owe their previous legal team a good chunk of money? If they really had big investors like some Mac fans alleged, then $88k wouldn't be that big of a deal. I'm not convinced that this operation is any more than a few buddies that didn't know what they were getting into.

[talonhawk]

Originally Posted by Dr Millmoss

I don't think Apple has ever said such a thing. The source of this idea has been third party speculation.

At one point Apple amended it's own suit against Psystar to include a search for additional party(-ies) that may be behind a more concerted effort to hurt Apple. It might be buried by now, but hopefully you can find it in an earlier story.

[Quadra 610]

Originally Posted by JeffDM

If someone is bankrolling Psystar, then why do they still owe their previous legal team a good chunk of money? If they really had big investors like some Mac fans alleged, then $88k wouldn't be that big of a deal. I'm not convinced that this operation is any more than a few buddies that didn't know what they were getting into.

Good point.

It's pretty clear that Psystar couldn't afford to pay its previous legal team, and the current one is probably hoping for some sort of ridiculous windfall in order to get some kind of remuneration.

[melgross]

Originally Posted by Dr Millmoss

I'm confused. The article says Psystar's Chapter 11 filing was "dismissed" by the court. Usually in legal lingo, that means it was not allowed. Unless I'm missing something, I think the correct term is "emerged" from Chapter 11.

I'm not sure how that would work. Usually when a company "emerges" from bankruptcy it's because they have come to terms with their creditors. It's not clear that this happened. Actually, it seems that it hasn't happened.

so it's possible that the judge decided that the bankruptcy wasn't proper in the first place, and dismissed it. If a company can be shown that their only reason to declare bankruptcy is to avoid lawsuits, then it usually isn't granted. It's possible the court may thing that it was granted under false pretenses, and I believe that indeed, that's the situation here.

[melgross]

Originally Posted by Dr Millmoss

I don't think Apple has ever said such a thing. The source of this idea has been third party speculation.

It is true. In their lawsuit, Apple said that their are other entities that are behind the company, and that Apple had information to that effect, and wanted to find more from Psystars books. It was considered to be one reason why Psystar unbelievably said that they hadn't any financial information.

[SpamSandwich]

It would be interesting to be a fly on the wall when Apple unearthed evidence of whoever they thought was behind Psystar. Really makes one wonder if this a single company or a corporate conspiracy. It should be noted that an LLC structure legally protects the identities of all companies or individuals who may be shareholders in the company.

[OC4Theo]

I can't wait to see these bastards shut down. Why is everybody stealing and profiting from Apple? From Microsoft to Palm and everyone and their mothers? Is there no more talent left in America? It is very shameful to see these no-good companies trying to reap off many years of R & D, hundreds of millions of dollars of cost and development.

America has become a deadpan of ignorance. This is what happens when a country spends its resources in war instead of education. Very sad indeed!

[SpamSandwich]

Originally Posted by OC4Theo

I can't wait to see these bastards shut down. Why is everybody stealing and profiting from Apple? From Microsoft to Palm and everyone and their mothers? Is there no more talent left in America? It is very shameful to see these no-good companies trying to reap off many years of R & D, hundreds of millions of dollars of cost and development.

America has become a deadpan of ignorance. This is what happens when a country spends its resources in war instead of education. Very sad indeed!

What in the world is a 'deadpan of ignorance'? I like the sound of it, but it certainly doesn't mean what you think it means.

[Dr Millmoss]

Originally Posted by melgross

I'm not sure how that would work. Usually when a company "emerges" from bankruptcy it's because they have come to terms with their creditors. It's not clear that this happened. Actually, it seems that it hasn't happened.

so it's possible that the judge decided that the bankruptcy wasn't proper in the first place, and dismissed it. If a company can be shown that their only reason to declare bankruptcy is to avoid lawsuits, then it usually isn't granted. It's possible the court may thing that it was granted under false pretenses, and I believe that indeed, that's the situation here.

The court reorganizes their debts such that they can pay them off. The source article doesn't shed any light on this situation, as it suggest that Psystar asked the court to dismiss their Chapter 11 filing. So it's not clear whether their debts were reorganized, or something else happened. Either way, it appears that Apple now has a clear shot at them.

Originally Posted by melgross

It is true. In their lawsuit, Apple said that their are other entities that are behind the company, and that Apple had information to that effect, and wanted to find more from Psystars books. It was considered to be one reason why Psystar unbelievably said that they hadn't any financial information.

From the discussion at the time, I recall only that Apple had named "John Does" in the lawsuit, which some assumed must be an implication that Apple was looking for ghosts in the works, even though it's standard procedure to do this. What I am not recalling is anyone from Apple or their legal briefs stating the belief that Psystar is a front. That's what I remember anyway.

EDIT: A story from late 2008:

http://news.cnet.com/8301-13579_3-10112307-37.html

[JeffDM]

Originally Posted by SpamSandwich

What in the world is a 'deadpan of ignorance'? I like the sound of it, but it certainly doesn't mean what you think it means.

Would it mean something like playing dumb? It looks like it might be mixing metaphors, but I don't know what the original metaphors are.

[bartfat]

Originally Posted by melgross

This whole thing would be a joke if it weren't such a serious issue.

This IS starting to sound like a bad joke, just like SCO. Just... die... already.

[Chris_CA]

Originally Posted by Dr Millmoss

I'm confused. The article says Psystar's Chapter 11 filing was "dismissed" by the court. Usually in legal lingo, that means it was not allowed.

Correct. It wasn't.

Unless I'm missing something, I think the correct term is "emerged" from Chapter 11.

Emerge simply means what it means - "coming out of" whether the bankruptcy was dismissed or fully administered.
Dismissed means the court does not accept the bankruptcy and creditors/other interested parties are free to pursue legal action.
If the bankruptcy had been allowed, then the plan would have stipulated who is to be paid what and how, if anything.

[melgross]

Originally Posted by SpamSandwich

It would be interesting to be a fly on the wall when Apple unearthed evidence of whoever they thought was behind Psystar. Really makes one wonder if this a single company or a corporate conspiracy. It should be noted that an LLC structure legally protects the identities of all companies or individuals who may be shareholders in the company.

I wonder if that's still true if a company has been shown to have committed illegal activities. Perhaps those identities could be revealed. Possibly if it could be shown that there are other entities, Apple could move for them to be unmasked under some area of the RICO Act. Are they using that already?

[melgross]

Originally Posted by bartfat

This IS starting to sound like a bad joke, just like SCO. Just... die... already.

But the SCO situation really only affected them. there was no wide reach to the decisions, not adding markedly to the law.

If Apple loses this, it would have consequences well beyond Apple.

The SCO case was a footnote in legal history, but this would be a major shift.

[xRube]

***sorry, politics is too far off topic***

[melgross]

Originally Posted by xRube

Sorry, you've only got that partially correct. The lack of creativity and critical thinking in this country is the result of the dumbing down of American because of a flawed liberal agenda that has taken over education. We see the result of decades of that process in the Obama administration's abuse of the free market economy AND the media's complicit cooperation. THAT, sir, is what is very sad

Ok, cut the politics.

[Dr Millmoss]

Another one post wonder. How about a delete?

[melgross]

Originally Posted by Dr Millmoss

Another one post wonder. How about a delete?

Let's see how he rolls.

[bwik]

I support Psystar's right to build hardware and sell the Mac OS. They need not pre-load the OS but I do believe it is permissible for them to build compatible hardware. That they also have the right to sell the OS, boxed, has never been a debate. Maybe they should fall back from the provocative pre-loading of the OS and just sell hardware. The essential hardware business is a needed realm of competition. A computer should be an appliance, not a protected locked device. If Apple wants to sell hardware, let them do it on the merits, not because of some contrived lock their marketing dept cooked up. The pejorative "Hackintosh' is really getting old.

-- Apple owner and shareholder

[ulfoaf]

Originally Posted by Quadra 610

Good point.

It's pretty clear that Psystar couldn't afford to pay its previous legal team, and the current one is probably hoping for some sort of ridiculous windfall in order to get some kind of remuneration.

Agreed. Any major company would laugh at the idea this would ever succeed without being sued out of existence. I doubt they would waste their money just to harass Apple. It amazes me that so many have cheered Pschystar as some kind of legitimate competitor.

[Rot'nApple]

Originally Posted by AppleInsider

"They will observe the building process from start to finish, including the installation of OS X on our machines," the company said of Apple's legal team. "We believe the only thing they will discover is what we have been open about from the start, and of course the scorching Florida heat."

[ View this article at AppleInsider.com ]

Psystar doesn't know the meaning of heat since their actions has unleashed the wrath of one Steve Jobs. The "heat" that is coming upon them will make "the scorching Florida heat" feel like spring in Maine!


Mmmuuuuuaaaaaahhhhahahhahahahaahaha...

[Dr Millmoss]

Originally Posted by bwik

I support Psystar's right to build hardware and sell the Mac OS. They need not pre-load the OS but I do believe it is permissible for them to build compatible hardware. That they also have the right to sell the OS, boxed, has never been a debate. Maybe they should fall back from the provocative pre-loading of the OS and just sell hardware. The essential hardware business is a needed realm of competition. A computer should be an appliance, not a protected locked device. If Apple wants to sell hardware, let them do it on the merits, not because of some contrived lock their marketing dept cooked up. The pejorative "Hackintosh' is really getting old.

This case is about whether they have that right. I wouldn't bet on it.

They can make "compatible hardware" as much as they like -- it's only when they start selling it as a Mac when they get in trouble. I'm not sure selling the the OS separately and unloaded would be a more defensible strategy, if it was clear that they were trying to sell Macs, and invade Apple's patents and trademarks on same. Which it is.

The reactions people have to this case are often perplexing. We are all perfectly happy to buy products composed of parts. We never insist that those parts be deconstructed so that we can make our own, or to force companies to compete with themselves. Only with computers does this seem to make sense to some. I wonder why. It's so completely strange to me.

[Virgil-TB2]

Originally Posted by talonhawk

At one point Apple amended it's own suit against Psystar to include a search for additional party(-ies) that may be behind a more concerted effort to hurt Apple. It might be buried by now, but hopefully you can find it in an earlier story.

The suit was amended to include possible "Jon Doe's" that may be involved in Psystar's operations, but there were multiple interpretations of that rather vague inclusion at the time. One of which is that the "Jon Doe's" referred to are actually the people in the OSX86 community that wrote the patches and hacks that Psystar ripped off for their business model.

So while the current third party assumption has always been that Apple believes Psystar is involved in a conspiracy or is actively looking for conspirators in their operation, that isn't necessarily the case at all.

[melgross]

Originally Posted by bwik

I support Psystar's right to build hardware and sell the Mac OS. They need not pre-load the OS but I do believe it is permissible for them to build compatible hardware. That they also have the right to sell the OS, boxed, has never been a debate. Maybe they should fall back from the provocative pre-loading of the OS and just sell hardware. The essential hardware business is a needed realm of competition. A computer should be an appliance, not a protected locked device. If Apple wants to sell hardware, let them do it on the merits, not because of some contrived lock their marketing dept cooked up. The pejorative "Hackintosh' is really getting old.

-- Apple owner and shareholder

It's not just the hardware and software. Installing OS X on a PC box involves extra software written to modify either something in the computer, or in the OS itself to enable the install.

So if they sold Linux machines, and boxed copies of OS X (and they would have to get some kind of resellers agreement to do that), then the OS still couldn't be installed.

They would then have to give away, or at least give links to the software and methodology of doing the modifications to install the OS. That could still run afoul of the law.

[Quadra 610]

Originally Posted by melgross

It's not just the hardware and software. Installing OS X on a PC box involves extra software written to modify either something in the computer, or in the OS itself to enable the install.

So if they sold Linux machines, and boxed copies of OS X (and they would have to get some kind of resellers agreement to do that), then the OS still couldn't be installed.

They would then have to give away, or at least give links to the software and methodology of doing the modifications to install the OS. That could still run afoul of the law.

This. I couldn't have put it more succinctly myself.

[LE Studios]

When this is all over there should be a ruling for all involved with Psystar to be executed!

[melgross]

Originally Posted by Quadra 610

This. I couldn't have put it more succintly myself.

Sure. Assuming that the protections that software companies count on for their protection isn't overturned in this case, the only recourse companies would have is to sell linux boxes that are built as closely to Apple requirements as possible, as they are doing now, and enumerate exactly what hardware they are using. Then, by word of mouth, those who are willing to go the entire way themselves could buy the machine, and OS (somewhere else), download the special software, and follow all the instructions to go into the terminal etc, to get an install.

They would be on their own.

But Psystar doesn't want to do this, they want to have a much bigger sales base, and profit, by selling Mac boxes.

[success]

Originally Posted by SpamSandwich

What in the world is a 'deadpan of ignorance'? I like the sound of it, but it certainly doesn't mean what you think it means.

Maybe he meant bedpan of flatulence.

[charlituna]

Originally Posted by appleuser10145

Pystar will never become a viable company even if left alone. The best they will ever do is hack together some drivers that will never play consistently with the rest of the OS. They will end up like EmperorLinux, turning out crappy expensive machines that will break with every software update. Apple has nothing to worry about.

the catch is that even if you are correct, not shutting down Psystar and legally validating that Apple has a right to the tying and to not allowing cloning etc means that every other company, one of which might be a viable threat, will think it is okay.

so Apple needs this case against Psystar carry on and be judged in Apple's favor. to protect themselves for the future

Originally Posted by bwik

I support Psystar's right to build hardware and sell the Mac OS.

you support gross violation of the law then.

They need not pre-load the OS but I do believe it is permissible for them to build compatible hardware.

you are correct that they can certainly build any computer configuration that they wish.

Maybe they should fall back from the provocative pre-loading of the OS and just sell hardware.

it isn't the pre-loading per se that is the issue. yes one can argue that since they "bought" the software (there is still doubt due to the lack of evidence that those disks were not stolen) and someone else is using it they violated the End User Agreement. but such agreements are still walking the line of invalidity.

the real concern is that they violated Apple's court certified right to restrict the hardware used with the OS via the creation of a technology that bypasses the allowed lock. If the court places said restriction into the realm of copyright (via installation which copies the software from the physical media to the computer) as Apple wants then that bypass becomes a flagrant of the DCMA. Possibly at a criminal level.

If Apple wants to sell hardware, let them do it on the merits, not because of some contrived lock their marketing dept cooked up.

you don't like the locking but Apple has a right, and some darn good logic, behind them. so you are left with a three choices

1. buy a Mac and get over it
2. buy a Windows machine and get over it
3. buy/build a hackintosh but don't pretend like you are doing anything noble and wonderful. because you aren't. you are encouraging illegal activity.

Originally Posted by melgross

They would then have to give away, or at least give links to the software and methodology of doing the modifications to install the OS. That could still run afoul of the law.

Originally Posted by melgross

those who are willing to go the entire way themselves could buy the machine, and OS (somewhere else), download the special software, and follow all the instructions t

not could. would. the DCMA is against any tech or knowledge that breaks copyright protection. so even instructions on '3 easy changes in Terminal' is not allowed. same for the info on how to unlock the sim on an Iphone.

what Psystar could have legally done and Apple would not be able to stop them, is to have gone to the open source portions of the OS (which are free for the taking), made their own GUI and created their own OS that would work on whatever they wanted and very possibly run all the Mac-compat software. Apple might have tried to ding them about their software but there's tons of 3rd party stuff also that Apple can't speak about.

[Quadra 610]

Originally Posted by charlituna

what Psystar could have legally done and Apple would not be able to stop them, is to have gone to the open source portions of the OS (which are free for the taking), made their own GUI and created their own OS that would work on whatever they wanted and very possibly run all the Mac-compat software. Apple might have tried to ding them about their software but there's tons of 3rd party stuff also that Apple can't speak about.

True, but then they'd likely be running into patent issues - i.e., the Dock, parts of the Leopard theme, etc. It would have to be a different OS to whatever degree. In which case you'd likely end up with something other than OS X that is able to run OS X software. So it wouldn't really be a Mac clone. It would be . . . something I'm not sure anyone would want to begin with.