Psystar files for bankruptcy likely delaying Apple case
Psystar abruptly filed for bankruptcy protection in the state of Florida last week in a move that's likely to delay or end its ongoing legal proceedings with Apple over the sale of unauthorized Mac clones.
The voluntary petition for bankruptcy [PDF] was filed last Thursday in the United States Bankruptcy Court for the Southern District of Florida, indicating that Psystar is more than $259,000 in debt. The MacObserver, speculates that this may be an indication that the company's financial backers may have pulled out under the belief that Apple will inevitably prevail in the lawsuit against the unauthorized clone maker.
Fed up with the Florida-based firm's online sale of knock-off Mac systems running hacked versions of the Mac OS X operating system, Apple last July sued Pystar on grounds of copyright infringement. Pystar retaliated with a counterclaim of is own, alleging that Apple was violating anti-trust laws through the terms of its Mac OS X end user license agreement, which forbids the installation of the software on non-Apple hardware.
The court eventually threw out Pystar's anti-trust claims but allowed the company to proceed with its second line of defense, which argues that Apple wrongfully extended the scope of its Mac OS copyright through the end user license agreement.
For its part, Apple has also said in court documents that it believes Psystar may be part of a larger conspiracy and is seeking to uncover unknown parties who may be secretly backing the clone maker, either financially or otherwise, in its efforts to disrupt Apple's stronghold on Mac hardware sales.
In an amended motion filed [PDF] last week, Psystar attributed its hardships to the turbulent global economy and pullback in consumer spending, saying the crisis has spilled over to its creditors, who have tightened their terms and become more demanding for immediate payments.
"Debtor’s vendors due to their own financial problems are not being able to supply all necessary items to allow Debtor to produce their product, thus, forcing Debtor to pay higher prices for parts in order to fulfill customer orders in a timely manner and to assure satisfaction with the product," Psystar's attorneys wrote. "These factors seriously contribute to the Debtor not being able to turn a significant profit in each sale."
Psystar's request for bankruptcy may delay its case against Apple given that proceedings in that case will be put on hold while the bankruptcy court hears the clone maker's case for Chapter 11 protection. However, the bankruptcy court will reportedly hold a meeting on June 5th where Psystar's creditors will be named, meaning any unknown parties backing the clone maker financially will be exposed.
It's likely to be only a few months before the court lifts its hold on Psystar's proceedings with Apple. But as the MacObserver points out, "Even if Psystar has plans of continuing its battle against Apple to sell PCs with Mac OS X installed, it isn't in a strong position to move forward once the Judge overseeing its bankruptcy lifts the automatic stay since it doesn't likely have money to pay for its legal defense."
For its part, Psystar maintained in court documents filed last week that it "plans on emerging from this Chapter 11 with a strong and effective plan to make an increasingly higher profit and still provide the consumer with the product that they have grown to enjoy and trust."
The voluntary petition for bankruptcy [PDF] was filed last Thursday in the United States Bankruptcy Court for the Southern District of Florida, indicating that Psystar is more than $259,000 in debt. The MacObserver, speculates that this may be an indication that the company's financial backers may have pulled out under the belief that Apple will inevitably prevail in the lawsuit against the unauthorized clone maker.
Fed up with the Florida-based firm's online sale of knock-off Mac systems running hacked versions of the Mac OS X operating system, Apple last July sued Pystar on grounds of copyright infringement. Pystar retaliated with a counterclaim of is own, alleging that Apple was violating anti-trust laws through the terms of its Mac OS X end user license agreement, which forbids the installation of the software on non-Apple hardware.
The court eventually threw out Pystar's anti-trust claims but allowed the company to proceed with its second line of defense, which argues that Apple wrongfully extended the scope of its Mac OS copyright through the end user license agreement.
For its part, Apple has also said in court documents that it believes Psystar may be part of a larger conspiracy and is seeking to uncover unknown parties who may be secretly backing the clone maker, either financially or otherwise, in its efforts to disrupt Apple's stronghold on Mac hardware sales.
In an amended motion filed [PDF] last week, Psystar attributed its hardships to the turbulent global economy and pullback in consumer spending, saying the crisis has spilled over to its creditors, who have tightened their terms and become more demanding for immediate payments.
"Debtor’s vendors due to their own financial problems are not being able to supply all necessary items to allow Debtor to produce their product, thus, forcing Debtor to pay higher prices for parts in order to fulfill customer orders in a timely manner and to assure satisfaction with the product," Psystar's attorneys wrote. "These factors seriously contribute to the Debtor not being able to turn a significant profit in each sale."
Psystar's request for bankruptcy may delay its case against Apple given that proceedings in that case will be put on hold while the bankruptcy court hears the clone maker's case for Chapter 11 protection. However, the bankruptcy court will reportedly hold a meeting on June 5th where Psystar's creditors will be named, meaning any unknown parties backing the clone maker financially will be exposed.
It's likely to be only a few months before the court lifts its hold on Psystar's proceedings with Apple. But as the MacObserver points out, "Even if Psystar has plans of continuing its battle against Apple to sell PCs with Mac OS X installed, it isn't in a strong position to move forward once the Judge overseeing its bankruptcy lifts the automatic stay since it doesn't likely have money to pay for its legal defense."
For its part, Psystar maintained in court documents filed last week that it "plans on emerging from this Chapter 11 with a strong and effective plan to make an increasingly higher profit and still provide the consumer with the product that they have grown to enjoy and trust."
Comments
the bankruptcy court will reportedly hold a meeting on June 5th where Psystar's will be named, meaning any unknown parties backing the clone maker financially will be exposed.
Where Pystar's [backers, investors, partners..] will be named?
I don't think that it would be fair if the bankruptcy filing stays the civil law suit. Apple has probably spent hundreds of thousands of dollars in legal fees at this point, so the case should be allowed to proceed just for its precedential value to Apple. Of course, any judgment against Psytar would then be subject to the bankruptcy filing (priority rules, enforcement, etc).
11 U.S.C. § 362(a).
The automatic stay bars, inter alia:
(1)\tthe commencement or continuation of lawsuits or administrative proceedings against the debtor to recover pre-petition claims;
Edit: I might add, that if it's discovered that there is actually a conspiracy behind this, the whole thing is really quite intriguing. Quite the effort to destroy the reputation and try and undo the model of another company!
Jimzip
Where Pystar's [backers, investors, partners..] will be named?
I don't think that it would be fair if the bankruptcy filing stays the civil law suit. Apple has probably spent hundreds of thousands of dollars in legal fees at this point, so the case should be allowed to proceed just for its precedential value to Apple. Of course, any judgment against Psytar would then be subject to the bankruptcy filing (priority rules, enforcement, etc).
11 U.S.C. § 362(a).
The automatic stay bars, inter alia:
(1)\tthe commencement or continuation of lawsuits or administrative proceedings against the debtor to recover pre-petition claims;
Hundreds of thousands in legal fees? not likely, they have their own staff lawyers.
If Apple can put these chumps out of business completely, they will have successfully defended their intellectual property. So be it with crooks!
suit against Apple, will the assets of those friends be taken into consideration in the
bankruptcy case? In other words, will it be possible for Apple to reach their hands
into those deep pockets, under some scenario?
The ONLY thing I'm interested in is if A.) There is a financial backer, and B.) If they will expose them to the public. Whether or not Psystar goes bankrupt and if Apple is "winning the case" against them, I couldn't care less about (because it was the obvious ending lol.)
The ironic part is when the ower was asked to produce documents to show what his Cash FLow was he answer was he did not have such documentation... At first we though it was some sort of delay tactic, but maybe the guy had no clue and maybe he had no backers he was just an idiot and found so lawyer who shared his dilutions of winning against Apple.
Where Pystar's [backers, investors, partners..] will be named?
The bankruptcy filing does not necessarily stay the civil law suit. Apple has probably spent hundreds of thousands of dollars in legal fees at this point, so the case should be allowed to proceed just for its precedential value to Apple. Of course, any judgment against Psytar would then be subject to the bankruptcy filing (priority rules, enforcement, etc).
Another thought
Most likely Apple will let this thing die where it is, taking no further action. Going after what remains of Pystar to recover costs would be throwing good money after bad. But suppose for a moment that Apple made something like this as an offer to Pystar. All action against them will cease if Pystar makes a public declaration. That ONE they will cease any and all cloning operations and not restart them at any time in the future. TWO Pystar shall post publicly a list any and all backers past and present.
I think that idea has a snowball's chance in July, but it is nice to dream. The list I think would have some very familiar names.
Hundreds of thousands in legal fees? not likely, they have their own staff lawyers.
1. Yes, but in-house counsel rarely deal with these types of cases in-house. This lawsuit is being handled by Townsend and Townsend (an outside law firm), not by Apple's corporate lawyers.
http://www.townsend.com/
Townsend & Townsend is not cheap.
2. Even if this case was being handled by Apple's in-house attorneys, do you think that these lawyers work for free?
who didn't guess this was going to be the outcome. There is no way a PC assembler even putting OSX on it was going to survey this economy.
The ironic part is when the ower was asked to produce documents to show what his Cash FLow was he answer was he did not have such documentation... At first we though it was some sort of delay tactic, but maybe the guy had no clue and maybe he had no backers he was just an idiot and found so lawyer who shared his dilutions of winning against Apple.
For some reason he came to mind while reading your comment
If it is determined that Psystar has been backed by deep-pocketed friends in their
suit against Apple, will the assets of those friends be taken into consideration in the
bankruptcy case? In other words, will it be possible for Apple to reach their hands
into those deep pockets, under some scenario?
I believe (correct me if I am wrong) that Psystar is/was a limited liability corporation, in which case the answer would most likely be no.
I don't think that it would be fair if the bankruptcy filing stays the civil law suit. Apple has probably spent hundreds of thousands of dollars in legal fees at this point, so the case should be allowed to proceed just for its precedential value to Apple. Of course, any judgment against Psytar would then be subject to the bankruptcy filing (priority rules, enforcement, etc).
11 U.S.C. § 362(a).
The automatic stay bars, inter alia:
(1)\tthe commencement or continuation of lawsuits or administrative proceedings against the debtor to recover pre-petition claims;
You just answered your own question correctly. The suit cannot proceed while the bankruptcy is active per the Bankruptcy Code.
Hundreds of thousands in legal fees? not likely, they have their own staff lawyers.
While Apple certainly has in house counsel (all companies do) they retain outside counsel for specialized litigation, such as this. They are certainly paying good money in attorneys costs/fees, though I am not sure hundreds of thousands of dollars is accurate at this point. A hundred thousand may not be an unreasonable figure given where the case is.
If it is determined that Psystar has been backed by deep-pocketed friends in their
suit against Apple, will the assets of those friends be taken into consideration in the
bankruptcy case? In other words, will it be possible for Apple to reach their hands
into those deep pockets, under some scenario?
No. Investors are just that. If the company goes under, they lose their investment but the liability of a company invested in does not extend. If it turns out that an Apple friend/competitor has bankrolled this operation, then there could be business ramifications in the open market based on how Apple reacts to the disclosure. For example, if it tuns out that M$ had any interest in this, you can bet your a$$ there will be a "I'm a Mac, I'm a PC" commercial about it (or more).
For whom? Why?
Care to elaborate?