Psystar files for bankruptcy likely delaying Apple case

Posted:
in General Discussion edited January 2014
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."
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Comments

  • Reply 1 of 168
    nerudaneruda Posts: 427member
    Quote:
    Originally Posted by AppleInsider View Post


    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;
  • Reply 2 of 168
    jimzipjimzip Posts: 444member
    Heheh. So begins the tumbling of dominoes that will undo those pricks.



    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
  • Reply 3 of 168
    shavexshavex Posts: 34member
    sad day.
  • Reply 4 of 168
    Quote:
    Originally Posted by Neruda View Post


    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.
  • Reply 5 of 168
    irnchrizirnchriz Posts: 1,588member
    I hope they lose their homes and the shirt off their backs.
  • Reply 6 of 168
    macfandavemacfandave Posts: 603member
    Psystar's bankruptcy isn't delaying Apple's case -- it is proving that Apple's case is working!



    If Apple can put these chumps out of business completely, they will have successfully defended their intellectual property. So be it with crooks!
  • Reply 7 of 168
    quinneyquinney Posts: 2,525member
    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?
  • Reply 8 of 168
    striker_kkstriker_kk Posts: 246member
    These kind of endings in a battle often happens in fairy tales. Psystar's position would be really pathetic if they wont have money to pay their legal team when they are in fight with Apple.
  • Reply 9 of 168
    istinkistink Posts: 250member
    You guys are cheering on Apple in this? Why would you give a shit, seriously? Anyone with a brain knew this would happen and that Apple would win. It's like cheering on someone who's stepping on a spider. LOOK AT THOSE LEGS CURL UP ON THAT LITTLE PRICK!



    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.)
  • Reply 10 of 168
    maestro64maestro64 Posts: 4,564member
    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.
  • Reply 11 of 168
    htoellehtoelle Posts: 89member
    Quote:
    Originally Posted by Neruda View Post


    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.
  • Reply 12 of 168
    nerudaneruda Posts: 427member
    Quote:
    Originally Posted by roehlstation View Post


    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?
  • Reply 13 of 168
    istinkistink Posts: 250member
    Quote:
    Originally Posted by Maestro64 View Post


    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
  • Reply 14 of 168
    nerudaneruda Posts: 427member
    Quote:
    Originally Posted by quinney View Post


    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.
  • Reply 15 of 168
    achieverachiever Posts: 23member
    Quote:
    Originally Posted by Neruda View Post


    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.



    Quote:
    Originally Posted by roehlstation View Post


    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.



    Quote:
    Originally Posted by quinney View Post


    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).
  • Reply 16 of 168
    dr millmossdr millmoss Posts: 5,403member
    If Psystar had deep-pockets financial backers then they very likely would not be filing for bankruptcy protection.
  • Reply 17 of 168
    achieverachiever Posts: 23member
    As an aside, the June 5th hearing is likely a bankruptcy 341(a) hearing, a/k/a the Meeting of Creditors. During this hearing, the Judge will question the debtor on the bankruptcy petition they have filed, their intentions with the bankruptcy,etc. Creditors are allowed to appear and, subject to the discretion of the Judge, are usually allowed to ask questions fo the debtor. In short, Apple can theoretically appear and ask them who has bankrolled their operation, though in reality, that info should have already been disclosed in the bankruptcy schedules. Probably a "nothing to see here, please disburse" type of situation, but you never know.
  • Reply 18 of 168
    ruel24ruel24 Posts: 432member
    Okay, so Pystar makes computers that are 100% Mac OS X compliant. Why does that make them crooks? The parts are open and freely used on PC's running Windows... Folks, if Pystar would win, we all win. It creates competiton, and therefore better products and lower prices. That's capitalism. Hoping Apple wins out is a vote for higher prices, less choice, and whatever Apple feels we deserve to get from them. In other words, you, the consumer, loses.
  • Reply 19 of 168
    anantksundaramanantksundaram Posts: 19,154member
    "End" is more like it. Good riddance.
  • Reply 20 of 168
    anantksundaramanantksundaram Posts: 19,154member
    Quote:
    Originally Posted by shavex View Post


    sad day.



    For whom? Why?



    Care to elaborate?
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