Apple says Psystar holding back info in Mac clone legal case
Apple this week asked a federal court judge to intervene in its discovery process with unauthorized Mac clone maker Psystar, which is reportedly violating proper procedure by refusing to answer key questions and turn over critical financial information about its business.
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 in a California court on grounds of copyright infringement. Pystar soon fired back 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 is allowing 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.
Meanwhile, Apple also at one point expanded its own complaint to allege that 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.
The legal bout, now in the discovery phrase that precedes a formal trial, is seen as a landmark case because it could potentially set a precedent on whether third parties have a right to build and market their own computers capable of running Apple's Mac operating software.
But in a partially redacted administrative request to presiding Judge William Alsup on Wednesday, Apple said representatives for Psystar, including its founder and chief executive Rudy Pedraza, aren't playing nice in the discovery process, and are thus making it extremely difficult for the company and its counsel to obtain the necessary information they need for trial.
In particular, Apple attorney James Gilliland said that despite "numerous meet and confer sessions," Psystar "has produced no monthly profit and loss statement, balance sheets or other financial statements and only a small subset of revenue and cost-related receipts.
"Moreover, at the deposition regarding Psystar?s revenues, profits, assets and liabilities (including investors, lenders or other sources of financial support), taken on March 20, 2009, Psystar?s CEO and founder Rudy Pedraza, the person designated by Psystar to testify on this topic, would not answer basic questions about Psystar?s financials."
Pedraza, who runs small company, reportedly stated approximately 90 times during the deposition "that he did not know or recall answers to basic questions about Psystar?s sales, its general costs and profits, its costs and profits by product line, how it determined its prices and profit margins, [redacted]"
The lack of transparency on Psystar's part regarding its lenders and investors may be an effort conceal the parties behind the Apple-allege conspiracy. Still, these aren't the only disclosure the the small firm is holding back, according to Gilliland. He goes on to inform the judge that Psystar has also failed to turn over any customer purchase receipts or order documents.
"Indeed, despite a supplemental production on April 13, 2009, Psystar still has not produced customer purchase receipts/invoices from at least April 2008, when it began selling its computers, to October 2008. Additionally, only a subset of vendor invoices3, from December 2008 to March 2009, were produced (and those just one day before the deposition)," he wrote.
"Due to these deficiencies in both Psystar?s document production and its testimony (along with others described below), Apple submits this letter brief requesting an order compelling Psystar to produce financial documents sufficient to determine Psystar?s revenues, costs, profits, assets and liabilities and (2) to make available a knowledgeable designee for another deposition on this topic at Psystar?s expense."
A trial date for case is set for November 9th, though a supplemental hearing is likely to be held in the near future to sort through Psystar's failure to comply with standard procedure. The discovery process in the case ends June 26th.
A copy of Gilliland's partially redacted letter to Judge Alsup in PDF format can seen here.
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 in a California court on grounds of copyright infringement. Pystar soon fired back 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 is allowing 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.
Meanwhile, Apple also at one point expanded its own complaint to allege that 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.
The legal bout, now in the discovery phrase that precedes a formal trial, is seen as a landmark case because it could potentially set a precedent on whether third parties have a right to build and market their own computers capable of running Apple's Mac operating software.
But in a partially redacted administrative request to presiding Judge William Alsup on Wednesday, Apple said representatives for Psystar, including its founder and chief executive Rudy Pedraza, aren't playing nice in the discovery process, and are thus making it extremely difficult for the company and its counsel to obtain the necessary information they need for trial.
In particular, Apple attorney James Gilliland said that despite "numerous meet and confer sessions," Psystar "has produced no monthly profit and loss statement, balance sheets or other financial statements and only a small subset of revenue and cost-related receipts.
"Moreover, at the deposition regarding Psystar?s revenues, profits, assets and liabilities (including investors, lenders or other sources of financial support), taken on March 20, 2009, Psystar?s CEO and founder Rudy Pedraza, the person designated by Psystar to testify on this topic, would not answer basic questions about Psystar?s financials."
Pedraza, who runs small company, reportedly stated approximately 90 times during the deposition "that he did not know or recall answers to basic questions about Psystar?s sales, its general costs and profits, its costs and profits by product line, how it determined its prices and profit margins, [redacted]"
The lack of transparency on Psystar's part regarding its lenders and investors may be an effort conceal the parties behind the Apple-allege conspiracy. Still, these aren't the only disclosure the the small firm is holding back, according to Gilliland. He goes on to inform the judge that Psystar has also failed to turn over any customer purchase receipts or order documents.
"Indeed, despite a supplemental production on April 13, 2009, Psystar still has not produced customer purchase receipts/invoices from at least April 2008, when it began selling its computers, to October 2008. Additionally, only a subset of vendor invoices3, from December 2008 to March 2009, were produced (and those just one day before the deposition)," he wrote.
"Due to these deficiencies in both Psystar?s document production and its testimony (along with others described below), Apple submits this letter brief requesting an order compelling Psystar to produce financial documents sufficient to determine Psystar?s revenues, costs, profits, assets and liabilities and (2) to make available a knowledgeable designee for another deposition on this topic at Psystar?s expense."
A trial date for case is set for November 9th, though a supplemental hearing is likely to be held in the near future to sort through Psystar's failure to comply with standard procedure. The discovery process in the case ends June 26th.
A copy of Gilliland's partially redacted letter to Judge Alsup in PDF format can seen here.
Comments
I realise I have taken the time to post this.
Psystar is toast... The Court is not going to look at these shenanigans favorably, now or in the future. Decisions have a way of going against a player, even when there is merit to their arguments, with conduct that tries the Court's patience.
I wouldn't be shocked if they fell off the face of the earth to keep their secrets hidden.
It looks like there is something very funny going on in terms of Psystar. From what I can tell, they're either out-of-control with their finances, or there is a deep secret that they're trying to hide.
I wouldn't be shocked if they fell off the face of the earth to keep their secrets hidden.
Sounds like a bag of hurt coming on...
And, likely that a large backer is lurking hoping to maintain anonymity leaving psystar in the lurch? (as others have noted)
If they're just a small op, then the game is over...otherwise, this may potentially get interesting, and Apple is gonna eat some Pystar!
Pystar stories are bo-o-o-ring.
I realise I have taken the time to post this.
I have to agree, but I like the comments. I didn't even read this article. I'll wait until the final verdict is made before readin about how much Psystar has to pay and how quickly they have to shut down.
Sounds catchy.
Although it would be more risky, moving to custom chipsets in their desktop and laptop computers could effectively stop Pystar. I'm sure that is a road they would only go down should the court side with Pystar, which is unlikely.
Perhaps Psystar doesn't want to produce any financial statements because they haven't got any. I wouldn't be surprised -- this seems like a real shoestring operation.
Either that, or Pedraza has some bad debts or bad connections that are draining him dry. Things you can't exactly put on the books.
It looks like there is something very funny going on in terms of Psystar. From what I can tell, they're either out-of-control with their finances, or there is a deep secret that they're trying to hide.
I wouldn't be shocked if they fell off the face of the earth to keep their secrets hidden.
I'm still not sure. As long as their behaviour can be explained by ideological blindness and general stupidity, I'm inclined to stay on the fence in regards the presence of a conspiracy.
The biggest argument against it, it that the truth always comes out eventually. If Microsoft or some other big concern is pulling Psystar's strings, it will eventually be public knowledge. Nothing can be kept secret forever, especially in a court case. Seen that way, it's a really dumb move for Microsoft to make, borderline criminal even.
Either that, or Pedraza has some bad debts or bad connections that are draining him dry. Things you can't exactly put on the books.
Most likely they are hiding money offshore as a contingency plan.
Pedraza, who runs small company, reportedly stated approximately 90 times during the deposition "that he did not know or recall answers to basic questions about Psystar?s sales, its general costs and profits, its costs and profits by product line, how it determined its prices and profit margins, [redacted]"
Wow, he repeated that sentence 90 times in third-person? Grueling.
I have subsequently read that this company has a big time law firm representing them. Without a doubt they need a lot of money to finance their defense regardless of the legitimacy of this company or its operation.
So they real question: Who is hiding behind Psytar? There are a lot of people with deep pockets out there. But who would have an interest in Psystar succeeding?
Dell? HP? Acer? I thought about Microsoft wanting to hurt Apple. But if Apple is forced to allow 3rd parties to sell Mac OSX computers, that is potentially a greater threat to MS than Apple in its current state. I am almost certain a PC vendor is backing Psysar, but who??
That is the fascinating story here. Will we ever know? Will someone let something slip or leak out?
Apple: the New Microsoft.
Sounds catchy.
Well, that's what I thought at first, but the key difference here is Psystar isn't some company trying to introduce an original product while Apple stomps them. They are a shoestring operation (as someone pointed out) that's meant to disrupt Apple sales.
Look at these specs:
Psystar:
OSX 10.5 w/ iLife & iWork
2.83GHz C2Q Q9550
8GB DDR2-800
1TB HDD
20x DVD burner
9800GT 512mb
802.11n
Keyboard/Mouse
Three year warranty on parts and support
Add in a $300 monitor from newegg and the final price is 2032.98.
Comparatively from Apple:
2.66 Quad Xeon
3GB 1066DDR3
1TB HDD (same as above, 7200 rpm SATA)
nvidia Gt 120 512mb
keyboard/mouse
802.11n
iWork 09
No monitor mind you, all for 2698.00
Either Psystar isn't turning a profit, or Apple is inflating the price substantially. I think it's somewhere in the middle.