Psystar Files Bankruptcy, and Stalls Apple's Mac-Cloning Lawsuit

The apple doesn't fall far from the tree, right? Sure, but not all apples are created equal -“ even if they're exact replicas. At least that's what computer giant Apple says about the desktops and laptops PC assembler Psystar is selling equipped with Mac programs. "Hackintosh- is the label Apple has given Psystar's product.

Apple believes Psystar's Mac-cloning process is part of larger conspiracy to break the computer giant's stronghold over the rights to produce and install the Mac programs. In an effort to pierce the veil of this suspected conspiracy, Apple sued Psystar last July, claiming copyright infringement. Psystar counterclaimed, arguing Apple's monopoly over the Mac programs violates antitrust laws and that its copyright protection does not actually prevent installation of Mac software on non-Apple hardware.

As the litigation ensued, Apple made numerous discovery requests for information about Psystar's business operations, trying to uncover the identity of its financial backers. Apple did not get what it wanted from Psystar. So, this past May, the computer giant filed motions to compel Psystar to hand over more information. The court ultimately ordered Psystar to produce various financial documents and to make a company representative available for Apple to depose. The deadline to comply with this order was June 3rd.

But at the end of May -“ a week before the June 3rd deadline -“ Psystar filed a Chapter 11 bankruptcy petition. The automatic stay brought the proceedings in Apple's lawsuit to a screeching halt. Psystar's explanation for the filing rings a familiar tune these days: "Debtor sales have been greatly affected by the decrease in consumer spending. The financial crisis has also caused creditors to tighten up their terms and become more demanding for immediate payment,- Psystar stated in its filing. Translation: "This recession is killing us.-

Apple has a different take on the situation. It thinks the brass at Psystar knows the company is going to get slammed in the lawsuit and is just using the bankruptcy filing to stall the litigation. And, as part of its conspiracy theory, Apple says the timing of Psystar's bankruptcy was designed to avoid having to reveal the identity of its financial backers.

The bankruptcy court is expected to lift the stay on the litigation sometime in the next few months. But Apple wants the stay lifted now, and requested the court to do so last week. It argues that as long as the stay is in place, Psystar can -“ and will -“ continue selling Mac clones, regardless of whether it's illegal. Apple also says that delaying the litigation until after bankruptcy will do no good. Psystar will have no viable business to return to if its practice of selling Mac clones is ultimately deemed illegal, Apples contends.

Even if Apple gets what it wants, it's difficult to see how Psystar can continue with the litigation from practical standpoint. According to its bankruptcy petition, the company is carrying more than $250,000 in debt that it can't afford to pay back. Until Psystar sheds some of these debts, it probably can't afford to defend itself, especially against the giant Apple. Of course, if Apple's conspiracy theory bears out, maybe there's a lot more to Psystar than meets the eye. This should come to light regardless of the litigation, as Psystar will eventually have to tell the bankruptcy court who's running the show.

Oh, and by the way, if you want a "Hackintosh,- now's probably the time to buy; Psystar's online sales operation is still up and running -“ but probably not for long.

From: The Law Offices of John T. Orcutt, with convenient office locations in Raleigh Durham, Fayetteville, and Wilson. Call (toll free) +1-833-627-0115, to set up a free, confidential debt consultation. Visit www.billsbills.com for more information.