Mac clone maker Psystar files for bankruptcy protection
This post was updated at 10:45 a.m. PDT with information from court filings.
Psystar, maker of the the Open Computer, has filed for bankruptcy protection.
The papers were filed in a Florida federal court Thursday. Psystar is more than $250,000 in debt, according to the bankruptcy petition, owed mostly to shipping companies, the IRS, and the law firm Carr & Farrell.
In the filing, Psystar pins its financial mess on the poor economy.
"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," the company said in a court document.
Psystar also blames its partner vendors' own financial problems, which resulted in Psystar having to pay higher prices on parts. At that point, Psystar was unable "to turn a significant profit in each sale."
The Chapter 11 filing will temporarily suspend Apple's copyright infringement suit against Psystar, which is currently before the U.S. District Court of Northern California. But once the bankruptcy protection is sorted out, the copyright case will resume. Apple had no comment on Psystar's bankruptcy filing.
A major question surrounding Psystar and its young CEO, Rudy Pedraza, has been who has provided financial backing to the Miami-based company, which should come to light once all of Psystar's creditors are named.
Psystar began selling desktops and, later, laptop computers running Mac OS X in April of last year. In July, Apple sued it for copyright infringement.
Erica Ogg is a CNET News reporter who covers Apple, HP, Dell, and other PC makers, as well as the consumer electronics industry. She's also one of the hosts of CNET News' Daily Podcast. In her non-work life, she's a history geek, a loyal Dodgers fan, and a mac-and-cheese connoisseur. E-mail Erica. 
That is not an authorization to break the law
"That is not an authorization to break the law"
It's also not a law that is being broken- it's a EULA. Psystar *legally* purchased the retail software packages from Apple. They then became the owners of that software. Now if Psystar went ahead and violated the EULA, then that's all they did. There is no 'law' about that.
If this was about breaking the law, then the police would be involved. This is a civil case, not criminal.
Just wanted to make sure things were clear about this.
Clever. I didn't see that one coming and it's a brilliant move on Psystar's side. This gives them time to not only strengthen their defense, but also continue to operate as a company. Any action Apple takes now will be very much the David vs. Goliath sort and a PR nightmare for Apple if they chose to do so. Notice that Psystar isn't blaming Apple in this at all, which plays right into their favor later.
This doesn't sound like an accident at all, but part of a much larger planned campaign. I still don't know who is behind it. I have my suspicions (Dell, Acer, Lenovo), but have nothing to base that upon other than a gut feeling and what has transpired to date.
I believe their filing is quite real, since they were pretty much running on a shoestring when they launched in the first place. The additional stresses of a lawsuit plus the general economic malaise (when money's tight, one would rather concentrate their budgets on a known quality instead of a relative unknown)? It's natural that they would have gone under. Add to that their rather frank description of what every vendor alive is experiencing now (especially with CC processors), and it makes perfect sense.
As for Apple? They can sit back and wait, while Psystar continues to not sell systems (mostly due to economic troubles, though I'm not sure if there's an injunction in place or not).
"They can sit back and wait, while Psystar continues to not sell systems"
That's not how bankruptcy works. Psystar is still taking orders and selling systems. They are still producing a product for sale. What bankruptcy does is put a hold on any creditors demanding payment as well as, and this is the important point here, halts any and all legal actions upon that company for the duration of that bankruptcy status. There are some companies that operate for *years* under that status. Why look at the US auto industry as they are headed that way themselves. Do you believe that GM is going to stop making or selling cars because they in bankruptcy status? Of course not- they will use this time to stabilize and restructure.
It *is* possible they may just fold up shop having decided they had a good run and there isn't any point to continue. They could also be putting themselves into position to be bought out by another company in a legal move that leaves the buying company in a stronger position.
It's really too early to say, but I seriously doubt this is going to over any time soon. This whole thing smacks of a trial balloon by OEM's to test the OS X waters to me.
They were dishonest, so now they have lost their case and their business.... it's a HAPPY day for HONEST people!
I'm not disagreeing as far as whether or not they are able to sell systems (injunctions excepted of course, if those do exist), but whether or not they still *can* sell systems.
This isn't about legal reasons, but for more down-to-earth reasons. First, they're going to have a very hard time processing credit card orders if their CC processor isn't getting paid. Second, they're going to have a very hard time placing orders if their supplier isn't getting paid.
Also, there is still an incongruity that hasn't been resolved: If Psystar is being funded under-the-table by an OEM, then how come they're not even able to pay off their suppliers and CC processor? You can't exactly hide the financial records if you're in bankruptcy court, you know - this means that every dime will have to be tracked and eyeballed by court-appointed accountants.
Chapeter 11 means that they will be able to keep on selling computers. The goal is to come out of bankrupsy a healthy company. Chaper 7 would shut the doors and sell off the assetts.
I don't think it was planned, but I do think that Dell, HP, or some other OEM might just fish them out because it might just allow them to make computers with Mac OS
Doesnt matter what the EULA is if its ILLEGAL !!!
Apple has no right to violate the copyright misuse doctrine and put Sabotage code in the EFI chip in order to forece users who bought the OS separately to only use it on Apple hardware!
ITS AGAINST THE LAW period.
If Microsoft tried to do that with their code, they'd be sued into oblivion. So why is Apple allowed to do so!?!?!?!
"No, it ends their argument. They will have to now shut down operations and that will dry up their money, ending their case."
How do you figure that? Psystar is now free to continue producing their product and Apple cannot do anything about it during this transition time. If they are able to come out of bankruptcy through this process, then.... it's brilliant. If they are forced to shut down, then Apple has a media PR horror story to deal with. Can they afford to be labeled Goliath by the general public? How will they defend the accusation that they own the software and that you are only renting it essentially? That the customer has no rights in this or what they do with the product? It's a bad bad situation for them.
@Random_Walk:
I'm not entirely sure they have to disclose their funding or financial resources. They could be investments from another LLC or similar. Run anything through enough levels and you can do anything- We've seen that enough with government suppliers already.
It should be interesting to see how things play out. Apple would really be well advised to simply buy out the company at this point and try to bury the news story as much as they can, pretending it never happened. Anything less and they become a bully in the public's eye.
$1000 less is a mighty tempting difference for some who are on the verge of making a purchase.
NO, Vegaman_Dan... i looked into them too, and they were a couple hundred less, NOT $1000.... not even close. You need to remember Apple machines are priced about the same as all top tier PC Vendors, so companies like Psystar don't have much room for profit.
Macs are the best if you want the most for your money, and that's been true for decades... and sure, if you don't... PCs are an option... but spare us the incorrect info that they were somehow $1000 less... that is simply not true.
No idea about how PsyStar compares to Apple for price, but when it comes to the Laptops The top tier ran rings around MacBook Pros. More Laptop for Less money without too much work.
Macs are not (and never have been) the best bang for the buck. Their appeal lies elsewhere.
"the base system on similar configurations is approximately $1000 less for Psystar than Apple"
Really? Last I checked, I could get an iBook from Apple for $999 or an iMac for $1199. So if my math is right, than Psystar gives me an iBook equivalent and $1, or an iMac equivalent for only $199? Wow...no wonder they are bankrupt.
I doubt the $1k thing
@OS11
Macs are not best Bang for buck
Apple doesn't even compete in that market, if they did, they would have a sub 1k mid tower
But it was around 600-800 cheaper on average.
No, cyclonica1980 is correct. When spec'ing out the machine that was about on par with a Mac mini, the price difference was very slight. And the iMac spec'd machine was within a couple of hundred dollars (and wasn't in a space efficient all in one design either.).
It is more logical for Dell or another OEM to support Psystar
I mean if Apple gets to do what it wants with it's code, why not microsoft right? Apple basically is going to win a case that can be used against itself!
No, I think there's a hardware OEM behind this one.
This is in the interest of OEM's, not microshaft.
And Apple would be burning through their cash to stay afloat and develop Mac OS X. Apple agreeing to making clones in this environment would be corporate suicide.
I'd have to say that those flames you mention are heating up quite a bit- Psystar's got something cooking. :)
but that means they will have to shut their doors and website is the problem... nobody is going to buy from them from today forward.
they were a dishonest firm, and got caught... now they will close down... there is not much more to the story than that.
Chapter 11 is not the same as Chapter 13 or Chapter 7. Chapter 11 is a financial re-organization under court protection. This means that Psystar can remain open (though for how long if their basic supply chain isn't getting paid is another question).
1. Apple can just go after Psystar's suppliers and get an injunction against selling to them.
2. You do understand that if Psystar wins this case, OEM vendors will have the right to sell any version of Windows to run on any hardware with or without a hardware sale? If Psystar wins, Microsoft will be harmed in more ways that Apple.
@ the Psystar supporters, If you want to build a Hackintosh, I don't think Apple will have a problem with that. Apple was started by a couple of guys playing with computers. In many ways the Apple universe is far more open than Microsoft. Apple ships every computer with a very sharp development system (The same one they use to build software themselves). It is very easy to become an iPhone developer. When you do, they pile so much support on you it almost feels like an avalanche (Not just tech support, but marketing and lots of good business advice). Don't want to sell your applications? You can load them up on any iPhone or touch you own.
Apple is not even that upset about jailbraking iPhones. They just cause enough stink about it that Apple customers know when they do this, they will be on their own. They may get new functionality but they will be trading reliability (The user will also get the possibility of iPhone viruses and mallware.) . The user is warned.
Do what you will with Apple products, but if you steal their IP and try to make money from it, they will burn you.
Apple is more open than Microsoft? Isn't the core of this case the fact that Apple has a Gestapo like control over what their software will run? Haven't we been reading dozens of stories of how Apple has been arbitrarily rejecting certain apps from the iPhone store? And wasn't there a problem last year with an iPhone update bricking jailbroken phones? I use Linux and Windows at home and administer a network with 239 machines. I can honestly say that Apples are better machines with a better operating system (although not worth the money IMHO, any decent admin should be able to keep their own Windows system working with little effort). However if you believe that Apple is more open then I have a great bridge in Alaska to sell you.
If Apple loses the case, then suddenly Microsoft cannot legally bind OEMs (Dell, HP, etc) into demanding that consumers must buy a Windows license with a given product line (they do this now for most models in the consumer realm, and I'm willing to bet that this is due to contracts). This also eliminates the "downgrade rights" scam... an OEM can sell XP as-is, without having to charge Vista (or 7) licensing prices for it (at least until their pools of paid-for XP licenses have finally dry up).
"If you want to build a Hackintosh, I don't think Apple will have a problem with that"
They don't - the continued existence of long-standing hobbyist websites is testament to that. It's when someone gets dumb and tries to make money off the enterprise that Apple gets irked (again, as evidenced by the continued and unmolested existence of the hobbyist websites).
they care if you build a Hackintosh and play around with a jailbroken iPhone
Apple won't take you to court but they will release updates for the sake of bricking
and I still find Linux more open
When Apple decided to put the iPhone on the market, one of the key features they wanted to run was random access voice mail. When you check your voice mail on an iPhone, you see a list of people who called you. If you want to listen to one of the messages, you can just tap it and it plays. Unfortunately, that required rewriting part of the back end of the cell phone network.
The only mobile company willing to make those changes was Cingular. They required Apple sign an exclusivity contract in the United States. They also required Apple put code on the phone that checked to see if the phone was connected to Cingular (Now ATT).
Jail Breaking your iPhone did not brick it. You needed to jail break your phone to run code to remove the network check. When Jail broken iPhone users updated their phones, they re downloaded the network check (as per contract). When the check executed, it detected the phone was no longer running on the approved network and turned itself off. Why would anyone be surprised if a jail broke phone was no longer jail broke after a software update?
Psystar can indeed continue operations. That's the purpose of bankruptcy versus just shutting down and liquidating the company. Look at the auto industry. When Chrysler went bankrupt back in the 80's, they didn't shut down production or go out of business either. This time around they are also going to keep running.
@raifthedog:
"1. Apple can just go after Psystar's suppliers and get an injunction against selling to them."
I don't think so. To have the courts interfere with the company's ability to do business would be a conflict of interest and would then allow Psystar to sue the government for any and all losses as a result of that action. The court cannot decide on your part which companies are allowed to sell to you. That's a limitation of commerce and then they'll have the FTC on their backs as well.
And yes, I fully know that if Psystar wins, the EULA from Apple will be overturned likely. That's why I keep saying that companies like Apple, Microsoft, Google, etc, any and all companies that use EULA's do not want this to happen. Software companies have every reason to want to see this fail.
PS. I would think their name should be pSystar.
I'm no Apple nut, but I'm a firm believer in the Pay to Play principle. If you don't want to pay to use OSX, use something else.
Your point is a bit off I think.
OEMs like HP, Dell, and yes Apple, do not make hardware.
They put off the shelf components together and slap a sticker on it.
That is completely different then designing and manufacturing processors, hard drives, etc. That many Cnet readers don't understand the difference is more than alarming.
Sorry, but they can't lower the computing experience. OS X is all Apple. If it's good on a Mac it's Good on a Hack be it PsyStar or Hackintosh.s.
how is taking a Mac to your local PC builder and taking a Hackintosh to him any different?
and if you aren't taking your computer to the local computer shop, please do
you get better service and you are supporting your community at the same time
I doubt apple makes [much of a] profit on a $129 OS license VS selling the OS bundled with the sale of [overpriced] new Apple branded hardware.
I would also argue that there is little to no profit at all in selling the OS for $129; the development costs surely are o
$129.99 on a DVD is a high markup that can easily turn a huge profit.
They will, hopefully disappear as their creditors will want their money. Do you think that their lawyers will continue to represent them for free? And would you buy a computer from a company that cannot guarantee that their system will be built, or shipped?
Good riddance.
Actually it is not illegal at all. It's been upheld in other cases under contract law. You agree to that contract when you install that software. It's there in black and white. Read it if you can.
Apple spends billions of dollars each year on research and development. Psystar comes along and basically wants to force Apple to allow anyone access to that R&D with out receiving any money back. Psystar wants to take all the work somebody else did and take credit for it. That is illegal REGARDLESS how much you dont want to pay for the "apple tax". If you dont want to pay for it, than tough noogie. Having an apple computer is a luxery not a right. If you want better quality stop buying microsoft's crap and go with a distribution of linux. The licence agreement on the box says to be used with apple hardware.
by NervClaX May 26, 2009 9:42 AM PDT
Some people don't feel like paying extra for the privelage of using OSX. I think the competition was healthy. Psystar obviously felt they were filling a need in the marketplace for Apple software on cheaper hardware. Apple isn't interested in selling OSX on any hardware but their own, but to sue? That's just downright bullying. The lawsuit probably had a lot to do with the bankruptcy filing, but had Psystar the money to go through with it, I think they stood a very good chance of winning.
Sorry to tear your argument apart, but it is completely flawed. Dont want to spend the money on the delux model, sounds like youll have to go with another option, and my there are plenty in the Operating System Market. One product isnt a market. So you cant say Apple is misusing its monopoly on a market that doesnt exist. ALSO USPTO grants patents on products which is a legal monopoly. It prevents others, with no investment, from stealing work and making profit off it.
From wikipedia: "A patent is not a right to practice or use the invention.[4] Rather, a patent provides the right to exclude others[4] from making, using, selling, offering for sale, or importing the patented invention for the term of the patent, which is usually 20 years from the filing date[3] subject to the payment of maintenance fees. A patent is, in effect, a limited property right that the government offers to inventors in exchange for their agreement to share the details of their inventions with the public. Like any other property right, it may be sold, licensed, mortgaged, assigned or transferred, given away, or simply abandoned."
Do you really think EULA was Apple's ONLY defense?
What I have discovered is that Apple's "tax" is an upfront fee. How much do you end up spending on Anti-virus, and crap software you dont need, including your time and effort and frustration. God help you if youre computer illiterate and cant do this on your own. My two macs at home have needed significantly less attention than any other non apple computer I have used or fixed. I cant even calculate what that is worth to me. My time, my mind, my data, my money...
by Police_States_of_America May 26, 2009 11:13 AM PDT
look like the butthurt mac fans are coming out in droves in fear that someone might get the same quality for half the price
Im only butt hurt because youre among the group of people who think you can buy what ever you want and use it how ever you want. I wonder, do you have a problem with the RIAA suing people for downloading their music? You probably wouldnt understand anything about that because youre probably not an artist whos work could easily get stolen. Noone cares about your opinion, its on the internet, it must be free. Try making a living off that. It doesnt work that way at all.
by Renegade Knight May 26, 2009 12:03 PM PDT
Since you pay for OS X on these machines and Apple makes their profit regardless, your logic escapes me.
Apple makes its profit from hardware not software. If apple made profit from software, their pricings would look more like Microsoft's pricings for their operating systems. People dont want that, they would then complain about the price if apple were to make a profit off their OS. Hence why apple says you can only install the software on an apple product.
We really have to get it out of our mind that we can use anything as we wish. You are provided a license to use music, movies, software as described by the company.
* Apple (or any other company) is not legally entitled to make a profit from any sale.
* Their one and only legal argument on the matter hinges on the EULA. That's it.
* First Sale Doctrine figures heavily here, even if in fact Psystar is basically re-selling the things.
All that said, I'm actually neutral on the whole affair. I have a Hackintosh, but I know that Apple apparently doesn't care that I run one (or that any hobbyist runs one), and I don't sell the results of my building it. OTOH, if someone is making a commercial concern off of it (as Psystar is), that's (IMHO) definitely not cool.
About: "...because youre [sic] among the group of people who think you can buy what ever you want and use it how ever you want..."
Hate to tell you this, but that's what First Sale Doctrine is all about. As long as the buyer isn't violating copyright or using the purchase to commit a crime (e.g. if one buys a pistol), the buyer is perfectly allowed to do whatever he or she likes with the purchase. If I buy a program from you and want to make 4,000 copies of it for my own use, you are not allowed to sue me if I do so. If I violate your copyright, that is a different story... but in Psystar's case, they did not violate copyright - they paid for each copy they installed and subsequently sold.
Psystar's only foul in this instance is that they violated one point of the end user license agreement - a concept that is legally shaky in the first place. It may stand, it may fall... but that is up to a court to decide, and only in this exact context.
Simple, clear, and Apple's sabotage code and their EULA violate it.
This isn't correct. Apple is legally allowed to employ a TPM chip - just as DVD makers are allowed to incorporate CSS, or Microsoft is allowed to incorporate a license/CD key and activation into windows.
It is not "sabotage code" unless it were to somehow destroy your hardware or inflict a virus, or etc.
How many of you bought their machines? I am just curious.
Yea, I kid.
Pystar is stealing nothing.
- by BadLikeYaas May 26, 2009 1:27 PM PDT
- Bad Apple, Just like Microsoft saying which hardware you can use their OS on. I am talking about net books.
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- by jabberwolf May 26, 2009 2:14 PM PDT
- Bad good example, but Microsoft doesn't say you cannot use their os on specific netbooks.
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- by DrtyDogg May 26, 2009 4:04 PM PDT
- Yeah a really bad example. Microsoft's netbook definition is purely for pricing, ie you can get this software at a reduced price only if your hardware is this or below. You are still free to buy and install any flavor of Windows you want for a netbook as are OEMs.
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Showing 1 of 2 pages (116 Comments)If you purchase windows of any sort, you can do with it what you like and put it on any hardware you like. Now if it runs well or not on that hardware, that's not Microsoft's problem. MS can simply say that certain hardware do not meet their standards, but they don't restrict you from trying.