Apple

Psystar, the clone company Apple is suing for selling generic hardware with the Mac OS pre-installed, is expanding its business to include selling software that will allow anyone to install Apple's operating system.

(Credit: Psystar)

Psystar said on Thursday that its Rebel EFI suite is available for download from its Web site. The software will allow anyone to install any modern operating system on their computer, including Apple's Mac OS X Snow Leopard.

According to the company, the software is compatible with the Intel Core 2 Duo, Core 2 Quad, i7 or machines running the Xeon Nehalem CPU.

A demo version of the software is available for download so users can "test-drive" it before they buy. Psystar says the demo would allow users to install Mac OS X, but with "limited hardware functionality as compared with the full version."

Psystar said after downloading the software, users just need to burn it to a CD and follow the onscreen instructions. The full version of the Rebel EFI suite, removing any hardware limitations, costs $49.99.

Microsoft's Windows 7, released today, is also compatible with the Rebel EFI suite, according to Psystar.

Psystar is best known for selling clone computers and being sued by Apple for copyright infringement. A trial date has been set for January 11, 2010.

Psystar lawyers have begun deposing Apple executives in the copyright infringement lawsuit brought by Apple last year, the Mac clone maker announced.

Surprisingly, it seems that Psystar executives are actually enjoying themselves. In a Thursday post on its Web site called "A taste of their own medicine," Psystar seems to gloat over the fact it is now deposing several Apple executives. "For the past week and for the following ten days we will be doing depositions of some of Apple's highest level people. After numerous depositions of Psystar employees and associates the shoe is finally on the other foot, oh the joy!"

Apple accused Psystar of copyright infringement after it began making Mac clone computers and selling them with Mac OS X installed. Apple's license agreement clearly states that the operating system can only be installed on an Apple-labeled computer.

Psystar is even allowing its customers to submit questions to ask the Apple executives, according to a report on AppleInsider. The company said it will take the top 10 questions to each executive deposition.

According to the blog post, Apple executives being deposed are:

• Aug. 07 -- John Wright -- OS X -- Senior Software Manager
• Aug. 12 -- Kevin Van Vechten -- OS X -- Software Engineering Manager
• Aug. 13 -- Phil Schiller -- Marketing -- Senior VP Worldwide Product Marketing
• Aug. 14 -- Mike Culbert -- Mac Hardware -- Senior Director
• Aug. 18 -- Gary Thomas -- TBD
• Aug. 19 -- Simon Patience -- OS X -- Head of Core OS
• Aug. 21 -- Mark Donnelly -- Apple -- VP Finance and Worldwide Business management
• Aug. 21 -- Greg Christie -- TBD
• Aug. 21 -- Bob Mansfield -- Mac Hardware -- Senior VP Mac Hardware Engineering

Psystar said these executives were chosen because they are the most knowledgeable in their field.

The company kicked up the rhetoric a notch since changing lawyers in July. Psystar is now being represented by Houston-based Camara & Sibley, which is also defending convicted music-pirate Jammie Thomas-Rasset.

Psystar filed for bankruptcy protection in May, which normally could shield a company from its legal woes. But Apple asked the court to lift the automatic stay of proceedings in the copyright case. Apple won its argument, and a new trial date has been set for January 11, 2010.

Apple wanted Psystar back in court, and now it's going to happen.

An automatic stay of proceedings imposed when Psystar filed for bankruptcy in May has been lifted by the court, according court documents shared with CNET News.

Judge Robert A. Mark, who serves the Southern District of Florida U.S. Bankruptcy Court, lifted the stay on Friday, opening the door for Apple to continue its copyright infringement case against the company.

Apple made a strong case for having the stay lifted, noting that Psystar filed for bankruptcy after a motion was granted compelling Psystar to give Apple additional documents. The bankruptcy filing also came just before a scheduled deposition from Psystar.

Apple cleared the way for the bankruptcy court to lift the stay by agreeing that it would not try to collect any monetary damages against Psystar if it won the infringement case. That was also a condition imposed by Judge Mark in making his ruling.

It seems clear that Apple feels it has a strong enough case against Psystar to win a favorable ruling or it would not be pushing so hard to get the case back in court.

Apple insists that its Mac OS X license agreement (PDF), which users must agree to before installing, should stand up to the court's scrutiny. In fact, the agreement clearly states that the operating system can only be installed on an Apple-labeled computer. That should leave any clone maker without a leg to stand on.

Apple has been dealing with several clone companies this year, but the Psystar case is the furthest along, so it makes sense for Apple to see it through.

If Apple were able to get a favorable ruling, it could use that precedent as a deterrent against other companies that want to get into the Mac clone business. RussianMac and PearC have started selling clones in Russian and Germany, respectively, and Quo Computer opened the first Mac clone retail store in Los Angeles.

Apple is not giving up on its desire to get Psystar into a courtoom.

Apple filed a motion on June 5 asking the court to modify a stay of proceedings and to compel Mac clone-maker Psystar to show up in court in November as previously scheduled.

Psystar got an automatic stay of proceedings when it filed for bankruptcy in May, but Apple doesn't think the company should be able to use the bankruptcy laws to do so.

Apple points out in the court documents that Psystar filed for bankruptcy in May, after a motion was granted compelling Psystar to give Apple additional documents. The bankruptcy filing also came just before a scheduled deposition from Psystar.

At the heart of Apple's new motion is that despite Psystar's bankruptcy, the company is still in business and continues to sell its computers with Mac OS X pre-installed. The latter is what prompted Apple to file a copyright infringement lawsuit in the first place.

It's clear from the court documents that Apple is looking for a judgment in the case, not monetary damages. The company said in the filing that it understands that it can't collect against Psystar except through bankruptcy proceedings.

Psystar is just one of the clone companies Apple has to contend with. RussianMac and PearC have also started selling Mac clones in Russia and Germany, respectively.

One of the biggest Mac clone stories to come along in recent months is Quo Computer, a California-based company that has opened a retail store in Los Angeles.

Psystar, the controversial Florida company trying to sell so-called clones of Apple computers, says it doesn't have the money to fend off Apple's legal dogs. But with the company's Chapter 11 bankruptcy protection petition filed last week, it looks like Psystar could have minimized the damages it may have to pay Apple.

The bankruptcy petition filed last week shows that Psystar, the maker of the Open Computer, a Mac clone, is more than $250,000 in debt, due to poor sales. Most of the debt is owed to shipping companies, PC parts makers, and more importantly, its law firm Carr & Ferrell, which is representing the company in a suit brought by Apple. Apple sued Psystar last year for copyright and trademark infringement for selling Mac OS X on non-Apple hardware.

But now it looks like Apple will have to get in line. Under normal circumstances, when a defendant in a copyright infringement case files for bankruptcy protection, the copyright case is terminated and there is a hearing, or mini trial, held in the context of the bankruptcy proceeding that will quickly determine if there is indeed money owed to the copyright holder, according to Jesse Fried, co-director of the Berkeley Center for Law, Business and the Economy. In this case, that could mean an accelerated version of the copyright case brought by Apple, which was scheduled to begin hearings in November, to determine if Psystar did indeed infringe on Apple's trademark.

In some cases, the bankruptcy court will allow another court to determine a judgment first--in this case, the U.S. District Court of Northern California, where the copyright claim was filed. But that is a very expensive proposition, and one that's usually unlikely for companies that don't have a lot of money.

Either way, though Apple had asked the court for monetary damages and Psystar's profits it is not likely to get much.

"The bankruptcy court may say this company (owes) Apple $10 million. But that doesn't mean Apple will get that money," said Fried. "They'll be treated like an unsecured creditor."

Unsecured creditors are last in line after secured creditors, which usually means lenders, business debts, and back taxes. Secured creditors can usually recoup the amount owed to them in a bankruptcy. Unsecured creditors get to divide whatever is left over equally.

Essentially, what Psystar's bankruptcy protection filing has done is pressed the fast-forward button on the copyright proceedings and minimized what it could owe.

"They (probably) hope to have Apple's suit quickly resolved, have the dollar amount figured out, and pay Apple only a fraction of the dollar amount determined by court," noted Fried.

Psystar could not be reached for comment. But by filing Chapter 11, which allows companies to pay off their debts and re-emerge as a business in the future, they can pay unsecured creditors like Apple through equity in a new company or debt in a new company, he said.

And because Apple might only get a few cents on the dollar with Psystar now in bankruptcy proceedings, it may not have an incentive to continue with more litigation. Apple had no comment on Psystar's bankruptcy protection filing.

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.

RussianMac is the latest company to release a Mac clone and test Apple's resolve to stop companies from selling its operating system.

On its Web site, RussianMac says that a full version of Mac OS X Leopard comes pre-installed on its computers. The company also confirms that the operating system is able to receive automatic system updates from Apple once installed.

This is where Apple seems to have the clone makers over a barrel. Apple's Mac OS X End User License Agreement (EULA) clearly forbids anyone from installing the software on hardware not sold by Apple. This effectively closes the door on companies determined to make a Mac clone.

However, RussianMac maintains that it does not violate the terms of the EULA agreement because the operating system was purchased directly from Apple. That still doesn't get around the condition of installing it on an Apple-branded machine.

Legit or not, it is a popular argument. Germany-based PearC is using that defense to sell Mac clone computers in that country.

Of course, in the U.S., Psystar is the case everyone has heard about. The company first made headlines in April 2008 when it released its first Mac clone with Mac OS X pre-installed.

Apple filed a lawsuit against Psystar in July 2008, claiming the company was violating copyright and software licensing agreements.

The legal battle is ongoing between Psystar and Apple. The two are set to meet in court on November 9. Most legal experts expect Apple to ultimately prevail in the case.

Because the laws in each country are different, it's unclear whether Apple could be successful in Russia or Germany.

One year ago, an otherwise sleepy April in the Apple universe was turned upside down by a tiny company from Southern Florida, kicking off a real-world Clone War between Apple and Psystar.

It's been a year since Psystar began selling Mac clones in defiance of Apple.

(Credit: Psystar)

Today, the essential question regarding Psystar is unchanged: does the company have the right to sell computers with Apple's Mac OS X Leopard preinstalled, as it has been doing since April 14, 2008? Psystar set off shock waves through the Apple world that week, as an army of journalists, bloggers, fanboys, and detractors set off on a manic search for anything and everything related to the company and its desktops.

Psystar emerged a year ago as a small independent system builder, the likes of which can be found in any medium-size town in the U.S. What provoked the interest and ire of the Mac community was Psystar's decision to ship so-called "white box" systems with Mac OS preinstalled alongside systems with Windows Vista and Linux, in defiance of Apple's licensing policies for that operating system.

Psystar recently updated its flagship product, the Open Computer, and CEO Rudy Pedraza promises that more products are yet to come.

In an interview, Pedraza acknowledged that the past year has been quite a challenge, but he's glad that at least so far, Psystar has been able to provide an alternative to Apple. "(Our customers) are people who would otherwise be unable to afford an Apple computer, and they are just happy about it."

Whether or not Psystar sees another anniversary will depend in large part on legal wrangling in Northern California, far from Psystar's Doral, Fla., headquarters. The litigation between Apple and Psystar appears to be in a bit of a lull as the one-year anniversary passes, with lawyers immersed in the discovery phase of the trial following months of lawsuits and countersuits from both companies.

Apple's stance is pretty clear: the end-user licensing agreement that comes with Leopard forbids the user from installing that operating system on anything other than an Apple-labeled computer. Psystar, on the other hand, is attempting to argue that Apple is abusing its copyright on Mac OS X in requiring the operating system to run on Apple hardware after Psystar unsuccessfully tried to lodge an antitrust defense.

Little has changed on the legal front in recent months, but it seems worthwhile to take a step back and look at how Psystar has, and hasn't, changed the nature of the computer business. First off, Psystar does not appear to have made a huge dent in Apple's Mac business.

I've been using one of the original Psystar Open Computers for almost a year.

(Credit: James Martin/CNET)

Mac desktop shipments have indeed slipped since March 2008, from 856,000 units in the quarter ended March 2008 to 728,000 units in the quarter ended December 2008. But Apple and analysts attributed that decline to three main factors: an aging iMac lineup (refreshed in March 2009), the ongoing shift in consumer preferences from desktops to notebooks (Apple's notebook shipments increased 17 percent over that time span), and the general slump in the economy that took hold in the second half of 2008.

Psystar will not release sales figures, but Pedraza said that sales have exceeded his expectations to date. Pedraza said the company is still planning to release a notebook, but hinted that it might be something more along the lines of a Netbook rather than a full-sized notebook.

What Psystar has accomplished is to prove that a Mac OS computer that was not designed by Apple can deliver a satisfactory experience. CNET was one of the first to order an Open Computer in April 2008, and I've been using that machine as my primary work system ever since with few issues.

It's certainly not perfect: while I've been able to download every update to Leopard released since last April, I have not always been able to download and install updates for Apple application software through Software Update, such as iTunes and iLife. If something goes wrong with the OS, I'll have to venture down a complicated restore process involving a second installation CD that likely contains the magic files Psystar needs to bypass Apple's restrictions on where Leopard can be installed. And needless to say, the Open Computer is not the sort of thing that makes an IT department all giddy.

Still, the Open Computer is otherwise an almost identical Mac experience to the MacBook Pro I use at home. When it comes to reliability and service, Psystar may not be able to compete with Apple, but for people who know their way around a computer, the Open Computer is a Mac.

And that could have huge ramifications for the software industry if Psystar is able to overturn Apple's end-user licensing agreement, which could usher in another Mac clone era just when the operating system's popularity is arguably at an all-time high. The first Mac clone era did not go well for Apple, and it's not hard to see similar problems occurring if the perception of Mac OS X as stable and reliable start to wane as it is forced to interact with hardware for which it was not designed. Already, Psystar imitators such as PearC are trying their hand at the market.

An awful lot has to happen before Apple has to worry about anything like that. Psystar is a clear underdog against Apple, and the trial is not scheduled to begin until November.

But the Little Mac Cloner That Could is a year old this week, and is continuing to sell Open Computers under Apple's nose. How many more years does Psystar have?