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Tuesday, May 26, 2009, 10:00 am PT (01:00 pm ET)

Psystar files for bankruptcy likely delaying Apple case

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."