TechWeb

Psystar Carries On Cloning Despite Bankruptcy

May 26, 2009 (11:05 AM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=217700143


Faced with mounting legal fees and unpaid taxes, Psystar, the controversial startup that's challenging Apple's exclusive right to sell Mac OS-based computers, has filed for Chapter 11 bankruptcy protection. The company, however, appears to be continuing operations.

In papers filed in U.S. Bankruptcy Court for Southern Florida, Miami-based Psystar said it owes more than $250,000 to various creditors.

The largest creditors include Psystar founder Rudy Pedraza, who claims he loaned the company more than $120,000 of his own money, and law firm Carr & Farrell, which is owed about $88,500. Psystar retained the firm for its copyright battle with Apple.

Apple contends Psystar's Mac clones violate its copyrights over the Mac operating system. It sued Psystar in federal court in San Francisco last year. Pystar countersued Apple, alleging that Steve Jobs' control over the Mac OS violates consumer antitrust laws.

The judge hearing the copyright case recently granted Apple's request that Psystar produce detailed financial records. Apple believes Psystar, which maintains a slick, professionally produced e-commerce site despite modest facilities and a skeleton crew, has received funding from outside parties -- including, possibly, Apple's rivals in the PC market.

Psystar's bankruptcy petition, filed May 21, effectively puts the copyright case on hold, at least until the Chapter 11 proceedings are heard in Florida. In the bankruptcy case, court records show that Psystar has declared that no third parties hold a share in the company of 10% or more.

The records also indicate that Psystar is currently holding between $5,000 and $10,000 in customer deposits. The company has asked the bankruptcy court for permission to use the cash to fulfill the customers' orders.

Records show that Psystar also owes more than $11,000 in back taxes to the Internal Revenue Service and several thousands of dollars more to an assortment of business vendors, including Federal Express, UPS, and packaging manufacturer Timbar.

In addition to its Mac clones, Psystar sells Windows and Linux-based PCs. As of Tuesday afternoon, the company was still taking orders through its Web site, which does not mention the bankruptcy filing.


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