Home -> Law Blog Directory -> Intellectual Property Law Blogs -> Groklaw

Intellectual Property Law

: Groklaw

Psystar Files Motion to Leave Chapter 11

By Pamela Jones et al.

Psystar has filed a Debtor's Motion to Voluntarily Dismiss Case [PDF]. They would like to leave Chapter 11, and of course that means they have to have a viable plan to present to the bankruptcy court.

They claim they have a new product that will dazzle the world and be more profitable. But they kind of had to say something like that, I think, because they already told the court in their bankruptcy petition back on May 21 that they don't make "a significant profit" on each sale of their prior products. So they couldn't just say, "Oops. This didn't work. We thought we could stay in business while in Chapter 11 without Apple being able to sue us, so we could make money while they could only grit their teeth in frustration. But they got the judge to lift the stay. So get me out of here."

They have to show the judge instead that if they leave Chapter 11, they will be able to make a profit and pay off creditors. So they have to show the court a plan for survival after they leave Chapter 11. What can they show? Something had to be different. The old business plan wasn't enough. Hence a new product announcement.

In short, bankruptcy didn't protect them from Apple the way they hoped, I surmise. Apple on June 17 prevailed on its motion to lift the bankruptcy stay on the litigation, and Psystar says it can't afford to do both the litigation and the bankruptcy. So it wants to be relieved of the bankruptcy expense. They can't get out of bankruptcy now unless the court believes they can be viable. So they announce a new product. I expect Apple will oppose and instead ask for Chapter 7. A plan based on a hope for future profits? Sounds like SCO to me.

Full post as published by Groklaw on July 03, 2009 (boomark / email).