Yesterday, Apple filed a Motion with the Southern District of Florida Bankruptcy Court for Relief from the Automatic Stay of Proceedings in its lawsuit with Psystar and to allow the case to proceed to trial as previously scheduled. In its arguments, Apple sets forth twelve factors that the Florida Bankruptcy Courts have used in determining whether such a stay should be lifted as follows (citing In re Beane, — B.R. —, 2008 WL 6053198 (M.D. Fla. July 15, 2008):

(1) whether relief would result in a partial or complete resolution of the issues;
(2) lack of any connection with or interference with the bankruptcy case;
(3) whether the other proceeding involves the debtor as a fiduciary;
(4) whether a specialized tribunal with the necessary expertise has been established to hear the cause of action;
(5) whether the debtor’s insurer has assumed full responsibility for defending it;
(6) whether the action primarily involves third parties;
(7) whether litigation in another forum would prejudice the interests of other creditors;
(8) whether the judgment claim arising from the other action is subject to equitable subordination;
(9) whether movant’s success in the other proceeding would result in a judicial lien avoidable by the debtor;
(10) the interests of judicial economy and the expeditious and economical resolution of litigation;
(11) whether the parties are ready for trial in the other proceeding; and
(12) the impact of the stay on the parties and the balance of harms.

In my opinion, the essence of Apple’s strongest arguments are contained in the following statements:

As applied to the facts presently before the Court, not only will the Debtor suffer little, if any, prejudice should the stay be lifted, but denying the Motion and maintaining the stay will prejudice Apple. Apple, like all owners of intellectual property, has a strong interest in making sure that its property rights are protected from unauthorized use. Refusing to grant relief from stay will cause delay in protecting those rights.

Indeed, having these issues resolved before the District Court is essential to the determination of whether the Debtor can successfully reorganize and emerge from Chapter 11. At some point prior to any attempted reorganization, it must be determined whether the Debtor’s current business model – selling computers running Apple’s proprietary Mac OS X Leopard operating system without permission or authorization from Apple – is a viable business or, instead, unlawful copyright and trademark infringement, and, if the latter, whether an alternative business model would support a successful reorganization. The Debtor has no legitimate property rights in an infringing product and cannot pursue reorganization of its business affairs based on the sale of products that violates applicable non-bankruptcy law.

Indeed, Psystar commenced this bankruptcy case just weeks before the June 26, 2009 close of all fact discovery and the affirmative expert report deadline in the Infringement Action, shortly after the May 8, 2009 granting of Apple’s motion to compel additional documents from Psystar, and just prior to a June 4, 2009 scheduled deposition resulting from that motion to compel. After a brief period for expert discovery, the pre-trial conference was scheduled for October 26, 2009, in advance of the November 9, 2009 trial date.

Since the filing of this case, there is no evidence that Psystar has altered its business model or in any way ceased its infringing conduct. Its website remains operational and it continues to offer for sale Open Computers running Mac OS X Leopard. Thus, it appears that Psystar’s post-petition operations are identical to its pre-petition conduct in all relevant respects, thus subjecting the Debtor to ongoing claims of infringement.

Translation: Psystar is going on with business as usual and continuing to harm Apple such that an injustice to Apple and impediment to the bankruptcy case would take place if the case was not allowed to continue as scheduled. Further, in reading between the lines, Psystar’s timing of its declaration of bankruptcy follows on the heels of a potentially damaging discovery Order from Judge Alsup. Lastly, Apple cannot properly exert its claims as a creditor, nor can Psystar put forth any reasonable reorganization plan, until their dispute is resolved.

Apple anticipated that Psystar may argue that continued litigation costs would cause it irreparable injury. In response, Apple cited substantial case law purporting to state that such costs are not to be considered irreparable harm in bankruptcy cases that are filed in the midst of ongoing litigation.

Obviously, Apple makes numerous nuanced arguments in its 24-page filing. However, I believe that this summary gives the World of Apple readers an understandable snapshot of Apple’s position. I will interact with Apple’s arguments in more detail if and when Psystar files a Motion in Opposition.

Psystar, in the meantime, filed a request for an Order of the court authorizing the employment of Lazaro J. Lopez, Esq., to represent it in the bankruptcy proceedings. An emergency hearing is scheduled on that request for today.

Here are copies of Apple’s filings:

Motion of Apple, Inc. for Relief From Stay

Exhibit 1 to Motion for Relief From Stay