Under the terms of the agreement, Psystar will pay Apple (AAPL) damages totaling $1,337,550 for all the copyright, DMCA, and breach of contract claims against it and another $1,337,500 in attorney fees and additional damages. In return, Apple will drop all its trademark, trade dress and unfair competition claims against Psystar. Cupertino has also agreed not to “seek to execute on the money judgments…until any and all appeals in this matter are concluded or the time for filing any such appeal has lapsed.”

Not that Apple is likely to collect that money, anyway. As I’ve noted here before, Psystar’s total assets, according to its bankruptcy filing, are no more than $50,000.

The agreement if full, below.

Apple Psystar Settlement Agreement

Further details are yet to come, but in a U.S. District Court filing Monday, Psytar said, “Psystar and Apple today entered into a partial settlement that is embodied in a stipulation that will be filed with the Court tomorrow. Psystar has agreed on certain amounts to be awarded as statutory damages on Apple’s copyright claims in exchange for Apple’s agreement not to execute on these awards until all appeals in this matter have been concluded. Moreover, Apple has agreed to voluntarily dismiss all its trademark, trade-dress, and state-law claims. This partial settlement eliminates the need for a trial and reduces the issues before this Court to the scope of any permanent injunction on Apple’s copyright claims.”

Odd that Apple (AAPL), which just days ago seemed intent on hanging Psystar’s lifeless body from the gates of 1 Infinite Loop, would agree to such a thing. Odder still, that it would do so when Psystar is petitioning to have its Rebel EFI utility–which enables Apple’s Snow Leopard OS to be installed on generic PCs–excluded from any injunction.

In any event, it’s good news for Psystar, which had previously been facing damages of at least $2.1 million and the shuttering of its business.

Kara was sorely disappointed when she realized she wouldn’t need her yoga mat for her piece on Asana, which, as it turns out, isn’t a pose that helps you channel your chi, but rather, a high-profile start-up from two former Facebookers aimed at addressing the workplace collaboration and communications space. Benchmark Capital and Andreessen Horowitz together invested $9 million in an attempt to tip the karmic balance in Asana’s favor. Kara showed no fear in a post this week addressing head-on the what-ifs raised by our spicy chairman, Rupert Murdoch. Rupe has threatened to remove content from search giant Google (GOOG) and Kara decided to fill everyone in, from the inside out. AllThingsD went a little bit Hollywood late in the week and Kara reminded us all to set our TiVos to catch our very own Katie Boehret on “The Martha Stewart Show” where she was scheduled to showcase a few cool gadgets for the holidays.

Digital Daily wasn’t quite as Zen this week, covering a few of the scintillating conflicts that always seem to plague the holiday season. It was a case of bickering brothers and Psystar style early in the week as Apple readied the deathblow against the Mac clone retailer. Apple (AAPL) claims that Psystar computers that ship with Mac OS cut too close to home and must be eliminated. Apple may be sandblasting a soda cracker just a little here as Psystar has already filed for bankruptcy. John followed up with some thoughts on foreign policy. It seems that Senators John Kerry and Orrin Hatch put on their best Hawaiian shirts, black socks and leather-man sandals this week to play the obnoxious Americans intent on bossing around the European Commission. While there was no word on whether they made a fuss about not getting ketchup with their French fries, they did encourage the EC to hurry up and approve the pending Oracle (ORCL)-Sun (JAVA) deal. Sticking with the European vacation theme, John finished out the week with news that Apple and wireless carrier O2 would begin selling iPhones at Tesco supermarkets in the U.K. We assume that, like all things sold in British grocery stores, Tesco iPhones will also come with tikka masala and malt-vinegar options.

MediaMemo was back up to full speed this week, and while we don’t blame Peter for doing his civic duty last week, we’re glad he’s back on the job. He has been closely following the decline of advertising dollars that have been blamed for everything from the death of newspapers to Lou Dobbs “going rogue.” Peter reported that Yahoo upped the ante this week with a meta-advertising campaign targeted at, yep, ad executives. That’s one way to drum up business, or so believes the team at the new Yahoo (YHOO). In another startling revelation about media consumption, the Olswang media law firm reported that iPhone consumers tend to be willing to pay for some content. Peter echoed the same, reporting some purchases of his own. In yet another story about a potential grab for media dollars, Peter reported that Hulu, the online television giant, grew in both content and viewership. Peter reminded us that viewers everywhere are holding their breath for when the juggernaut throws up that pay wall.

Katie held down the Mossberg fort this week and did so even while simultaneously appearing on TV. Quite a feat, but lady geeks have special two-places-at-once powers. Back underground at Mossberg HQ, she reviewed Clicker, a Web site aiming to be the place to find any TV program you might want to watch. The service will point you to wherever a particular episode may live in electronically viewable format and does so without cluttering results with the Web’s video jetsam. She praised the service on the whole, but warned that it’s not a magic bullet. If you are directed to a site that features a pesky proprietary media player, you will still have to make the download. She said that the user account on the site will even let you use it like an online TiVo (TIVO), alerting you when shows have posted and building you a playlist.

Please take care while nursing your Post Retail Stress Disorder this weekend, and take solace that while you may never fully use that knee again, you did get your four-dollar toaster. Tune in next week: Weekend Update will bring you the all-meat, no filler account of the week’s events at AllThingsD.

“Psystar…has built its business on infringing Apple’s copyrights and trademarks, free-riding on Apple’s research and development efforts, and trading on Apple’s hard-earned reputation for high quality, innovative and easy-to-use computers,” Apple said in its motion.

“Psystar’s appropriation of Apple’s intellectual property and goodwill has been systematic and brazen, from the name of Psystar’s ‘OpenMac’ computers to its deliberate pirating of Apple’s Mac OS X,” the company added.

“Psystar even seeks to profit from Apple’s efforts to protect its rights, extolling this litigation as Psystar’s ‘opportunity to gain market share,’ in a pitch to venture capitalists….Unless Psystar is permanently enjoined, it will not stop its unlawful conduct–conduct that is causing irreparable harm to Apple’s business, brand and goodwill.”

Catch that? Psystar was pitching VCs on its plan to use Apple’s IP to “compete directly against Apple.” Shameless. Little wonder Cupertino is so intent on burying the would-be rival.

And make no mistake, Apple legal is going to grind Psystar into fine silicon dust. In addition to the injunction, Apple is requesting compensation for legal costs and statutory damages owed under the Copyright Act and the Digital Millennium Copyright Act. And according to Apple’s expert witness, statutory damages for the former should run “between $1500 and $300,000″ and for the latter “between $449,500 and $4,495,000.”

Suffice it to say, that’s quite a bit more than the current value of Psystar’s assets which, according to its bankruptcy filing, are no more than $50,000.

“Psystar has violated Apple’s exclusive reproduction right, distribution right, and right to create derivative works,” Alsup wrote in his ruling (see full text below). Not only did the company infringe on Apple’s (AAPL) copyrights by installing Mac OS X on its hackintoshes, he explained, it violated the Digital Millennium Copyright Act to do so.

An ugly defeat for Psystar, which just a few weeks ago asked a judge to bless its business and rule that it is legally allowed to sell machines with Apple’s Mac OS X pre-installed. Still, it doesn’t mean that the acrimonious legal battle between the two companies is finished. Psystar could appeal, though Alsup’s ruling would seem to leave the company pretty far up that certain creek it’s been traveling lately–without a paddle.

There remain a number of accusations to be decided at trial, among them, Apple’s claims of breach of contract, trademark infringement, trademark dilution and unfair competition. Beyond these, there are the damages that will almost certainly be brought against Psystar on the copyright issues in the case.

“The court asked for briefs on that subject,” Pamela Jones notes over at Groklaw. “In short, Psystar is toast. Psystar’s only hope now is Florida, and frankly I wouldn’t bet the house on that one. Judges notice if you were just found guilty of a similar cause of action in another state.”

Psystar –

In a post to its new community site Tuesday, Psystar said it has dumped its original legal counsel and hired Texas-based legal firm Camara & Sibley LLP to represent it.

Why? It’s not entirely clear. Certainly, Psystar’s explanation leaves a lot to be desired. “Psystar has always been more a Cowboy than a Hippie,” the company said. “Now we’ve changed lawyers to better reflect who we are. Everyone here values openness. And that’s how we’re going to fight Apple: in public.”

An ironic claim for the company to be making given that Apple has accused it of being backed by shadowy third parties. But if, as Psystar claims, it as “nothing to hide,” then perhaps it really has nothing to hide.

In any event, we’ll find out in a few months. “A new trial date has been set for January 11, 2010, in federal court in San Francisco,” Psystar said. “As we move toward trial, we’ll be keeping you informed about the arguments, the evidence, and what’s going on in the case. And, come January, Camara & Sibley will be ready to fight for Psystar, guns blazin’.”

And end up a-headin’ for the last roundup, no doubt…

In a post to its new community site Tuesday, Psystar said it has dumped its original legal counsel and hired Texas-based legal firm Camara & Sibley LLP to represent it.

Why? It’s not entirely clear. Certainly, Psystar’s explanation leaves a lot to be desired. “Psystar has always been more a Cowboy than a Hippie,” the company said. “Now we’ve changed lawyers to better reflect who we are. Everyone here values openness. And that’s how we’re going to fight Apple: in public.”

An ironic claim for the company to be making given that Apple has accused it of being backed by shadowy third parties. But if, as Psystar claims, it as “nothing to hide,” then perhaps it really has nothing to hide.

In any event, we’ll find out in a few months. “A new trial date has been set for January 11, 2010, in federal court in San Francisco,” Psystar said. “As we move toward trial, we’ll be keeping you informed about the arguments, the evidence, and what’s going on in the case. And, come January, Camara & Sibley will be ready to fight for Psystar, guns blazin’.”

And end up a-headin’ for the last roundup, no doubt…

Also: Debtor is suffering under mounting legal costs as it is steadily beaten into submission by Apple (AAPL) and its notoriously vicious legal team.

Pystar’s bankruptcy declaration will delay Apple’s copyright-infringement suit against it, but only temporarily. In the meantime, the company will be allowed to continue to do business and perhaps, strengthen its defense. But on June 5, the date of its bankruptcy hearing, things could get nasty. Psystar will almost certainly be forced to reveal its financial backers, and if they are the nefarious Svengalis that Apple claims, there may be hell to pay.

The unauthorized Mac clone maker has won the right to continue its countersuit against Apple. In an order signed last Friday, U.S. District Court Judge William Alsup ruled that Psystar–whose antitrust complaint against Apple was tentatively dismissed last year–can refocus that complaint around copyright misuse. “Psystar may well have a legitimate interest in establishing misuse [of copyright] independent of Apple’s claims against it–for example, to clarify the risks it confronts by marketing the products at issue in this case or others it may wish to develop,” Alsup wrote in his order. “Moreover, if established, misuse would bar enforcement (for the period of misuse) not only as to defendants who are actually party to the challenged license but also as to potential defendants not themselves injured by the misuse who may have similar interests.”

The ruling is something of a setback for Apple (AAPL), which had argued that Psystar’s request to resubmit an amended counterclaim was a transparent “attempt to repackage its dismissed antitrust allegations under the guise of copyright misuse.” Because if Psystar does somehow manage to prove that Apple abused copyright laws, it could open up the market for Mac clones–or at least make it quite a bit more difficult for Apple to drop the hammer on other companies intent on peddling them.

Of course, if legal avenues fail it, Apple could easily hamstring clone makers in other ways. After all, it’s not incumbent on the company to ensure that its operating system works on non-Apple hardware, is it?

On information and belief, PSYSTAR alleges that APPLE intentionally embeds code in the Mac OS that causes the Mac OS to malfunction on any computer hardware system that is not an Apple-Labeled Computer Hardware System. Upon recognizing that a computer hardware system is not an Apple-Labeled Computer Hardware System, the Mac OS will not operate properly, if at all, and will go into what is colloquially known as ‘kernel panic.’

PSYSTAR is informed and believes, and thereon alleges, that APPLE is engaged in anticompetitive conduct that prevents the proper operation of the Mac OS on any computer hardware system that is not an Apple-Labeled Computer Hardware System–a Mac OS Capable Computer Hardware System–thereby forcing customers of the Mac OS to purchase–and only purchase–an Apple-Labeled Computer Hardware System if they wish to have the Mac OS operate sans kernel panic or an infinite loop.”

That’s an intriguing allegation. Risky though, since it’s also an admission that Psystar has circumvented the technological copyright-protection measures built into OS X, just as Apple claims in its amended complaint against the company. Apple contends Psystar has done so illegally, in violation of The Digital Millennium Copyright Act. Psystar says that’s impossible because the kernel panic-forcing code at issue here isn’t a copyright-protection measure.

Who’s right? Who knows? But if it’s Apple, then Psystar presumably is guilty of circumventing Apple’s copyright protection systems under the DMCA. And that’s a felony, because Psystar profited from the circumvention.

Sued by Apple in August for violating the terms of its shrink-wrap license, trademark and copyright on OS X, Psystar replied in kind with a countersuit charging Cupertino with restraint of trade, unfair competition, and other violations of antitrust law. Apple, Psystar argued, engages in all manner of anticompetitive conduct to “protect its valuable monopoly in the Mac OS market.”

But according to the California judge presiding over the case, Apple’s products don’t constitute a market to dominate. And that being the case, Apple (AAPL) can’t be considered a monopolist.

“The counterclaim explains that Mac OS performs the same functions as other operating systems,” Judge William Alsup wrote in his order dismissing the suit. “The counterclaim admits that market studies indicate that, although Apple computers with Mac OS enjoy strong brand recognition and loyalty, they are not wholly lacking in competition. Psystar also points to Apple’s extensive advertising campaigns. Those advertising campaigns more plausibly support an inference contrary to that asserted in the counterclaim–vigorous advertising is a sign of competition, not a lack thereof. If Mac OS simply had no reasonable substitute, Apple’s vigorous advertising would be wasted money. The advertising campaigns suggest a need to enhance brand recognition and lure consumers from a competitor…. Apple asks its customers to purchase Mac OS knowing that it is to be used only with Apple computers. It is certainly entitled to do so.”

Blu-ray is a bag of hurt.”

– Apple CEO Steve Jobs

Mac clone maker Psystar isn’t letting its uncertain future undermine its product road map. Though embroiled in a nasty legal spat with Apple (AAPL) over the legality of its use of Mac OS X in its Open Computer, Psystar this week defiantly announced plans for Mac notebook clone and began shipping Hackintoshes with both Blu-ray drives and GeForce 9800GT video cards, neither of which is available in official Macs.

In a press release announcing these new options, Psystar president Rudy Pedraza upbraided Apple for delaying support for Blu-ray, which Apple CEO Steve Jobs recently described as “a bag of hurt” for consumers. “Blu-ray has already won the format war,” Pedraza said. “Not only is there fully functional and mature support for Blu-ray in other operating systems, but you can now rent Blu-ray discs from almost any rental chain. Blu-ray has become pervasive technology that is being widely adopted by consumers everywhere.”

And that’s all well and good. But until Apple adds Blu-ray support to OS X, Psystar’s Mac clones can’t play back Blu-ray video. Which means they’re only good for reading and writing data. From the Psystar FAQ:

Is Blu-Ray supported in my OS?
Blu-Ray Read/Write capabilities are fully functional in all operating systems offered by Psystar. Blu-Ray video playback requires support from the media player software. There is no Blu-Ray software capable of playing back Blu-Ray video for Mac OS or Linux.

PREVIOUSLY:

• Speaking of “Destroying Competition,” Meet Our Legal Team From Mortify, Debase and Demolish LLP
• Psyonara …
• “OpenMac” Not Open for Much Longer

The suit, filed in U.S. District Court for the Northern District of California, seeks unspecified, triple damages and, more importantly, an order voiding Apple’s end-user license agreements (EULA). If successful, it will allow OS X to be installed on hardware it was never intended to run on, opening the door for the first legitimate Mac clones in more than a decade. Hard to see Apple (AAPL) allowing that to happen, though. My guess is the company would sooner kill retail sales of OS X and manage upgrades through iTunes, than allow it to be run on inferior machines over whose quality it has no control.

The suit, filed in U.S. District Court for the Northern District of California, seeks unspecified, triple damages and, more importantly, an order voiding Apple’s end-user license agreements (EULA). If successful, it will allow OS X to be installed on hardware it was never intended to run on, opening the door for the first legitimate Mac clones in more than a decade. Hard to see Apple (AAPL) allowing that to happen, though. My guess is the company would sooner kill retail sales of OS X and manage upgrades through iTunes, than allow it to be run on inferior machines over whose quality it has no control.

A curious strategy for a company that has been selling desktop computers running Mac OS X in clear violation of Apple’s software license agreement–desktop computers Apple claims are so lousy they’re damaging the Apple brand. Interesting, though. Because if Psystar wins the suit it would certainly set an interesting precedent.

Not that it’s likely, given the acumen and prowess of Apple legal. They’re like Pacino’s John Milton in The Devil’s Advocate–the whole team of them.

Odd that it’s taken Apple this long to drop the hammer on Psystar, but now that it has, the company’s days are almost certainly numbered.

Odd that it’s taken Apple this long to drop the hammer on Psystar, but now that it has, the company’s days are almost certainly numbered.