The case between Apple Corps Limited (the publishers of the Beatles’ music) and Apple Computer Incorporated (the creator of Apple computers and the iPod) has been decided in England. The verdict? Apple Computer Incorporated did not breach a 1981 agreement entered into between the two companies. As Judge Mann put it:
From time to time, the marks of Corps and Computer created conflicts. In November 1981 they entered into an agreement concerning the use and registration of the word “Apple” and various apple logos. I do not need to set out the detailed terms of that agreement. In general terms, Computer was allowed to use its marks in relation to computer goods and services, but not use them in relation to computer equipment specifically adapted for use in the recording or reproduction of music, or in relation to operational services relating to music. It was also prevented from using its marks in relation to apparatus specifically designed and intended for synthesising music unless certain restrictions were met. Corps could use its marks in relation to sound and video recording, and reproducing apparatus and instruments, and sound and video records, but not computers and computing systems. That was how the parties divided up the product territories at the time.
A dispute arose between the two companies regarding the use of certain trademarks and this led to an agreement which the judge referred to as the “TMA” (for “Trade Mark Agreement”). The latest case concerns an alleged breach of the TMA by Apple Computer Inc:
The dispute arises
# In January 2001 Computer introduced iTunes software. That software was what is described as a juke box for the computer. This enabled storage of music so that it could be played back through the computer. The music to go into it was principally acquired by the user “ripping” CD tracks. In October of that year computer launched its iPod player – a small portable device for storing digitally encoded music (on a small hard disk within the machine) and playing it back through headphones. iTunes transferred music from the computer to the iPod, originally just for Computer’s own Mac computers. Other software did this for Windows-based computers until iTunes for Windows was introduced. Over the four and a half years which followed the iPod has been a dramatic commercial and conceptual success. I shall have to describe the operation of iTunes in more detail below.
# Time and technology marched on. In April 2003 Computer announced that it was going to launch the “iTunes Music Store”. For several years before that time a very significant amount of popular music had been available for illicit downloading on the internet. It was illicit because the downloads infringed copyright. When such illicit downloads took place downloaders did not pay for the music that they acquired. The loss to the music industry was potentially very significant. The quality of these illicit downloads was variable.
# ITMS was introduced to provide a commercial but legitimate source for downloaded software. It was a form of electronic “shop” where music could be downloaded for a relatively small sum – 99¢ per track in the US, and 79p per track when it was introduced into the UK the next year (2004). While Computer was not the first person to launch a site making authorised sales, it was a significant addition to the market and has proved to be enormously successful. The notional store consists of a large number of tracks held on a central server (or servers), which can be accessed over the internet and downloaded for a price. It is accessible to anyone with a computer capable of running Computer’s iTunes software, which includes the majority of the personal computers in use in the world today.
# When the ITMS was first launched it was accessed by first going to www.applemusic.com. The user was then diverted to the iTunes website, where the iTunes software could be downloaded. The store was then available through iTunes. After a few months this route was changed. Now a user gets to the iTunes website either by using the URL www.itunes.com, or via Computer’s website. In the latter case there is a link (graphically in the form of a tab) which takes one to the iTunes website, or perhaps more accurately to its pages within Computer’s website.
# There are now 4.5m tracks on the site, and video content and TV programmes have recently been added. There are also a large number of audiobooks – abridged and unabridged readings of literary works. While the word “Apple” was not used in the title of the new store, it is said that “Apple” marks were, and have since been, used prominently in connection with the store. To put it at its lowest, there is no doubt that Computer associated itself very firmly with iTunes Music Store; there would have been little point in keeping the association secret. Doubtless Computer wished it to be known that the Store was indeed its venture. As part of its launch, Mr Steve Jobs, the chief executive officer of Computer, extolled its virtues, including what was said to be the competitive price for the downloaded music and the quality of its music compression standards. Again, I shall describe the operation of the store in more detail below.
# Between November 2002 and April 2003 Computer entered into various agreements with the five major record companies (Warner, Universal, EMI, Sony and BMG) for the online delivery of content through the iTunes Music Store in the U.S. These were preparatory steps to the launch of the Store. A prototype of the Store was demonstrated to Mr Neil Aspinall, the sole executive officer of Corps, on 31st January 2003. Because he did not like the appearance, and perhaps the nature, of the product, Corps has never authorised any of its music to be sold through the Store. Computer has since added other agreements with other music providers.
# The introduction of the ITMS caused consternation to Corps, which considered that the use of the Apple logo in relation to the store would be a breach of the TMA. In essence, it says that it is entitled to use its mark on or in connection with music content and Computer is not; and when Computer uses its mark in relation to the ITMS it is using it in connection with music content in breach of the TMA. It complains that a variety of things amount to a breach. In order to make sense of them I shall have to describe how the store operates. In what follows any recitation or description of fact should be treated as a finding of fact by me unless the contrary appears or the context indicates otherwise.
Ultimately the judge found that there was no breach of the TMA by Apple Computer Incorporated. As MacWorld put it:
The judge did not agree with the plaintiff’s complaint, Instead, he sided with the defendant’s claim that iTunes is, at heart, no more than a data transmission service for music, a use he declared was acceptable under the 1991 agreement.
A copy of the judgment is here.
Not one known to miss a good opportunity, Steve Jobs invited Apple Corps Limited to list the Beatles’ music on the iTunes Music Store:
After successfully defending itself from a lawsuit by Apple Corps, Apple Computer CEO Steve Jobs on Monday invited the Beatles to join the iTunes Music Store.
“We have always loved the Beatles, and hopefully we can now work together to get them on the iTunes Music Store,??? said Steve Jobs in a statement provided to Macworld.
Apparently Apple Corps Limited is appealing the decision.