Did Apple’s iPod become the dominant music player illegally? That’s the charge in a billion dollar suit that claims Apple shut out competitors.
But in a new wrinkle to the high-profile case that got under way earlier this week, Apple Thursday challenged the legal qualifications of two women who are the primary plaintiffs to pursue the suit claiming that customer records show the iPods were purchased later than the timeframe at issue in the suit—2006 to 2009.
Lawyers for the plaintiffs in the class-action suit being heard in a federal court in Oakland, Calif., are in a scramble to find receipts that show the iPods were purchased in the 2006 to 2009 timeframe.
“I am concerned that I don’t have a plaintiff,” Judge Yvonne Gonzalez Rogers said Thursday. “That’s a problem.” Judge Rogers directed lawyers for both sides to present legal briefs on the issue.
However the question of the plaintiffs’ qualifications is resolved, early testimony in the case has already provided some rare insights into Apple’s behind-the-scenes market strategy. The case is already almost 10 years old, and the strict timeframe has to do with the fact that Apple stopped shipping the software in question in 2009.
The most dramatic testimony of the week came on Dec. 5 when jurors got to view a video deposition given by Steve Jobs, Apple’s late co-founder and CEO, six months before his death in 2011. In the video, Jobs defended Apple’s Digital Rights Management software, which blocked other music services that competed with Apple’s iTunes from playing on the iPod.
The suit claims Apple illegally forced song buyers to use iPods and Apple’s iTunes software to download music rather than cheaper music players that could not play songs purchased using iTunes.
In the video Jobs said Apple was “very scared” of the prospect that hackers could break its security system because it could break the contracts Apple had with recording companies to enforce anti-piracy measures. “We would get nasty emails from the labels,” he added.
He also confirmed he had suggested language in an Apple press release that called RealNetworks a “hacker.”
“We are stunned that Real has adopted the tactics and ethics of a hacker to break into the iPod, and we are investigating the implications of their actions” under federal law, the release said.
Plaintiffs in the case argue Apple was able to sell iPods at inflated prices, between 2006 and 2009, pocketing $350 million more than it should have. Under federal anti-trust law, Apple could be liable for triple the amount it’s alleged to have gained if the jury determines those gains were the result of illegal, anti-competitive behavior. Apple said in opening arguments that iPod prices came down over the period in question, so there should be no damages.
But a new charge emerged Wednesday, alleging that Apple deleted music that some iPod owners had downloaded from competing music services from 2007 to 2009 without telling users, the attorneys representing consumers told jurors.
Another claim is that Apple also prevented RealNetworks’ Harmony software from playing on the iPod. Harmony, designed as a digital rights management (DRM) translation software, would have allowed iPod users to play music purchased from RealNetworks on Apple’s device. But after it was released, an Apple software update made it incompatible with the iPod.
Apple iPod Suit at Risk Over Challenge to Plaintiffs’ Qualifications
RealNetworks later released an update to Harmony that made it work on iPods again, but another Apple update again made Harmony incompatible. Eventually, RealNetworks gave up trying to play on the iPod, which had quickly established itself as the world’s most popular music player.
Apple claims its software updates weren’t targeted at Harmony, but designed to offer improvements like the ability to play video and movies. In opening statements to the jury Apple called the improvements groundbreaking.
The San Jose Mercury News reported earlier this week that lawyers representing consumers in the case have already shown the jury some of Apple’s internal communications after RealNetworks launched Harmony including a draft of a news release in which Jobs compared Harmony to “the tactics and ethics of a hacker and breaking into the iPod.”
If Apple loses, it can well afford even a billion dollar judgment, but it’s still a lot of money and the tech giant is mounting a vigorous defense. Gartner analyst Mike McGuire said he’s surprised the case has gone on so long, and while he’s reluctant to predict the outcome of a jury trial, he thinks Apple has a few trump cards.
“I’m kind of surprised this reached class-action status,” McGuire told eWEEK. “The impetus I guess at the time was to ask ‘why can’t I get my [non-Apple] stuff on this device?’ But the reality was the industry was hoping for but never really tried to enforce interoperability and Apple never set that expectation. As a consumer, I never expected my RealNetworks subscription would run on all devices; I’d use it on my PC.”
McGuire also noted the key argument in Apple’s favor is Fairplay, the DRM software designed to keep songs downloaded on the iPod from being illegally copied. Fairplay (ironically, given its name) was incompatible with the anti-copying code used by other online music sellers and you could not play songs purchased on iTunes on, for example, non-iPod devices like Microsoft’s Zune music player or the Diamond Multimedia Rio.
“All those contracts Apple had with music labels at the time required them to put protection on the music files,” said McGuire. “Anything that breaks that protection is a hack of the DRM, he noted.
Apple’s intent in keeping the DRM in place isn’t relevant, McGuire contended. “It had the right to fix any holes in the DRM, and if that means Harmony wouldn’t work, oh well.”
Marc Canter, a pioneering developer of multimedia technology and music fan, said there’s no question in his mind that Apple wanted to stop RealNetworks Harmony from playing on the iPod, but he also agreed that consumers then had no expectation of interoperability.
But he said that inevitably we will get to a point where you’ll be able to mix and match your music regardless of how you bought it because that’s what consumers want.
“The notion of intermixing to this day is still not possible. It’s been the holy grail of the industry,” Canter told eWEEK. “I have songs I bought on iTunes and now on other services like Pono for high res and Spotify. I’d like to mix and match, but I can’t—but that’s where the world wants to go.”