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  • Lawyers Lose a Huge Payday

    December 18th, 2014

    On the surface, it must have seemed a sure thing. File a multimillion dollar antitrust lawsuit against an iconic tech company and maybe get a settlement that will enrich everyone, except for the aggrieved customers of course. At best, they can expect a discount coupon or a prepaid gift card for a small sum.

    Well, that’s what usually happens. Certainly Apple has lost a few, won a few, and settled other claims over the years. On the surface, this particular case, involving Apple’s decision to make iTunes and iPods incompatible with rival music services and devices, could have cost up to one billion dollars if the plaintiff won.

    What is striking about this case is the time it took to resolve. It was first filed in 2005, and covered some eight million customers who bought iPods while Apple’s FairPlay DRM was being used. Apple was accused of not just locking in customers to the iPod and overcharging for their devices.

    Now DRM has always been controversial. To get the music companies to agree to supply music that included individual tracks for the original 99 cents price at iTunes, they had to be protected. That meant that you could share them with iPods and personal computers in your household, but not with anyone else. The original limit was three computers — and that included Windows PCs after Apple opened up iTunes — but was later raised to five.

    If you had a big family with more than five computers, you were in trouble. In theory, you had to buy your music twice. Of course, nothing stopped you from ripping your own music from your CDs and vinyl collection, nor did it prevent you from adding unprotected tracks to iTunes. Of course some of those tracks may not have come from legal sources, but that didn’t matter.

    Lest you forget, Microsoft had its own DRM scheme, PlaysForSure, which restricted content to licensed devices in a similar fashion due to the licensing agreement with the same music companies. In retrospect, you’d think Microsoft should have faced the same potential antitrust concerns as Apple for the same offenses (remember the Zune?), but there was one more issue.

    You see, back in 2004, RealNetworks came up with a scheme known as Harmony that was designed to, in part, circumvent the restrictions on content in iTunes and the iPod. So you’d be able to download tunes purchased from the RealPlayer Music Store. In passing, some complained that RealNetworks was keeping its own intellectual property and products locked up while using workarounds to circumvent FairPlay.

    In any case, new releases of iTunes blocked Harmony, but Apple claimed it was more about shoring up security and not locking out a competitor. Still, there was that contract with the music industry that could lead to serious consequences if an iPod was jailbroken.

    Are you with me so far?

    Now this lawsuit has had its ups and downs over the years. Testimony even became somewhat morbid by the inclusion of recorded testimony from Steve Jobs, which was taped about six months before his death in 2011.

    Unlike the Apple/Samsung trial that may never end, the eight-member federal jury in U.S. District Court in California took about three hours to decide that Apple was innocent of any wrongdoing.

    Apple’s response to the verdict, “We created iPod and iTunes to give our customers the world’s best way to listen to music. Every time we’ve updated those products — and every Apple product over the years — we’ve done it to make the user experience even better.” 

    Curiously, RealNetworks wasn’t even part of the case. In a fascinating keystone cops routine, the case went through several plaintiffs as the lawyers attempted to find someone among those eight million who actually purchased one of the iPods that was impacted by this problem which, as you no doubt recall, was eliminated in 2009 by removing DRM for iTunes music.

    Unfortunately, the first plaintiffs, when subjected to questioning by Apple, were shown not to have eligible gear. Don’t get me started, but you’d think lawyers setting up a billion dollar class action lawsuit would have the sense to make sure they had eligible plaintiffs. After a couple of potential plaintiffs were dismissed, they finally found someone to serve the role as an aggrieved party.

    What made the situation altogether difficult is the fact that anyone who wanted a music player during that period could have bought someone else’s product. Sure, if it used a DRM licensed from Microsoft, or was otherwise under some sort of copying restriction, the end result would be essentially the same. Apple never forces anybody to buy their stuff; there are usually alternatives. So finding injury was exceedingly difficult. That the Harmony jailbreaking method was repeatedly blocked by Apple made sense from a legal standpoint. What if RealNetworks tried to do the same with Microsoft’s PlaysForSure? Wouldn’t Microsoft be justified in blocking it for the same reasons?

    What’s more, despite this loss, it’s a sure thing that there are other ambitious ambulance chasers out there who’d be delighted to have a crack at Apple for one presumed transgression or another, and I haven’t begun to research pending cases. After all, the potential for a huge payday is still endlessly attractive.



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