Apple Hit by Lawsuit

Lawyers filed a 10-count lawsuit against Apple earlier
this week, claiming the ties between the company’s iTunes
music download service and its iPod violate state and federal
antitrust law.

Slattery v. Apple, filed Monday in the U.S. District Court, Northern
District of California in San Jose, is a plea to allow the case to become a
class action lawsuit on behalf of anyone who has used the iTunes service or
bought an iPod from Apple since April 28, 2003, the day iTunes first
opened shop
.

The suit is also seeking compensation for the affected users and to
“disgorge its ill-gotten gains, and awarding the proceeds of this
disgorgement to” the plaintiff and class action members.

Officials from Apple were not available for comment at press time. Eric
Belfi of New York-based Murray, Frank & Sailer LLP, one of the lawyers
representing Thomas Slattery, a California resident, declined to comment on
the suit.

The suit claims Apple broke the law when it altered the industry standard
Advanced Audio Codec (AAC) file format and used it to restrict the music’s
usage outside the iPod. Songs sold to the public on iTunes use the AAC with
Fairplay Digital Rights Management (DRM), called AAC Protected.

With the altered AAC files, the suit claims, users can’t play the music on
any other portable digital music player than iPod and they can’t convert the
music files to MP3 files. Also, the suit
claims Apple has rigged the hardware and software on its iPod so that files
downloaded from other online music stores can’t be directly played on the device.

“At the same time, by engaging in this unlawful conduct, Apple has managed
to unlawfully maintain its monopoly market power in the market for online
music sales because owners of the monopolized iPod product who wish to
purchase music tracks online have no choice, given Apple’s conduct, but to
purchase these tracks only from Apple’s iTunes store,” the suit reads.

The iTunes store is one of the most popular legal
online music download sites. Last month, Apple announced it had
reached the 200 million song milestone, and according to the suit, Apple CEO
Steve Jobs said the service had at least 80 percent of the legal music
download market. Other services include Real’s Rhapsody, Sony Connect,
Napster and Buy.com.

Apple has been more than willing to cut deals with the iPod’s popularity,
but has come down hard on anyone trying to circumvent its technology. A
year ago, HP arranged a tit-for-tat
arrangement
that let the company sell HP-branded digital music players
based on the iPod in exchange for pre-installing the iTunes software on
certain of its desktop and notebook lines.

Rival online music providers have had a harder time, though. RealNetworks
CEO Rob Glaser reportedly
sent an e-mail to Jobs in April requesting Apple’s Fairplay DRM license so his Rhapsody subscribers could listen to
music on iPods. The deal didn’t go through, and three months
later Glaser came out with Harmony
Technology
, which reverse-engineered Apple’s technology. Apple
officials responded by calling Real hackers
and mulling a lawsuit.

The lawsuit filed this week states Apple’s defense of its Fairplay DRM is
to protect copyrights owned by the artists or music labels.

“That defense, however, is both irrelevant and unavailing,” the suit reads.
“In fact, other than Apple’s iTunes, no other online music vendor has such a
restriction in place; yet these other online vendors still manage to provide
copyright protection mechanisms to artists and record labels — often the
same artists and labels whose same songs are sold online through iTunes.”

In related news, reports abound over a lawsuit filed by Apple against
Web sites publishing details of forthcoming hardware and software products.
According to CNN Money, information published on Mac rumor site
ThinkSecret.com contained what Apple officials say are trade secrets, and
that the site’s owner, Nick deLume, induced individuals with access to
pre-released products to make them public.

“Apple’s DNA is innovation, and the protection of our trade secrets is
crucial to our success,” an Apple statement to the media outlet read.

Last month, Apple filed a lawsuit in the U.S. District Court in San Jose
against 28 individuals who violated the company’s Apple Developer Connection
(ADC) program. The program, used by third-party software developers to
create products that interoperate with Apple’s, give members restricted
access to pre-release software. Apple lawyers will argue the defendants
took copies of Apple Tiger builds 8A294 and 4A323 and distributed them through
file-sharing networks.

According to AppleInsider.com, another Mac rumor site, the builds are
pre-release versions of Mac OS X 10.4 “Tiger.” The site also reported a
similar lawsuit in December for leaked details on a music device code-named
Asteroid.

“Acting in concert, [the] Defendants have deliberately and systematically
misappropriated and distributed through the Internet thousands of copies of
confidential, unreleased Apple software,” the suite reads. “Using a
publicly accessible Web site and “BitTorrent” technology that permits users
to send and receive data files simultaneously, [the] Defendants have
enabled, assisted and induced others to make and use illegal copies of this
misappropriated software.”

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