Tim Cook supported Apple's legal team after 'very ugly' iBooks lawsuit
In a wide-ranging interview, former Apple general counsel Bruce Sewell has told law students how the iBooks antitrust case went wrong, and also what it was like moving to Cupertino after years with the much more formal Intel corporation.
Tim Cook (left) with Bruce Sewell
Bruce Sewell, who retired as legal general counsel at Apple in 2017, says now that he got the company's "so important" and "very ugly" iBooks case wrong. Speaking to law students, he talked about the risks that legal teams take and how Apple's Tim Cook reacted to the loss.
"Apple got involved in a very ugly suit with the US government in the Southern District of New York that had to do with our release of the iBooks Store," Sewell told an audience of lawyers for the YouTube series "Before You Take the LSAT." "I tried to chart a course that I thought was incredibly good for Apple, and would bear legal scrutiny."
Sewell was responding to a question about risk in the law and how you avoid it, but he answered that there are reasons to look for risk. "Steer the ship as close to that line as you can," he continued, "because that's where the competitive advantage lies. It's hard to say exactly where that line is... but you want to get to the point where you can use risk as a competitive advantage."
Speaking about how in-house legal teams work as opposed to outside counsel, he said that you need to be able to react and willing to change. "That's the point at which law actually becomes a commercial asset to the company," he explained. "If you can figure out how to get closer to a particular risk, but be prepared to manage it if it does go nuclear, your company is able to sail closer to the wind than its competitors are and that's a real advantage. But you have to have permission of the company to do that because every so often, you're going to get it wrong."
Regarding the iBooks case, he said that he hadn't got all the information he needed.
"There were some things going on amongst a group of publishers that I didn't know about," he continued. "If I had known about them, I would've taken a different tack. That was an example of sailing close to the wind because it was so important to Apple. But, in the end, I got it wrong. Apple ended up being sued by the government and having to pay a large fine."
Sewell also revealed what Tim Cook's response to losing the case had been.
"Tim's reaction was, [what we had done] was the right choice," he said. "'You made the best choice you could with the information you had. You didn't know about these other things. Don't let that scare you. I don't want you to stop pushing the envelope because that's why legal is an important function in the company.'"
Bruce Sewell talking to law students
Describing the general way that Apple's legal team functions, Sewell revealed that by the end of his tenure with the company, it had an annual legal budget of a billion dollars. Most of that was spent on litigation cases, and he gave as an example how the smartphone patent trial against Samsung at one point had 350 lawyers billing time. They had between seven and eight million documents to review, and spent in total some 208,000 hours on the case.
Sewell moved to Apple from several years as general counsel at Intel and was asked about how he found that change. "Going from Intel to Apple, in some cases, was like going from university to kindergarten," he said. "Because Apple's just this wild place. The atmosphere at Intel was very formal, the atmosphere at Apple is very creative, very laissez-fair."
"And so there's this sense of order leading to good results at Intel," he continued, "and kind of chaos leading to incredible results at Apple."
He stayed at Apple for eight years and said that when he decided to retire, he sent Tim Cook a note about starting to look for a replacement. "He didn't respond for, like, five days!" said Sewell. "I was just, oh my god, he's going to throw me out... [Then] he sent me the most beautiful note. He said 'sorry it took me so long to respond, but I kept thinking it was a nightmare and I was gonna wake up from it.'"
Sewell left Apple at the end of 2017 and was replaced by Katherine Adams.
Tim Cook (left) with Bruce Sewell
Bruce Sewell, who retired as legal general counsel at Apple in 2017, says now that he got the company's "so important" and "very ugly" iBooks case wrong. Speaking to law students, he talked about the risks that legal teams take and how Apple's Tim Cook reacted to the loss.
"Apple got involved in a very ugly suit with the US government in the Southern District of New York that had to do with our release of the iBooks Store," Sewell told an audience of lawyers for the YouTube series "Before You Take the LSAT." "I tried to chart a course that I thought was incredibly good for Apple, and would bear legal scrutiny."
Sewell was responding to a question about risk in the law and how you avoid it, but he answered that there are reasons to look for risk. "Steer the ship as close to that line as you can," he continued, "because that's where the competitive advantage lies. It's hard to say exactly where that line is... but you want to get to the point where you can use risk as a competitive advantage."
Speaking about how in-house legal teams work as opposed to outside counsel, he said that you need to be able to react and willing to change. "That's the point at which law actually becomes a commercial asset to the company," he explained. "If you can figure out how to get closer to a particular risk, but be prepared to manage it if it does go nuclear, your company is able to sail closer to the wind than its competitors are and that's a real advantage. But you have to have permission of the company to do that because every so often, you're going to get it wrong."
Regarding the iBooks case, he said that he hadn't got all the information he needed.
"There were some things going on amongst a group of publishers that I didn't know about," he continued. "If I had known about them, I would've taken a different tack. That was an example of sailing close to the wind because it was so important to Apple. But, in the end, I got it wrong. Apple ended up being sued by the government and having to pay a large fine."
Sewell also revealed what Tim Cook's response to losing the case had been.
"Tim's reaction was, [what we had done] was the right choice," he said. "'You made the best choice you could with the information you had. You didn't know about these other things. Don't let that scare you. I don't want you to stop pushing the envelope because that's why legal is an important function in the company.'"
Bruce Sewell talking to law students
Describing the general way that Apple's legal team functions, Sewell revealed that by the end of his tenure with the company, it had an annual legal budget of a billion dollars. Most of that was spent on litigation cases, and he gave as an example how the smartphone patent trial against Samsung at one point had 350 lawyers billing time. They had between seven and eight million documents to review, and spent in total some 208,000 hours on the case.
Sewell moved to Apple from several years as general counsel at Intel and was asked about how he found that change. "Going from Intel to Apple, in some cases, was like going from university to kindergarten," he said. "Because Apple's just this wild place. The atmosphere at Intel was very formal, the atmosphere at Apple is very creative, very laissez-fair."
"And so there's this sense of order leading to good results at Intel," he continued, "and kind of chaos leading to incredible results at Apple."
He stayed at Apple for eight years and said that when he decided to retire, he sent Tim Cook a note about starting to look for a replacement. "He didn't respond for, like, five days!" said Sewell. "I was just, oh my god, he's going to throw me out... [Then] he sent me the most beautiful note. He said 'sorry it took me so long to respond, but I kept thinking it was a nightmare and I was gonna wake up from it.'"
Sewell left Apple at the end of 2017 and was replaced by Katherine Adams.
Comments
Listen to the Ibook situation, it sounds like it was no different than the itune's and $0.99 songs. Apple was trying to turn around/save the industry from the whole pirating crazy. The music industry did not like what Apple was trying to do since it would eventually cut out all the middle men. At the time there were a number of very vocal Artist saying the Apple was trying to rip them off, when in reality Apple was guaranteeing they would paid. Recently a number of artist said once iTunes started up and especially Apple Music royalty payment began rolling in again and they had not seen them in years.
The fact there were publisher working behind the scene trying to undermine the whole ibooks deal show the Publisher are afraid of losing their power over the writers. With Ibooks like iTunes writers could write a book and directly publish it on iBooks and make profits directly and not have to share the profits with Publishers. Amazon currently has sweetheart deal with publishers, and no one want this to change. Book writers are the one who are going to get screwed by Apple loosing this case.
Pushing the boundaries of morals, ethics and decency are BAD things and I'm glad Apple does not do that.
What is barely legal in what Apple did?
All Bruce Sewell said was you have to push the limits of jurisprudence. What may be considered illegal today could be legal tomorrow and vise versa. All because someone was able to present information or evidence in a different light or with new data to back their understanding. This is not unethical and actually is would be unethical not to challenge laws as written or understood. Everyone has an obligation to operate at the edge of the laws.
If you research Anit-trust cases in the past it was seen that a company which control a market was bad and had to be broken up, even if the consumers were not harmed. In the 70's this changed to look at the economic value to the consumers. This mean they look to see if consumers were economically harmed by what the company was doing, if consumers would pay less leaving a company intact or its business tactic the courts could not rule to change or break it up. The court flipped on this standard and rules against the consumers in the ibook case, and said publishers get to decide what price consumers pay in the various markets which people buy books. This case was about the MFN (Most Favored Nation) clause in the agreement, which said that Apple would not be force to sell books at a higher cost than any of their competitors. The government said that Apple was not allowed to do this in turned this harmed consumers since it is now requires you to shop for the best costs, verses knowing ibooks would be no more expensive than Amazon.
What you perceive as unethical is actually in consumers best interest. look at iTunes, it allowed you to buy a song for $0.99 and only the songs you liked verse, buy an album of 10 to 15 songs for $20 to only listen to one or two songs when the balance was garbage. Consumers and Artists won all the away around and the Record Label Monopoly loss, but the Publisher Monopoly won in the Ibook case.
In Sewell's defense he does say had he known the entire details surrounding Mr Jobs and his communications with and between the publishers he implies he would have recommended against designing it the was Apple did. He seems to be admitting in hindsight that it was illegal as done tho he was not originally privy to all of it.
I certainly don't see that, but it is also true that the publishers did collude with each other.
https://www.idownloadblog.com/2013/05/16/doj-steve-jobs-apple-guilty/
Sewell would have almost certainly have been aware of Steve Job's email at that time, and not of the collusion between publishers.
"For its part, Elliott, the firm founded and led by billionaire Paul Singer, acquired Britain’s biggest bookseller, Waterstones, last year. Owning the two book retailing giants could give Elliott synergies and buying leverage with publishers, people familiar with the industry say.
Elliott will operate the two retailers independently, the company said on Friday, though Waterstones CEO James Daunt will oversee both retailers as chief executive."
Apple devised a Most Favored Nation (MFN) clause in its contracts with publishers which "guaranteed that the e-books in Apple’s e-bookstore would be sold for the lowest retail price available in the marketplace," Cote wrote. For the publishers to charge up to $14.99 for e-books on Apple's iBooks store, they had to raise prices on Amazon's Kindle store as well by collectively forcing Amazon to accept the agency model.
As Cue acknowledged at trial, “I just wanted to assure them that they weren’t going to be alone, so that I would take the fear away of the Amazon retribution that they were all afraid of.” By acting in concert, enabled by Apple being the coordinator between them, they removed Amazon as a problem.
I don't think Sewell would have signed off on it had he known all the communication details and he now suggests that's exactly what he would have done, recommended against it It doesn't make Apple the corporation "bad", more a rare error in judgement by executive management.
For the record I don't buy from Amazon. I don't just because I don't like what they've done to publishing, and a lot of other fields. It's a hopeless protest but at least my money isn't feeding the monster.
"There were some things going on amongst a group of publishers that I didn't know about," he continued. "If I had known about them, I would've taken a different tack."
...nowhere does he also say that "...that we were orchestrating..."
Cool narrative tho. Keep it up!