Apple 'iPod iTunes' antitrust case sent to jury after closing arguments
Closing arguments in a class-action lawsuit against Apple's iPod iTunes ecosystem were heard on Monday, with each side arguing their case for what could potentially result in a $1 billion penalty for Apple.
On Monday, lawyers for both Apple and plaintiffs offered closing arguments to a jury of eight in a California antitrust lawsuit regarding the tech giant's supposed scheme to use iPod, iTunes and FairPlay digital rights management to effectively lock customers in to its digital music ecosystem.
According to in-court reports from The Verge, plaintiffs targeted Apple's iTunes 7.0 software update, with attorney Patrick Coughlin saying security tweaks that came as part of the update "knocked out competitors" like RealNetworks. Released in September 2006, version 7.0 brought various user features to Apple's iTunes software, but certain security modifications are under scrutiny.
Specifically, iTunes 7.0 broke compatibility with RealNetworks' Harmony, a technology created to thwart FairPlay DRM and allow users to playback on their iPods music not purchased from the iTunes Music Store. Plaintiffs argue the change introduced "switching costs" that discouraged existing iPod users from leaving Apple's ecosystem when it came time to upgrade hardware.
Coughlin went on to reassert claims about a software error that reportedly wiped an iPod's library if songs not purchased or imported through iTunes were found.
"I liken it to blowing up your iPod," Coughlin said in court, repeating an analogy he used in presenting the supposed iTunes flaw earlier this month. "It's worse than a paperweight. You could lose everything."
During trial proceedings, Apple argued its iPod and iTunes security measures were installed to protect users from potentially malicious software outside of their control. The company's security director Augustin Farrugia testified in court that Apple was "very paranoid" in implementing an extremely protected digital music service, especially when it came to possible pirated music and malware. Late Apple cofounder Steve Jobs said much the same in a deposition videotaped just months before his death in 2011.
In Jobs' view, Apple's subsequent iTunes revisions targeted DRM hacks, which were prevalent at the time. He said Apple would "constantly" revise both iTunes and iPod software to keep out what the company considers hackers.
Another major concern for Jobs was a series of tenuous deals made with record labels to sell music through iTunes. Without adequate protections and assurances that owned content would not be pirated, or alternatively that pirated content would not be promoted by iPod playback capabilities, iTunes would lose backing from content owners. When asked if music companies complained about RealNetworks' Harmony technology, Jobs said, "It doesn't really matter because in fixing holes for DRM hacks, it might screw up the Real technology anyway, as collateral damage."
While Jobs' statements are plausible, former Apple FairPlay engineer Rod Schultz disagreed, saying in court that the company's DRM deployment "intended to block 100% of non-iTunes clients" and "keep out third-party players."
Apple, however, maintains all iTunes, iPod and FairPlay enhancements were made to protect consumers and foster innovation in the digital music space.
"We now have a plaintiff that is asking you to hold Apple liable for innovating, for providing security, that is what they are asking you to do," Isaacson said during closing statements. "They are doing that and asking you to hold us liable for providing consumers a choice, for providing integrated products, for providing iPod plus iTunes, and saying that's how our products work best."
hTe suit has seen its share of troubles over the past two weeks, not the least of which being improper representing class plaintiffs. Last week, the suit against Apple lost its last named plaintiff after another withdrew one week prior due to ineligible iPod purchases. The lawsuit stipulates claimants must have purchased an iPod between Sept. 12, 2006 to March 31, 2009.
Lawyers for the plaintiffs found a suitable replacement in 65-year-old ice dancer Barbara Bennett, who is representing a class of 8 million iPod buyers.
A jury will now decide whether Apple is accountable for $350 million worth of damages, an amount that would automatically trebled to more than $1 billion under U.S. antitrust laws.
On Monday, lawyers for both Apple and plaintiffs offered closing arguments to a jury of eight in a California antitrust lawsuit regarding the tech giant's supposed scheme to use iPod, iTunes and FairPlay digital rights management to effectively lock customers in to its digital music ecosystem.
According to in-court reports from The Verge, plaintiffs targeted Apple's iTunes 7.0 software update, with attorney Patrick Coughlin saying security tweaks that came as part of the update "knocked out competitors" like RealNetworks. Released in September 2006, version 7.0 brought various user features to Apple's iTunes software, but certain security modifications are under scrutiny.
Specifically, iTunes 7.0 broke compatibility with RealNetworks' Harmony, a technology created to thwart FairPlay DRM and allow users to playback on their iPods music not purchased from the iTunes Music Store. Plaintiffs argue the change introduced "switching costs" that discouraged existing iPod users from leaving Apple's ecosystem when it came time to upgrade hardware.
Coughlin went on to reassert claims about a software error that reportedly wiped an iPod's library if songs not purchased or imported through iTunes were found.
"I liken it to blowing up your iPod," Coughlin said in court, repeating an analogy he used in presenting the supposed iTunes flaw earlier this month. "It's worse than a paperweight. You could lose everything."
"There is no evidence anyone went through the restore process and ever had this happen. Not even a complaint about it." -- Apple lawyer William IsaacsonTo this point, Apple's lead counsel William Isaacson said, "There is no evidence this ever happened. There is no evidence anyone went through the restore process and ever had this happen. Not even a complaint about it."
During trial proceedings, Apple argued its iPod and iTunes security measures were installed to protect users from potentially malicious software outside of their control. The company's security director Augustin Farrugia testified in court that Apple was "very paranoid" in implementing an extremely protected digital music service, especially when it came to possible pirated music and malware. Late Apple cofounder Steve Jobs said much the same in a deposition videotaped just months before his death in 2011.
In Jobs' view, Apple's subsequent iTunes revisions targeted DRM hacks, which were prevalent at the time. He said Apple would "constantly" revise both iTunes and iPod software to keep out what the company considers hackers.
Another major concern for Jobs was a series of tenuous deals made with record labels to sell music through iTunes. Without adequate protections and assurances that owned content would not be pirated, or alternatively that pirated content would not be promoted by iPod playback capabilities, iTunes would lose backing from content owners. When asked if music companies complained about RealNetworks' Harmony technology, Jobs said, "It doesn't really matter because in fixing holes for DRM hacks, it might screw up the Real technology anyway, as collateral damage."
While Jobs' statements are plausible, former Apple FairPlay engineer Rod Schultz disagreed, saying in court that the company's DRM deployment "intended to block 100% of non-iTunes clients" and "keep out third-party players."
Apple, however, maintains all iTunes, iPod and FairPlay enhancements were made to protect consumers and foster innovation in the digital music space.
"We now have a plaintiff that is asking you to hold Apple liable for innovating, for providing security, that is what they are asking you to do," Isaacson said during closing statements. "They are doing that and asking you to hold us liable for providing consumers a choice, for providing integrated products, for providing iPod plus iTunes, and saying that's how our products work best."
hTe suit has seen its share of troubles over the past two weeks, not the least of which being improper representing class plaintiffs. Last week, the suit against Apple lost its last named plaintiff after another withdrew one week prior due to ineligible iPod purchases. The lawsuit stipulates claimants must have purchased an iPod between Sept. 12, 2006 to March 31, 2009.
Lawyers for the plaintiffs found a suitable replacement in 65-year-old ice dancer Barbara Bennett, who is representing a class of 8 million iPod buyers.
A jury will now decide whether Apple is accountable for $350 million worth of damages, an amount that would automatically trebled to more than $1 billion under U.S. antitrust laws.
Comments
Maybe the ambulance chasers will lose, as they should. Losing doesn't seem to bother the clueless. Imagine how much time and money Apple loses defending themselves against these people. Share holders should be outraged. Let's hope judges and juries are.
That's the real Apple tax customers have to pay.
This case is a total crock but you never know what juries will decide. Stealing money from successful companies is too often viewed as a victimless crime.
The iPod would play a variety of unprotected music files (MP3, WAV, AAC, etc)... but the only DRM'd tracks it would play were from Apple's own store. It was like this from the beginning. And I'm pretty sure it was written on the box.
If Apple didn't want 3rd-party DRM'd music onto their hardware... why would that be illegal?
Who knows what problems would arise when you release control to outside companies. Apple knew... and that's why they didn't license FairPlay.
RealNetworks found a way [I]around[/I] it... but Apple eventually plugged the hole. That was the first part of the case.
My question is... did RealNetworks ask for permission for their DRM'd songs to be allowed onto the iPod? Did Apple say no?
Then RealNetworks should have simply forgotten about the iPod and focused on other MP3 players. The iPod was never available to 3rd-party music stores... so RealNetworks shouldn't have even bothered. Whatever RealNetworks' business model was... it should not have been based around iPods.
As for the 2nd part of the case... the lawsuit claims that iPod prices were set artificially high because of it.
But iPod prices obviously weren't [I]too[/I] high... since iPods kept selling, and selling, and selling. And... iPod prices actually [I]dropped[/I] over the years. So that's why I don't understand the part about iPods being "priced higher than they would have been."
Neither part of this lawsuit seem to make any sense to me. Let's hope the jury feels the same way.
If not... will that mean Apple will have to allow 3rd-party app stores onto the iPhone? :wow:
Maybe the ambulance chasers will lose, as they should. Losing doesn't seem to bother the clueless. Imagine how much time and money Apple loses defending themselves against these people. Share holders should be outraged. Let's hope judges and juries are.
Maybe shareholders should sue Apple for making so crappy software that they get sued all the time, therefore losing time and money.
/s
This is what I don't get...
The iPod would play a variety of unprotected music files (MP3, WAV, AAC, etc)... but the only DRM'd tracks it would play were from Apple's own store. It was like this from the beginning. And I'm pretty sure it was written on the box.
If Apple didn't want 3rd-party DRM'd music onto their hardware... why would that be illegal?
I think it's a question of why they didn't allow these things. If Real off their own backs got their DRM'd tracks to be compatible with an iPod, does it harm users? The claim it works with an iPod comes from Real not Apple so it would be Real giving the refunds if compatibility broke.
So when Apple actively blocked it from working were they protecting their users. Or were they abusing their market share position in digital music players to unfairly compete against other music retailers. As the music retailers couldn't sell music without DRM they were effectively restricted from selling to iPod users.
On the flip side by selling all these DRM protected songs to people that owned an iPod it effectively stopped users from buying a different device as their music wouldn't work with it.
I would suspect Apple's original intentions were good. They did DRM because they had to, they didn't support other DRM formats because they didn't have to. As time went on though I doubt they recognized that the situation benefited them hugely. The origins of DRM free tracks is unclear. Amazon got them before Apple and when Apple finally did get them, the music label that went first stated that it was them that instigated it and not Apple. Up until that point there music had to be sold with DRM, there was no choice not to. But Apple has always stated they had to use DRM for the music labels. It could be initially Apple had to, and never challenged the situation because it benefited them.
These suits are a honeypot for lawyers since there is no penalty for losing. When they win the lion's share of the settlement goes directly to the lawyers and the supposedly damaged plaintiffs will get a $5 iTunes gift card. The whole notion of fairness and making things right for those who have supposedly suffered is completely lost in the process.
This case is a total crock but you never know what juries will decide. Stealing money from successful companies is too often viewed as a victimless crime.
How do other countries handle this type of case? I would love for the losers to have to pay. I know the original intent in not having losers pay was to prevent people from being afraid to sue, but when you trust people to do the right thing, inevitably, it gets abused and we all lose out.
I think it's a question of why they didn't allow these things. If Real off their own backs got their DRM'd tracks to be compatible with an iPod, does it harm users? The claim it works with an iPod comes from Real not Apple so it would be Real giving the refunds if compatibility broke.
So when Apple actively blocked it from working were they protecting their users. Or were they abusing their market share position in digital music players to unfairly compete against other music retailers. As the music retailers couldn't sell music without DRM they were effectively restricted from selling to iPod users.
On the flip side by selling all these DRM protected songs to people that owned an iPod it effectively stopped users from buying a different device as their music wouldn't work with it.
I would suspect Apple's original intentions were good. They did DRM because they had to, they didn't support other DRM formats because they didn't have to. As time went on though I doubt they recognized that the situation benefited them hugely. The origins of DRM free tracks is unclear. Amazon got them before Apple and when Apple finally did get them, the music label that went first stated that it was them that instigated it and not Apple. Up until that point there music had to be sold with DRM, there was no choice not to. But Apple has always stated they had to use DRM for the music labels. It could be initially Apple had to, and never challenged the situation because it benefited them.
Here is the thing. A car engine pings because of the use cheap gas, do people complain to the gas station or Honda? Honda. Even though one chose to use cheap gas.
Buying a song on a third party site that says they have found a way to load it to your iPod, then Apple, in the normal course of business, plugs vulnerabilities, as they are obligated to do, and it breaks. Why is this Apple's fault? Because we are dumb. The fact is, Real went out of their way to market their product with zero support from Apple. Apple had zero obligation to work with Real.
What is bing missed in all of this, by throwing in "locked in" type terms? With all these stores you could BURN AN AUDIO CD and then rip them back into what ever new player you wanted to. So NOTHING was taken from you and there were NO DAMAGES.
I think it's a question of why they didn't allow these things. If Real off their own backs got their DRM'd tracks to be compatible with an iPod, does it harm users? The claim it works with an iPod comes from Real not Apple so it would be Real giving the refunds if compatibility broke.
Fine, so under your scenario, the ultimate financial liability might by Real's, but Apple has more than just the $$$ on their minds. They want the iPod user's experience to be top notch, and if the user experience includes songs that won't play, or worse yet, causes issues with the general operation of the iPod while songs are playing, then Apple's brand is on the line. In other words, I am not the least bit swayed by your argument here.
Here is the thing. A car engine pings because of the use cheap gas, do people complain to the gas station or Honda? Honda. Even though one chose to use cheap gas.
Buying a song on a third party site that says they have found a way to load it to your iPod, then Apple, in the normal course of business, plugs vulnerabilities, as they are obligated to do, and it breaks. Why is this Apple's fault? Because we are dumb. The fact is, Real went out of their way to market their product with zero support from Apple. Apple had zero obligation to work with Real.
What is bing missed in all of this, by throwing in "locked in" type terms? With all these stores you could BURN AN AUDIO CD and then rip them back into what ever new player you wanted to. So NOTHING was taken from you and there were NO DAMAGES.
By that logic though should a car manufacturer be allowed to dictate that you could only buy gas from them?
If Apple just plugged a vulnerability which happened to break compatibility with music from Real then it would probably be fine. If they tested it blocked it and that was the aim then its probably different.
In terms of being locked in. With the argument you could burn a CD and then rip it, the opposing argument to that would be.
1. You would need to know how to do it.
2. It's not free, you need a CD to burn it to.
3. It's not necessarily legal. In the early days of mp3 players in the UK, ripping any CD wasn't legal. iTunes would do it, but it wasn't legal to.
4. You actually need to know it's possible. None of the stores advertised you could do this.
I don't know if their guilty or not. There's examples where this type of thing is fine. e.g. Games consoles, childrens toys etc. But then there's examples of the opposite. e.g. Microsoft selling Windows with an MP3 player built in. That's not even restricting where you can shop like with the iPod.
1. Ignorance is not an excuse.
2. True. But Apple never told you to buy from someone else. Go after Real for the price of the CD, not Apple.
3. This argument is invalid. It covers a specific time frame, in the United States, where it was legal at that time.
4. Actually, Apple did. So, again, not their problem.
If Apple was contractually obligated to patch holes, they did nothing wrong. These hacks, like jailbreaking, exploit a vulnerability that Apple is obligated to fix.
Apple never said you could only buy music from them. As a matter of fact, iPods existed before the iTMS, so that argument is also false. Apple restricted what DRM you could use on an iPod. Ripped from a CD, purchased from a non-DRM music site, etc ? All worked fine. Real looking to gain sales on the popularity of the iPod, by resorting to a hack? That is the crutch of this case. how this even got this far is baffling to me. Plus, did they ever find a real Plantiff?
And it isn't the same as Microsoft including an MP3 player in Windows. I don't remember a specific case you are referring to, but the way you explain it, that seems more like Microsoft not paying the licensing fee for MP3, but, again, I don't know the specifics of what you are referring to.
By that logic though should a car manufacturer be allowed to dictate that you could only buy gas from them?
If Apple just plugged a vulnerability which happened to break compatibility with music from Real then it would probably be fine. If they tested it blocked it and that was the aim then its probably different.
...
You must use their pump but it is free to anyone who wants one. iTunes was free and always has been.
Thought to DMCA made it illegal to reverse engineer the DRM anyway... There are plenty of people that became irrelevant over the last number of years. Video stores with the advent of Netflix. Netflix saw the next shift coming and adapted for streaming movies. If they hadn't, they would be gone now.
(Who is REAL anyway?? /s)
By that logic though should a car manufacturer be allowed to dictate that you could only buy gas from them?
That logic don't work. When you buy a gallon gas, from any station, you own the gas. It is not licensed out to you, so it doesn't matter what you do with it. Plus you can't give your friend the gallon of gas and still be able to use it in your own car.
When you buy music, you don't own it, you license it. And Apple is not the owner of the music they sell. Thus Apple must follow the license agreement they have with the actual owners, if they want to be able to sell that music. When you buy that music from them, you pay for a license to use the music and it will come with restrictions as to how you can use that music. Plus, there are ways to give your friends the music while still keeping a full working copy (or original).
A more appropriate analogy would be that if you're using a PC with Windows, you have to buy a license to use the Windows version of Office (from MS) or Photoshop (from Adobe). But when if you switch to a Mac with OSX, you can no longer use those Windows versions that you bought and you'll have to go out and buy new licenses for the OSX version of Office and Photoshop. So if you have enough invested in the Windows version of the software you need, switching to OSX would be expensive. (I'm not surre if you get to pay the upgrade cost if switching platform.) And becasue of this, you are locked in to a Windows system. And its been this way since there were PC's and Macs to choose from.
A jury will now decide whether Apple is accountable for $350 million worth of damages, an amount that would automatically trebled to more than $1 billion under U.S. antitrust laws.
You guys might want to source that one. I can't find legal reference suggesting such a thing is automatic.
Apple never said you could only buy music from them. As a matter of fact, iPods existed before the iTMS, so that argument is also false. Apple restricted what DRM you could use on an iPod. Ripped from a CD, purchased from a non-DRM music site, etc ? All worked fine. Real looking to gain sales on the popularity of the iPod, by resorting to a hack? That is the crutch of this case. how this even got this far is baffling to me. Plus, did they ever find a real Plantiff?
And it isn't the same as Microsoft including an MP3 player in Windows. I don't remember a specific case you are referring to, but the way you explain it, that seems more like Microsoft not paying the licensing fee for MP3, but, again, I don't know the specifics of what you are referring to.
My original comment was to someone saying they didn't understand how blocking other formats could be considered illegal when they never claimed the device could play them. Ultimately Apple have one the case so we can all agree they haven't done anything wrong.
The aspect I was suggesting could be illegal though is if they broke competition rules. An iPod and a track from the iTunes music store are separate purchases. If they were seen to be using their dominant position in the portable digital music player market to actively block competitors in the digital music retail market from being able to sell to customers. Which if they released an update to iPods that's only purpose was to block music files from another store, it could be considered un-competitive.
The MS case is EU rather than US so it's different laws, but similar basis. MS must still offer a version of Windows without Windows Media Player. Nothing to do with license fees, but because MS is dominant with Windows including a way to play mp3 files i.e. Windows Media Player (which did also have a store, though not in every market this affected so I'm not sure how important the store was) was seen as uncompetitive to other's offering a similar product. You weren't forced to use it, you could use others and in reality most people used iTunes largely because they owned an iPod. But Windows is a monopoly and by including WMP it was considered that MS was using Windows to get people to use WMP. Apple on the other hand have a much smaller market share with OSX so including iTunes is fine as they can only influence a smaller section of the market.
So similarly the iPod was very dominant. If Apple had used that dominance to promote another product over competitors, in this case the iTunes music store it could have been illegal.
End of the day, the update in question added lots more features and on that basis they didn't do anything wrong.