Apple's music monopoly case may turn on a procedural issue

Apple's music monopoly case may turn on a procedural issue

Summary: Does the link between iTunes and the iPod, coupled with Apple's strong position in the music download market, make it a monopolist? And is the case a likely candidate for class certification? As interesting as the antitrust issues may be, whether the case persists is likely to turn on whether the court agrees it may proceed as a class action.

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TOPICS: Apple
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Larry Dignan recently had an excellent overview of the antitrust tying case currently pending against Apple.  The case is pled as a class action, and the determination of whether class treatment is appropriate can often determine whether or not such a case will proceed.  The stakes are much higher for all concerned if the case is permitted to go forward as a class action.  If not, the chances of the case being dropped or quietly settled go considerably up.  So, while the antitrust claims may be the more intriguing/sexy part of the case, the procedural issue of class certification may prove to be more important.

In addition to alleging improper tying, the complaint (PDF) takes issue with the nature of Apple's disclosures about iTunes and the iPod.  This is potentially fatal to the plaintiff's class certification opportunity.  In a class action, common issues of fact and law must predominate over issues that may be unique to would-be class members.  Once you make the particular perceptions of individual plaintiffs a primary focus (as it seems to me this claim must), it's more difficult and less appropriate to certify a class.  (See generally Wikipedia's discussion.)

On the tying issue, should the parties get there, overall I like Apple's chances despite its market power in this arena.  Apple will be able to credibly argue that the tying is merely incidental to its success with iTunes and the iPod, which have won hearts and pocketbooks not because they are "tied" to one another or Apple's other offerings, but because, independently, they work well.  Additionally, Apple can argue these products aren't actually "tied" because one doesn't need an iPod or other Apple device to enjoy iTunes.  (This argument becomes tougher though when you reverse it; iPod owners basically need iTunes to make their devices function.)

Antitrust cases are notoriously complex (as are class certification issues), and this one should be no exception.  On the surface Apple makes a good target due to the undeniable links between its products, its share of the music download market, and the failure of iTunes and the iPod to interoperate with other devices and services.  But Apple has excellent counsel (Jones Day), and they'll have lots to work with in combating these claims.

(BTW, I'm a Mac user, own a little Apple stock, want an iPhone.  Etc.)

Topic: Apple

Denise Howell

About Denise Howell

Denise Howell is an appellate, intellectual property and technology lawyer who enjoys broad industry recognition for her expertise on the intersection of emerging technologies and law.

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31 comments
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  • Sat what !

    Jus kidding . Listen up , there is no way Apple will lose this case if it ever turns up in court . I to am an AVID Apple user , I also run Windows XP and many flavors of LINUX . I'll be trying Solaris 10 soon . To be quite honest , I don't SEE APPLE as any kind of MONOPOLY . I'm not going to give an explanantion because it's not necessary . Let all the WINFANBOYS jump on this , and I'll tell them that the ZUNE's DRM scheme is the future of Microsoft . So just get use to it .

    "In a world without walls and fences , who needs windows and gates." <--- I just had to say it
    Intellihence
    • Issue is not Is Apple a Monopoly

      The Issue is tying the use of a particular product to particular content, or vice-versa. And yes, it should be illegal.

      When some of these smaller suits go through, maybe someone will finally sue Microsoft because they *OWN* your email...get rid of Outlook, can no longer read email, too bad.

      Well, you can spend a couple hours on each email in Notepad removing all the special formatting so as to save email as a text document...but how many can you really do? I only had time to do one!

      The FORMAT may be Microsoft's but the EMAIL is *YOURS* -- you wrote it! So it should be illegal for you not to be able to convert email between formats if you want to sue a different client to read YOUR email.

      Apple iPod/iTunes store is the same issue, just in reverse...have an iPod, it can only use iTunes.
      studentCoder
      • You aren't a lawyer, are you sharpshooter?

        "The FORMAT may be Microsoft's but the EMAIL is *YOURS* -- you wrote it! So it
        should be illegal for you not to be able to convert email between formats if you
        want to sue a different client to read YOUR email.

        Apple iPod/iTunes store is the same issue, just in reverse...have an iPod, it can
        only use iTunes."

        The email IS yours, you are right. And through Copy/Paste you can convert it to
        another format if you want. Outlook doesn't own the content of the mail, it owns
        the format and presentation of the mail.

        However, the Apple issue is different. The email was free. iTunes Music Store sells
        copyrighted material with a royalty due because it is materila owned by OTHERS,
        and NOT by you.

        In fact, whatever the medium, CD, cassette, record or radio transmision, you
        NEVER own the music, the authors do. Same with software. You buy a right to
        use PRIVATELY (you are not allowed to broadcast your music) and you may never
        charge someone to listen to your CD, AAC file or anything if the music is owned
        by someone else.

        When you "buy" music, you buy a license for private use, just like with software.

        So your reasoning is fallacious and specious.

        BTW, an iPod can play any non DRM music you want and you do not need to use
        iTunes to put it on. You can put any file you want on to an iPod. It is nothing
        more than an external disk with synching software on it.

        An iPod can also be a startup disk for Mac computers when used in FireWire mode.
        So study up a little before making rash statements like "an iPod, it can only use
        iTunes."

        It will be demonstrated in court that there are more music download services that
        do NOT work with iPod than do work with iPod, therefore, there is no monopoly
        and no abuse of monopoly. Apple just does it better than all the others.
        mlindl
  • Another Worthless Story!

    Apple isn't big enough to even worry about being a monopoly. Next story please!
    andrej770
  • Do tell

    [i]This argument becomes tougher though when you reverse it; iPod owners basically need iTunes to make their devices function.[/i]

    I'll have to tell my daughter that -- she's been using her iPud for three years without iTunes.
    Yagotta B. Kidding
    • It is backwards

      You can't listen to iTunes on a portable device (iPod, Zune, RIO, ect ect) unless you own an iPod, or rip/burn the music to a DRMless format.
      Edward Meyers
      • I like this

        "You can't listen to iTunes on a portable device (iPod, Zune, RIO, ect ect) unless you own an iPod"

        you would find it hard to listen to itunes music on an ipod unless you owned an Ipod!! ;)

        I think the fatal flaw that apple made was to release the Itunes store a standalone system, If they had bundled it as part of the IPOD software as a bonus addon to allow you to buy music for the ipod it would be a win win situation for them.

        However they went about it in the wrong way and so are not paying the price!
        usrhlp
        • Many people refer to all of them as iPods

          Some people refer to all mp3 players as an iPod include the Zune, RIO, and the offerings from sandisk, RCA, and Colby.

          The fact remains that iTunes will only play on Apple certified devices (The iPod, the iPhone, and 1 other phone).

          This is due to the fact that Fairplay will only allow the file format, which a lot of devices actually support, to play on these devices because an iTune is the format + Fairplay and only the iBranded devices and 1 model of non-iBranded phone is allowed to use Fairplay. That is the complaint.
          Edward Meyers
          • Then the story got it backwards!

            "The fact remains that iTunes will only play on Apple certified devices"

            Then it is not the reverse, as said in the story.
            studentCoder
          • It goes back to tieing and defining the market

            [i]these products aren't actually "tied" because one doesn't need an iPod or other Apple device to enjoy iTunes. (This argument becomes tougher though when you reverse it; iPod owners basically need iTunes to make their devices function.)[/i]

            You do need an Apple certified device (An iPod) to enjoy iTunes on a portable digital music player.

            The story does have it backwards.

            If the market is defined as MP3 players then yes it is tied. If the market gets defined to include computers it is not.

            Apple took the reverse strategy that Microsoft did with Plays for Sure. Microsofts strategy was to allow any portable digital music player to license the .WMA format + PFS DRM but refused to license this to any other computer OS maker. They licensed/supplied .WMA without the PFS DRM to Mac, some Linux users, and all versions of Windows except Windows 95.

            If the judge allows the market to be defined as portable digital music players and the digital downloads Apple does have a monopoly and it is tied.
            Edward Meyers
          • Not necessarily true

            "If the judge allows the market to be defined as portable digital music players and
            the digital downloads Apple does have a monopoly and it is tied."

            Tying (just call it bundling) software together to hardware products doesn't
            constitute monopoly abuse.

            Windows used to have Internet Explorer and Explorer. They were separate
            entities. Then they used the interface of IE and tied it to Explorer. They won the
            argument that IE was such an integral part of the operating system that they
            couldn't untie IE from Windows. They won.

            Apple can rightly claim that software must be furnished to run any hardware.
            iTunes runs on Mac OS X and Windows 2000 and XP. They will certainly do a
            version for Vista but will hold out on that as much as possible to slow down Vista
            sales to iPod owners.

            Many new players have come into the market on both sides of the fence but there
            are only two DRM's to my knowledge: FairPlay and PlaysForSure. Windows will
            NOT license PFS to Apple but Apple, in effect, has created a Windows version of
            FairPlay.

            There is no judge in the world that will require Apple to make any of its software,
            designed to run exclusively on its hardware, run on anybody else' hardware.

            And no judge will require Apple to offer DRM software to competitive online music
            stores. That would be like saying that Virgin Records had to let competing stores
            use Virgin's computer systems, cash register systems and market research so they
            could compete better.

            Not going to happen, not in Norway, Denmark or Germany. France backed way
            down from requiring iTMS to open up after they had one meeting with Apple
            about it.
            mlindl
          • Read it again

            To begin with Microsoft didn't get off. In fact one case is still going forward, Comes v. Microsoft on this issue. The court didn't kill that issue but rather sent it back for further examination. The DOJ had MS on 8 (Out of 16) antitrust counts already so they didn't pursue it further.

            Furthermore the Judge in the MS antitrust cases in both Europe and in the US ordered Microsoft to publish and license their protocols to competitors so that they could interoperate, which they still haven't complied with, so in fact the judges did in fact order something very similar.

            In Norway Apple was ordered to do just that. BTW Norway is not a member of the EU but rather has a treaty with Sweden and Finland.

            The Federation of German Consumer Organizations is petitioning the govt of Germany to look into this matter and the French bill did not strip out the part about ordering companies to cross license. Pan-European consumer groups are petitioning the EU to look into this matter.

            Finally when you are dealing with antitrust cases the courts define the market. If the market gets defined as portable digital music players (and not computers), Mac OSX and Windows does not run on these, then in fact downloaded iTunes will only play on Apple produced iPods and 1 non-Apple produced phone. Apple cannot claim that this is because it is an integral part of their OS because it does run on Microsoft Windows and that 1 other phone.

            Then again the downloaded iTunes can be burnt to unprotected CDs (If you own a computer with Windows XP SP2 or higher plus CD burner or Mac OSX 10.3 or higher) and the unprotected CD can be ripped into unprotected MP3 which will play anywhere. The mere fact that this is possible destroys the notion that Fair Play is designed in any shape or form to stop p2p internet piracy because those same unprotected MP3s can be traded on p2p.

            So if its not there to stop piracy why is it there?

            I say it's there for 2 reasons.

            1. Lock the non-technical users, which p2p pirates are not, into using iTunes only on their iPods.
            2. Prevent doctrine of first sale- iTunes are designed so as not to be resold/transfered (Although you can do this if you are technically minded and transfer the entire account).
            Edward Meyers
          • Edward: Point of Refence . . .

            FYI: This doesn't change any of the arguments here, but there are [b]3[/b] other phones that have iTunes on them and they are ALL made by motorola for Cingular: The Original ROKR (E1 and E2), the SLVR (essentially an updated ROKR), and the RAZR v3i (there's a v3m version of this one that just has a generic mp3 player on board, which means it's probably a re-labeled version of the Verizon RAZR v-cast model).


            Just thought you'd like to know, it's still a pretty limited circle of devices, and could get Apple in trouble, especially if it comes to light if another company came to Apple to license FairPlay and Apple refused . . .
            jlhenry62
          • I was aware of the first but not the other two

            I was aware of the first one but not the other two phones. It still doesn't change much though considering over 45+ different phones support ACC and only 3 have been licensed, and then only through 1 carrier, to use Fairplay.
            Edward Meyers
  • Factually Wrong

    [i] iPod owners basically need iTunes to make their devices function. [/i]

    No they do not. (Well they need the iTunes software [or 3rd party hack] to sync
    but not the iTunes store or iTuens purchased tracks, which is what the real
    complaint is, not the iTunes software itself). iPods need MP3 or AAC or other
    compatible format files. You can make these yourself from any other source
    material. You may also buy AAC files from iTunes. A good number of iPods out
    there do not at all have any iTunes sourced material on them and work just dandy.
    In fact, the claim is made that each iPod only has about 21 tunes on it from iTunes
    on average, and since that is a small number compared to the presumed amount
    of music on them based on capacity, iTunes sourced music is a great minotity on
    the iPod.

    btw, I am a Mac user but do not own an iPod. My father got a nano given to him
    when he bought a Honda car by the dealer and he only has his own MP3s on it. I
    gave a Nano to the wife and so far it only has AAC from our own CD collection.
    chadpengar
    • re: Factually Wrong

      I didn't mean to suggest people need to look to iTunes for the content they put on their iPods. What I was referring to was the fact that most people are completely oblivious to the existence, availability, and function of 3rd party hacks, and need iTunes to get *any* material onto an iPod in listenable/viewable form. I'm well aware it's possible to run Linux on an iPod, etc., etc. That's just not how most people will or want to interact with the device.
      Denise Howell
      • still factually wrong

        I was not refering to Linux on iPods or any hacks. You imply that the facts of the
        case are the iTunes software itself. That is not the case. It is the iTunes Music Store
        protected music using FairPlay which is the issue. You can happily use the iPod
        without any sort of buying of songs from iTunes.
        chadpengar
  • iBucks

    A few engineers get together and brainstorm an invention.Then it turns into a corporation.These are hardware engineers.There's hardly such a thing as a software engineer.They strike a deal with the record companies and you have downloaded music.The question is:"Is it legal to charge for downloaded music"?As for file types---there is simply not enough known.
    BALTHOR
  • Think about this...

    GM doesn't allow owners of their cars free access to the software that runs on their computers. If you buy a GM car, you are FORCED to use GM's software to run the engine systems. So I should sue GM because I can't just upload my own software?

    iTunes is required to run the iPod.. so? you knew that when you bought it. don't like it...don't buy an iPod, buy a Zune. Oh wait, the Zune requires you to use MS's software. So by a Zen. But don't sue... it's a waste of time. U don't like DRM, buy CD's and rip them. You get better bit rates, and a backup at the same time!
    NealC5
  • I think what's lost in all of this...

    1) Is that the plaintiff (Melanie Tucker), is complaining that Apple Inc? isn't paying
    a Microsoft tax on all iPods. She directly complains that the iPod won't play .wma
    files and that it "shouldn't cost more than $800,000 a year, for the iPod to
    use .wma files". It could also lead to higher prices for both iPods and iTunes
    tracks, or the disappearance of the iTunes store altogether. What are Microsoft's
    licensing terms for .wma files?

    2) She also claims to have purchased the iPod from the iTunes store (blatant lie).
    You can't buy an iPods from the iTunes store, you can buy them online. I just
    looked again, there is no option to buy them there.

    3) As far as the "Fairplay tracks". You can't play Sony's ATRAC files on anything but
    a Sony device. You can't play any tracks from the zune store on anything but a
    zune.

    4) You are not required to buy anything at the iTunes store. Zip, nada, zilch. I
    believe (and could be wrong about this) originally windows version of iPods came
    with winamp.

    So all in all there is something wrong with this lawsuit.
    Rick_K