It was the best of times, it was the worst of times.
Apple Computer, a company sharing a moniker with the Apple recording label, being sued by that label's parent company, not once but thrice. The first two suits were settled for very different amounts, but the third suit goes to the British High Court this week, and could turn out to be the most damaging of all.
The first court case probably seemed a bit frivolous in 1989: a record label devoted primarily to issuing recordings made by a band that had ceased to exist a decade earlier suing a computer company, for little more than a similarity in names. Yet the band behind the Apple Corps record label was the Beatles, arguably the most important rock act ever, and the company named in the law suit was Apple Computer, then in its influential heyday as a computer manufacturer.
The results of the suit didn't seem particularly significant at the time. Reportedly, Apple Corps accepted a settlement of around US$80,000 from the computer builder, and extracted a seemingly inconsequential agreement that Apple Computer would stay out of the music business.
Twenty-five years later, that agreement looms large, as Apple Computer is now known as the company behind the iPod, iTunes, and even more importantly to Apple Corps, the iTunes Music Store. With overall downloads recently topping a billion songs, iTMS is nothing if not part of the music industry, and Apple Computer has become one of the major players in the biz.
In September 2003, Apple Corps again filed suit against Apple Computer, this time for entering the music business in violation of their previous agreement.
On the surface, it certainly looks as though Apple Computer could end up on the hook for a potentially very large and damaging settlement.
The defense revolves around the second lawsuit, which was filed in 1989 by the music label against the computer maker. At that time, the suit involved the Macintosh's growing ability to produce music.
In 1991, this case resulted in a much larger cash settlement (reports vary from US$26 million to US$50 million) and a new set of agreements in which Apple Computer would stay out of distribution of music media. Data transfers were allowed under the agreement, and music as data as opposed to physical media is likely to form the crux of Apple's argument.
It is important to note that, at the time, there was no such thing as online transfer of music. While compact discs were common and digital music had existed for years, storing sound as a file was a fairly esoteric concept, the Internet was in an embryonic state, and data transfer was based on 300 baud modems. In short, only the most daring futurist might have properly predicted where the music business would be headed just ten years later. The concept of transferring music as digital data was little more than science fiction.
So Apple Computer finds itself on the receiving end again. This time, Apple Corps looks like it has a powerful case, as it has already twice received settlements for far less direct infringement on its business interests by the computer maker.
Nevertheless, with so much at stake, expect Apple Computer to fight long and hard to prove that iTMS file transfers are perfectly acceptable under the 1991 agreement.
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