Court denies motion to dismiss lawsuit accusing Apple of ‘unlawfully tying’ iPod+iTunes

“Apple Computer Inc. said Friday it is facing [a lawsuit] alleging the company created an illegal monopoly by tying iTunes music and video sales to its market-leading iPod portable players,” Betsy Schiffman reports for The Associated Press.

“The case, filed July 21, is over Apple’s use of a copy-protection system that generally prevents iTunes music and video from playing on rival players. Likewise, songs purchased elsewhere aren’t easily playable on iPods,” Schiffman reports.

Schiffman reports, “The plaintiff is seeking unspecified damages and other relief. The court denied Apple’s motion to dismiss the complaint on Dec. 20.”

Full article here.

From Apple’s 10-K for Fiscal Year Ended September 30, 2006:
Tucker v. Apple Computer, Inc.
Plaintiff filed this purported class action on July 21, 2006 in the United States District Court for the Northern District of California alleging various claims including alleged unlawful tying of music and videos purchased on the iTunes Store with the purchase of iPods and vice versa and unlawful acquisition or maintenance of monopoly market power. The complaint alleges violations of §§1 and 2 of the Sherman Act (15 U.S.C. §§1 and 2), California Business & Professions Code §16700 et seq. (the Cartwright Act), California Business & Professions Code §17200 (unfair competition), and the California Consumer Legal Remedies Act. Plaintiff seeks unspecified damages and other relief. On November 3, 2006, the Company filed a motion to dismiss the complaint, which was heard on November 20, 2006. On December 20, 2006, the Court denied the motion to dismiss.

A similar lawsuit also detailed in Apple’s 10-K:
Charoensak v. Apple Computer, Inc. (formerly Slattery v. Apple Computer, Inc.)
The original Plaintiff (Slattery) filed this purported class action on January 3, 2005 in the United States District Court for the Northern District of California alleging various claims including alleged unlawful tying of music purchased on the iTunes Store with the purchase of iPods and vice versa and unlawful acquisition or maintenance of monopoly market power. Plaintiff’s complaint alleged violations of §§1 and 2 of the Sherman Act (15 U.S.C. §§1 and 2), California Business and Professions Code §16700 et seq. (the Cartwright Act), California Business and Professions Code §17200 (unfair competition), common law unjust enrichment and common law monopolization. Plaintiff sought unspecified damages and other relief. The Company filed a motion to dismiss on February 10, 2005. On September 9, 2005, the Court denied the motion in part and granted it in part. Plaintiff filed an amended complaint on September 23, 2005 and the Company filed an answer on October 18, 2005. On May 8, 2006, the Court heard Plaintiff’s motion for leave to file a second amended complaint to substitute two new plaintiffs for Slattery. In August 2006, the court dismissed Slattery without prejudice and allowed plaintiffs to file an amended complaint naming two new plaintiffs (Charoensak and Rosen). On November 2, 2006, the Company filed an answer to the amended complaint denying all material allegations and asserting numerous affirmative defenses. The hearing on class certification is set for April 16, 2007.

Related articles:
Judge allows antitrust suit against Apple for iPod+iTunes illegal ‘tying’ to proceed – February 06, 2006
Antitrust suit filed against Apple, alleges iPod and iTunes Music Store illegally ‘tied’ together – January 05, 2005

63 Comments

  1. Fine, then we also need the following lawsuits to happen…

    Sue Microsoft for unlawfully tying the Zune exclusively to the Zune Marketplace
    Sue Microsoft for unlawfully tying Xbox games exclusively to Microsoft Xbox hardware
    Sue Sony for unlawfully tying PlayStation games exclusively to Sony PlayStation hardware
    Sue XM for unlawfully tying XM programming exclusively to XM radio hardware
    Sue Dish Network for unlawfully tying Dish programming exclusively to Dish hardware

    Those are just a few examples of why this lawsuit is an absolute joke. Companies do this stuff all of the time and there is nothing illegal about it.

  2. Well, the repercussions of this case (if the plaintiffs win) will be other lawsuits to follow including Microsoft and its Zune player, which not only is tied to its Zune software and Marketplace, but is Windows-only, which already has been a monopoly problem.

    MDN; keep us abreast on this lawsuit.

  3. The fact that Microsoft entered the market with the Zune makes the argument that Apple has a monopoly less tenable (despite Zune’s likely demise). It shows M$, at least, does not consider it to be a closed market.

  4. This is standard operating procedure for Apple. They force you into their “solutions” with proprietary formats and software. Hey iPod lemmings, you want freedom from this tyranny? Go with Microsoft + Zune! Redmond doesn’t play the proprietary game. They level the playing field with open formats like .DOC, WMA and ActiveX. They don’t have to hide behind proprietary schemes to secure a market position and then have the gall to call their platform “open”.

    Leave behind the constraints of burning purchased music to CD’s, or sharing it on up to 5 computers, or streaming it to powered speakers anywhere in range of an Airport Express Base Station. Free yourselves from the shackles of putting hundreds of songs on an iPod and using it anywhere: at home, in a car, out on a jog, connected to powered speakers. Apple has you snookered. I bet dealing with Apple’s DRMed files is miserable. You can’t do anything but play them on an also-ran, wish-I-was-half-a-Zune iPod. What’s worse is you probably can’t drag non-DRMed MP3 files to a non-iPod music player right from the godawful Finder or magnificent Explorer in Windows. Apple sure ain’t gonna give you a right-click access to the MP3 file right from iTunes. You can’t even convert DRMed AAC files to MP3, or even better, the wide-open independently-approved industry standard WMA either. Losers.

    With Zune it’s totally different, and that’s why 2007 will be the year of the a Zunatic.

    Welcome to the Social.

  5. harry, what have lawsuits got to do with democratic freedom? if anything, lawsuits are a perfect example of democratic freedom – dispute resolution according to the rule of law.

    Our system of juriprudence encourages suits which amount to legal extortion. It encourages law firms to take on plaintiffs with no case, knowing that the defendent will make a business decison to settle. Businesses do this because the cost of defense is most times greater than the cost of settling out of court.

    The plaintiff’s lawyers get paid hard cash, while the defendent gets coupons for free product.

  6. I’m sure the asswipes who bring these lawsuits are so “damaged” from iTunes’ proprietary integration with iPod. I can just imagine their pain. How do they get through the day? It must be torture. Poor, poor babies. Greedy, worthless pukes!

  7. Oh and one more thing Zune Thang. Your spew about this is the year that will be known as blah blah Zune blah blah blah.

    Doesn’t look like the media is showing 2006 to be that way.

    Apple’s iPod king of consumer electronics again in ’06
    http://www.appleinsider.com/article.php?id=2337

    AGAIN Zune Thang…LOL

    And not even a mac affiliated site: 2006: The year in music. The guy made a prediction back in 2005:

    Short of hell freezing over, look for the iPod to maintain its Top Dog position throughout 2006.

    http://playlistmag.com/news/2006/12/29/music06/index.php

    Well the only thing to freeze were Zune sales…LOL

    He gets it:”Professional prognosticators suggested that the $249 Zune—which featured a unique “squirt” technology for transferring music from one Zune to another wirelessly—would do little to take a chunk out of the iPod’s popularity with holiday buyers. This proved to be the case, as harsh reviews did little to popularize Microsoft’s flawed music player.”

    Welcome to the social…reviews.

    Oh well there is always 2007 and revisionistic history.

  8. This article is by the notorious Betsy Schiffman, whose career has been 99% as a real estate writer for Forbes. She’s responsible for one of the most famous pieces of technical FUD ever written. To quote one of the gaming sites:

    Quote:
    “The journalistic tragedy resumed this week when Forbes.com again published a scathing review of Nintendo’s recent efforts titled, Nintendo’s Holidaze. The painfully moronic article by Betsy Shiffman makes one incorrect claim after another, pausing only for interjection of personal views. Inaccurate claims that Nintendo is losing $180 per console sold and the author’s questioning, “why the company is in the business in the first place,” make this one of the worst examples industry analysis in history.

    Given the demographics of Forbes readership, does such failure to accurately represent the truth indicate a breach in the publication’s ethical responsibilities to the investing community? Publisher of Forbes, Larstin Publishing stated that “Independent documentation by the Wall Street Journal indicates that favorable mention in Forbes has sent companies stock prices soaring.” What about a negative mention? What about when that negative mention is deeply flawed?”

    To dredge up nuisance lawsuits from last July and October to try to manufacture a hit piece against Apple is truly pathetic. Ms. Schiffman should go back to researching the most expensive zip codes in America. I have a suggestion for Ms. Schiffman: A few nice gardening articles would be nice. IT’S HARD TO DO MUCH DAMAGE WRITING ABOUT BEGONIAS, MORON!

  9. Zune Tang is doing satire. He is a fake Microsoft apologist, doing for Redmond what Stephen Colbert does for the White House. If you think even harder, you might see that he’s satirizing spin and zeolotry in general as well.

    The only thing funnier than Zune Tang these days is when somebody takes him seriously…keep it coming!

  10. Can we sue MS for not making full version of MS Office for Mac? I don’t think so.
    Finnish Cellphone service provider advertises on TV that their music store is available only to their customers. I don’t see people rioting in the streets.

    I think the thing that pisses of some people is that iTS/iPod is doing so damn good. A thing that can change in a future. MS wasn’t split and they looked like Standard Oil to me, and they still do.

    MW: case. Time for new case. MS has Windows (home, pro, server, gaming and htpc markets), XBox, Office and now Zune. Sounds like they’re after total world domination is DoJ blind, bribed or is it that they just don’t care.

    It’s not good for anyone that one company gets too big.

  11. Zune Tang is doing satire.

    F— ZUNE TANG! F— him, f— Sputnik, and f— any other so-called “satirists” filling this forum with their sh*t!!! IT STOPPED BEING FUNNY A LONG TIME AGO!!

    Zune Tang is a troll! It doesn’t matter that he doesn’t actually believe the crap he spews — the result is the same: the forum gets filled with angry responses. That’s the goddamn textbook definition of a troll!

    I am sick and tired of people defending this bonehead. For the love of God, Zune Tang, SHUT THE F— UP AND GO AWAY!!!

  12. Fatty Arbuckle:

    Whether Zune Tang is a troll or an Apple devotee, he’s at best boring and at worst painfully monotonous and excruciatingly repetitive. The fact you enjoy his threads only proves to me that you are as immature and dimwitted as Zune Tang.

  13. I thought Zune Tang’s first 10 satirical posts were hilarious.

    But I think it’s time to move on. No offense Zune, seriously. I just don’t want you to turn into the Stones, touring awful new albums when everyone just wants to hear Satisfaction.

    m

  14. So, then… Following this logic, if Nintendo should succeed with the Wii they need to do one of 2 things:
    1) Make sure the Wii will play PS3 games and XBOX games
    2) Make sure the Wii discs will play on all systems

    You see? There is NOTHING illegal about what is going on with Apple’s music system. They sell the songs in AAC format (playable on iPod only).

    EVERY OTHER FARKING COMPANY sells their music in either MP3 formats or WMA formats. MP3s will play on every, single player, whereas WMAs will play on every player BUT the iPod.

    What’s the problem?

    I can buy Grand Theft Auto for PS2 or Xbox or both, but I cannot use the same disc. Yup. Gotta buy it TWICE.

    Therefore, I can buy “Dick in a box” as an AAC for the iPod, or as a WMA for another player, such as Zune or Zen, or both. Yup. Gotta buy it TWICE.

    Fuck off, stupid people who think this is a court case.

  15. Can one file a class-action lawsuit against people? If so, I’d like it to be
    “Smart consumers” vs. “Charoensak & Tucker”

    – No difference between what Apple does with its music and what Nintendo does with its games. Nintendo supplies development tools for the Nintendo products only. They don’t care if the developer ever makes an Xbox game, nor is it Nintendo’s responsibility to make sure that happens. And just like that, it’s Apple’s responsibility to make sure all songs are encoded in protected AAC. It’s other companies’ responsibilities for making sure their versions of the songs are in a format that will work with their player.

    I don’t see any difference and I should be able to sue these 2 assholes for artifically dropping the stock – probably for the sole purpose of buying more once they do so.

  16. There are so many examples of this kind of monopoly if that’s what you want to call it. Apple doesn’t discriminate unlike the other online stores. Apple offers there music and videos to both PC’s and Mac’s. You can convert an ACC file to mp3 and then use there music so I don’t think once this goes to court this guy will be able to win.

  17. And we all think about it. Apple actually sells mp3 files. Buy an album, burn it, rip the audio cd in to the “standard” mp3 format and now it plays on every player.

    So what’s the problem here. The fact that Apple is still around, even if it supposed to be dead? To some people I think, yes. And Apple only has 63% marketshare world wide, so they’re not in the same league as Microsoft.

    MW: dark. It’s dark out there – It’s raining water and all the snow is gone. And my ankle is totally f****d up.

  18. I think the lawsuit is good. I don’t like that the downloads from iTunes are in the AAC format and can only play on iPODS. If I didn’t have an iPOD and I downloaded all my music I’d be pissed to have to burn it all on a disc and waste more time and a CD on that.

    Everyone here seems to be upset because they’re going after Apple, but what they did is really bullshit. When Apple announced the iPOD and iTunes they said it was going to be a system free of locks and restrictions and the music will be available for everyone. They lied with that one.

    Apple should free up the music and just make it a mp3 file. Then it can play anywhere and on anything. Same with the Zune. These dumb ass restrictions hinder more than they help and they lead to stupid shit like these lawsuits.

    It’s funny you chose to compare the game systems. It’s not exactly the same thing because all those systems are similarly priced and no one absolutely dominates the market like Apple does with the iPOD. Which system someone chooses is based on personal tastes. The same can be said with the iPOD and such, but the fact that iTunes has the biggest library and the iPOD dominates the market, it eliminates a lot of options because of the convenience and compatibility. But, if someone decides they don’t like the iPOD anymore, they’re f’d when it comes to putting their music on another player. And to the comment that iTunes plays on MAc and Win, yeah, that’s true, but you know you’re making a general statement there. The point of the lawsuit is the fact that music wil not play on any other music devices.

    before anyone says I’m a jerk or work for Microsoft, I own an iPOD mini, new shuffle, and a MacBook. So hush. I’m just smart enough to be able to see things kind of objectively – not strok Apple’s dick at every opportunity and automatically dismiss anything that says something bad about our beloved Apples.

  19. AAC IS NOT A PROPRIETARY APPLE FORMAT! It’s an open standard, if fact the Zune plays AAC:

    http://en.wikipedia.org/wiki/Zune

    The issue is the Fair Play DRM prevents the iTunes Store purchased songs from playing on other players. However, major labels demand DRM if you want to sell their music. Whose DRM are they supposed to use? Microsoft’s? Not to mention that the music from all other download stores that use various forms of Microsoft DRM won’t play on a Mac or iPod. Oh, and nothing is stopping anyone from loading up an iPod with music without purchasing a single song from iTunes by ripping from CD.

  20. AAC IS NOT A PROPRIETARY APPLE FORMAT! It’s an open standard, if fact the Zune plays AAC:

    http://en.wikipedia.org/wiki/Zune

    The issue is the Fair Play DRM prevents the iTunes Store purchased songs from playing on other players. However, major labels demand DRM if you want to sell their music. Whose DRM are they supposed to use? Microsoft’s? Not to mention that the music from all other download stores that use various forms of Microsoft DRM won’t play on a Mac or iPod. Oh, and nothing is stopping anyone from loading up an iPod with music without purchasing a single song from iTunes by ripping from CD.

  21. AAC IS NOT A PROPRIETARY APPLE FORMAT! It’s an open standard, if fact the Zune plays AAC:

    http://en.wikipedia.org/wiki/Zune

    The issue is the Fair Play DRM prevents the iTunes Store purchased songs from playing on other players. However, major labels demand DRM if you want to sell their music. Whose DRM are they supposed to use? Microsoft’s? Not to mention that the music from all other download stores that use various forms of Microsoft DRM won’t play on a Mac or iPod. Oh, and nothing is stopping anyone from loading up an iPod with music without purchasing a single song from iTunes by ripping from CD.

  22. “The issue is the Fair Play DRM prevents the iTunes Store purchased songs from playing on other players. However, major labels demand DRM if you want to sell their music. Whose DRM are they supposed to use? Microsoft’s? Not to mention that the music from all other download stores that use various forms of Microsoft DRM won’t play on a Mac or iPod. Oh, and nothing is stopping anyone from loading up an iPod with music without purchasing a single song from iTunes by ripping from CD.”

    Well said.

  23. Okay….

    I don’t think my copyof Microsoft Office should be tied to Windows when I want to transfer the software to a Mac….

    Why should MS be allowed to ‘tie’ these two products and not allow users to freely choose between computing platforms w/o having to completely repurchase their software?

    Now THAT example is exactly the same, especially considering the domination of MS Office….

  24. Here is my take on the lawsuit…

    Tying iPod + iTunes for complete interaction is a wonderful system. Apple should be allowed to use it’s own DRM, however it should open up the format for Real, MicroSoft, etc. to use on their Zunes, Skansas, DJs, Gigabeats, etc. It’s dirty pool because if a consumer decides to not purchase an iPod, they cannot use any of the media files they choose to purchase off of iTunes. It’s kind of like Microsoft forcing computer companies to only sell their operating system.

  25. “Apple should be allowed to use it’s own DRM, however it should open up the format for Real, MicroSoft, etc. to use on their Zunes, Skansas, DJs, Gigabeats, etc. It’s dirty pool because if a consumer decides to not purchase an iPod, they cannot use any of the media files they choose to purchase off of iTunes. It’s kind of like Microsoft forcing computer companies to only sell their operating system.”

    But they CAN use the music files, just burn them to an audio CD and re-import them as generic MP3s. Microsoft “should” also open their DRM(s) to Mac users to give us a choice of download services (especially for those who would prefer the subscription model), but I don’t see any clamor (or lawsuits) demanding that happen. I wonder why.

  26. “But they CAN use the music files, just burn them to an audio CD and
    re-import them as generic MP3s. Microsoft “should” also open their DRM(s)
    to Mac users to give us a choice of download services (especially for those
    who would prefer the subscription model), but I don’t see any clamor (or
    lawsuits) demanding that happen. I wonder why. “

    I completely agree that MS should open up their DRMs to Mac Users…

    As for the other thought, the file bit-rate off of iTunes is already so low, if you were to strip and reimport, it’d be even worse, not most people’s 1st choice to say the least.

  27. “As for the other thought, the file bit-rate off of iTunes is already so low, if you were to strip and reimport, it’d be even worse, not most people’s 1st choice to say the least.”

    I agree, but you said that you “cannot use any of the media files they choose to purchase off of iTunes” and I was just pointing out that you CAN even if the situation isn’t optimal.

    I’m not picking on you Anthony, because you seem like a reasonable person, but I think the people clamoring for “fairness” from Apple would be on a far stronger footing if Microsoft were to release a new version of Windows Media Player for the Mac with support for Microsoft’s various DRM schemes, so we could at least play those files on our computers. Then if Apple were to refuse to provide WMA or Microsoft DRM support for the iPod, then I think it would be fair to demand Apple to “open up”.

    I’m getting a little tired of how all the demands for “fairness” and “openness” is directed solely one way at Apple when us Mac users were completely locked out of the market for major label legal downloads by Microsoft DRM before ITMS came along.

  28. To amend my previous post, I just listened to this week’s Macbreak Weekly podcast:

    http://www.twit.tv/mbw21

    …where they were discussing Microsoft DRM vs. Apple DRM and they mentioned the fact that the MS DRM scheme would be a resource drain on the iPod’s limited brainpower(what a surprise, right?), whereas now with Fair Play the DRM management is in iTunes. So Apple would have a legit reason not to support MS DRM on the iPod. I still say any talk of “fairness” should start with a new DRM-supported version of WMP for the Mac instead of going after Apple first. Then that would open the market to Mac users to other portable players that already support MS protocols if you want one. I’m perfectly happy with my iPod and ITS, but when you talk of opening markets, remember that Windows users were begging to be a part of the same “closed ecosystem” so many of them are now complaining about when iTunes and the iPod were Mac only.

  29. So the basic argument behind this lawsuit is that Apple should run the iTunes Music Store at a break even price so that their competitors and the people who buy competitors’ music players can benefit from it?

    The fact is that iTMS music is downloaded to COMPUTERS, not portable music players. No computer manufacturer or computer owner is locked out. You can do what you want with your music regardless of platform, including burn it to a DRM free CD, which you can play in your car, on your stereo, your Walkman, etc. You can even import your music that’s been transferred to CDs to ANY portable music player.

    Now, if you happen to own an iPod Apple makes it easier to transfer your iTMS music to it, again REGARDLESS OF PLATFORM. What you can’t do is take music that Apple provides at little or no profit and transfer it directly to a $49 Taiwanese rip-off of an iPod. Do you get it now?

    If this lawsuit was successful what you would see is pricing on iTMS that reflects a reasonable return on investment for iTMS as a standalone operation. perhaps $2 per track. I suggest that nobody, not even the record labels, would be happy with that. People would simply return to ripping off the record companies by illegally copying music. New versions of illegal file sharing services would put the subscription services out of business. Constant reports of prosecution and consumer lawsuits by the record companies would put them even lower (if possible) on the list of entities thoroughly detested by the public. And Apple would continue to dominate the market for music players, even though the bulk of music on them would then be either stolen or purchased in the form of conventional CDs or from iTMS at $2-$3 per track.

    It all boils down to the fact that there are folks out there who believe that they are entitled to something for nothing. and they are working hard to screw things up for the rest of us.

  30. Okay, I didn’t read all of the comments, but I really don’t see the issue at all…

    First of all, any songs you buy from the iTunes Music store and put into the iTunes software can be burned to CD. The CD can then be ripped and put into other vendors software and used on other MP3 players. Where is the limitation?

    Second, video can be done similarly via iMovie/iDVD.

    Getting music from other online stores into iTunes and onto the iPod? Just drag and drop any MP3 song into iTunes.

    You don’t like iTunes and want to use something else? I believe Tune Plus will do this…

    Geez, what a freakin waste of money this lawsuit is…

  31. To add to the list of “why not sue…”

    Sue Ford since only Ford parts work on Ford products
    Sue GM since only GM parts will work on GM products
    Sue Toyota since only Only Toyota parts will work on Toyota products
    Sue GE since only Only GE (diswasher, dryer, clothes washer, CT scanners, etc.) parts will work on GE products

    Geez, the list is endless.

    The sky is NOT falling!

  32. There are two Zune Tangs now one with an email address one without one it appears there is a imposter. But why would you want to impersonate someone as idiodic, thickheaded dumb-ass like Zune Tang?! As for this court case, it’s also a load of crap…just how Zune Tang likes to speak

  33. Zune Tang is God.

    (all due respect to Clapton)

    ” width=”19″ height=”19″ alt=”cool smile” style=”border:0;” />

    MDN magic word = “almost”

    “Reading the comments from Zune Tang’s foaming detractors is almost as funny as reading the man himself.”

    PS – the real ZT is the one WITHOUT the email address. Idiots.

  34. DRM is more for the protection of record labels than of distributors such as iTunes. From their prospective you would not want to make it any easier than it already is to transfer music, with AAC at least you have created another step in the process.

    I would suspect that the record industry will send some goons over to plaintiff’s house and arrange an “accident”.

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  39. I don’t know how many of you expected this but I surely saw it coming. Apple’s monopoly is forcing the markets to adjust and I don’t think it’s too easy to have so much flexibility as it’s sometimes against the economical laws. Is there any description of the civil procedure in this specific trial?

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