The Business Litigation Blog

Jurors Find Apple Not Liable for Antitrust Violations in Class-Action iPod Lawsuit

After a two week trial and nearly a decade of litigation, it took a panel of eight jurors just several hours to find Apple, Inc. not liable for antitrust violations relating to its iTunes version 7.0 which allegedly restricted competition in the digital music space.  The seemingly endless legal battle involved a class of over 8 million consumers and a potential treble damages verdict in excess of $1 billion against Apple if found liable. 

The near decade-long litigation had seen its fair share of tribulation.  Commenced in January 2005, over a year before the now pivotal 7.0 version was even introduced, the initial complaint argued that Apple restrained competition by making iPods only compatible with iTunes.  When Apple’s activity was deemed legal, the focus shifted to iTunes’ blocking software.   The case bounced around courts, and was very recently on the brink of dismissal when it was discovered the class representatives were unqualified for not having purchased iPods during the requisite timeframe.  The judge allowed the plaintiffs to present a new representative, which they did the following day, though the new representative did not testify in front of the jury panel. 

Plaintiffs contended that the software update blocked Apple’s competitors in the digital music space, namely RealNetworks, Inc.  During the closing arguments on December 15, 2014, plaintiffs’ attorney Patrick Coughlin accused Apple of using the software to “blow up” consumers’ iPods and turn them into paperweights if the devices stored songs not purchased from iTunes or transferred directly from CDs.  In addition to infringing on consumers’ ownership and usage of the devices they purchased, Coughlin argued that the restrictions were motivated by Apple’s desire to gain and abuse a monopolistic position in the digital music space which further harmed the consumer experience. 

Apple’s primary legal defense was that the series of updates that first blocked iPods from playing or storing competitors’ music files were genuine product improvements securing the devices from hackers and protecting its contractual obligations to records companies. Apple’s attorney Karen Dunn argued that her client received no consumer complaints about the updates and that it had no duty to make its products compatible with its competitors.  Dunn criticized the plaintiffs’ position as being a “made up…lawyer argument” that misunderstood the technology involved.

The two-week trial included meticulous technical testimony concerning complex technological concepts such as reverse engineering digital rights management code.  Major Apple executives’ testimony was heard, including a video deposition of deceased co-founder Steve Jobs taken six months prior to his passing. Plaintiffs’ attorneys plan an appeal, believing Judge Yvonne Gonzalez Rogers improperly prohibited jurors from considering the effect of encryption code used in an iTunes software update that was central to the trial.  Judge Gonzalez Rogers also disallowed Coughlin from presenting a brand new theory to jurors that he attempted to introduce the weekend prior to Monday’s closing argument that Apple had colluded with Amazon to eliminate competition – a strategy Judge Gonzalez Rogers described as a “hail-Mary, last-ditch effort” and “offensive.”

A simple takeaway: Legal theories can and often do change over the course of litigation (for example, if evidence is uncovered during discovery to support a new claim). That said, it is almost never a good idea to blindside a judge after years of litigation and a two week trial with a brand new legal theory just before closing arguments commence—especially a theory that is somewhat far-fetched considering Apple has been found liable for colluding against Amazon as its competitor for the sale of e-books.

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