18
Dec2014
Apple Not Liable

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

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

Did Apple Restrict Competition?

The near decade-long litigation had seen its fair share of tribulation. The litigation commenced in January 2005, which was over a year before iTunes even released its version 7.0. The initial complaint argued that Apple made iPods only compatible with iTunes, which restricted competition. When the court deemed Apple’s activity legal, the focus shifted to iTunes’ blocking software. The case bounced around courts and was very recently on the brink of dismissal. However, the court discovered that 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. However, 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. Coughlin argued that Apple’s desire to gain and abuse a monopolistic position motivated the restrictions.

Apple Claims the Updates were Genuine Improvements

Apple’s primary defense was that the series of updates that blocked playing or storing competitors’ music files were genuine improvements. The updates secured the devices from hackers and protected Apple’s contractual obligations to record companies. Apple’s attorney Karen Dunn argued that her client received no consumer complaints about the updates. Additionally, she argued that Apple 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 concepts. The court heard major Apple executives’ testimony, including a video deposition of deceased co-founder Steve Jobs. Plaintiffs’ attorneys plan an appeal. They believe Judge Yvonne Gonzalez Rogers improperly prohibited jurors from considering the effect of encryption code used in an iTunes software update. The judge also disallowed Coughlin from presenting a brand new theory to jurors that he attempted to introduce the weekend prior to Monday’s closing argument. The theory stated that Apple colluded with Amazon to eliminate competition; a strategy the judge 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. However, it is never a good idea to blindside a judge with a brand new theory just before closing arguments. Especially a theory that is somewhat far-fetched considering a court found Apple liable for colluding against Amazon as its competitor for the sale of e-books.