Apple wins $1bn iPod trial

Apple did not breach competition laws when customers were left unable to play rival music stores' songs on iPods, jury decides

Steve Jobs holds an iPod
One of the key witnesses in the case was former Apple chief executive Steve Jobs, who died in 2011 but was heard in a videotaped deposition Credit: Photo: Rex Features

A jury has ruled that Apple did not breach competition laws when it blocked songs from rival music stores from playing on its iPods.

Lawyers representing up to 8m iPod customers and 500 retailers had claimed that an update to the iTunes music service stopped rivals’ software from working on Apple’s devices.

This also pushed up the cost of music devices, they claimed, seeking $350m (£222m) in damages, which could have been tripled under US antitrust laws.

However, an eight-member jury in California sided with Apple after deliberating for just a few hours, deciding that the iTunes update was a product improvement that did not breach any laws.

Patrick Coughlin, a lawyer for the plaintiffs, said they plan to appeal the decision.

One of the key witnesses in the case was former Apple chief executive Steve Jobs, who died in 2011 but was heard in a videotaped deposition.

The case harked back to the early days of digital music and portable devices, when Apple quickly became the world's biggest legal seller of downloaded songs after launching its iTunes store in 2003. By agreement with major record companies, which were wary of unauthorised copying and file-sharing services like Napster and Kazaa, Apple encoded the songs sold through iTunes with "digital rights management" software that prevented unauthorised copying. The same software, known as FairPlay, was also built into iPods.

But Apple's FairPlay was incompatible with anti-copying code used by other online music sellers, such as the RealPlayer Music Store operated by RealNetworks, an internet streaming company. As a result, songs from rival online stores could not be played on iPods, and songs purchased on iTunes could not be played on competing portable devices, including Microsoft's Zune and Diamond Multimedia's Rio music player.

RealNetworks introduced coding that allowed songs purchased from its store to be played on iPods and other devices. But Apple blocked the RealNetworks code, known as Harmony, when it released an update to the iTunes program in 2004. Real tried again with a new version of Harmony, but it was blocked by another iTunes update in September 2006.

The plaintiffs argued that music fans were effectively locked into using iPod players because they could not easily switch their music collections to other portable devices. This prevented competition that would have driven down iPod prices, plaintiffs said. Apple sold iPods at prices ranging from $79 to $349 in 2006. It would go on to sell nearly 150m of the devices over the next two and a half years, during the period covered by the lawsuit.

Apple stopped using the restrictive FairPlay code in early 2009, after record companies shifted strategy to embrace the growing popularity of digital music. More recently, the music industry has moved toward a streaming-focused business model rather than selling copies of songs for individual download.