Apple Defeats $1 Billion US Anti-Trust Lawsuit In Three Hour Jury Decision
Thursday 18 December 2014 @ 11.16 a.m. | Legal Research
A Northern Californian jury found Apple not guilty of anticompetitive conduct in a well-publicised trial that had spent 10 years being “kicked around in various courts and in various forms”. CNET reported that:
“[h]ad Apple lost the class action case, more than 8 million iPod owners who purchased devices between September 2006 and March 2009, along with hundreds of retailers, would have been collectively eligible for up to $1 billion in damages”.
The plaintiffs were seeking over $350 million in damages, and in the United States, damages can be tripled for violations of antitrust law. However, they lost the case after under four hours of jury deliberation, after facing a series of setbacks and a summing up by Judge Yvonne Gonzalez Rogers where she told the jury:
“A company has no general legal duty to assist its competitors, including by making products interoperable, licensing to competitors or sharing information to competitors.”
The Case History
The case differed considerably from the one originally brought, with the plaintiffs suffering a number of setbacks, including the removal of the two lead plaintiffs when it was discovered that they had not actually bought iPods during the time period in question. The Sydney Morning Herald also pointed out that:
“[t]he jury was initially instructed to assess whether two versions of Apple's iTunes software were genuine product improvements. But the judge tossed out a claim about the second iTunes version after an economist testifying for the plaintiffs, Roger Noll from Stanford University, conceded in court that he had not assessed any impact made by that version of the software.”
A professor from the Rutgers School of Law, Michael A. Carrier, told the New York Times that while the verdict was not a surprise, the argument made by the plaintiffs was made substantially more difficult by their own oversight:
“Frankly, I find that flabbergasting, that in a universe of eight million potential plaintiffs, the two that were selected were disqualified… That really tells you a lot about this trial.”
The Key Arguments
The case eventually turned on 2006 changes made by Apple in the iTunes 7.0 update. The jury was asked to decide whether the update was a “genuine product improvement” (which cannot be considered anticompetitive, regardless of its effect on competitors) or was simply designed to throttle competitors. CNET reported that the update included:
“a security feature that disabled a consumer's iPod if it detected songs from competing music stores that had reverse-engineered Apple's FairPlay digital rights management technology… The updated software demanded consumers restore the iPod to factory settings, effectively deleted those competing music stores' songs.”
The plaintiffs argued that these changes weren’t improvements, but a deliberate strategy to block users from accessing rival marketplaces to purchase music, then playing it on their iPods. According to the Wall Street Journal, in closing arguments the plaintiff’s attorney “compared the update to a new Snickers bar that was bigger and had more chocolate, but included a preservative that was toxic”.
The plaintiff’s argument also relied on “the notion that Apple may have a legal responsibility to allow competitors onto its platform and inside its ecosystem”, as CNET reported:
“This so-called duty to deal argument was the core pillar of the plaintiffs' case, which argued that Apple should have ensured fair competition by allowing RealNetworks to put its songs on customers' iPods. Apple in turn argued that consumers could burn songs to CDs and then legally upload them into iTunes.”
Apple executives also testified that the security features were designed to protect iTunes music from hackers. In a videotaped deposition made shortly before he died, Apple founder Steve Jobs told the court that Apple was concerned that iTunes hacks would mean they had violated their contracts with the music companies and that they would lose crucial licenses as a result.
Apple lawyers also repeatedly pointed out that the plaintiffs’ didn’t actually bring forth anyone who’d been harmed. The New York Times reported Apple’s lead lawyer, William Isaacson, said:
“There’s not one piece of evidence of a single individual who lost a single song, not even a complaint about it… This is all made up at this point.”
The plaintiffs have indicated they will consider appealing the decision.
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