Ondrej Holzman He is currently on the run before the Circuit Court in Oakland, California buoy between Apple and the plaintiffs, who represent about eight million customers as well as major retailers, over whether the Apple company blocked competition over the past decade with protections in iTunes and iPods. Apple claims it did nothing wrong, prosecutors think otherwise.
The plaintiffs are seeking $351 million in damages from Apple, saying that the updates Apple has been rolling out to iTunes have been anything but improvements, at least not from the users' point of view. Along with the new iPod nano introduced in 2006, the California firm was accused of restricting customers and violating antitrust laws.
iPod for iTunes only
"It had twice the memory and came in five different colors," plaintiffs' attorney Bonnie Sweeney said in her opening statement Tuesday, "but what Apple didn't tell customers was that the code that came with the new Nano also contained a 'Keybag Verification Code '. This Nano code didn't speed it up or improve its sound quality in any way... it didn't make it more elegant or stylish. Instead, it prevented users who legally purchased songs from a competitor from playing them on their iPods.”
In particular, we are talking about the iTunes 7.0 and 7.4 updates, which, according to the plaintiffs, were aimed at the competition. Apple is not being sued for using DRM for copy protection per se, but for modifying its DRM to not work with, for example, Real Networks' rival Harmony.
Songs purchased from iTunes were encoded and could only be played on iPods. When a user wanted to switch to a competing product, they had to burn the songs to a CD, transfer them to another computer, and then transfer them to another MP3 player. "This strengthened Apple's monopoly position," Sweeny said.
The fact that Apple tried to really block competition on its products was substantiated by the plaintiff with some internal e-mails of the top representatives of the company. "Jeff, we might have to change something here," Steve Jobs wrote to Jeff Robbins when Real Networks launched Harmony in 2006, which allowed players to play a competitor's stock on the iPod. A few days later, Robbins informed his colleagues that simple measures would indeed need to be taken.
In internal communications with chief marketing officer Phil Schiller, Jobs even referred to Real Networks as hackers trying to break into his iPod, even though the competing service's market share at the time was tiny.
Harmony was a threat
But Apple's lawyers understandably have a different opinion on iTunes 7.0 and 7.4, introduced in September 2006 and a year later in September 2007, respectively. "If at the end of the trial you find that iTunes 7.0 and 7.4 were genuine product improvements, then you have to find that Apple did nothing wrong with competition," William Isaacson told the eight-judge jury in his opening statement.
According to him, the mentioned updates were mainly about improving iTunes, not a strategic decision to block Harmony, and version 7.0 was "the most significant update since the first iTunes". Although this release was said not to be all about DRM, Isaacson admitted that Apple did indeed view Real Networks' system as an intruder in its system. Many hackers tried to hack iTunes through it.
“Harmony was software that ran without any permission. He wanted to interfere between iPod and iTunes and cheat FairPlay (the name of Apple's DRM system - editor's note). It was a threat to the user experience and the quality of the product,” Isaacson said on Tuesday, confirming that among other changes, iTunes 7.0 and 7.4 also brought a change to encryption, which put Harmony out of business.
During his opening statement, Isaacson also pointed out that Real Networks - while an important player - will not appear in court at all. However, Judge Rogers told the jury to disregard Real Networks' absence of witnesses because the company is not a party to the litigation.
Deleting songs without warning
The trial continued Wednesday, with Patrick Coughlin, a lawyer representing the users, explaining to the jury how Apple deleted music purchased from competing stores from its iPods without notice between 2007 and 2009. "You've decided to give them the worst possible experience and destroy their music libraries," Apple Coughlin said.
Back then, when a user downloaded music content from a competing store and tried to sync it to an iPod, an error message popped up instructing the user to reset the player to factory settings. Then when the user restored the iPod, the competing music disappeared. Apple designed the system to "not tell users about the problem," Coughlin explained.
That is why, in a ten-year-old case, the plaintiffs are demanding the aforementioned $351 million from Apple, which could also increase up to three times due to US antitrust laws.
Apple countered that it was a legitimate security measure. "We didn't have to give users more information, we didn't want to confuse them," said security director Augustin Farrugia. He told the jury that hackers like "DVD Jon" and "Requiem" made Apple "very paranoid" about protecting iTunes. "The system was completely hacked," Farrugia reasoned as to why Apple had competing music removed from its products.
"Someone's breaking into my house," Steve Jobs wrote in another email to Eddy Cue, who was in charge of iTunes. Prosecutors are expected to introduce other Apple internal communications as evidence during the course of the case, and it is Cue with Phil Schiller who will appear on the witness stand. At the same time, prosecutors are expected to use parts of a video recording of Steve Jobs' testimony from 2011.
Very embarrassing. I hope Apple rightfully loses this battle.