By Daisuke Wakabayashi
A jury ruled in favor of Apple Inc. on Tuesday in a class-action
lawsuit that accused the technology giant of violating antitrust
laws by suppressing competition for its iPod music players.
After deliberating for only about three hours, an eight-person
jury in U.S. District Court in Oakland, Calif., found that Apple's
iTunes 7.0 was a genuine product improvement, and therefore didn't
violate antitrust laws. The decision was unanimous.
Apple applauded the jury's verdict. "Every time we've updated
those products--and every Apple product over the years--we've done
it to make the user experience even better," the company said in a
statement.
The plaintiffs had said Apple made changes to its iTunes music
service so that iPods wouldn't operate with competing services,
driving up the cost of the devices. The plaintiffs, representing
potentially eight million harmed consumers, were seeking $350
million in damages, which could have been tripled under antitrust
laws.
Apple's lawyers said it was a rare case where a jury was allowed
to decide whether a product was a genuine improvement from earlier
versions. Usually, a judge makes that decision before it goes to a
jury.
U.S. District Judge Yvonne Gonzalez Rogers stressed the
importance of the question going to the jury. Patrick Coughlin, an
attorney for the plaintiffs, said they were happy that the case
went to the jury, but that it was a "very tough case." He said the
plaintiffs plan to appeal the jury's decision.
"Very few of these cases make it this far," said Michael
Carrier, a law professor at Rutgers University in New Jersey,
because defendants such as Apple only need to show "a little bit of
a product improvement and then it gets thrown out."
For now, the verdict closes a 10-year legal battle over the
iPod, a breakthrough portable music player when it was introduced
that has been cannibalized by smartphones in recent years.
The 10-day trial took jurors back in time. The key events at
issue took place in 2006 and 2007, as music downloads and iTunes
grew in popularity. More recently, iTunes downloads have fallen, as
users switch to streaming music services.
The trial also included a never-before-seen video of Apple's
late co-founder, Steve Jobs, from a deposition in April 2011, about
six months before he died. Mr. Jobs argued that Apple was scared of
iTunes hackers and that it needed to add security features to
appease record labels concerned about piracy.
Initially, the plaintiffs had argued that Apple's iTunes 7.0 and
7.4 updates in 2006 and 2007, respectively, were anticompetitive.
During the trial, Judge Rogers narrowed the plaintiffs' case to
only the iTunes 7.0 update.
Plaintiffs said security changes made by Apple in the iTunes 7.0
update weren't improvements, but maneuvers to block other music
from playing on iPods. Plaintiffs said those changes made all other
improvements irrelevant. In closing arguments on Monday, Mr.
Coughlin compared the update to a new Snickers bar that was bigger
and had more chocolate, but included a preservative that was
toxic.
Apple's lawyers said it made no sense for the company to harm
its own product. Apple said the security fixes that disabled
rivals' software were necessary to patch a potential vulnerability.
In the iTunes 7.0 update, Apple also added the ability to play
movies on iTunes and scan through album art with Cover Flow.
Mr. Carrier said the plaintiffs' case suffered after their two
class representatives were dropped because neither had bought a
relevant iPod during the period covered by the suit. The plaintiffs
scrambled, finding an amateur ice dancer from the Boston area to
become the face of their case.
Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com
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