IP Notes

 By Duncan Martell</p><p> SAN FRANCISCO (Reuters) -

An unhappy iTunes online music
store customer is suing Apple Computer Inc. <AAPL.O>, alleging
the company broke antitrust laws by only allowing iTunes to
work with its own music player, the iPod, freezing out
competitors, court filings showed.</p><p> Apple, which opened its online music store in April 2003
after introducing the iPod in October 2001, uses technology to
ensure each digital song bought from its store only plays on
the iPod, a computer or home stereo system.</p><p> The suit was filed on Monday in the U.S. District Court in
San Jose. One antitrust expert called it a long shot, but
Californian Thomas Slattery is hoping for unspecified damages
for being "forced" to buy an iPod, one of the most successful
electronics products in years.</p><p> The key to such a lawsuit would be convincing a court that
a single product brand like iTunes is a market in itself
separate from the rest of the online music market, according to
Ernest Gellhorn, an antitrust law professor at George Mason
University.</p><p> There is legal precedent for such claims, but courts
usually conclude competing products as viable alternatives,
Gellhorn said.</p><p> "As a practical matter, the lower courts have been highly
skeptical of such claims," Gellhorn said.</p><p> Since rolling out the iPod, which has sold nearly 6 million
units and was a top Christmas gift this past holiday season,
Apple has garnered 87 percent of the market for portable
digital music players, market research firm NPD Group has
reported.</p><p> "Apple has unlawfully bundled, tied, and/or leveraged its
monopoly in the market for the sale of legal online digital
music recordings to thwart competition in the separate market
for portable hard drive digital music players, and vice-versa,"
the suit charged.</p><p> Slattery called himself an iTunes customer who "was also
forced to purchase an Apple iPod" if he wanted to take his
music with him to listen to.</p><p> A spokesman for Apple declined to comment on the suit. Its
iTunes charges 99 cents per song on its online music store and
has sold more than 200 million tracks.</p><p> Although Apple is the dominant disk-drive-based digital
music player, many others, using the MP3 compression
decompression standard and others, are sold by Creative
Technology Ltd. <CREAF.O> <CREA.SI>, Dell Inc. <DELL.O>,
Gateway Inc. <GTW.N>, and others.</p><p> Apple's online music store uses a different format for
songs than Napster, Musicmatch, RealPlayer and others. The
rivals use the MP3 format or Microsoft Corp.'s <MSFT.O> WMA
format while Apple uses AAC, which it says helps thwart piracy.</p><p> While songs saved in the AAC format can be saved in the MP3
format and played on virtually any digital music player, songs
bought from the iTunes music store have an added software tag,
which Apple calls FairPlay DRM, or digital rights management,
added to the file that contains the song.</p><p> "Apple has turned an open and interactive standard into an
artifice that prevents consumers from using the portable hard
drive digital music player of their choice, even where players
exist that would otherwise be able to play these music files
absent Apple's actions," the suit alleges.</p><p> In the past Apple has aggressively pursued those who had
provided a work-around to Apple's FairPlay DRM to let songs
purchased from other online music stores play on the iPod. Last
year it also blocked technology from music rival Real Networks
Inc. <RNWK.O> that made downloads from its online music store
compatible with any other portable media player, including
Apple's.</p><p> Apple shares more than tripled last year, fueled by soaring
sales of iPods and strong demand for its PowerBook notebook
computers. The shares rose 56 cents to close at $64.50 on
Nasdaq on Wednesday.  (Additional reporting by Peter Kaplan)
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# posted by John @ 8:29 PM