4 Apple Court Cases Hurt by Steve Jobs’s Own Words
When it came to knowing what types of computer products consumers would love, Steve Jobs may have had no equals. Under his tenure, Apple developed and released three of the company’s most successful products: The iPod, the iPhone, and the iPad. On the other hand, although Jobs had an uncanny knack for creating successful products, when it came to interacting with companies or individuals who challenged his company in any way, Jobs’s instincts were far less reliable. While the legendary Apple CEO and co-founder passed away more than three years ago, his sometimes rash words and actions continue to haunt the company’s courtroom cases to this day.
Since Jobs’s death, Apple has become entangled in three major antitrust lawsuits in which plaintiffs have used Jobs’s own words against the company he helped found. There has also been at least one patent-infringement lawsuit initiated by Apple that appears to have been negatively affected by the company’s former CEO. Here are four cases in which Steve Jobs’s words or actions have given ammo to Apple’s courtroom opponents.
1. iPod antitrust lawsuit
The latest antitrust case to use Steve Jobs’s words against Apple has been in the works for almost 10 years. According to CNET, the iPod antitrust trial will kick off December 2 in an Oakland, Calif. courtroom. However, the initial complaint that sparked the current lawsuit dates back to 2005. According to papers filed with the court, the class action lawsuit accuses Apple of violating antitrust laws by raising “the cost of switching from iPods to competing portable digital media players by eliminating the ability of consumers to collect a library of downloads that could be played on all players.”
One of the key issues in the iPod antitrust trial will be Apple’s alleged misuse of its FairPlay digital rights management (DRM) technology. While DRM technology was supposed to stop piracy by blocking unauthorized copies of digital media content from being made, the plaintiffs in this case contend that DRM changes applied in the iTunes 7.0 and 7.4 updates were only intended to prevent music files obtained from rival Real Networks from being played on the iPod. According to the plaintiffs, these DRM manipulations enabled Apple to overcharge for its iPod. The plaintiffs are seeking $350 million in damages.
A videotaped deposition and emails from Steve Jobs are among the key pieces of evidence that the plaintiffs are expected to use to Apple’s detriment. “We will present evidence that Apple took action to block its competitors and in the process harmed competition and harmed consumers,” said plaintiffs’ lawyer Bonny Sweeney, according to The New York Times. While the videotaped deposition has never been publicly released, some of the emails that the plaintiffs are likely to use have already emerged. “We need to make sure that when Music Match launches their download music store they cannot use iPod,” wrote Jobs in one email obtained by The New York Times. “Is this going to be an issue?”
2. E-books antitrust lawsuit
Last year, U.S. District Judge Denise Cote ruled that Apple violated antitrust laws by coordinating the use of agency model contracts with five publishers to combat Amazon’s policy of selling e-books at a standard price of $9.99. In her ruling, Judge Cote noted that “Compelling evidence of Apple’s participation in the conspiracy came from the words uttered by Steve Jobs, Apple’s founder, CEO, and visionary.”
One of the emails cited by Judge Cote was an email Jobs sent to News Corp executive James Murdoch in which he stated that “Amazon’s $9.99 price for new releases is eroding the value perception of their products.” Jobs then asked Murdoch to “[t]hrow in with Apple and see if we can all make a go of this to create a real mainstream ebooks market at $12.99 and $14.99.” Statements such as these convinced the judge that Jobs was fully aware that Apple was engaging in an illegal conspiracy to raise e-book prices.
As a result of the liability finding in the e-books antitrust trial, Judge Cote issued an injunction against Apple that imposes a staggered contract renegotiation schedule with the five settling publishers and forbids the iPad maker from entering into “any agreement with an E-Book Publisher relating to the sale of E-books that contains a Retail Price MFN [most favored nation].” According to Publishers Weekly, Apple recently agreed to settle the damages claims from consumers that were allegedly harmed by the e-book price-fixing conspiracy, although the amount it will pay will depend on the success of its appeal of the original liability finding. If Apple’s appeal is unsuccessful, it could pay out as much as $450 million.
3. No-hire agreement antitrust lawsuit
Apple is also facing a class action lawsuit over an illegal anti-poaching conspiracy that Steve Jobs allegedly orchestrated with various other tech companies. By agreeing not to hire each other’s employees, the companies that participated in the conspiracy effectively suppressed workers’ wages. Earlier this year, U.S. District Judge Lucy Koh rejected a $324.5 million settlement offer from Apple and three other tech companies for being too low.
In her order rejecting the settlement offer, Judge Koh noted that “There is substantial and compelling evidence that Steve Jobs (Co-Founder, Former Chairman, and Former CEO of Apple, Former CEO of Pixar) was a, if not the, central figure in the alleged conspiracy.” Among the evidence cited by Judge Koh were multiple discussions that Jobs had with various tech company executives about enforcing the no-hire agreement.
In one example cited by Judge Koh, Jobs wrote an email to Google’s Eric Schmidt that stated, “I am told that Googles [sic] new cell phone software group is relentlessly recruiting in our iPod group. If this is indeed true, can you put a stop to it?” In another example, after a Google executive asked Jobs if it would be okay to hire three former Apple engineers, Jobs emailed back that “[w]e’d strongly prefer that you not hire these guys.”
In what may have been the most egregious example of the lengths that Jobs was willing to go to stifle competition, the Apple CEO even threatened another company with patent litigation if it didn’t join the no-hire agreement. In response, Edward Colligan, former president and CEO of Palm, wrote to Jobs that the “proposal that we agree that neither company will hire the other’s employees, regardless of the individual’s desires, is not only wrong, it is likely illegal.” Jobs responded to Colligan’s email by noting that Apple had more financial resources than Palm and advised him to “look at our patent portfolio before you make a final decision here.”
Not only did Jobs’s emails provide plenty of evidence of Apple’s primary role in the no-hire conspiracy, it also appeared to have influenced the judge’s decision to deny the company an opportunity to settle the case for a relatively low amount. As noted by Judge Koh in her order denying the settlement, “While the unpredictable nature of trial would have undoubtedly posed challenges for Plaintiffs, the exposure for Defendants was even more substantial, both in terms of the potential of more than $9 billion in damages and in terms of other collateral consequences, including the spotlight that would have been placed on the evidence discussed in this Order and other evidence and testimony that would have been brought to light.” Apple and several other tech companies are currently appealing Judge Koh’s rejection, reports Bloomberg.
4. Apple v. Samsung patent infringement lawsuit (2014)
Besides providing ammo to Apple’s opponents in three major antitrust trials, there is also evidence that Jobs’s words and actions may have negatively impacted the size of the company’s damages award in its last patent-infringement trial against Samsung. Earlier this year, a jury awarded Apple $119.6 million in damages for Samsung’s infringement of two patents, reports FOSS Patents. While this may seem like a sizeable amount, it was only about 5.5% of the $2 billion amount Apple was seeking.
According to Bloomberg, one of the questions that the jury submitted to U.S. District Judge Lucy Koh during their deliberations was whether or not Steve Jobs mentioned Google when he first decided to sue Samsung for patent-infringement in 2011. While the judge responded by noting that the jury could only consider evidence presented during the trial, the question suggested that the jury was influenced by Samsung’s contention that Apple’s patent-infringement lawsuit was just a proxy war on Google’s Android mobile operating system.
“[T]he jury seems to be debating whether this case represents a genuine effort by Apple to protect patents it truly values or, instead, is a pretext for a general attack on Samsung and Google,” observed Santa Clara University law professor Brian Love via Bloomberg. Unfortunately for Apple, Samsung was able to use Jobs’s own words to support this argument. Samsung’s lawyers introduced internal company memos in which Jobs characterized its rivalry with Google as a “Holy War” and noted that the company needed to “catch up to Android where we are behind.” According to Samsung, this proved that Apple was not suing to protect its patents, but was merely trying to punish Google through Samsung.
While it’s unknown how much this argument influenced the jury’s decision to award Apple only $119.6 million in damages, the question submitted to the judge shows that the jury was at least considering the importance of Steve Jobs’s words. Either way, it’s hard to imagine that the memos written by Steve Jobs would help Apple in this case. It should be noted that, although Apple secured a damages award in this trial, it was widely considered a symbolic victory for Samsung because the amount was so small, especially when compared to the $1 billion in damages it won in its previous lawsuit against the Korea-based company.
With over $150 billion in cash and an impressive lineup of popular products and services, it’s unlikely that any of these lawsuits will have much of a financial impact on Apple. In this sense, Jobs’s words and actions are more of an embarrassment, rather than an actual liability. And considering that the company’s most profitable products were made under Jobs’s watch, it is quite likely that Apple considers any future payouts that result from its former CEO’s words and actions a small price to pay for all the other benefits that he brought to the company.
Follow Nathanael on Twitter @ArnoldEtan_WSCS