Will Apple’s iPod Antitrust Trial Help Kill Digital Rights Management?
As a company that manufactures its own hardware and software, Apple exerts an unusual amount of control over the products that it sells to consumers, including its digital media content. However, a lawsuit filed by lawyers representing a class of consumers accuses Apple of overstepping the boundaries of legal competition in the way that the California-based company implemented its FairPlay digital rights management (DRM) technology in relation to its iPod media player. [Correction, 10/16/2014: Plaintiffs in case are a class of consumers, not Real Networks.]
DRM technology is intended to decrease piracy by preventing unauthorized copies of digital media content from being made. However, it also often includes restrictions on how legal buyers of digital media can play their files. While Apple no longer uses a DRM system for its music files and the iPod is quickly becoming an obsolete gadget, the consumers’ lawsuit may have the side effect of breathing new life into the ongoing debate over DRM restrictions on other types of digital media that makes it harder for consumers to play media content on competitors’ devices.
The background to the case dates back to 2004, when Real Networks embedded its media files with a so-called “Harmony” feature that allowed users to play songs purchased from its own digital music store on Apple’s iPod, reports Ars Technica. Apple countered Real Networks’ compatibility software by issuing a software update that blocked the Harmony feature. Real Networks responded by issuing its own software update to work around the block, before Apple once again blocked Real Networks’ media files from being able to be played on iPods with the iTunes 7.0 update. In its lawsuit, lawyers for the plaintiffs allege that Apple’s iTunes 7.0 update violated 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.”
Lawyers for the plaintiffs claim that Apple’s restrictive DRM gave the company an unfair advantage in the digital download music market since iPod owners would have been discouraged from switching to a competing digital music player since they would either have to lose their iTunes music files in the transition, or perform cumbersome DRM workarounds, such as burning the music onto a CD and then ripping the CD onto a computer. According to the lawsuit, this allowed Apple to overcharge consumers for its iPod since users were effectively locked in to using its media player. Lawyers for the plaintiffs are seeking over $350 million in damages.
The plaintiffs’ damages claim hinges on the expert witness testimony of Stanford University economics professor Roger Noll, who provided the theory that Apple was able to overcharge for its iPod because of its DRM practices. In a recent court filing, Apple tried to get Noll’s testimony excluded along with a summary judgment on the antitrust litigation. Both motions were denied by U.S. District Judge Yvonne Gonzalez Rogers and a trial has been set for November 17.
Ironically, the person largely responsible for establishing Apple’s iTunes Music Store — former CEO Steve Jobs — was never a fan of DRM restrictions. In an open letter published in 2007, Jobs noted that it made no sense for record labels to require DRM restrictions for online digital music since CDs already offered unprotected music files to anyone who wanted to illegally pirate content. However, as part of the deal that Apple struck with the four major record labels, the company was forced to include a DRM system for its iTunes Music Store.
Apple eventually ditched the FairPlay DRM system for its iTunes music files in 2009, which means that the problems the consumers had with Apple’s iPod compatibility have already been settled. However, since many of the arguments against compatibility restrictions on music files would seem to apply to other types of digital media content, the lawsuit could be a first step in rolling back many of the DRM restrictions still found on e-books, movies, and TV shows — including digital videos sold through iTunes. While it remains to be seen how this case will be resolved, it could be a first step in relaxing some of the DRM restrictions still found on other forms of digital media.
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