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Tuesday, May 09, 2006

Abbeyrd Beatles Page news headlines for 5/10/06

Update (5/10/06) from our Beatle News Briefs

- Court rules against Beatles in Apple vs. Apple case: More links, text of original 1971 settlements.
- Quick news links: Sean Lennon booked for SF club gig; Warner Bros. to distribute films by Bittorrent.
- Read the latest Beatle Bits blog by Terry Ott

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Monday, May 08, 2006

Statements from Neil Aspinall on behalf of Apple Corps Lt.d. (the Beatles) and Nicholas Valner, one of the Beatles lawyers




When the two Apple companies reached their agreement in October 1991 over future use of the apple name and marks, they did so on the clear basis that Apple Computer would be unable to use these on or in connection with pre-recorded music. That was to remain the exclusive province of The Beatles' company, Apple Corps. The launch by Apple Computer of its iTunes website selling pre-recorded music, coupled with its extensive marketing and advertising campaign, clearly, in our view, broke that agreement because the apple name and logos were and are used very extensively in connection with pre?recorded music.

Commenting on the judgment handed down today by Mr Justice Mann, Neil Aspinall, Manager of Apple Corps, said:

"With great respect to the trial judge, we consider he has reached the wrong conclusion. We felt that during the course of the trial we clearly demonstrated just how extensively Apple Computer had broken the agreement. We will accordingly be filing an appeal and putting the case again to the Court of Appeal. We have been advised by our legal team, including two eminent specialist QCs and our solicitors Eversheds, that we have every prospect of reversing this decision on appeal.”



Commenting upon the judgment in Apple Corps v Apple Computer handed down by Mr Justice Mann today, 8 May 2006, Nicholas Valner, partner at Eversheds, solicitors to The Beatles' Apple Corps Ltd, said:

"This is a particularly disappointing decision. The judgment is curious. So much of what the judge says is right. It will be noted that he rejected pretty much every argument advanced by Lord Grabiner for Apple Computer.

He expressly found (paragraph 83) that Apple Corps' exclusive province includes recordings transmitted in intangible form and says "[Apple] Computer has no right to apply its marks to such matters". He thereby expressly agreed with Mr Vos' submission (paragraph 60) that Apple Corps' area of exclusivity covers a download over the internet.

But since the only visible element in such a music download process would be a store like iTunes Music Store (or one of its rivals) appearing on a computer screen, it is inconsistent then to hold, as the judge does, that the use of the apple logos is not use in connection with the downloaded music.

The way the judge seeks to avoid this inconsistency is two-fold: first, he places a narrow construction upon the words "on or in connection with", and expressly rejects their normal English meaning in favour of a very limited 'trade connection' sense. In doing so, the judge ignores what is referred to as 'the Golden Rule' of construction[1] - that the words of a contract should be construed in their grammatical and ordinary sense. Secondly, he gives an interpretation of clause 4.3 of the contract (the clause is set out on page 6 of the judgment) which Counsel for neither party advanced because they both knew it was wrong. It involves implying into it the words "fair and reasonable use when applied to the service" (see paragraph 78). English law on implied terms is clear: terms cannot be implied if they contradict express terms in the contract. Since the judge's implied term imported into clause 4.3 has the direct effect of contradicting the clear terms of clauses 4.2 and 4.9 (which expressly forbid Apple Computer from using their marks on or in connection with Apple Corps' exclusive field (which includes downloaded music - as the judge concedes)), the judge cannot be right.

It is for these reasons, among others, that Apple Corps has been advised that an appeal has every prospect of success. It will be appealing."


Eversheds, 8 May 2006


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Beatles lose Apple case -- our report

Update II (5/8/06)
  • A British court has ruled against the Beatles in the case of Apple vs. Apple, reports Reuters,Bloomberg, the Associated Press, Agence France Presse and the BBC. Mr Justice Edward Mann ruled that the computer company used its Apple logo in association with its store, not the music, and so was not in breach of the agreement between the two.

    He ruled iTunes was "a form of electronic shop" and not involved in creating music. "I conclude that the use of the apple logo ... does not suggest a relevant connection with the creative work. ... I think that the use of the apple logo is a fair and reasonable use of the mark in connection with the service, which does not go further and unfairly or unreasonably suggest an additional association with the creative works themselves."

    The Beatles must pay legal expensees, estimated at £2m, but the judge refused an interim payment of £1.5m pending further hearings. The ruling means iPods and iTunes will still be able to carry its Apple name and logo. In reaction to the ruling, Apple Corps manager Neil Aspinall said, "With great respect to the trial judge, we consider he has reached the wrong conclusion. ... We felt that during the course of the trial we clearly demonstrated just how extensively Apple Computer had broken the agreement. We will accordingly be filing an appeal and putting the case again to the Court of Appeal." Apple Computer chief executive Steve Jobs said, "We are glad to put this disagreement behind us. We have always loved The Beatles, and hopefully we can now work together to get them on the iTunes Music Store." Shares of Cupertino, California-based Apple Computer rose $1.22 to $73.11 at 8:10 a.m. New York time in trading before the regular open of the Nasdaq Stock Market.

    During the trial, Aspinall, a longtime acquaintance of the Beatles, testified that Jobs once told him Jobs named his own company after the band. Aspinall also confirmed that the company is currently re- mastering the Beatles' entire music catalog in digital format, but hasn't set a date for their release and hasn't signed deals with any online music retailers.

    More links:
  • Guardian UK (commentary)
  • Business Week.

    The full text of the judgment:

    Neutral Citation Number: [2006] EWHC 996 (Ch)

    Case No: HC03C02428


    Royal Courts of Justice
    Strand, London, WC2A 2LL






    APPLE COMPUTER, INC, Defendant

    MR. G. VOS Q.C., MR. D. ALEXANDER Q.C. and MR. R. MEADE (instructed by Eversheds LLP) for the Claimant.

    LORD GRABINER Q.C. and MR. D. TOLEDANO (instructed by Freshfields Bruckhaus Deringer) for the Defendant.

    Hearing dates: 29th, 30th, 31st March 2006, 3rd and 5th April 2006

    Crown Copyright

    Mr Justice Mann


    This is a claim for breach of an agreement made between the claimant and the defendant in 1991 in which they sought to arrive at an agreement as to how they would each use their respective similar marks. The claimant, whom I will call "Corps", claims that the defendant, whom I will call "Computer", has acted in breach of that agreement in circumstances arising out of the creation and operation of Computer's iTunes music download service. At this stage of the trial I am asked to determine liability only. If I determine that question in favour of Corps any damages or other financial compensation will be determined at a separate inquiry; whether any, and if so what, injunction is necessary or appropriate will also be dealt with once liability is determined.

    The Parties

    As is widely known, Corps is the record company synonymous with the Beatles. It was incorporated as The Beatles Limited on 20th June 1963. On 4th December 1967 it changed its name to Apple Music Limited and on 9th February 1968 it changed its name again to its present name. From that time at the latest the apple mark, both in the sense of the word and as a graphic symbol, became an important part of its business. Its symbol was a sideways view of a whole apple. On 19th March 1968 the first apple trade mark was registered. Corps owned, and still owns, the rights to a large number of Beatles recordings, and extensive other rights both in relation to the Beatles and in relation to other artists. For many years its principal activity has been the continued exploitation of those rights in a variety of ways which it is not necessary for me to go into. In the course of exploiting those rights, its apple marks have been an important benefit for it. In this case Mr Geoffrey Vos QC led for Corps.

    Apple Computer was founded in 1976. It is the well known computer and software house. It started producing computers (the Apple I and II) at the end of the 1970s and has continued to develop computers and software ever since. While it has had nothing like the market share of Windows-based computers, its market share in the personal computer market is nonetheless significant and it has large numbers of devotees. It too has adopted apple marks, including the word "Apple" and a stylised apple with the bite taken out of it. Its own marks have been important to it in the development of its business. In this case Lord Grabiner QC led for Computer.

    The Genesis of the Agreement sued on

    From time to time, the marks of Corps and Computer created conflicts. In November 1981 they entered into an agreement concerning the use and registration of the word "Apple" and various apple logos. I do not need to set out the detailed terms of that agreement. In general terms, Computer was allowed to use its marks in relation to computer goods and services, but not use them in relation to computer equipment specifically adapted for use in the recording or reproduction of music, or in relation to operational services relating to music. It was also prevented from using its marks in relation to apparatus specifically designed and intended for synthesising music unless certain restrictions were met. Corps could use its marks in relation to sound and video recording, and reproducing apparatus and instruments, and sound and video records, but not computers and computing systems. That was how the parties divided up the product territories at the time.

    Thus the parties co-existed for a period. However, after a few years the situation became one which was not to the liking of Computer. It started to conduct activities which Corps considered to be in breach of the agreement, and in 1989 Corps sued Computer in this jurisdiction and obtained interlocutory injunctive relief. The matter got as far as a trial, and the trial went on for over 100 days before it was settled by two agreements, namely the so-called Settlement Agreement and the Trade Mark Agreement, both dated 9th October 1991. The agreement sued on in this action is the latter of those two agreements; I shall call it the "TMA". The settlement agreement dealt with the mechanics of settlement. The TMA provided a new regime to avoid the conflict of the parties' respective marks and allotting to each party their own areas of exclusive use.

    The relevant terms of the TMA

    The TMA is dated 9th October 1991. It contains no express choice of law clause, but in 2004 I held that it was an English law agreement. The relevant parts of the recital read:

    "Whereas, the context in which this Agreement arises is the parties' desire to reserve for Apple Corp's field of use for its trademarks, the record business, the Beatles, Apple Corp's catalog and artists and related material all as set forth in section 1.3 herein and to reserve for Apple Computer's field of use for its trademarks, the computer, data processing and telecommunications business as set forth in section 1.2 herein and to co-ordinate the use of their respective trademarks in such fields of use as set forth in section 4 herein."

    Then there are some definitions, of which the material ones are as follows:

    "1.2 'Apple Computer Field of Use' means (i) electronic goods, including but not limited to computers, microprocessors and microprocessor controlled devices, telecommunications equipment, data processing equipment, ancillary and peripheral equipment, and computer software of any kind on any medium; (ii) data processing services, data transmission services, broadcasting services, telecommunications services; (iii) ancillary services relating to any of the foregoing, including without limitation, training, education, maintenance, repair, financing and distribution; (iv) printed matter relating to any of the foregoing goods or services; and (v) promotional merchandising relating to the foregoing.

    1.3 'Apple Corps Field of Use' means (i) the Apple Musical Artists; the Apple Catalog; personalities or characters which appear in or are derived from the Apple catalog; the names, likenesses, voices or musical sounds of the Apple Musical Artists; any musical works or performances of the Apple Musical Artists; (ii) any current or future creative work whose principal content is music and/or musical performances; regardless of the means by which those works are recorded, or communicated, whether tangible or intangible; (iii) promotional merchandise relating to any of the foregoing; …

    1.4 'Apple Computer Marks' means (i) any design, reproduction or other depiction of an apple, in whole or in part, except for a whole green apple or a half apple (of any color(s)); and (ii) the word 'Apple'.

    1.5 'Apple Corps Marks' means (i) any design, reproduction or other depiction of an apple, in whole or in part, except a 'rainbow' or multicolour striped apple (in whole or in part) or any apple (of any color(s)) with a 'bite' removed; and (ii) the words 'Apple', and 'Zapple'."


    The use of those marks is regulated by the important provisions of clause 4:

    "4. Rights to use Trademarks

    4.1 Apple Computer shall have the exclusive worldwide right, as between the parties, to use and authorize others to use the Apple Computer Marks on or in connection with goods and services within the Apple Computer Field of Use.

    4.2 Apple Corps shall have the exclusive worldwide right, as between the parties, to use and authorize others to use the Apple Corps Marks on or in connection with goods and services within the Apple Corps Field of Use.

    4.3 The parties acknowledge that certain goods and services within the Apple Computer Field of Use are capable of delivering content within the Apple Corps Field of Use. In such case, even though Apple Corps shall have the exclusive right to use or authorize others to use the Apple Corps Marks on or in connection with content within subsection 1.3(i) or (ii), Apple Computers shall have the exclusive right to use or authorize others to use the Apple Computer Marks on or in connection with goods or services within subsection 1.2 (such as software, hardware or broadcasting services) used to reproduce, run, play or otherwise deliver such content provided it shall not use or authorize others to use the Apple Computer Marks on or in connection with physical media delivering pre-recorded content within subsection 1.3(i) or (ii) (such as a compact disc of the Rolling Stones music).

    4.4 Notwithstanding Section 4.2, Apple Computer shall have the right to use or authorize others to use the Apple Computer Marks on or in connection with goods within Section 1.3(ii) (but not within section 1.3(i)) which are not charged for separately (other than for costs of shipping and handling) for the bona fide purpose of training, advertising, promoting, or demonstrating the use of goods within the Apple Computer Field of Use.

    4.5 Except in connection with the other party's exclusive fields of use and as otherwise provided herein, either party may use and authorize the use of its Marks on or in connection with any goods or services, except where such use causes or is likely to cause confusion with the use of the other party's Marks. No such confusion shall in any way restrict either party's exclusive rights under subsections 4.1 and 4.2.

    4.9 Except as provided in subsection 4.4, neither party shall use or authorize others to use their respective Marks on or in connection with the other parties' exclusive field of use hereunder."

    As part of the overall deal reached in 1991, Computer paid to Corps a sum of over US$26m. As will be apparent from the short description of the 1981 agreement, the TMA shifted the boundaries between the respective parties' exclusive fields of use so that Computer was entitled to a wider-ranging field of use in relation to, inter alia, equipment and delivery services. There remained, however, an important boundary line between Computer's permitted field of use and musical content – the latter was the exclusive preserve of Corps. Whether or not Computer has crossed that boundary is what lies at the heart of this action.

    The dispute arises

    In January 2001 Computer introduced iTunes software. That software was what is described as a juke box for the computer. This enabled storage of music so that it could be played back through the computer. The music to go into it was principally acquired by the user "ripping" CD tracks. In October of that year computer launched its iPod player – a small portable device for storing digitally encoded music (on a small hard disk within the machine) and playing it back through headphones. iTunes transferred music from the computer to the iPod, originally just for Computer's own Mac computers. Other software did this for Windows-based computers until iTunes for Windows was introduced. Over the four and a half years which followed the iPod has been a dramatic commercial and conceptual success. I shall have to describe the operation of iTunes in more detail below.

    Time and technology marched on. In April 2003 Computer announced that it was going to launch the "iTunes Music Store". For several years before that time a very significant amount of popular music had been available for illicit downloading on the internet. It was illicit because the downloads infringed copyright. When such illicit downloads took place downloaders did not pay for the music that they acquired. The loss to the music industry was potentially very significant. The quality of these illicit downloads was variable.

    ITMS was introduced to provide a commercial but legitimate source for downloaded software. It was a form of electronic "shop" where music could be downloaded for a relatively small sum - 99¢ per track in the US, and 79p per track when it was introduced into the UK the next year (2004). While Computer was not the first person to launch a site making authorised sales, it was a significant addition to the market and has proved to be enormously successful. The notional store consists of a large number of tracks held on a central server (or servers), which can be accessed over the internet and downloaded for a price. It is accessible to anyone with a computer capable of running Computer's iTunes software, which includes the majority of the personal computers in use in the world today.

    When the ITMS was first launched it was accessed by first going to www.applemusic.com. The user was then diverted to the iTunes website, where the iTunes software could be downloaded. The store was then available through iTunes. After a few months this route was changed. Now a user gets to the iTunes website either by using the URL www.itunes.com, or via Computer's website. In the latter case there is a link (graphically in the form of a tab) which takes one to the iTunes website, or perhaps more accurately to its pages within Computer's website.

    There are now 4.5m tracks on the site, and video content and TV programmes have recently been added. There are also a large number of audiobooks – abridged and unabridged readings of literary works. While the word "Apple" was not used in the title of the new store, it is said that "Apple" marks were, and have since been, used prominently in connection with the store. To put it at its lowest, there is no doubt that Computer associated itself very firmly with iTunes Music Store; there would have been little point in keeping the association secret. Doubtless Computer wished it to be known that the Store was indeed its venture. As part of its launch, Mr Steve Jobs, the chief executive officer of Computer, extolled its virtues, including what was said to be the competitive price for the downloaded music and the quality of its music compression standards. Again, I shall describe the operation of the store in more detail below.

    Between November 2002 and April 2003 Computer entered into various agreements with the five major record companies (Warner, Universal, EMI, Sony and BMG) for the online delivery of content through the iTunes Music Store in the U.S. These were preparatory steps to the launch of the Store. A prototype of the Store was demonstrated to Mr Neil Aspinall, the sole executive officer of Corps, on 31st January 2003. Because he did not like the appearance, and perhaps the nature, of the product, Corps has never authorised any of its music to be sold through the Store. Computer has since added other agreements with other music providers.

    The introduction of the ITMS caused consternation to Corps, which considered that the use of the Apple logo in relation to the store would be a breach of the TMA. In essence, it says that it is entitled to use its mark on or in connection with music content and Computer is not; and when Computer uses its mark in relation to the ITMS it is using it in connection with music content in breach of the TMA. It complains that a variety of things amount to a breach. In order to make sense of them I shall have to describe how the store operates. In what follows any recitation or description of fact should be treated as a finding of fact by me unless the contrary appears or the context indicates otherwise.

    The operation of the iTunes and the ITMS

    This point is best dealt with by reference to screen shots. The screen shots that I have used are of the latest version of iTunes, but there is no material difference between the versions that have been operating since the ITMS opened. I shall also take the opportunity of describing how one of the breaches of the agreement is said to arise because of the presence of an on-screen Apple symbol while the ITMS is on screen.

    The iTunes software is capable of standing as a self-contained juke box, enabling the user to manage downloaded music on his or her computer. The music arrives there from a potential variety of sources – "ripping" tracks from CDs, recording from other analogue devices (which might require some intermediate software), downloading from a music site and probably other sources. iTunes is capable of importing, and then playing, files in several compressed and uncompressed formats. When in operation, the present version of the software presents as appears in Appendix 1 to this judgment. In the top left-hand corner are the menu controls and the playing controls. In the middle there is a banner, which I shall describe separately in the next paragraph. To the right there is a search window (into which a user types search criteria in order to find a given recording) and a browse or burn control button. The left-hand vertical pane contains a list of "sources" for the music, which is listed in the larger pane to the right. The user mouse-clicks one of the entries in order to display the category of his or her choice. Thus, clicking on the "Library" will cause the software to display a list of all the recordings held in the jukebox in the central section, ordered in accordance with any of the column headings which the user chooses. The bottom five sources are sub-categories provided by iTunes (but editable) or created by the user, to which the user can allocate recordings for ease of "filing". The user can also create playlists here – particular tracks which the user wishes to gather together in one place because the user wishes to play them together. It is as though the user had created a tape or CD of those tracks. The playlist is created by dragging and dropping particular tracks on to the playlist name. When the playlist is selected then only the items appropriated to that playlist appear in the track listing section. Tracks can be allocated to more than one playlist; and all tracks remain visible in the Library source at all times. The playlists essentially contain pointers to the tracks. The three smaller boxes labelled "Genre", "Artist" and "Album" are toggled on and off by the Browse button. If they are off, the appearance is as in page 2 of Appendix 1. The various controls on the bottom of the frame do not matter for the purposes of this litigation.

    In the centre of the top horizontal pane the word "iTunes" appears. If any of the categories in the source column are double-clicked, it changes to match that category. Below it is a panel which mimics a sort of monochrome LCD display. In it the all-important apple symbol appears – it can be seen on the screenshot. That symbol stays there until a track is played. A track is played by double-clicking it or by selecting it and clicking the "play" button in the control section. At that point the apple disappears and the identity of the track appears, together with a form of progress bar – a graphic indication of the progress of its playback. When the track is finished, the apple re-appears.

    The music that is handled by iTunes is not confined to output on the computer. Tracks can be burned on to CD ROM in standard CD ROM format or as a series of MP3 files. That CD ROM can then be played in standalone players. When a CD is being burned the apple logo in the LCD display again disappears during the burn, and is replaced by an indication of the progress of the burn.

    So far no objection is taken to that. The apple symbol appears within the context of the iTunes software. Corps does not complain that the apple mark, thus displayed, is being used on or in connection with "content" (The word "content" was used as a shorthand during this trial to connote head (ii) of Corps' field of use. Where convenient I shall continue to so use it for the purposes of this judgment, but I have at all times had in mind the true and full description of that head). It is what happens when the iTunes Music Store is accessed that is objectionable so far as Corps is concerned.

    The iTunes Music Store is accessed by clicking on the "Music Store" heading in the Source column. If the computer is connected to the world wide web, then a connection is made to the store. While the connection is being established, the apple symbol at the top of the screen goes away, and a progress bar indicates the extent of the success of the connection over a brief period of time, and the text "Accessing Music Store" appears, but the symbol is restored when the connection is established. When that is achieved an opening screen appears, a sample of which appears in appendix 2. Each of the pieces of record label art is a click-through link to the track or collections in question. To the left and right of the screen are various links for getting to individual tracks or various facilities. A viewer can get to the music that he or she is looking for in a variety of ways – by searching or by clicking through links. The search box in the top right hand corner now enables a text search of the store (and its caption is changed to reflect that that is now what is being searched). Thus a search for the name of an artist will throw up a list of tracks in the main window (either the tracks of the artist or tracks of other artists where there is a reference to the first artist in associated text). Eventually the user will be presented with a screen which looks something like appendix 3. The bottom part, listing the tracks, is not dissimilar to the main music display when iTunes is acting as a juke box, the most obvious difference being a column allowing the song to be bought. The panel above that displays various albums or tracks and can be re-sized to make more or fewer tracks visible in the lower portion. The Apple logo remains visible at all times save when the computer is communicating with the store or playing a track. A 30 second clip of all tracks can be played; when that happens the apple logo disappears and is replaced with the track artist and title, along with a progress bar, in the same manner as if the computer is playing a stored track. If the computer is communicating with the store, then the nature of the communication replaces the Apple symbol. Usually there are the words "Accessing Music Store" together with a progress bar.

    A user has to register and set up some sort of credit mechanism in order to be able to purchase a track. A track can then be purchased by clicking a purchase button against the track in the main column. A confirmation box appears, and if the purchase is confirmed the track is then downloaded over the internet connection. While the download is taking place the apple symbol in the central display disappears again, the words "Purchasing [track name]" and then "Downloading [track name]" appear and there is a progress bar charting the progress of the download. When that has finished, then the Apple symbol is restored.

    It is the appearance of this apple logo while the Store is on screen and being accessed that is said to be a (and indeed probably the principal) breach of the TMA. It is said that its use is a use on or in connection with musical content (ie with the creative works whose principal content is music.) Mr Vos particularly relies on the fact that the Apple logo disappears and is restored as being a factor which emphasises the connection or link with Computer.

    One of the things relied on by Computer as demonstrating that it does not display its logo in connection with content is the fact that the store and the downloaded track contains information making it clear that Computer does not own the rights to any of the music. If one clicks on an arrow marking against an individual track in the store, the upper pane displays details of the album from which the track is taken (if it is not already displayed). That information includes a graphic representation of the album source (in the nature of an album cover or CD insert) together with some listed information about the album. Amongst that information is a line which identifies the owner of the rights in the music preceded by a "(P)" or other mark. In the store the information is not available until one has done that. If one has a listing of a number of tracks which do not themselves constitute an album (ie they are taken from more than one album) one cannot immediately see who owns the rights in any of them; one has to perform the selection operation that I have just described before one can see it. The same rights information can be made to appear once the track has been downloaded by highlighting the track and going into an "information" window where the attribution can be made to appear in the same form. That information (along with other information, such as the artwork and track information again) is encoded into the downloaded bitstream. Mr Vos makes the point that all this requires a certain amount of mouse-clicking through various options. It is in fact one click away from the track-listing window in the music store, and one or two clicks away when in iTunes.

    There was sensitivity at the trial on the part of Computer to the ITMS being described as a website. Computer said it was not a website. This may in the end boil down to a matter of terminology only, but the means of access to the material is said to be significant. It is not accessed through a browser as an ordinary website would be. It can only be accessed through the iTunes software. It is not written and constructed in the same way as a familiar website. There is no way in which it can be accessed through a normal browser. While there is an iTunes website (or webpages within the Apple Computer website) and a link to the store, clicking on the link does not take one straight to the store within the browser. Clicking on the link causes the computer to check whether iTunes resides on the machine. If it finds it, it launches iTunes and loads the store presentation within it in the manner referred to above. If it does not find it it offers the user the opportunity to download the software (for free). If the user declines the opportunity then he or she will not be able to enter the Store.

    Thus is the main breach said to arise. It is said by Corps that the presence of the Apple mark when the ITMS is invoked (reinforced by its re-appearance when it has been temporarily displaced) is a clear association with the music content on the screen so as to make its use one which is "in connection" with the content. Computer's answer to this is, in short, that the Apple mark "franks" the software, not the content. It is actually somewhat more complicated than that, but I shall consider the merits of the rival contentions in more detail below.

    The ITMS music files

    It is necessary for me to consider the nature of the ITMS music files, because part of Corps' case turns on the extent to which Computer has associated itself with them and their format.

    A track held in an uncompressed digital form would occupy many megabytes of storage space. That has disadvantages for the seller, who would require much more server space in order to store the tracks, and disadvantages for the downloading buyer, who would also need large amounts of digital storage space and for whom downloading time would be very long. Accordingly, compression techniques are used to reduce the size of the file. This is achieved by technology known as a codec (compression/decompression, or coder/decoder) which operates on a non-compressed file and reduces it very dramatically in size.

    There are a number of codecs available for this purpose. They can be divided into lossless and lossy codecs. Lossless codecs carry out a degree of compression without losing any of the musical or sound content of the file. They do not achieve as great a degree of compression as lossy codecs. The Apple lossless codec reduces a file size by about a half. A lossy codec, as its name suggests, goes further and sacrifices some of the sound content (starting with content that most people cannot hear anyway) in order to achieve compression. There is a trade-off – greater compression can be achieved by sacrificing more sound content.

    There are a number of codecs available for this purpose. One of the best known is known for short as MP3, and it has given its name to a type of player – an MP3 player. Another, and the one adopted by Computer for its ITMS is AAC – Advanced Audio Coding. It is a generally available codec, not peculiar or exclusive to Computer. Various factors and variables operate to determine the actual degree of compression. It is unnecessary for me to go into the details here but the total overall resolution is, in simple terms, represented by the bit rate. The higher the bit rate, the better the quality (because less sound is lost) but the bigger the file.

    iTunes is capable of compressing ripped files into (inter alia) MP3 and AAC files, and is equally capable of reading those files. It does so by use of technology known as QuickTime. However, Computer only uses one codec for ITMS, namely AAC, using a bit rate of 128 kbps. I shall call it "AAC 128" for short. It uses that codec because it believes it offers the best compromise between sound quality and level of compression. Its belief is that it offers a better sound quality than MP3 at the same bit rate. I do not need to find whether that is correct or not; indeed, it may be such a subjective matter that I could not do so. However, I can and do find that that is a justifiable belief and a reasonable position to adopt. Computer arrived at its decision to use AAC 128 after consultation with the principal music content providers (Warner, Sony and so on). Of the other digital music download services, only one of the main players offers AAC as a download format. Of the others MP3 and WMA are the predominant offerings. A variety of bit rates are offered; the main players tend to use a bit rate of 192 kbps.

    However, ITMS does not simply offer plain or standard AAC encoded tracks without more. Encryption intervenes at two stages. The tracks are stored in an encrypted form, and transmitted as such. They are decrypted on the receiver's machine by means of a key transmitted separately by the store to the user's computer. That encryption is said to prevent the file being of any use to someone who intercepts it en route.

    The decrypted file is then immediately re-encrypted and stored using another key unique to each user's account. This key is part of a rights protection system known as FairPlay. What the user sees in his library is the file thus re-encrypted (though there is, of course, no explicit reference to the fact that it is encrypted and not a "plain" AAC file). This encryption limits the use that can be made of the file. The file can be transferred at will, like any other computer file, but only a computer with the necessary key can decrypt the file and thus play its music. The key is placed on computers by registering them with the ITMS, and no more than 5 computers can be registered for these purposes at any one time. Thus the number of computers on which the file can be played is limited. When the tracks are downloaded on to an appropriate portable player the key is also downloaded, enabling playback on that player. The FairPlay system thus limits the use that can be made of the file and prevents piracy in relation to the file itself. It does not, however, prevent burning the file to CD ROM. Files thus imported can be burnt to CD an unlimited number of times (though playlists can only be burned 7 times). The user signs up to rules which govern this when he or she signs up to the ITMS.

    In the jargon of this case the FairPlay DRM ("digital rights management") feature was called the "FairPlay wrapper". The encrypted AAC file provided by the ITMS is provided in what has been called Protected AAC or Apple Protected AAC. Other providers of downloaded music use products which have a degree of piracy protection too. Some of them provide files in WMA Protected format, so the principle of protection is not unique. However, Computer is the only person, or the only principal player in the field, using Apple Protected AAC.

    The agreements with musical content owners which led to the supply of music in the ITMS provide for piracy protection. That protection is supplied by the FairPlay wrapper. Most of the content owners provide a file already encoded into AAC 128 form, having used their own software for that purpose or, in a minority of cases, having used software provided by Computer for that purpose. A minority (less than 10% of content) is provided by providers in non-compressed form, and Computer then carries out the compression itself. I have referred above to the information about, and associated with, the track – the identity of the track and artist which appears when the track is played, artwork, a rights notice and so on. This information is stored in metadata which is added to the music element of the AAC file. This metadata is delivered to the user with the music content, so that the information is available on screen by going to the relevant "information" function in iTunes. Some of it is available on the screen of a portable player. Computer does not alter the musical content in the sense of adjusting anything like balance, sound quality, volume, timbre or anything like that. So far as the bits (in the computer sense) carry information which is decoded into music, what Computer does is to encrypt them. When they are restored they are restored so that the music is the same as it was in the originally unencrypted AAC file.

    These technical features are not of themselves relied on as a breach. The nature of the transmitted file is relied on by Corps as a counter to an averment by Computer that the ITMS is merely a service for the transmission of the digital file, which is said to bring the store within its field of use. Corps says that the activities carried out in relation to the files, the choice of Protected AAC, the addition of the metadata and the FairPlay wrapper all show Computer's description of the Store is not accurate.

    Alleged breaches of the TMA

    Various things are said to be a breach of the TMA as being the use of Computer's mark on or in connection with musical content. They can be divided into the following aspects.

    The use of an apple logo in the upper pane when the ITMS is connected.

    I have already described the facts relevant to this when describing the operation of iTunes and the ITMS above. It is only the use in the context of the ITMS that is complained of. Use when iTunes is functioning as a jukebox is not complained of.

    Special musical content

    One of Computer's main points in this case is that Computer is selling other people's music. It is not acting as a record label, or anything like that. Corps says that that is irrelevant, but in any event there are respects in which Computer is actually affecting content to a greater degree than one who merely sells digitised tracks. Corps relies on the following facts and matters, which demonstrate that Computer is indeed doing the sort of thing that record companies do. All the events actually occurred as facts, as I find.

    i) From time to time ITMS has tracks or collections which are exclusive to ITMS for a period of time (weeks or months) in the sense that they are not available elsewhere, or not available for download elsewhere, for a time. ITMS advertises this feature; the exclusives figure significantly in the ITMS when it appears on the screen. The content (in the sense of the rights) is not owned or acquired by Computer – it is owned by the record label to whom the performer in question is contracted (or some other owner). It is exclusive in the sense that ITMS is the only place where the tracks can be obtained, or obtained digitally, for a limited period of time. This feature is not exclusive to ITMS – other download services offer it.

    ii) On occasions Computer arranges a recording session which generates a recording which is then made available exclusively through ITMS for a period of time (again weeks or months). Typically Computer pays for the equipment and the other costs of the recording session. It never acquires the IP rights – those remain with the performer or his record company (or other the owner). These recordings are again promoted on and by the ITMS as an exclusive recording. Mr Cue's evidence was that there are no more than about 10 of these live recordings.

    iii) ITMS features special playlists selected by performing artists, featuring tracks of other artists that they particularly like. These are selections of tracks gathered together and presented for the user so that the latter can see their chosen artist's choices, and buy them all or singly as they wish.


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  • Abbeyrd Beatles Page news headlines for 5/8/06 Update II

    Update II (5/8/06) from our Beatle News Briefs

    - Apple suing Apple Computer again: Breaking news: Court rules against Beatles
    - Ringo announces new All-Starr Band, new tour: PNC Bank Center show not canceled; tickets on sale

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    Sunday, May 07, 2006

    Abbeyrd Beatles Page news headlines for 5/8/06

    Update (5/8/06) from our Beatle News Briefs

    - What's doing at the Capitol Tower? "Capitol Albums, Vol. 2"!: The SK1 location, and more returns comments.
    - Ringo announces new All-Starr Band, new tour: All-Starr Band: Show cancelled?
    - Unreleased George vocal surfaces with Platinum Weird: Ringo contribution
    - "Breakfast With the Beatles," hosted by Dennis Mitchell -- the latest show online
    - "Breakfast With the Beatles" KLSX-FM/Los Angeles playlist
    - Beatle chart news
    - Pete Best Band news: Show cancelled.
    - Quick news links: Heather renounces tabloid marriage reports.
    - Read the latest Beatle Bits blog by Terry Ott

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