Apple has escaped a massive class-action lawsuit after an eight-member California federal jury concluded the company didn’t violate antitrust laws by including copy-protection measures in its iTunes software. Had Apple lost the suit, it would have been on the hook for $351 million in damages. That figure could have swelled to over $1 billion, forcing CEO Tim Cook to transfer money between accounts.
According to court filings, the tech behemoth was accused of stifling competition by using its routine software updates to foist a digital rights management system, or DRM, onto iPod users. The plaintiffs said Apple’s DRM created a “walled garden” by blocking iPod owners from playing digital music unless it came in Apple’s proprietary file format. The plaintiffs said the policy prevented competition from third-party digital music sellers such as RealNetworks, giving Apple an unfair monopoly. But the jury disagreed, concluding the iTunes update was an improvement to the product that provided a benefit to the class of 8 million iPod owners.
If terms like “DRM” and “RealNetworks” sound foreign, as though they were plucked from an old sci-fi movie, that’s because the lawsuit was filed way back in 2005, around the time Apple engineers were pulling all-nighters under shroud of confidentiality, preparing to shock the world with the introduction of an iPod featuring a color screen and the ability to display photos. (Though one of those would be nice to have right about now.)
Apple’s use of copy-protection measures was a big deal at the time, and the company eventually dropped its DRM in early 2009 after years of excoriation from tech writers. By preventing users from playing third-party files on the iPod, critics argued, Apple was forcing iPod users to purchase music from iTunes, resulting in a coerced brand loyalty when it came time to purchase a new device, with customers buying new iPods in order to avoid rendering their purchased iTunes music useless. But Thursday’s verdict undermines that line of reasoning, buttressing Apple’s argument that it has done nothing to dampen competition in the digital music space. Besides, if that were the case, there wouldn’t be the rampant, passionate speculation about the features and upgrades rumored for the next-gen Microsoft Zune.