Apples Argue About Core Business

The Beatles’ record company is returning to London’s High Court because it believes its namesake Apple Computers’ successful iTunes Music Store breaches a long-standing agreement that prevents the iPod creators from operating in the music business.

The latest round of one of Britain’s long-running corporate legal battles was scheduled to open March 29th in front of Justice Mann, a self-professed music and computer fan.

He owns an iPod himself and has already asked both sides if that should prevent him from hearing the case.

Apple Corps, which is owned by the former Beatles and their heirs, will be asking for multimillion-pound damages against Apple Computer, which is likely to rebut the action by saying its music service is merely data transmission.

When Apple Computer CEO Steve Jobs founded his company in 1976, he reportedly used the logo of a rainbow-colored apple with a bite taken out of it as a tribute to The Beatles.

Five years later, Apple Corps sued him and accepted a $80,000 settlement and a promise that the computer company would stay out of the music business.

The Beatles first used a logo of a Granny Smith in 1968 when they founded the Apple Corps to distribute records signed to the Apple record label. The records had a ripe apple on one side and a neatly sliced half on the reverse.

The two Apples were back in court in 1989 because Apple Computer introduced a music-playing software program. The dispute rumbled on for a couple years and ended up with the computer company shelling out $26 million in damages. The company also made a further agreement to stay away from The Beatles’ company’s core businesses.

Apple Corps was awarded rights to the name on “creative works whose principal content is music,” while Apple Computer was allowed “goods and services … used to reproduce, run, play or otherwise deliver such content.”

The agreement also prevented Apple Computer from distributing content on physical media, a clause that was designed to cover CDs and tapes, and the current case is likely to focus on whether that should be considered to include later inventions such as digital music files or devices used to play them.

Last year, Apple Computers earned more than 40 percent of its revenue from iTunes and the sale of iPod music players and accessories. ITunes has sold more than a billion songs since 2002.

If the Apple Corps action is successful, and Jobs’ company is hit for trademark violation, the financial penalties are likely to be massive.

– John Gammon