Jury begins deliberations in billion

OAKLAND, Calif.-The long-running iTunes antitrust lawsuit against Apple has gone to a jury, which took the case after about three hours of closing arguments today. The jury will make an unusual split decision, deliberating first over the narrow issue of whether iTunes 7.0 was a true product improvement or an anti-competitive scheme to kick out Apple competitor RealNetworks.

If the jury sees the 'software and firmware updates' in iTunes 7.0 as a real improvement, the case will be over-a win for Apple. If it doesn't see it that way, the jurors will still have to decide if Apple broke competition laws and, if so, how much the company should pay in damages. Plaintiffs are asking for $351 million, and any award will be tripled under antitrust law.

Plaintiffs representing a class of eight million consumers and resellers say Apple's behavior was anti-competitive, because the iTunes update stopped Real's competing DRM system from working correctly. Apple says Real should take responsibility for what was basically a hack of Apple DRM. When the company updated its security in iTunes 7.0, Real's reverse engineering, quite naturally, stopped working.

A toxic Snickers bar

Plaintiffs' lawyer Patrick Coughlin tried to get the jury to focus on two specific parts of iTunes, the Keybag Verification Code or KVC and Developer Verification Code or DVC. 'They're lethal, and they degrade the user's experience,' he said. They were like a 'one-two punch.' Coughlin continued:

Further Reading

An avid Ars Technica reader steps into a lawsuit that needed a new plaintiff.

I've been trying to think of an analogy, and I've been living on Snickers bars for the past couple weeks. Now if the Snickers bar was bigger, or contained more chocolate, that would be better. But if that Snickers bar had a preservative in it that was toxic-that was lethal-that would not be an improved Snickers bar.

Coughlin ran through several e-mail chains that were key to his case against Apple, beginning with a 2003 e-mail from Steve Jobs. The message came shortly after the iTunes store had opened and sold more than a million songs in one week.

'Guys: we need to make sure that when Music Match launches their download music store they cannot use the iPod,' wrote Jobs.

'Immediately, when they had this success, he's locking down the iPod,' said Coughlin.

Later in 2003, Apple VP Philip Schiller wrote an e-mail suggesting they offer a software development kit for Apple's FairPlay DRM system, 'such that other music players can also work with iTunes and AAC+Fairplay in addition to our beloved iPod.'

'For non-competitive devices, maybe,' replied Jobs. 'For competitive devices with iPod, it's too soon to decide this.'

By 2004, the iPod plus iTunes combo was becoming dominant.

'In this balkanized world, the safest bet is the largest, most successful standard, and today we're it,' Jobs wrote in an e-mail from that year. 'Let's leverage this position now!!!'

A few years later, when RealNetworks debuted its 'Harmony' system for allowing its own songs onto iPods, Apple was treating it like just one more hacker. That was unfair, said Coughlin.

Further Reading

Real Networks, the competing music store they shut out? Barely an afterthought.

'They threw Harmony into this picture,' he said, showing an Apple slide that listed hacking threats to iTunes, which included PlayFair, Hymn, JHymn, FairTunes, DVD Jon-and RealNetworks. 'All of these stripped or stole the music off the desktop or the iPod. Only Real's Harmony actually kept your song encrypted.'

Coughlin also hammered home the idea that when non-compatible songs like RealNetworks songs were uploaded into an iPod, the system could sometimes force users to reformat their iPods, thus losing whatever content was on the device.

'If you used RealPlayer to put songs on the iPod-that's it!' said Coughlin. 'Your device is a brick. Your songs are gone. It's worse than a paperweight.'

No evidence

Those users with deleted music databases? They don't exist, said defense lawyer William Isaacson.

'It is absolutely astounding that this case rests on a theory, that people [lost their music] because of version 7.0 of the iTunes DVC,' said Isaacson. 'There's not a single consumer, not a single document, no evidence that this ever happened.'

The plaintiffs had filed a lawsuit claiming injury to a vast class of consumers, but they couldn't get one person to testify to the jury about a real injury. 'Plaintiff called the KVC and DVC a 'one-two punch,'' said Isaacson. 'But a one-two punch usually connects with someone. Someone usually walks into court and says, 'I got hit.' It didn't happen here.' He continued:

There's no evidence that a single consumer lost a single song. There's no evidence that people thought burning and ripping was hard. There's no evidence in this case that any Harmony users even used it with the iPod. That is all made up, at this point. It's lawyer argument, is what it is.

As for the iTunes 7.0 update, there's 'overwhelming evidence of product improvement.'

A chart shown to the courtroom outlined the many differences between iTunes 7.0 and what came before it. It was the first version of iTunes to support album art, it had four times the resolution of its predecessor, and it could 'reverse sync' content from an iPod to a computer. It was the first iTunes system to include movies and video games. And it had the 'keybag integrity check,' a feature that plaintiffs claimed was illegal, but Isaacson said was a clear security improvement.

'The plaintiff ignores everything except the integrity check,' said Isaacson. The only witnesses they brought forward to support that theory were a paid expert who makes all his income from litigation testimony and one former Apple engineer who testified that he didn't think code in iTunes 7.0 was a 'product improvement,' Isaacson said.

The Harmony was a reverse-engineered system that was never going to work, said Isaacson. 'It was inevitable that it was going to break. '

The case was submitted to the jury just before 2:00pm Pacific time.

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