The case centred on the agreement which had been drawn up after
a previous dispute between the record label of The Beatles and the
computer company. It set out how the companies would use their
respective similar trade marks.
The 1991 agreement, drawn up in the days before music downloads,
set out the 'Field of Use' for each company's mark. Apple
Computer's Field of Use included electronic goods, data
transmission services ancillary services and more. Apple Corp's
Field of Use included musical content.
The agreement included this crucial clause:
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).
In 2001, Apple Computer launched the iTunes software for ripping
CDs and then the iPod in 2001. It launched the iTunes Music Store
(ITMS) two years later. A prototype had been demonstrated to Apple
Corps' sole executive officer, Neil Aspinall, before launch; but
because he did not like the appearance, and perhaps the nature, of
the product, Apple Corps has never authorised any of its music to
be sold through ITMS.
Apple Corps claimed its agreement was breached by ITMS. One of
its arguments was that the Apple symbol was visible while ITMS was
on screen.
Mr Justice Mann noted: "It is said that its use is a use on or
in connection with musical content (i.e. with the creative works
whose principal content is music.)" Geoffrey Vos QC, representing
Apple Corps, relied on the fact that the Apple logo disappears and
is restored when ITMS is being used. This, he argued, emphasises
the connection or link with Apple Computer.
But Apple Computer pointed out that the store and the downloaded
track contain information making it clear that Apple Computer does
not own the rights to any of the music. A click displays details of
the album from which the track is taken, including, for example, an
album cover and the name of the rights owner.
Apple Computer said its mark "franks" the ITMS software – not
the content. Apple Corps disagreed. It alleged numerous other
examples of the Computer mark being used on or in connection with
musical content. Apple Computer is doing the things that record
companies do, it argued: it pays for the recording of exclusive
tracks to offer via ITMS; it offers special playlists
selected by artists; it has broadcast adverts featuring U2,
Coldplay and Eminem that feature the Apple logo.
Apple Computer said that to cross into Corps' territory with its
mark it would have to have indicated, by its use of the mark, that
Computer was the source or origin of the music. It argued that it
did not do so and has never done so.
Mr Justice Mann considered the wording of the agreement and drew
his own conclusions. He decided that "the mere running of a data
transmission service, transmitting musical content, under a
Computer apple mark would not, of itself, be a breach."
Apple Corps pointed to words in the 1991 agreement which prevent
Apple Computer from using its mark "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)".
Mr Vos argued that this makes it clear that Computer must not
use its mark in connection with the sale of music content however
sold, and it does not matter that the sale is via a computer
connection because of the incorporated cross-reference to
intangibility, which preserves it for Corps. Clause 1.3(ii) makes
it clear that the words in question are within Corps' exclusive
field of use however they are communicated ("whether tangible or
intangible"), and they are capable of describing what Computer is
doing even though nothing like a CD is delivered. He argued that
Computer is confined to the use of its marks on its service and
must not trespass in any way into a use in connection with
content.
He pointed to comments made by Steve Jobs, Apple's CEO and
co-founder, who claimed that permanent downloads are just the next
thing on from CDs, or are like CDs, and claims that in ordinary
language any reasonable person would regard a permanent download
stored on a physical medium, such as a hard drive, as "physical
media". Bearing all this in mind, and bearing in mind that the
court has to apply this contract to technological developments that
were not precisely foreseen, Vos argued that it would be
appropriate to regard a permanent download within the definition of
"physical media delivering pre-recorded content".
But Mr Justice Mann disagreed.
He wrote: "it would require a serious distortion of fairly plain
notions to say that files delivered by ITMS and stored somehow in
digital form, and/or the hard disk which stores them, amount to
'physical media' which 'deliver' pre-recorded content. It is true
that physical things are involved – servers, communication
equipment, wires and hard disks, to name but some, but they do not,
in any form of ordinary parlance, amount to 'physical media
delivering pre-recorded content'. The hard disk on which downloaded
content is stored may in some contexts be regarded as a physical
medium, but it does not deliver anything; it stores what is
delivered by a means other than a 'physical medium'."
He believed the parties had in mind a physical media like a CD.
"The physical medium has to carry the content," he reasoned. "There
is no equivalent or analogue in a download service like ITMS."
The reference to intangibility in clause 1.3(ii) did not refer
to "content," in Justice Mann's view. Rather, "it refers to the
method of recording or communication of works – 'the means by which
… works are recorded, or communicated whether tangible or
intangible'."
Justice Mann concluded:
"All this does not, as Mr Vos submitted,
make nonsense of the exclusive rights given to Corps to apply its
marks to musical recordings, including recordings transmitted in
intangible form. It still has those rights. Computer has no right
to apply its marks to such matters. What Computer does have the
right to do is to use its mark in connection with the service which
sells content without automatically being in breach of the [trade
mark agreement], and to be able to avoid being in breach providing
that it is acting fairly and reasonably. Corps retains the
exclusive right to apply its marks to the 'creative works', however
communicated. I do not see what is nonsensical about the result
which I consider to be correct."
There was no breach of the 1991 agreement, he wrote. "The action
therefore fails."
Macworld UK quotes Apple Corps' Aspinall vowing to continue the
fight: "With great respect to the trial judge, we consider he has
reached the wrong conclusion … We will accordingly be filing an
appeal."
Lee Curtis, a trade mark attorney with Pinsent Masons, the law
firm behind OUT-LAW.COM, said: "The ruling is good news for Steve
Jobs, but the fight over the iconic trademark isn’t over yet, and
the stakes remain high."
"Justice Mann ruled that Apple Computer
didn’t breach the 1991 agreement because it used the brand only in
relation to its iTunes store, not on the physical music itself. He
ruled that Apple Computers had complied with the agreement because
it used the Apple logo in a retail capacity, and did not associate
itself with creative musical works per se."
He noted that Apple Corps will now be landed with a bill for
both companies' costs – reported to total £2.5 million. Apple
Computer's request for its costs to be paid now was denied pending
the outcome of the appeal. "The stakes are still high," said
Curtis. "If Apple Computer loses this war of words at appeal, it is
likely that Apple Corps would obtain significant damages for past
iTunes use, plus the legal tab."
