Intellectual Property, Music, Trademarks, United Kingdom / Great Britain

On Remand: Apple Wedges Itself Into The Music Business

(c) Image by Juri H. Chinchilla.

Ed. note: This is the first installment of “On Remand,” a legal-history column by new writer Samantha Beckett. You can read her full bio at the end of this post.

The statute of limitations never expires on an interesting legal story, so each week “On Remand” will report on legal aspects of a story from the past using a “this day in history” theme. First up, Beatlemania!

Five years before John, Paul, George, and Ringo crossed Abbey Road, they crossed the pond and invaded U.S. living rooms. Fifty years ago last night, the Beatles appeared on The Ed Sullivan Show for the first time. The floppy-haired Fab Four were warmly welcomed by shrieking fans and America’s version of royalty – the King himself, Elvis Presley. As Ed Sullivan explained before the Beatles took the stage: “You know something very nice happened and the Beatles got a great kick out of it. We just received a wire – they did – from Elvis Presley . . . wishing them a tremendous success in our country.”

It’s safe to say that Elvis’ wish came true. The Beatles won an Oscar, racked up enough Grammys to collapse a shelf, and were inducted into the Rock and Roll Hall of Fame.

By 1978, both the Beatles and the British Invasion were ancient history. Beatles fans consoled themselves with the music of Wings and the solo careers of John, Ringo, and George. And one Beatles fan in particular, Steve Jobs, was busy with his two-year-old computer company, Apple Computer. But that year, Apple Computer would experience a British invasion of its own when the Beatles’ company, Apple Corps (thank Paul McCartney for that pun), sued Apple Computer in Britain’s High Court. The dispute concerned the companies’ similar apple logos: a Granny Smith for Apple Corps, and an icon of an apple with a byte bite removed for Apple Computer….

The companies settled in 1981. At the time, Apple Computer was growing rapidly – it had just raised approximately $100 million in its IPO – but it did not yet have the Beatles’ star power. The settlement agreement reflected the parties’ relative power at the time, with Apple Computer paying $80,000 to license the apple logo from Apple Corps. As part of the settlement, Apple Computer also promised to stay out of the music and entertainment business. No big deal, right? Why would a couple of college drop-outs who started their computer company in a garage want to enter the music business? Everything was fine until Apple Computer started to think different.”

By 1990, Apple Computer was no longer just some kind of fruit company.” That year, it earned $475 million to Apple Corps’ $10 million. But after Apple Computer added software to its computers that allowed them to record electronic instruments, it upset the apple cart. After 100 days in trial, the parties settled. But this time, the price was steeper. Much steeper. Apple Computer paid Apple Corps $26.5 million, and entered new settlement and trademark agreements, which permitted Apple Computer to use the apple logo for certain music-related purposes but prohibited it from selling “physical media” containing music.

Fast forward another decade to 2001. That year, Apple Computer released the first versions of iTunes and the iPod. That first iPod was a brick the size of a deck of cards and, at the time, iTunes didn’t sell any music – it just housed music ripped from CDs. Back then, thanks to Napster, only fools paid for digital music. But Apple Computer had big plans. It launched the iTunes Music Store in 2003, intending to convert those thieves to customers 99 cents at a time. Hoping to stem a third row, Apple Computer, apparently using a strategy it learned from Dr. Evil, offered Apple Corps one miiiiiiilion dollars for permission to use the apple logo with iTunes. Apple Corps didn’t bite, but it did sue. And this time, there was no settlement.

The Apple v. Apple case went to trial in Britain’s High Court in the spring of 2006. Despite the high-profile parties, the case wasn’t very sexy, so the lawyers did their best to spice it up. Apple Corps’ lawyer demonstrated iTunes by downloading and playing the 1978 disco hit “Le Freak” for the Court, noting each time the apple logo appeared during the process. Apple Computer’s lawyer argued that “even a moron in a hurry could not be mistaken” about the difference between iTunes and Apple Corps. (Does that make people who actually read the iTunes license agreement lawyers nerds with too much time on their hands?)

In the end, the judge, an iPod user, found in Apple Computer’s favor. Apple Corps vowed to appeal, but in 2007, the parties announced a settlement. Apple Computer (now known simply as Apple, Inc.) owned all rights in the apple logo. The once-mighty Apple Corps was relegated to licensing its own mark from Apple Computer.

The case and subsequent settlement set off speculation that the Beatles’ catalog – still missing from iTunes in 2007 – would finally be added to the store. But, after years of waiting to hear the Beatles, iTunes users heard only crickets. Finally, in 2010, the Beatles arrived on iTunes. And despite his genius, Steve Jobs couldn’t resist an obvious Beatles pun in his announcement: “It has been a long and winding road to get here.” Indeed, it was. Perhaps, as Dealbook suggested, the two Apples’ years of strife can teach us something about negotiation. Then again, given their history, it may not be long before the Apples are back in court. Or have they finally decided to let it be?

Apple v. Apple: Name at Core of Beatles Lawsuit [Los Angeles Times]
John, Paul, George, Ringo . . . and Steve? [Bloomberg Businessweek]
British Court Hears Apple v. Apple and ‘Le Freak’ [New York Times]
The Beatles come to iTunes at last [CNET]


Samantha Beckett (not her real name) is an attorney with more than ten years of experience working in Biglaw. When not traveling back in time, she is most likely billing it. Her writing has been featured in state and federal courts across the nation and in the inboxes of countless clients, colleagues, and NSA analysts. She can be reached at OnRemand@gmail.com.

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