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The hip computer maker battles with another headache

Shortly following news of Apple’s stock options backdating scandal, the Associated Press is reporting that the company is now facing several lawsuits, including one alleging that Apple is monopolizing the digital music market.

The lawsuit is over Apple’s proprietary iPod and iTunes software, which is generally incompatible with non-Apple products. Media purchased on iTunes is supposed to be playable only on iPod hardware, and songs purchased on other DRM systems are not easily playable on iPods.

Apple motioned for the courts to dismiss the case, originally filed July 21, but the courts denied the motion on Dec. 20. The plaintiff seeks unspecified compensation.

Apple is also facing a lawsuit, filed on Nov. 7, over the supposed high failure rate of the logic board in the iBook G4. Another lawsuit filed by PhatRat Technology accuses Apple of patent infringement for its iPod-Nike product.

While the iPod reigns supreme in the music player market, Apple’s success has not come without a price. Last year, Creative Labs sued Apple over patent infringement of the iPod interface, which eventually lead to a countersuit. The companies eventually settled on having Apple pay Creative $100 million for use of the patented technology.

The popularity of the iPod has drawn attention from hackers discontent with the proprietary nature of the device. Jon Lech Johansen, who cracked DVD encryption, has undone Apple’s protection scheme and plans to license his work to companies interested in opening up interoperability between iPod/iTunes and non-Apple devices.

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RE: Monopoly?
By Hoser McMoose on 1/2/2007 3:18:14 PM , Rating: 4
Generally speaking a "monopoly" has been defined as controlling more than about 80% of the market. By this definition Apple does indeed have a monopoly in iTunes Music Store. And yes, Microsoft does have a monopoly in their Windows OS, though I'm not sure about the other examples you mentioned (certainly Sony does not have a monopoly on consoles, they definitely don't have 80% of the market).

Now, the trick is that simply having a monopoly is not illegal, but there are restrictions on what you can do with it. In particular there are two things you can't do, predatory pricing to force smaller competitors out and using your monopoly with one product to push a different product. Apple should be safe enough with the first, their pricing in very much in line with the competition. However it's the second one that could cause problems. One could make a very valid argument that Apple's using their monopoly on iTunes to block other competitors in the digital music player business. Only the iPod can work with iTunes and Apple has shown absolutely no interest in licensing the technology to any other hardware vendors.

Long story short, Apple better have their lawyers ready to go, because they are definitely walking on some shaky ground. Of course, Microsoft has done many of the same things and managed to get away with a very light slap on the wrist, so maybe Apple doesn't have too much to worry about.

"It seems as though my state-funded math degree has failed me. Let the lashings commence." -- DailyTech Editor-in-Chief Kristopher Kubicki
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