Beatles bite Apple Computer
By May Wong
Associated Press
SAN JOSE, Calif. — The Beatles want to take another bite out of Apple Computer Inc.
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Their record company, Apple Corps Ltd., said yesterday it was suing
Apple Computer Inc.'s chief executive Steve Jobs appeared at Apple's launch of its online iTunes Music Store in San Francisco in April. The service sells downloads from five major record labels at 99 cents per song.
Apple Computer because the technology company violated a 1991 agreement by entering the music business with its iTunes online store.
When Steve Jobs co-founded Apple Computer in 1977, he is said to have chosen the name in part as a tribute to the Beatles. The 1991 agreement dealt with the future use of the name "Apple" and of both companies' well-known logos.
Apple Corps, founded in 1968, is owned by Sir Paul McCartney; Ringo Starr; John Lennon's widow, Yoko Ono; and the estate of George Harrison. It sued on July 4, about a month after Apple Computer launched its iTunes Music Store, a download music service.
The Beatles' suit, filed in the High Court in London, seeks an injunction to enforce the terms of the 1991 agreement, and monetary damages for the alleged contract breach.
"Unfortunately, Apple and Apple Corps now have differing interpretations of this agreement, and will need to ask a court to resolve this dispute," said Katie Cotton, an Apple Computer spokeswoman.
The stakes could be high: Apple's iTunes Music Store has sold more than 10 million songs at 99 cents each since its April 28 launch, and is central to Apple's strategy to promote its computers as digital entertainment hubs.
Despite Jobs' admiration of the Fab Four, Beatles songs are still missing from the iTunes store. Apple Corps, which controls most of the Beatles' recordings, traditionally has been wary of releasing its music in new formats and has yet to authorize distribution on any Internet music site.
The London lawsuit is the latest legal spat between the two cultural icons.
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In 1981, the Beatles, who released most of their recordings on the Apple label, sued Apple Computer over the corporate name. The case ended after the tech company paid the Beatles' company an undisclosed amount and agreed to use the name only for computer products.
Former Beatle Paul McCartney is one of the owners of the Apple Corps record company, founded in 1968.
A decade later, the Beatles sued again, alleging Apple Computer was violating the agreement by using its apple logo on music-synthesizing products. That case was settled out of court, with Apple Computer again paying an undisclosed amount and signing the agreement around which the latest lawsuit revolves.
Terms of the 1991 settlement were kept confidential, with Apple Computer allotting $38 million to settle.
Some think the latest case may lead to a walk down penny lane.
Charles Wolf, analyst with Needham & Co., predicted yesterday the two companies would settle if a judge did not throw out the lawsuit.
The Cupertino-based computer company already is paying hefty royalties for the right to distribute music online. It pays the five major record labels an estimated 65 cents per song, plus about 25 cents per song in distribution and credit-card processing fees.
Wolf thinks the Beatles company will manage to exact perhaps a half penny per song from Apple.
"They'll never stop the iTunes Music Store," Wolf said. "The point of the suit is to collect money, and they won't get any money if they cut off the store."
Wolf said Apple Computer's lawyers must have considered the Beatles agreement before launching the online music store. "They must have thought about this, because (the name) Apple Music Store has more brand equity."
The Beatles' holding company has been diligent in protecting its property and trademark. In addition to the computer company, Apple Corps has sued others over domain names and unauthorized use of the Apple logo.
Its latest case against Apple Computer will hinge on the details of the 1991 agreement, said San Francisco lawyer Eric Sinrod of Duane Morris LLP, who specializes in intellectual property and information technology.
"The devil is in the contractual details and how restricted Apple Computer is in terms of using its trademark," Sinrod said. "Since the online music space is an area where many people are trying to grab territory now, this could be a situation of an aggressive fight."
Shares of Apple closed yesterday at $23.10, up 54 cents, on the Nasdaq Stock Market.
