Case over Apple's digital music dominance heads to jury

Posted: 12/15/2014 03:24:57 PM PST

OAKLAND -- iTunes 7.0: A landmark improvement to Apple's software for the iPod or an empty update meant to drive out competitors and hike prices for consumers?

That will be the $1 billion question for a federal jury in Oakland as they deliberate over whether Apple's dominance of digital music during the iPod's heyday amounted to an illegal monopoly. After a two-week trial with a few speed bumps, lawyers for Apple and the plaintiffs made their final pitches to jurors Monday, offering up divergent portraits of the Cupertino-based tech giant.

Plaintiffs argue that Apple's practice of restricting music downloads on the iPod to the iTunes store stamped out competition from other firms. During his closing argument, plaintiffs lawyer Patrick Coughlin said Apple's software updates, which drove out a rival program from RealNetworks, were a 'one-two punch' in the market.

'Apple didn't want to leave you with that choice,' plaintiffs lawyer Patrick Coughlin said during his closing argument.

But when it was his turn to address the jury, Apple lawyer William Isaacson framed iTunes 7.0 not as a death knell for competition but a boon for consumers. He noted the update delivered enhanced security, games and a host of movies, among other features.

'The overwhelming evidence here is of genuine product improvement,' he said.

Kicking off deliberations Monday afternoon, jurors will consider first whether iTunes 7.0 was indeed an improvement, as antitrust laws hold that companies cannot be punished for enhancing their products, regardless of the ramifications for competitors. If jurors side with Apple on that question, the company will win; if not, the group will move on to other issues, such as damages. To compensate consumers for inflated prices, plaintiffs seek more than $350 million, which would be tripled under antitrust laws.

They are rooting their case in testimony from former Apple engineer Rod Schultz, who testified on Friday that he worked on a project meant to 'block 100 percent of non-iTunes clients.' Plaintiffs lawyer Coughlin reminded jurors that Schultz said he did not see the iTunes update as a product improvement.

'I don't think there was a more genuine witness to talk about whether the algorithm that he invented was a product or security improvement,' Coughlin said.

But Isaacson pointed out that the ex-Apple engineer conceded that the software did contain meaningful new features. Apple's digital music strategy was grounded in a belief that the iPod and iTunes worked best together, he said, touting the company's tradition of tightly integrated software and services.

'When you don't have Apple plus iPod, you're getting two steering wheels and, even worse, two drivers,' Isaacson said.

Continuing the closing argument, Apple lawyer Karen Dunn questioned why Apple would have targeted RealNetworks, a small player, while ignoring a giant like Amazon if its aim was to stifle competition. The loopholes exploited by RealNetworks were the real problem, she stressed.

'The issue is not being a competitor,' she said. 'The issue is doing damage to the system and creating security problems.'

Contact Julia Love at 408-920-5536 or follow her at http://ift.tt/1qlfSY1