Steve Jobs may have succumbed to pancreatic cancer three years ago, but the visionary who founded Apple is slated to appear in court as a witness against his own company in a decades-old antitrust class action lawsuit accusing Cupertino of anti-competitive, anti-consumer practices in selling content to iPod owners.
According to the New York Times, Jobs will appear in a video deposition recorded before his death where he says he could not recall some actions allegedly done by Apple to stifle competition from other companies selling licensed music to iPod owners. However, a partial transcript of the deposition says Jobs helped Apple marketing chief Phil Schiller write a press release accusing RealNetworks, a company selling MP3s at a loss, of "adopting the tactics and ethics of a hacker to break into the iPod."
The case, which was filed by plaintiffs Melanie Wilson and Marianna Rosen, could see Apple paying $350 million in damages to more than 8 million customers who purchased an iPod between Sept. 12, 2006 and March 31, 2009. The litigation revolves around the question of whether Apple used unfair tactics in keeping the competition out of the digital music business, which Jobs played a major role in jumpstarting by convincing the big four music labels to license their content as legal MP3 downloads.
Specifically, the plaintiffs are accusing Apple of blocking content purchased from other digital music stores, such as RealNetworks, by issuing an update to iTunes that removed compatibility with RealNetworks' Harmony interoperability. iTunes 7.0 and 7.4, the plaintiffs say, were updated to prevent iPod owners from purchasing music from other stores and lock them in to iTunes, thus allowing Apple to inflate the prices of the iPod and its content. Apple has since discontinued the practice.
According to Bonny Sweeney, lead attorney for the plaintiffs, they will present evidence that proves how Apple acted to block competition and harm consumers in the process. Apart from the video deposition, Sweeney says they have acquired emails sent personally by Jobs himself pointing to his concern about the existence of other places selling digital music. In one curt email sent to Apple executives in 2003, Jobs expressed his concern over the launch of Musicmatch, a digital music store opened by a software company.
"We need to make sure that when Music Match launches their download music store they cannot use iPod," Jobs said in his email. "Is this going to be an issue?"
He sent a similar email to Jeff Robbin, the Apple executive responsible for iTunes, when RealNetworks launched Harmony in 2003.
"Jeff, we may need to change things here," Jobs wrote, indicating that some changes in the iPod were needed after RealNetworks' move.
In an instant message sent by Robbin to a colleague and obtained by the plaintiffs, Robbin was said to have discussed "doing a simple authentication in 6.0.2 for iPod."
"Nothing with DB, but lock down the keybag," Robbin said.
While Robbin was working on the lock-in, Jobs and Schiller issued a scathing press release accusing RealNetworks of using hacker tactics to sell music files compatible with the iPod as well as Windows Media Player. While RealNetworks quickly defended its action at the time saying "customers, and not Apple, should be the ones choosing what music goes on their iPod," Apple said it was "stunned" by the software company's efforts of "breaking into the iPod."
Sweeney says more emails are expected to come to light during the trial, which begins Tuesday.
University of Iowa professor and antitrust expert Herbert Hovenkamp thinks Apple will defend itself by arguing that the iTunes updates were not meant to stifle competition but to provide a better consumer experience. iTunes 7.0, for instance, allowed digital movie downloads, a feature which Jobs called the "most significant enhancement" since iTunes debuted in 2001. However, the update also includes code that would force iPod owners to reset their music players and delete all their files if they are found to have downloaded content from other stores.
Apple attorney William Isaacson maintains that the updates are "genuine product improvements" and that Apple continues to consider RealNetworks as a hacker. He says the Harmony interoperability format was simply outdated when Apple updated FairPlay, its digital rights management technology, rendering music downloaded from RealNetworks unplayable.
"Harmony was software that ran without permission," he says. "It wanted to insert itself between the iPod and iTunes. It had to build a keybag, music database, and mimic what FairPlay was doing, and trick FairPlay... It posed a danger to the consumer experience and the quality of the product."
This isn't the first time Apple got embroiled in an antitrust lawsuit after Jobs' death, with plaintiffs using as evidence Jobs' often terse emails portraying him as a ruthless executive driving hard bargain against other companies, ultimately leading to higher prices for consumers.
In 2010, for instance, Jobs was found to be a key player in conspiring with other Silicon Valley companies in an anti-poaching agreement that kept employee salaries down. In one email sent to his friend Eric Schmidt, he asked the Google chairman to prevent the Android group from recruiting Apple engineers working on the iPod.
"I am told that Google's new cellphone software group is relentlessly recruiting in our iPod group," Jobs wrote. "If this is indeed true, can you put a stop to it?"
When Apple sent a similar request to Palm, which Palm rejected, Jobs reportedly fired back with a threat to sue Palm over supposed patent infringements.
More recently, Apple was caught in price-fixing collusion with book publishers to raise book prices above Amazon's standard $9.99 on e-books. The Justice Department was able to obtain one of Jobs' emails where he cheerfully tried to convince publishers that teaming up with Apple instead of Amazon could raise the prices to $12.99 and $14.99.
"Yes, the customer pays a little more, but that's what you want anyway," Jobs told publishers, according to his biography.
Apple will face the anti-poaching conspiracy in a trial scheduled for next year, while a federal judge has ordered Apple to pay $400 million to 23 million customers involved in the book price-fixing scheme.
