Apple v Apple: Why the music is still playing
Introduction
This case has generated a great deal of press interest, not least because of the famous brand names involved, but also due to the impact that this High Court litigation could have had on Apple's iTunes website.
Apple Computer's victory has left Apple Corps, (the Beatles record label), vowing to appeal. Meanwhile Apple Computer ('Apple') continues to offer its music download services via its iTunes music store ('ITMS') under its world famous Apple logo.
What was the case about?
The case arose out of Apple's alleged breach of a 1991 agreement between Apple and Apple Corps concerning the use of their respective trade marks. Most people will know that Apple uses a distinctive apple shaped trade mark with a bite missing and Apple Corps utilises a sideways view of a whole apple.
When similar trade marks are used for the same or similar goods and services, a risk of conflict and litigation can arise and one mark must generally prevail over the other.
One solution, rather than to become embroiled in litigation, is for the trade mark owners to agree a commercially acceptable demarcation of the market boundaries, thus allowing the competing marks to peacefully co-exist. This is what Apple and Apple Corps did in 1991.
Time marches on: Why Apple Corps claimed
The iTunes concept was over a decade away in 1991, as was the convergence of various media delivering music to the public. The agreement could not therefore use convenient language to set the boundaries between the two trade marks in terms of the substantially converged music and technology markets of today.
In 2003 Apple Corps decided that, on their reading of the agreement, the boundary had been crossed and launched a claim for breach of contract. Apple Corps claimed that the use of the Apple logo on the ITMS website amounted to use on or in connection with music content. They argued that there was little difference between buying music from ITMS and buying a physical format such as a CD.
Apple countered saying that to cross the boundary into content, it would have had to have used its logo to indicate that it was the source or origin of the music itself. It pointed out that its advertisements were always in promotion of its services or computer based hardware such as its iPod rather than the music contained on the website (or indeed on yours or my iPod). They also stressed that there was no attempt to claim ownership of the content and the origin of that content is always obvious to a user of the iTunes website.
What was the crux of the case?
The case turned on 2 important aspects of how the agreement should be interpreted:
- The precise meaning of the words 'on or in connection with' in relation to music content.
- The precise meaning of the certain other clauses (particularly clause 4.3 which appeared to provide Apple with additional permissions) both in terms of what the parties said and what they meant.
It was by any standards a difficult exercise to judge. Mr Justice Mann when construing the meaning of the agreement, faced the challenge created by the passage of time and the consequent need to interpret the meaning of phrases used as if it was 1991. Put another way, the question was, what was in the minds of the contracting parties at the time the agreement was formed, not what did they think it meant with the subjective benefit of hindsight. Once he had done this he would be able to consider the alleged breaches to see whether they represented a breach of what had been agreed in 1991.
How did the judge determine these 2 points?
Firstly Justice Mann found that, on its proper construction, the agreement meant that Apple was free to '...use its mark in connection with the service which sells content without automatically being in breach of the TMA [the Trade Mark Agreement]...providing that it is acting fairly and reasonably.' whereas Apple Corps 'retains the right to apply its marks to the "creative works",...'.
His analysis examined how Apple Computer's logo was being used through the eyes of a reasonable and sensible user and having done that, he found, ultimately, that no breach had occurred.
The Judge reasoned that when a retailer offers goods which have originated from others he does not suggest that the goods are his in terms of trade origin or trade source. Here he is clearly considering ITMS to be an electronic shop rather than, as Apple Corps would argue, a provider of music content.
What now for Apple Corps?
There remains a lot at stake so an appeal is likely.
What should I do now?
- Ensure that commercial contracts are expertly drafted and use a language which provides the maximum amount of future proofing and conveys the parties intentions in a straightforward manner.
- Ensure that your trade mark specifications are expertly drafted and consider how the wording can be made 'future proof'.
- Adopt a regular review of your trade mark filings to plug any gaps.
- Actively monitor for any competing trade mark usage to catch problems early before the depth of investment by a competitor in a new venture under a similar mark makes litigation more likely and early commercial settlement harder to achieve.
- Re-consider any settlement agreements that you have entered into with a view to identifying any risks or opportunities.
Ashfords is regulated by the Solicitors Regulation Authority. The information in this article is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.
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