Apple's Next Legal Opponent: Bruce Willis?

In the wake of Apple's (Nasdaq: AAPL  ) major legal victory in the U.S. over frenemy Samsung (even though it was less successful internationally), the company may be about to be taken to court by an unlikely opponent: action star Bruce Willis.

Dying is hard
The actor is specifically concerned with how difficult it might be when he dies for his daughters to enjoy his extensive iTunes music collection. According to the Daily Mail, Willis has dropped thousands of dollars into his music collection that he loads onto numerous iPods, and is in the process of setting up a will, but the legal terms of Apple's iTunes store explicitly prohibit the transfer of songs to other parties.

Many consumers may be surprised to learn that when they purchase content through iTunes, be it a song or app or otherwise, they don't actually own anything. Instead, users are purchasing a license that allows them to access said content on their devices, a license that is specifically not transferrable.

Here are some excerpts from the iTunes Terms and Conditions that you've never read in your entire life but have likely agreed to:

The Mac App Store Products and App Store Products (collectively, "App Store Product(s)") made available through the Mac App Store Service and App Store Service (collectively, "App Store Service(s)") are licensed, not sold, to you.

The software products made available through the Mac App Store and App Store (collectively, the "App Store Products") are licensed, not sold, to you. There are two (2) categories of App Store Products, as follows: (i) those App Store Products that have been developed, and are licensed to you, by Apple ( "Apple Products"); and (ii) those App Store Products that have been developed, and are licensed to you, by a third-party developer ( "Third-Party Products").

You may not rent, lease, lend, sell, transfer redistribute, or sublicense the Licensed Application and, if you sell your Mac Computer or iOS Device to a third party, you must remove the Licensed Application from the Mac Computer or iOS Device before doing so.

Even the terms and conditions aren't clear, as it frequently refers to "purchases" throughout, only to later clarify that the item has not been sold to you. It's more like you're purchasing a license, so every time you're buying a song, instead of seeing the button labeled as "$1.29 BUY" you should instead see it as "$1.29 BUY LICENSE" in your mind's eye.

Don't think that Amazon.com's (Nasdaq: AMZN  ) large MP3 store is any different, either. The language in its terms and conditions is slightly different, but carries the same message:

Upon payment for Music Content, we grant you a non-exclusive, non-transferable right to use the Music Content only 

for your personal, non-commercial, entertainment use, subject to the Agreement.

... you may not redistribute, transmit, assign, sell, broadcast, rent, share, lend, modify, adapt, edit, license or otherwise transfer or use the Music Content

While we're at it, let's include Google's (Nasdaq: GOOG  ) terms just to round out the three largest digital content storefronts:

License to Use Products. Following payment of the applicable fees for a Product, you will have the non-exclusive right, ... to view, use, and display the Product on your Devices or as otherwise authorized by Google as part of the Service for your personal, non-commercial use only.

Sale, Distribution or Assignment to Third Parties. You may not sell, rent, lease, redistribute, broadcast, transmit, communicate, modify, sublicense or transfer or assign your rights to Products to any third party without authorization, including with regard to any downloads of Products that you may obtain through Google Play.

All three companies merely license the rights to use the content. The important part for Willis is that after he dies, the iTunes terms say he can't transfer his collection to his daughter. He is reportedly considering setting up a trust, a legally separate entity commonly used in estate planning, to hold these downloads. Hopefully it'll be called the "Willis iTunes Trust With a Vengeance."

The whole nine yards
Almost exactly two years ago there was an important court ruling that backed up these terms. From an artist's perspective, there's an important distinction between a song being licensed and a song being purchased. Artists get a 50% cut of licensed uses, but just a 20% cut of sales, so it's directly determines their paychecks.

Producers affiliated with Eminem had filed suit against Universal Music Group, arguing that iTunes "purchases" came with so many strings attached that they couldn't be considered sales. Instead, they were licensed uses, entitling the artist to higher payouts from the record label.

The lack of transferability is likely the product of record labels. One of their biggest and most legitimate fears before the full transition to digital distribution was how easy it would be to share and distribute content, especially as piracy continued to run amok. Physical mediums such as CDs and tapes were always less of a concern, whereas digital files are easily replicated and redistributed. Record labels presumably required this language in order to go along with Apple's iTunes Music Store that launched in 2003.

The expendables
Imagine a parent passing on an old vinyl record collection that he spent a lifetime gathering. With society's shift to digital content, we shouldn't have to give up that ability or be required to purchase content multiple times.

Willis has proven proficient with assault rifles on many occasions. How will he fare in a court of law?

Regardless of this ruling, Apple's competition is coming from players much more important than Mr. Die Hard himself. Even though the record labels are fighting just to protect their copyright holdings, Apple and Amazon will do just fine. The Motley Fool has just launched new premium ticker reports that lay out everything for current or prospective shareholders. Grab copies of our report on Apple and our report on Amazon today, and get regular updates at no additional cost!

Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Amazon.com and Apple. Motley Fool newsletter services have recommended buying shares of Amazon.com, Apple, and Google. Motley Fool newsletter services have also recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy.
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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 04, 2012, at 11:33 AM, applefan1 wrote:

    Would you stop this crazy National Inquirer mentality. Bruce Willis isn't going to sue Apple, that was just leaked BS.

    Write about something more important.

    If he REALLY wants to, I'm sure they'll make CD copies of his catalog and give his girls access to them and they'll listen to whatever they want.

    EIther way, Apple is only living by the terms and conditions of the record industry and they are simply just the store front.

    I personally buy physical CDs for this and many other reasons. I like the physical copy as my main backup and I like uncompressed audio and liner notes. And those can be given away to only one person, not copied.

  • Report this Comment On September 04, 2012, at 12:29 PM, melegross wrote:

    As has been said, Willis isn't suing Apple.

    The problem is with the recording companies, and the agencies that distribute the royalties. I'm sure Apple doesn't care in the slightest what you do with your music. Their license requirements are defined by those companies who enter into agreements with the retailers, such as Apple.

    Let's remember that it was Apple which led the movement for cheap downloadable music, and the removal of DRM.

  • Report this Comment On September 04, 2012, at 12:34 PM, jdmeck wrote:

    And what about my kids music collection? Apple will not let you have an account without a credit card. All my kids music went through my account. What happens when I die?

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