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.
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
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.
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!