Apple Can't Let It Be

As it so happens, I've got iTunes playing as I pen this piece this morning, but Apple would prefer I didn't. Apple Records, that is. Apple Computer (Nasdaq: AAPL  ) , on the other hand, is probably thrilled that I'm currently grooving at the keyboard to Paul Simon's The Obvious Child.

This week, Apple Records, the company formed by The Beatles to market their music, finally got its day in court after filing suit against Apple Computer in September 2003. According to press reports, the new complaint contends that Apple Computer violated a 1991 settlement between the two companies when it chose to include the cartoonish Apple logo in its marketing of iTunes.

I'm no lawyer, so I can't venture a guess as to who is right. But according to a 2004 story on this very topic at News.com, the answer may be both:

According to a recent court decision quoting the 1991 settlement agreement, the Beatles were given the right to use the Apple name wherever their songs were involved and on "any current or future creative works whose principal content is music." However, Apple Computer was allowed to use its brand on "goods or services ... used to reproduce, run, play or otherwise deliver such content," as long as it was not on physical media such as a CD.

Assuming News.com's reporting is correct, iTunes could be construed as a "creative work" to which Apple Records has rights. But iTunes specializes in digital distribution, which also seems well within Apple Computer's rights.

Frankly, the legalities leave me confused. My inner skeptic, however, wonders whether the intellectual property brouhaha is a facade. Couldn't it be that Apple Records has yet to figure out a digital distribution strategy for its Beatles collection and that it wants tighter control over how and when it sells songs online?

Maybe it has its own online store in mind. No, seriously. A trip to the digital home of Apple Corps, the parent company of Apple Records, brings you to a one-page website. That's right -- it's just a big placeholder. But it's not hard to imagine a subscription site where you'd log in to stream or download Beatles tunes.

Certainly, there would be big money in such a deal. My guess is that's why the same 2004 News.com story I referenced earlier says that Apple Records was in talks with several digital music services -- no doubt including iTunes peers Napster (Nasdaq: NAPS  ) and RealNetworks' (Nasdaq: RNWK  ) Rhapsody -- to offer six months' worth of downloading rights for (get this) $15 million. It never came to be, and Beatles aficionados remain chained to CDs.

You've got to think Apple Records executives would love nothing more than to change that. There's just one problem: Apple Records signed a non-compete with Apple Computer. Wouldn't opening its own digital store violate that agreement, at least in spirit, if not legally? Maybe, but only if iTunes were legal to begin with. And maybe that's why both companies are in court today.

But, hey, what do I know? I use my computer as a stereo.

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Fool contributorTim Beyersstill doesn't own an iPod. He's waiting for the hand-me-down from his wife. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.


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