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The Marketplace Report: Apple vs. Apple

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This week, the Beatles' record company, Apple Corps Ltd., is meeting with representatives from Apple Computer over a trademark lawsuit concerning its iTunes Online music store. The record company contends a 1991 agreement over the use of the Apple name precludes the computer company from getting into the music business. Madeleine Brand talks to Tess Vigeland of Marketplace.

MADELEINE BRAND, host:

Back now with DAY TO DAY.

It's Apple versus Apple in a London courtroom tomorrow. Apple Computer is fighting a lawsuit by the Beatles' record company, Apple Corps Ltd. Fifteen years ago, the two Apples agreed that they could both use the trademark, as long as they didn't use it in businesses that conflicted with each other. Now, the record company does not like the idea of Apple Computer getting into the music business through its iTunes online music store.

Marketplace's Tess Vigeland is here, and, Tess, remind us of the history between these two companies and their court battles.

TESS VIGELAND reporting:

Yeah, this is actually the third time that they've met, Madeleine. Back in 1978, just as Apple was getting up and running, the Beatles' record company sued over the logo. That company, as you mentioned, Apple Corps Ltd, uses a bright green apple as its logo. Apple Computer, of course, uses that drawn one with a bite taken out of it.

The two eventually settled for a fairly small amount of money, and, at that time, Apple Computer said don't worry, we have no intention of getting into the music industry. More than a decade after that, in 1991, Apple came out with a Mac that had a CD player in it. Apple Corps sued again, and that time, it won more than $26 million, and another promise from Apple Computer that it wouldn't get into the music industry.

Of course, now, Apple is arguably one of the biggest forces in the music industry, and so Apple Corps is suing again, this time after the launch of the iTunes music store.

BRAND: And so, what's the main issue as the case that begins tomorrow?

Ms. VIGELAND: Well, that second agreement back in 1991 gave Apple Computers a bit on an exception. It said that the company could make it so that people could play and edit music that had already been recorded. Apple says now that that meant it was only restricted from selling things like tapes and CDs, not digital data over the Internet.

Apple says that song downloads are basically just data transfers back and forth through the computers, so what it's doing is perfectly fine under that old agreement.

BRAND: And what are the stakes for Apple, the computer company?

Ms. VIGELAND: Well, of course, iTunes has been a huge moneymaker for the company. Users download about 3 million songs every day, and those go for .99 cents each. Those downloads and the iPods that play them were responsible for about 40 percent of Apple's revenues last year, so any injunction could hurt, and, certainly, the judge could decide to impose heavy fines on Apple for trademarks infringement. And the judge, by the way, admitted to all the parties earlier in these proceedings that he, himself, owns an iPod, but, apparently, nobody asked him to recuse himself for that.

And today on MARKETPLACE, the latest from Houston, where the prosecution has wrapped up its case in the Enron trial.

BRAND: Thank you, Tess. Tess Vigeland of public radio's daily business show, MARKETPLACE, and MARKETPLACE is produced by American Public Media.

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