Marketplace Report: Hacking Apple's iCode

A computer hacker claims to have unlocked the restrictions on Apple Computer's iPod and iTunes music products — restrictions that prevent users from making copies of songs or sharing them with others. He will face Apple's lawyers, but if he wins, he plans to sell the code. Bob Moon of Marketplace talks with Alex Chadwick about the impact of the lawsuit.

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Back now with DAY TO DAY, I'm Alex Chadwick.

A computer hacker says he's managed to unlock the code for copyright-protected song files sold by Apple Computer. But is the cracked computer code legal to use?

Joining us is MARKETPLACE's senior business correspondent, Bob Moon. Bob, who is this person who's cracked the code? Do we know how this computer hacker managed to figure it out?

BOB MOON: Well, it turns out, Alex, that this young man who says he's found what amounts to the software key for the iPod is the same guy who cracked the copy-protection system for DVD movies. That was back when he was 15 years old and growing up in Norway. He's kind of legendary in the world of computer hacking. He's become known as DVD Jon. His name is Jon Lech Johansen. He's 22 years old now, living in San Francisco not too far from the headquarters of Apple Computer, in fact. And Johansen is an advocate of the open-source philosophy of sharing software code for free.

But in this particular case, he's keeping the details of his discovery under wraps, because apparently he sees dollar signs here. An associate of his says Johansen is hoping to make some cash out of this discovery. He plans to sell the code, license it to companies that might be interested in using it, and the associate claims that attorneys have given the go-ahead for this. They believe Johansen is on good legal ground.

CHADWICK: Well, he plans to make some cash. Apple makes a lot of cash. They're the dominant force in online music sales with iTunes Music Store. How about that?

MOON: Yeah, the company's had no comment about this, but in theory this could open up the iPod to music sold by Apple's rivals. It could also make it possible for other players to play iTunes downloads, as well. Johansen's associate told Reuters that an unnamed client will soon use this technology so its copy-protected content will be playable on iPods, but she declined to give any details on who that might be.

CHADWICK: Bob, isn't this against, or wouldn't it be against the new copyright laws that are supposed to stop this sort of thing?

MOON: Well, experts say that there's some untested legal ground here when it comes to what they call reverse engineering. That's, in essence, trying to find the back door and work your way inside the software. As you mentioned, Apple makes a huge amount of its operating profit on the iPod player, so we can expect the company to take this very seriously. In fact, some analysts say that Johansen is going to have a tough time marketing this technology without potential clients worrying that they might be sued by Apple if they try to use it, so it may come down to who has the deeper pockets here. Although, Apple's copy-protection system has been facing some legal challenges of its own back in Johansen's native Norway.

And today in the MARKETPLACE newsroom, we're looking at possible problems for Boeing's new 787 jetliner.

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