Virgin: Apple's not playing fair with iPod

Online music store files a complaint, claiming that Apple's refusal to license FairPlay, the copy protection in iPod, harms competition.

French online music store Virgin Mega has filed a complaint against Apple Computer, claiming that the company's refusal to license the copy protection technology used in its iPod is harming competition.

The action was filed with the French Competition Council in June and disclosed along with several other legal matters on Thursday as part of Apple's quarterly filing with the U.S. Securities and Exchange Commission.

According to the filing, the online store, part of the Virgin family, is seeking various unspecified "interim measures," pending a decision on the merits of the case. A hearing on that request is expected in either October or November, Apple said in the filing.

An Apple representative declined to comment further on the Virgin dispute. A Virgin representative was not immediately available for comment.

A number of media companies, most prominently RealNetworks, have called on Apple to open up its FairPlay digital rights technology so that other digital music services can securely transfer files onto Apple's iPod player. FairPlay blocks people from making unlimited copying of songs but also makes sure that the iPod doesn't work with any other kind of copy-protected formats.

Apple has refused to unlock the software for other companies. Last month, however, RealNetworks released "Harmony", which it said is copy protection software engineered to be compatible with FairPlay that will also enable music purchased from Real to be securely transferred to and played on an iPod.

Apple has criticized the move as akin to hacking and warned that it could always break Real's approach in the next software update to the iPod.

Also in the SEC filing, the Mac maker noted that it has settled several actions, including a lawsuit with Tibco over the Rendezvous trademark and another suit over the technology used in the Apple PowerBook to make the keyboard light up. The company did not offer details but said that in both cases, the settlement would not have a material impact on its financial results.

An Apple representative declined to say what the impact of the Tibco settlement was and whether Apple will continue to use the Rendezvous name.

Separately, Apple has brought an end to a legal dispute over the iTunes Music Store, E-Data announced on Wednesday. The iPod maker has agreed to license patents from E-Data, which says its owns intellectual-property rights to the process of selling music online. Microsoft has also settled with E-Data.

Apple expects to capitalize $5 million worth of research and development costs related to its development of Tiger, the next version of the Mac OS X that is due out next year, the company said in the filing. It also anticipates recording about $5 million in restructuring costs related to vacating certain European sales offices in the current quarter.

The filing also stated that if Apple had included the cost of stock-based compensation as an expense, its earnings for the three months ended June 30 would have been 9 cents per share instead of the 16 cents reported in third-quarter earnings.

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