Beatles judge finds iTunes nothing to get hung about

U.K. judge says iTunes Music Store hasn't breached trademark agreement between Mac maker, Apple Corps.

Is your hard drive equivalent to a compact disc? The Beatles said yes, Steve Jobs said no.

And in the end, a judge ruled in favor of Apple Computer. The long and winding road to Apple Computer's victory Monday over Apple Corps, the record label launched by The Beatles, hinged on a U.K. judge's interpretation of a 1991 agreement that forbade the computer company from distributing music on physical media, such as tapes or CDs, according to legal experts.

With Justice Anthony Mann's ruling, which is likely to be challenged on appeal, Apple Computer can continue to operate its iTunes Music Store in the U.K. using its name and logo.

In 1991, the two Apples amended a 10-year-old agreement following a lawsuit that spelled out how each company would be allowed to use its trademarks. Apple Computer paid Apple Corps $27 million and agreed not to enter the music distribution business under the Apple Computer name and logo.

However, Apple Corps said it believed Apple Computer has been doing just that with the iTunes Music Store, and filed suit in 2003. Music fans can purchase and download songs to their PCs through iTunes.

The Beatles have been one of the most prominent holdouts from the shift to digital distribution of music, is booming in part because of iTunes and Apple Computer's iPod device.

Since Apple Computer occasionally offers exclusive albums or songs for a short period of time, it is also associating itself and its logo with the content, which was prohibited by the companies' 1991 agreement, lawyers for Apple Corps argued. "Thus it would be acceptable for Computer to use its mark on a service delivering music content provided that the mark was not also (in the circumstances) used on or in connection with the content itself," Justice Mann said in his ruling.

In addition, Apple Corps believed the agreement covered "physical media delivering pre-recorded content," content that was distributed through "tangible or intangible" means. The iTunes Music Store delivers content intangibly by way of the Internet, and the hard drive or flash memory on a PC, Mac or iPod is the physical media, according to Apple Corps.

The judge disagreed, upholding Apple Computer's argument that it wasn't violating the 1991 agreement because it was not the original source of the content available on iTunes. "For Computer to cross into Corps' territory with its mark it would have to have indicated, by its use of the mark, that Computer was the source or origin of the music," the judge wrote. "It did not do so and has never done so...The ownership of the rights is always attributed to the correct person within (iTunes) and in the track information on any downloaded track."

Hard drives are storage media, to be sure, but they have nothing to do with the delivery of the content available on iTunes, the judge wrote. "It would require a serious distortion of fairly plain notions to say that files delivered by (iTunes) and stored somehow in digital form, and/or the hard disk which stores them, amount to 'physical media' which 'deliver' pre-recorded content."

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