Jobs Said Apple Took Pains to Protect Record Contracts

By Joel Rosenblatt  

Photographer: David Paul Morris/Bloomberg

Steve Jobs, Co-Founder and Former Chief Executive Officer of Apple Inc.

Steve Jobs defended Apple Inc. (AAPL)’s use of software for the iPod and iTunes that blocked compatibility with a competing digital music store as necessary to protect licenses with major record labels.
Jobs, Apple’s co-founder and former chief executive officer, was questioned six months before he died in October 2011 by lawyers for consumers who sued the company over claims it tried to thwart rival music stores to maintain a monopoly over digital players. A video recording of his testimony may be played this week for a jury in federal court in Oakland, California, where a trial of the case got under way yesterday.
Jobs was asked during his deposition whether music labels were pressing Apple for “greater interoperability” between the iPod and competing technology. The consumers suing
Apple say that by locking iPod owners into iTunes, the company stifled competition for downloading services, allowing it to charge more for iPods. They seek more than $1 billion in damages.
“Apple’s point of view was, you know, we were the only big company involved in this stuff at that time, the one with the deepest pockets,” Jobs said in the 2011 testimony, according to a transcript made public yesterday. Apple had “black-and-white contracts” with record labels that would be violated if consumers could strip licensed songs from iPods and install them on other devices, he said.

Photographer: David Paul Morris/Bloomberg

Steve Jobs, Former Chief Executive Officer of Apple Inc., speaks about the Apple iTunes... Read More

“So I remember we were very concerned about that,” Jobs added. “And we went to great pains to make sure that people couldn’t hack into our digital rights management system because if they could, we would get nasty e-mails from the labels threatening us to -- you know, that they were going to yank the license.”

Contractual Agreements

Attorneys for Apple told the jury in their opening statement yesterday that the company created its own software, FairPlay, to safeguard contractual agreements with the record labels.
Lawyers representing as many as 8 million consumers and 500 retailers and resellers who bought iPods from 2006 to 2009 claim Apple modified iTunes software so music downloaded with software made by RealNetworks Inc. (RNWK) couldn’t be played. The consumers’ lawyers contend the record companies sought the ability for songs to be played on and from different systems -- not just Apple devices.
Apple said “no, take a hike,” Patrick Coughlin, a lawyer for the consumers, told jurors yesterday.
Internal e-mails between Jobs and other senior executives at Apple were shown to the jury yesterday in a bid to depict the late CEO as the mastermind behind a push to stymie competitors.

Eddy Cue

Jobs was asked during his deposition about a July 2004 e-mail from Eddy Cue, the head of Apple’s iTunes store. Cue, who may testify in the trial as early as today, was writing a decade ago about the reaction of music labels to the RealNetworks software.
“I talked to Universal,” Cue wrote in the message. “They were aware of it,” he added. “From their viewpoint, they are OK with it because they want interoperability.”
Jobs helped draft a press release issued a few days later that accused RealNetworks of using “the tactics and ethics of a hacker” with Harmony.
The lawyer who was questioning Jobs, Bonny Sweeney, pressed him on Cue’s comment in an e-mail that the record labels were worried that Apple was becoming too dominant.
“I don’t remember -- I remember maybe reading some press articles where they might say that,” Jobs said. “They never said that to us.”
The case is The Apple iPod iTunes Antitrust Litigation, 05-00037, U.S. District Court, Northern District of California (Oakland).