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TRADEMARKS - Apple Inc. vs. Apple Corp, a long and winding road

Date: 
November 25, 2010

E. Logan Lo

As of today, Thanksgiving 2010, the Beatles have sold over two million individual songs and almost half a million albums in a single week on iTunes, bringing together two formerly bitter rivals with the same name - Apple Inc and Apple Corps.

This is a big deal for two reasons, one of which is legal in nature and the other of which is simply cool.

Regarding the latter, it’s nice to see that a band that called it quits forty years ago still resonates with today’s digerati.

Regarding the former, it’s a great illustration of how the law and personality collide.

First, let’s define "trademark." A trademark includes almost anything used by someone “to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods.” 15 U.S.C. § 1127. (emphasis added).

As for the collisions, first a little background: Apple Corps (a pun on the words: “apple core”) was founded as the business arm of the Beatles. The first of many collisions between Apple Corps and what was then Apple Computer occurred in 1978 when Apple Corps sued Apple Computer for trademark infringement.

Simply put, Apple Corps was saying that Apple Computer was introducing confusion in the marketplace as to the sources of their respective goods. Since the Apple Corp’s mark was so strong – again, they were essentially the Beatles – they had a strong case and Apple Computer settled for a relatively modest $80,000, reportedly. One crucial term of that settlement was that Apple Computer would stick with building computers and stay out of the music industry.

Apple Corps, however, sued Apple Computer again in 1991, alleging that the Apple Computer violated the settlement when it put music-recording software on their computers. Once again, Apple Computer settled, this time for some $26.5 million.

Apple Computer, smarting over this latest legal wrangle, showed they too could turn a clever pun when a new sound was included in Apple Computer’s operating system; they named it “sosumi” (“so sue me”) as an inside joke against Apple Corps.

And Apple Computer would have the last laugh because a critical outgrowth of the settlement was the loophole that Apple exploited in the settlement: Apple Computer could use the name “Apple” on items that could “reproduce, run, play or other wise deliver such content” but not the media itself, like tapes or CDs. It was this critical component that radically changed the fortunes of the two companies as Apple Computer eventually widened this loophole the iTunes store and total dominance of the music market.

By 1997, Apple Computer, Inc. had become Apple Inc. as a clear indication that the company saw itself as far more than a computer company. By the 2000s, Apple Inc was ready to take what it saw as rightfully theirs – the ability to use their name “Apple” on their music products. This happened on May 6th, 2006 when a High Court judge found “no breach of the trademark agreement “ by Apple Computer for it's iTunes music store, clearing the way Apple Inc. to use it’s name as it saw fit.

Returning to our definition of trademarks above, one can easily see that the friction between the two went to the heart of trademark protection: in 1978, Apple Corps saw Apple Inc. as riding on its coattails in the music world as it was the stronger of the two trademarks at that time. However, by 2006, Apple Inc could effectively argue that it was Apple Corps that was confusing the marketplace since it’s mark was the stronger of the two.

This all culminated in 2007 with a joint press release from the two companies read: Apple Inc. and The Beatles’ Apple Corps Ltd. Enter into New Agreement. From that moment, trademark lawyers knew it was only a matter of time before Apple Corps would simply put the Beatles catalogue onto iTunes – there was no point in denying the profits that Apple Inc. could bring them since the war was long lost. Never one to miss a marketing opportunity, Steve Jobs quipped, "It has been a long and winding road to get here.

With these profits this Thanksgiving, both companies will have no shortage of things to be thankful for. And, evidently, no shortage of jokes.

 

This article is intended to provide information of general interest to the public and is not intended to offer legal advice about specific situations or problems. Mr. Lo and his firm, Woods & Lonergan, do not intend to create an attorney-client relationship by offering this information, and anyone's review of the information shall not be deemed to create such a relationship. You should consult a lawyey if you have legal matter requiring attention. ©Logan Lo

Mr. Lo is an attorney with Woods & Lonergan, a commercial litigation firm in New York City and can be reached via email at: loganlo@wlesq.com