Can't Buy Me Love

When I read in today’s Wall Street Journal about a settlement of certain “trademark-infringement litigation” between Apple Corps Ltd. (the company founded in 1968 by the Beatles, whose logo is a granny smith apple) and Apple Inc. (we all know who that is and what their logo looks like), I got the feeling that something was missing. Granted, I have not seen the court papers, and since the case was brought in England (presumably under English law) it might not do me all that much good to see them. But as big a Beatles fan as I am, I was taken aback at the notion that anyone could possibly think -- today -- that the Beatles had anything to do with Apple the computer company. What gives?

So I did a little more digging, and came up with what appears to be the answer. According to BBC News reports, Apple Corps asserted or threatened trademark claims against Apple Computer shortly after the computer company was founded in the late 1970s. In 1981, the parties entered into settlement in which Apple Computer basically agreed to stay out of the music field. But later in the 1980s, Apple Computer began to make its machines compatible with Musical Digital Interface devices, which allowed the machines to be used to create and edit music. Apple Corps sued, and that suit resulted in a 1991 agreement pursuant to which Apple Corps reportedly retained exclusive rights to use the name and logo for “any current or future creative works whose principal content is music and/or musical performances, regardless of the means by which those works are recorded or communicated”. The latest lawsuit was commenced in 2003, when Apple Corps claimed that Apple Computer’s iTunes music store -- whose principal content is, after all, music and/or musical performances -- was an impermissible use of the name under the terms of the agreement.

The judge in the case ruled that Apple Computer’s activities did not violate the agreement because the iTunes site is essentially a “market” and has nothing to do with the creation of music. The parties settled to avoid an appeal; the terms are largely undisclosed, but they reportedly do include a transfer of all of the trademark rights to Apple Computer and a license back of some of them to Apple Corps. Which seems to mean that the fight is finally over.

I’m guessing that reasonable minds could differ as to whether the judge was correct in his interpretation of the parties’ 1991 agreement, but to me the moral of the story is something else. I suspect that when Apple (Computer) agreed to the initial restrictions in 1981, it had no idea that it would ever want to enter into the music field. Similarly, when it agreed to the revised restrictions in 1991, it did not anticipate that one day it would actually want to use the name to sell music over the internet. On each of those occasions Apple (Computer) probably thought it was offering Apple (Corps) the contractual equivalent of ice in winter. And when that assumption later turned out to be wrong in each case, the provision ultimately did not deter Apple (Computer) at all from doing precisely what it wanted. All it had to do in each instance was pay the right price.

Now Apple (Computer) has all the rights in these marks. But strangely, it has not yet been able to score the real prize: a license to sell Beatles music on iTunes. Steve Jobs created some buzz when he used the Beatles’ “Lovely Rita” as part of a demonstration of the iPhone at a Macworld conference last month, but I’m thinking that a different Beatles song may have been more fitting.