The Battle of the Apples - Beatles Record Label Loses a Big Bite

Ripe with symbolism of love and fertility, and iconic of temptation and desire, the apple must surely be the most evocative of all fruit. This comment is not made with the intention of leading the reader up or down the garden path, and its connection to the field of intellectual property law will be revealed in due course. In the world of science the apple is reputed to have inspired Newton’s law of gravitation, while according to Judeo-Christian tradition it was the forbidden fruit with which Eve lured Adam to sin. In more recent times the apple made a cameo appearance in an awfully famous novel about the alleged bloodline of Jesus Christ. Moving from the realm of fiction to fact, a little less than fifty years ago the fascinating fruit migrated into the awesome territory of trade marks. This has now led to a courtroom showdown involving two rival champions of the apple, one of whom dabbles in computers while the other is a major player in the in the music industry.

The case in question is Apple Corps Ltd v Apple Computer Inc 2006 EWHC 996 (Ch), which was heard in the High Court in London with Mr Justice Edward Mann presiding. At issue was whether or not a trade mark co-existence agreement entered into by Apple Corps Limited and Apple Computer had been breached.

Apple Corps, a multimedia corporation with Apple Records as its core division, was formed in 1968 by four lads from Liverpool. At the time, the company was touted by its founders as being their attempt at "Western Communism", while it was in fact a tax shelter. The Beatles were probably the biggest groundbreaking pop and rock phenomenon of the 20th century, selling well over one billion records worldwide. Apple Corps is now owned by Sir Paul McCartney, Ringo Starr, John Lennon’s widow Yoko Ono and the estate of George Harrison. Apple Corps’ logo, a registered trade mark, consists of a side-on view of a whole Granny Smith apple and the word APPLE. In the US another phenomenon, in the form of Apple Computer, came into being in 1977. The innovative iMac, the landmark Powerbook, and now the money-spinning iPod, are some of the products that have brought Apple Computer immense commercial success. What is most remarkable about Apple Computer is that it is more than just a well-known computer hardware and software manufacturer; it is also hailed as an advertising and marketing mastermind. Using evangelical marketing methods, it transcended the ordinary, and was a huge hit when it set about building its brand in the 80s and 90. Consequently, it can now boast that it has the highest brand and repurchase loyalty of any computer manufacturer. Apple Computer’s trade marks include the word "Apple" and a stylized apple with a bite taken out of it.

The respective owners of the two "apple" trade marks have, from time to time, found themselves clashing and so the seeds of discord were sown. In 1981, a trade mark infringement case was settled and an amount of US $ 80 000 paid to Apple Corps. As part of the settlement, an agreement was entered into relating to the use and registration of the word "APPLE" and the different apple-based logos. Apple Computer agreed to use its trade marks for computer goods and services but not for computer equipment specifically adapted for use in the recording or reproduction of music, or in operational services relating to music. Apple Corps would stick to its side of the music business and would refrain from using its trade marks for computers. The territories were thus clearly divided and for a period they lived, if not under the same roof, then certainly in perfect harmony. As the years progressed, so did technology. Apple Computer introduced audio recording capabilities for its computers and a range of other nifty sound-related thingamabobs. Word of this spread and in 1989 Apple Corps sued Apple Computer for what it believed was a breach of the 1981 trade mark agreement. The matter went to trial and incredibly the case lasted for over 100 days before it was settled by two agreements – the so-called Settlement Agreement and the Trade Mark Agreement, both dated 9 October 1991. The Trade Mark Agreement, which is the subject of the dispute, limited Apple Computer’s use of the apple logos to certain technical fields, including data transmission services. Apple Corps use was restricted to Apple artists, promotional merchandise and current and future creative musical content , no matter how it was recorded or communicated. There was also the small matter of a settlement payment of around US $ 26.5 million to Apple Corps, which it is understood, left it feeling fine.

Technology continued its rapid advance and in January 2001, Apple Computers launched iTunes Software, a jukebox for the computer. Then in November 2001, Apple Computer released its first iPod portable digital audio player, which went on to achieve staggering success. Apple’s iTunes Music Store (ITMS), an electronic shop, hip-hopped onto the scene in 2003. Designed for integration with the iPod, ITMS also provided a legitimate commercial (at 99c per track in the US and 79p in the UK) source for downloading music off the internet (agreements were entered into with major record companies for the online delivery of content through iTMS). For those who have searched without any luck on iTMS for Yellow Submarine, Let it Be, or any other Beatles’s number, the reason is simply that Apple Corps is an iTMS holdout and has never authorized any of its music to be sold through the store. In fact so unimpressed were Apple Corps with iTMS, that in September 2003, it sued Apple Computer, claiming that use of its apple logos on iTMS amounted to its use in connection with music content, thus breaching the 1991 Trade Mark Agreement. The agreement was a clear indication that the music industry was not big enough for two apple trade mark users, as it granted Apple Corps the exclusive right to use the apple trade mark for “any current or future work creative whose principal content is music”.

At the trial, Chic’s 1978 disco hit Le Freak was used to demonstrate the operation of the iTunes software to Mr Justice Mann. This software is the juke-box that enables music to be stored on a computer, played back through the computer and transferred to the iPod and the iTMS. The apple symbol appears on the screen a number of times during this process. Apple Corps did not object to the Apple Computer logo appearing in the context of the iTunes Software and also accepted that the iTMS was a data transmission service that fell within Apple Computer’s field of use. It did, however, object firstly to the appearance of the apple logo when the iTMS was connected, and alleged that this was a clear association with the musical content on the screen. Secondly, there was an objection to Apple Computer’s inappropriate “record label-like” behaviour. Thirdly, it was argued that Apple Computer had, by its television advertising and the production of gift cards, crossed the boundaries into the exclusive field of use of Apple Corps, in which the apple logo was used in connection with recorded music.

In his judgment handed down on the 8th of May 2006, Mr Justice Mann ruled that no breach of the agreement had been demonstrated by Apple Corps. In trying to establish whether Apple Computer had associated its apple logo with creative works, the judge said that it was a matter of impression, as seen through the eyes of a reasonable and regular user of the iTMS (and definitely not the intellectual analysis of the trade mark lawyer). It was held that use of the apple logo by Apple Computer was fair and reasonable use of the mark in connection with the service (a form of electronic shop), and did not suggest an additional association with the creative works themselves. Furthermore, iTMS is a data transmission service used to convey music and has nothing to do with the creation of music. There was no breach of the agreement as the use of the apple logo was in relation to this service only. The judge awarded costs in favour of Apple Computer estimated at £2 million.

For Apple Computer this judgment means that life goes on as usual as it can continue to use its logos on the iTMS. There seems, however, to be no end to this long and winding road, as Apple Corps is intent on taking the decision on appeal. While the judgment does not break new ground in terms of trade mark law, it does serve as a reminder to trade mark attorneys that in drawing up any co-existence agreement, they must bear in mind , future technological advances. Mr Justice Mann, summed up the core of the problem soundly and succinctly when he stated that, “the parties cannot have imagined that technology would stand still, even if they could not have predicted its direction”.

Shamin Raghunandan

SPOOR & FISHER

Date published: 2006/06/01
Author: Shamin Raghunandan

Tags: beatles record apple corps apple computer