Slice of the apple

Apple Corps v Apple Computer [2006] EWHC 996 (Chd)


The much-publicised litigation between Apple Corps and Apple Computer over the use of the Apple trade mark is of interest to lawyers as well as music fans and techies.


At the heart of the dispute was a trade mark coexistence agreement, by which parties with potentially overlapping trade marks set out the scope of their respective use of those marks, and the judgment gives useful guidance on how these agreements will be interpreted. More generally, the case arose because the speed of technological developments outstripped anything the parties could have contemplated when they entered into the agreement, and raises the question: with technology moving at the speed it is, how do you 'future-proof' your contracts?


Apple Corps is the record company associated with the Beatles, and still owns a large number of rights in recordings by the Beatles and other artists. Apple Computer is the computer and software house founded by Steve Jobs, famous for its iconic products such as the iPod. The trade marks of Corps and Computer have coexisted, not always comfortably, for some time - Corps adopted the 'Apple' name in 1967, Computer was founded in 1976, and the parties were first forced to enter into a trade mark coexistence agreement in 1981.


In 1991, that agreement was replaced by the agreement that became the focus of this litigation.


The 1991 agreement reserved to each party the exclusive worldwide right to use their Apple marks 'on or in connection with' their respective fields of use. Those fields of use were as follows: '"Apple Computer field of use" means (1) electronic goods, including but not limited to computers... telecommunications equipment, data processing equipment, ancillary and peripheral equipment, and computer software of any kind on any medium; (2) data processing services, data transmission services, broadcasting services, telecommunications services... "Apple Corps field of use" means ... any current or future creative work whose principal content is music and/or musical performances; regardless of the means by which those works are recorded, or communicated, whether tangible or intangible...'


The agreement also contained a 'clarifying' provision: 'The parties acknowledge that certain goods and services within the Apple Computer field of use are capable of delivering content within the Apple Corps field of use. In such case, Apple Computers shall have the exclusive right to use or authorise others to use the Apple Computer marks on or in connection with goods or services within [the Computer field of use] to reproduce, run, play or otherwise deliver such content provided it shall not use or authorise others to use the Apple Computer marks on or in connection with physical media delivering pre-recorded content within [the Corps field of use].'


Time did not then stand still. Through the late 1990s, and in particular the early years post-2000, digital delivery of music content dramatically increased in popularity, and Computer saw a business opportunity.


In 2001, it introduced its iTunes software, by which music could be stored and played back on computers. In the same year, it launched the massively successful iPod, a portable digital music player.


Most importantly for this litigation, in April 2003 Computer opened its iTunes Music Store (ITMS). ITMS is an on-line music store, from which users can download music content, for a fixed fee per recording.


Corps had no issue with Computer applying its Apple marks to iTunes software or iPod hardware, which it said were software and hardware applications permitted by the 1991 agreement. What Corps objected to was Corporation's use of the mark in relation to the ITMS, which it saw as being use connected with its exclusive preserve, music content. In particular, it objected to Computer using its Apple symbol on the ITMS Web site itself; on television advertisements for recordings by particular artists available on ITMS; and in relation to music products available exclusively on ITMS, such as boxed sets and exclusive tracks.


In court, each side set out their interpretations of the coexistence agreement, and in particular the bland and tricky phrase that gave each party exclusive use 'on or in connection with' their fields. Corps argued that Computer's use of the mark on ITMS was use 'in connection with' music content. It argued that the 'clarifying' provision meant that Computer could apply its mark on a service delivering music content, but not in connection with the content itself.


Corps also argued that the agreement reserved to itself the right to use the mark on physical media for music transmission such as CDs, and that it would make a nonsense of the agreement if it had this sole right in connection with CDs, while Computer was nevertheless entitled to use the mark in connection with digital delivery media.


Computer countered by arguing that Corps' exclusive field of use was limited to indications of the source or origins of the rights, or rights to control, music content. The agreement described a distinct boundary between the delivery method and the content rights, and on ITMS these were kept distinct. Computer did not, it said, hold itself out as a record company, and it expressly attributed the third-party ownership of content rights for each track it advertised.


Mr Justice Mann interpreted the agreement in a way that fell between these arguments. He said that the agreement concerned trade marks; therefore, it needed to be construed in the context of trade mark law. The basic function of a trade mark is to indicate commercial origin, and therefore each party's exclusive right was to use the Apple mark to identify itself as the commercial origin of products or services within their respective fields of use. Corp's exclusive field of use was music content. Therefore, it was only if Computer used the Apple mark in a way that would indicate that it was the commercial origin of the music content on ITMS that it would be in breach of the coexistence agreement.


Applying this interpretation to the facts, the judge gave the analogy of a customer buying CDs from a music shop. The customer does not usually think that the shop has a trade connection with the content of the CD, apart from the bare fact of the sale. Similarly, boxed sets and exclusive tracks sold by a retailer do not of themselves suggest an association between the retailer and the content rights holder. Computer was merely a retailer, and was not using the Apple mark to give the impression that it was the origin of the rights in the content of ITMS. It followed that judgment should be given in favour of Computer.


The case illustrates a perennial problem for practitioners. On the one hand, to 'future-proof' an agreement, drafters want to keep their terms and definitions broad, and avoid any narrowing wording. Mr Justice Mann refused to extend the meaning of the word 'physical' to include digital media, for example, and case law is littered with examples of the courts refusing to expand on the strict wording of a contract to encompass new developments.


On the other hand, the problem in this case was precisely that broad wording in the contract created an area of overlap, to which both parties could reasonably argue exclusive rights.


Mr Justice Mann's judgment provides an elegant solution to a very awkward set of facts. Nevertheless, Corps has vowed to fight on, and there is plenty in this melée of a case that could enable it to do so. The long and winding road may yet lead to the Court of Appeal.


By Richard Taylor, DLA, Sheffield