Apple v Apple: Hefty settlement on the cards?

As the two Apples - the Beatles' record label and the maker of iPods - head to court today, the question in most people's minds is not 'will they settle?' but 'for how much?'.

The case centres on a 1991 settlement between Apple Corps and Apple Computer which carved out areas where each could use their shared brand - the former focusing on the music industry and the latter on the IT industry.

But since then the two industries have converged - a move neither likely foresaw at the time - and now Apple Corps is asking that Apple Computer stop using its name and logo for selling music online through the iTunes Music Store.

The 1991 agreement forbade Apple from distributing music on physical media such as CDs or cassette tapes but it's not clear whether this extends to the distribution of digital music over the internet. This is the question the court will decide.

The case is essentially a straightforward contract dispute that is most likely to end in a settlement according to legal experts who predict Apple Computer will pay potentially considerable damages. This is the third time the two parties have met in court and both previous disputes ended with the iPod maker paying hard cash.

Conan Chitham, partner at law firm Mishcon de Reya, told silicon.com: "It's going to come down to a deal. It's going to come down to some money."

If so, it's unlikely to hurt Steve Jobs and co too much. Chitham said: "Whatever [Apple Computer] has to pay, it can afford it."

Chitham called shutting down the iTunes Music Store an "inconceivable" outcome in part because it would be against the interests of the music industry. "If iTunes closed down, what would the music industry do? There's nothing to replace it."

Also, given that Apple Corps doesn't compete directly with iTunes in the online music space, it's unlikely the court will grant an injunction preventing Apple Computer's music store from operating. Sarah Wright, a solicitor at law firm Olswang, said: "An injunction is not automatic. To persuade the Court to grant one [to shut down iTunes], Apple Corps would have to produce evidence that damages wouldn't be a sufficient remedy - and in this case they probably are."

Along with damages, possible outcomes could include Apple Computer being restricted from using the Apple brand for iTunes and the iPod, or the Beatles catalogue being licensed at a premium for distribution on iTunes, according to legal experts, though at this point this is all just speculation.

Though Apple v Apple isn't breaking any new legal ground, it does illustrate just how far both the music and computing industries have come in the last 15 years.

Carla Basso, associate at law firm Osbourne Clarke, told silicon.com: "It was easy in [1991] to separate the computing and music entertainment markets. Now we have convergence in a way we never expected - it's completely changed how we consume media."

The convergence of IT and entertainment also increases the likelihood of more trademark disputes coming down the pipe, as entities in different industries that share brands find it increasingly difficult to carve out separate corners and co-exist.

For businesses with existing trademark agreements, the Apple case serves as a reminder that in the ever-changing world of technology it's wise to revisit those contracts.

Basso said: "Businesses need to look at existing contracts and analyse whether wording from 10 or 20 years ago or longer when no one knew about these newer technologies still holds up."

Olswang's Wright also encouraged companies drafting trademark agreements to look to the future: "It's always dangerous to give undertakings about future use, saying 'we won't use the brand for this' or 'we won't do that'. Who knows how your business will expand?"

She added: "You have to ask: 'where do we think our business is going?'. 'Where is the sector going?'. These are usually long-term agreements and therefore you should be wary of restricting potential growth areas."

Technological change is causing legal upheaval across the media industry - not just in music and software. The emergence of IPTV, for instance, means broadcasters must investigate licensing rights and analyse legal issues they may never have conceived of when contracts regarding their television content were first drafted.

Though the latest Apple trademark dispute could prove costly for Steve Jobs and co, it also cements the Cupertino company's position as a legitimate player in the music industry.

Mishcon de Reya's Chitham said: "The case reinforces Steve Jobs as the ultimate bridgehead between media and tech. He is 'The Man' around the whole online media world."

At the same time, Jobs may find it difficult to stay on top in music as long as he has in IT. Chitham said: "I suspect Steve Jobs' dominance won't last forever. The music industry is very fickle in terms of buyers, it could move quite quickly."