Apple Corps  v. Apple Computer

An important decision was rendered this week by the High Court of Justice in London in Apple Corps Limited v. Apple Computer, Inc. The case deals with a claim brought by Apple Corps for breach of a 1991 Trade-Mark [TMA] Agreement made between the parties in 1991 by which they agreed as to how they would use their respective “similar” marks in their respective fields of commercial activities.

As the case exemplifies, rapid technological changes can render the intended terms of a TMA either obsolete or insufficient to deal with change.  Here, Apple Computer was recognized the right to expand the scope of its limited rights to the marks even if it was clear that this was not Apple Corps' intent in 1991.

Apple Corps is the record company synonymous with the Beatles. Apple Corps has been known under this corporate name since 1968. The apple mark both as a word and as a graphic symbol became an essential part of its business. The symbol is a sideways view of the whole apple.

Apple Computer, Inc. was founded in 1976. It started producing computers under the Apple mark at the end of the 1970s. It has adopted, to conduct business, the word “Apple” and a stylized apple with a bite taken out of it .

An original agreement of coexistence between the parties was entered into in 1981 but did not allow for the parties to develop their own businesses as they had anticipated. Apple Corps Limited took injunctive relief against Apple Computer, Inc. and, after obtaining interlocutory injunctive relief, entered into a settlement agreement and TMA in 1991. The first clause of the TMA summarizes its essence:

• "Whereas, the context in which this Agreement arises is the parties' desire to reserve for Apple Corp's field of use for its trade-marks, the record business, the Beatles, Apple Corp's catalog and artists and related material all as set forth in section 1.3 herein and to reserve for Apple Computer's field of use for its trade-marks, the computer, data processing and telecommunications business as set forth in section 1.2 herein and to co-ordinate the use of their respective trade-marks in such fields of use as set forth in section 4 herein."

The parties’ respective marks were defined as follows:

“Apple Computer Marks” means any design, reproduction or other depiction of an apple, in whole or in part, except for a whole green apple or a half apple of any color(s) and the word “Apple”.

“Apple Corps Marks” means any design, reproduction or the depiction of an apple, in whole or in part, except a “rainbow” or multicolour striped apple, in whole or in part, or any apple of any color(s) with a “bite” removed, and the words “Apple” and “Zapple”.

The parties’ respective rights to use the trade-marks were divided according to the parties’ respective fields of activities acting as boundaries.

The Dispute

The introduction of the extraordinarily successful iTunes software primarily in association with the iPod™ and iTunes music store led to the present dispute over the TMA.

The Court engaged in a detailed analysis of the interaction between the iTunes software process and web notices and the use of the apple logo and word. According to Apple Corps, “it is what happens when the iTunes music store is accessed” which constitutes infringement of the TMA. When accessing iTunes, for the purpose of downloading music, the apple symbol, and, at times, the words “Apple music” appear at different times, as if such associations were a pattern. Did the 1991 TMA change the parties’ exclusive fields of use agreed upon in their 1981 agreement so that, after the TMA, Apple Computer was entitled to a wider-ranging field of use in relation to delivery services? The TMA did preserve an important boundary line between the parties’ permitted fields of use and musical content. Musical content, according to Apple Corps, was always to remain its exclusive preserve and the question was now for the Court to determine whether Apple Computer crossed that boundary.

The use of the concept of “musical content” in the TMA was to become an important factor for the Court to conclude that the 1991 TM had lessened Apple Corps' exclusive rights to the apple mark for musical content. Apple Computer’s main argument is that while the apple mark covers the pages accessible through the iTunes software, such mark is not used with a musical content, namely the musical downloads which users can access through the iTunes software. In order to defeat this argument, Apple Corps had to dissect the entire process through which a user accesses content through iTunes. Encryption, protected access, burning time, bits and other highly technical computer concepts were presented by Apple Corps in an effort to establish that Apple Computer was infringing on its exclusive trademark rights by engaging in the field of content provision in association with an Apple mark. Musical content is anything that is recorded music and Apple Corps believes that iTunes was a tool used in association with the restricted mark which were part of the field of recorded music.

The interpretation of the TMA requires a determination of the scope of the words “on or in connection with” in relation to usage of the Apple marks.  The Court would consider whether the mark is used by iTunes to suggest a “relevant trade connection with the recorded work”.  And even if it is, is this “fair use” by Apple Computer as part of the download service.

The Court Decision

The Court notes that such a trade-mark agreement must be interpreted by returning to the parties’ knowledge and minds at the time the TMA is entered into. Rapid technological advances should not be presumed to have been known or anticipated and may not have a role to play in interpreting the scope of restricted activities with respect to a mark which is shared.

The Court stated that the purpose of a mark is to guarantee commercial origin to consumers. This limitation was used by the Court to construe the proper scope of the TMA. The court concluded that Apple Computer has the right to use the apple mark in connection with a service which sells musical content as long as it is acting fairly and reasonably.  The primary association is between the apple logo and the music store, not the musical content. Apple Corps retains the exclusive right to apply its Apple marks to musical recordings, including recordings transmitted in an intangible form (over the internet).

Apple Computer was therefore successful in proving that the marks and logo are not used in association with “musical content” but only with respect to the services giving access to such content.

When the owner of a trade-mark agrees to coexist with another user of a confusing trade-mark, this agreement should be carefully drafted in order to create clear boundaries, shielded from the pervasive effect of rapid technological change.

Please do not hesitate to call  Laurent Debrun  ( 514-841-6502) in our Montréal office or Matthew Gottlieb (416-863-5516) in our Toronto office if you would like further information. 

Davies Ward Phillips & Vineberg LLP, with over 235 lawyers, practises nationally and internationally from offices in Toronto, Montréal, New York and an affiliate in Paris and is consistently at the heart of the largest and most complex commercial and financial matters on behalf of its North American and overseas clients. 

The information and comments herein are for the general information of the reader and are not intended as advice or opinions to be relied upon in relation to any particular circumstance. For particular applications of the law to specific situations, the reader should seek professional advice.