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Potential $1 billion Apple DRM judgment is now in jury’s hands

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Jury deliberations are now underway after two week-long trial

A jury of eight will now decide whether Apple should pay more than $1 billion for changes it made to its iTunes and iPod software nearly a decade ago. While both of those products have become less relevant in the age of smartphones and streaming, a legal complaint that was originally filed in 2005 argues that Apple locked down its products to keep competitors out, and harmed consumers in the process.

Both sides presented closing arguments in an Oakland, California courthouse today after two full weeks of trial, painting vastly different pictures of what was happening at both Apple and within the digital music business some 10 years ago. If the jury ultimately decides against Apple, there could be a stiff penalty. While the complaint originally asked for $350 million, that number would be tripled under antitrust laws.

"I liken it to blowing up your iPod ... It's worse than a paperweight."

During its closing, the plaintiffs in the case argued that Apple's iTunes 7.0, released in September 2006, contained what attorney Patrick Coughlin referred to as a "one-two punch" that "knocked out competitors." Version 7.0 included a security feature that verified a user's iTunes library with Apple's FairPlay digital rights management (DRM). That was followed up a year later with a software update that did the same check on iPods. Once activated, these security measures did a number of things, from keeping iPods from playing songs that had DRM that had been tampered with, to keeping third parties from changing the database of songs with jukebox software apps. On top of all that, Coughlin said, was that the newfound threat that the software could wipe users' iPods if the system detected abnormalities with their library.

"I liken it to blowing up your iPod," Coughlin told jurors. "It's worse than a paperweight. You could lose everything!"

In its closing, Apple's lawyer Bill Isaacson fired back, calling that claim nonsense. "There is no evidence this ever happened," he said. "There is no evidence anyone went through the restore process and ever had this happen. Not even a complaint about it." Isaacson's fellow Apple lawyer Karen Dunn took it one step further. "Plaintiffs don’t understand the technology in this case," she told the jury. "Witness after witness said ‘you don’t understand what I wrote.’"

Over the course of the trial, Apple has argued that these changes were made specifically to keep out malicious efforts to strip DRM and possibly inject dangerous code onto a user's computer, as well as uphold stipulations in deals the company had with record labels to patch security holes. In his testimony, for instance, Apple's iTunes and iCloud chief Eddy Cue said that the company basically had a countdown timer that started once a hack was found, with the very real threat of forfeiting its deals with the record labels if they weren't able to patch it. The company's experts, including iTunes software architect Jeff Robbin, have also suggested there were ample warnings to users before the software would wipe a device. But today, the plaintiffs once again suggested that these changes came about because Apple was simply enjoying — and in fear of losing — its dominance of the digital music market.

"When they had success, they were locking down the iPod."

"When they had success, they were locking down the iPod, or locking down specific competitors," Coughlin said. "They could use the DRM to do that."

Key among those competitors, though not a part of the lawsuit, is RealNetworks and its Harmony software. It was one of myriad projects that cropped up shortly after Apple's iTunes Music Store launch in 2003 that attempted to strip the FairPlay DRM, or act as a replacement to iTunes as a way to manage the iPod. But for the purpose of the case, the plaintiffs have used it as a prime example of Apple wanting to create a monopoly for FairPlay, pointing to an attempt by RealNetworks' CEO to license the DRM that was rebuffed by late Apple CEO Steve Jobs.

Apple returned fire in its closing, calling RealNetworks "one small competitor." Earlier in the trial, the company noted that Real's tracks accounted for less than one percent of music people were purchasing from music stores at the time. And today, in its closing, it reminded jurors that its own expert found Real's software to be buggy enough to corrupt playlists, cause music to disappear, and mangle filenames when used with Apple's iPods.

The jury needs to figure out whether iTunes 7.0 actually made things better

The jury's key job is deciding whether iTunes 7.0 can be considered a "genuine product improvement," one that actually made things better for consumers. That's been at odds in this case, with the plaintiffs saying the security changes were steps backward, while Apple's pointed to other features that came with iTunes 7.0 — movies, higher resolution videos, Cover Flow for albums, and support for video games — as making it better.

"We now have a plaintiff that is asking you to hold Apple liable for innovating, for providing security, that is what they are asking you to do," Isaacson said to the jury. "They are doing that and asking you to hold us liable for providing consumers a choice, for providing integrated products, for providing iPod plus iTunes, and saying that's how our products work best."

A 65-year-old ice skater may save the case

There was plenty of sparring leading up to today, including whether the plaintiffs' side would actually be allowed to have someone represent the some 8 million people who bought devices during the claim period. The two plaintiffs who filed the suit were removed earlier in the trial after evidence emerged that they either did not buy the correct devices or bought them outside the time period of the complaint. Barbara Bennett, a 65-year-old ice skater who bought an iPod nano in 2006, eventually emerged as a replacement, but did not get a chance to testify in front of the jury.

Now that the closings are done the jury begins its deliberation. Though unlikely, a verdict could come as soon as this evening.