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Apple's E-Book Trial Shrouded in Fog, Not Smoke

Apple's E-Book Trial Shrouded in Fog, Not Smoke

Unable to answer for himself, Steve Jobs is being subjected to prosecution and defense interpretations of what he meant in several emails he wrote but perhaps did not send. Ironically, while the DoJ is painting Jobs as the mastermind of the e-book price-fixing scheme it alleges, Apple's own team is portraying their iconic leader as confused about the complexities of book publishing.

By Rachelle Dragani MacNewsWorld ECT News Network
06/19/13 5:00 AM PT

The e-book price-fixing trial took another turn this week, with Apple claiming that what the Department of Justice called a "smoking gun" was simply a misunderstood email draft.

Apple veteran Eddy Cue worked with the late Steve Jobs to engineer a price-fixing plan that would undermine Amazon's dominant position in the e-book market, the prosecution has alleged.

Apple colluded with the major e-book publishers, who would stand to gain profits from the scheme, the DoJ maintained.

In addition to Apple, the Justice Department brought charges against five major e-book publishers, all of which settled out of court. Apple, the lone holdout, is currently defending itself against the DoJ, arguing that it was not the ringleader of an industry conspiracy to fix e-book prices.

The DoJ claims it has evidence to the contrary. During the proceedings, it introduced emails from Jobs to Cue, claiming they demonstrate Apple's role in shifting the industry to an agency model that would allow publishers -- not retailers -- to set e-book prices.

Amazon would have to go along with the model in order to continue distributing the publishers' e-books, meaning it would have to raise its prices. That, in fact, is what occurred, with the result that Amazon lost a large share of the e-book market it had once dominated.

Apple allegedly pressed publishers to contractually agree not to let e-books be sold in any retail outlet at prices lower than those at Apple's iTunes store. Apple would pay the publishers 70 percent of those sales, keeping a 30 percent commission.

The wheeling and dealing resulted in consumers losing the benefit of price competition and being forced to pay more for e-books.

Cue claimed that the emails from Steve Jobs suggesting he had orchestrated the plan were misunderstood by the DoJ, and that they were irrelevant in any case because Jobs had never sent them. Cue characterized Jobs as confused about the e-book publishing model rather than the mastermind of it.

Unanswered Questions

The confusion over the emails makes it unlikely that they will serve as key evidence in the trial's eventual outcome, said Jonathan Kirsch, author and publishing attorney in Los Angeles.

"I am skeptical of the smoking gun evidence because it is rarely as straightforward and conclusive as the phrase suggests," he told MacNewsWorld. "In the Apple e-book case, it is my understanding that there is more than one draft at issue, and the one that was actually sent is substantively different."

In addition, the prosecution doesn't have a digital response from Cue confirming he was on board with the plan, said James Hetz, attorney at Hetz, Jones & Goldberg.

"Unless the prosecution has more definitive evidence of the authenticity and reliability of the Jobs email, the judge should not accord it much weight, as there were several versions of the email, and because there is no evidence that Cue ever responded directly to the Jobs email," he told MacNewsWorld.

There is a bigger question at hand that remains unanswered, Kirsch pointed out.

"Apple wanted to enter the e-book market in a way that allowed it to be price-competitive with Amazon, which was -- and is -- the 800-pound gorilla in e-book publishing," he said. "The real question is whether Apple succeeded in navigating through the minefield of antitrust law when it adopted the agency model. From my perspective, the emails don't answer the question as conclusively as the prosecutors seem to think."

Apple did not respond to our request to comment for this story.

Apple Hands Over Data

Apple joined other tech companies this week in disclosing information about the details of its data requests from U.S. authorities. The disclosure came as information continues to leak about the U.S. government's PRISM program, in which federal authorities reportedly have access to personal data stored by major tech companies on the grounds of national security.

Apple released information about data requests it received between December 2012 and May, which amounted to between 4,000 and 5,000 requests on 9,000 to 10,000 consumer accounts. Many of those requests came from law enforcement officials investigating crimes, searching for missing children or Alzheimer's patients, or attempting to prevent suicides, the company said.

Apple claimed it heard about the PRISM program at the same time the rest of the general public did, and that no government agency had access to its servers. It also assured customers that privacy is a priority for the company, noting that it doesn't store data related to a user's location and cannot read the iMessages users send between phones.

The PRISM program has sparked a larger discussion about privacy in the U.S., with one sentiment being that users who have nothing to hide have nothing to worry about.

That may not be a solid rebuttal in a legal debate over what the government can monitor, said Marc Roth, partner in the advertising, marketing and media division of Manatt, Phelps & Phillips.

However, in terms of predicting consumer behavior, it's a pretty good indicator that iPhone users won't hold the data releases against Apple, he suggested.

"If you're not doing anything wrong, you don't care," Roth told MacNewsWorld.

The situation might be different if it were revealed that a single site or service -- such as queries made to Microsoft's Bing search engine --were the only targeted data, said Roth. However, it would be nearly impossible for most tech users to completely shut out Apple, Google, Facebook and Twitter from their daily routine.

"There may be initial consumer backlash and a slight slowdown in social media postings and other online and wireless activities," he said, "but that will eventually end as consumers fall back into comfortable habits."

That's especially likely if, like Apple, other companies continue to assure consumers they're doing what they can to keep information as private as possible, said Roth.

"By bringing the conversation to the public realm, these properties are siding with their users and effectively portraying themselves as the victims of government demands," he pointed out. "That is, they are being forced to make user information available but can't talk about it."


Rachelle Dragani is a freelance reporter based in Brooklyn, NY. She enjoys staying on top of e-commerce deals, reporting on what new gadget is coming your way, and keeping tabs on anyone trying to hack into your info. Feel free to e-mail her at rachelle.dragani@newsroom.ectnews.com.


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