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Just weeks after Apple (Nasdaq: AAPL) announced a two-for-one stock split, the company is facing intellectual property challenges related to its lucrative iPod device and iTunes music store. Two small companies are claiming that Apple has violated patents they own.
One of those companies is Chicago-based Advanced Audio Devices, which is suing Apple in federal court for allegedly violating its patents for a "music jukebox." The United States Patent and Trademark Office granted the company a patent in July 2003 for a music jukebox designed for storing a music library. The company originally filed for the patent in 2001.
"The music jukebox includes a housing, audio input structure on the housing for receiving audio signals, audio output structure on the housing for outputting audio signals, and a data storage structure in the housing for storing audio signals," the filing said.
Advanced Audio Devices reportedly tried to settle with Apple in December, but, according to its filing, "Apple ignored its attempt to seek a business resolution."
Demand for Payment
In the second claim, Hong Kong-based Pat-rights has charged that Apple's digital rights management technology violates a patent the company was granted in December 2003 for a method of "protecting publicly distributed software from unauthorized use" and a sub-program for authenticating user computers.
"This is certainly a patentable technology," said Pat-rights President Peter Chung. "If iTunes does not patent it, there must be a very good reason for them not to do so: Someone else has patented this."
Pat-rights is demanding 12 percent of gross sales from iTunes music tracks and iPods. According to the company, Apple has less than three weeks to accept the offer or it may be sued. Pat-rights said it would seek damages up to three times its original value if Apple does not comply.
Twelve percent represents a hefty sum, considering Apple shipped 4.58 million iPods during the first quarter of 2005 alone. What's more, Apple announced last week that iTunes Music Store downloads have surpassed 300 million.
No Surprise
Stephen Baker, director of industry analysis at the research firm NPD Group, told MacNewsWorld he is not surprised by the recent charges. "Patent lawsuits come with the territory," he said.
Baker said it is common for successful products and successful companies to face allegations from other companies claiming that they've done it before or done it better. It remains to be seen, however, whether these latest claims have any merit.
Apple did not respond to MacNewsWorld's requests for comment, and so far, the company has not responded publicly to the charges. Baker said that even as patent law has become much more complicated in the technological age, it is unlikely that Apple is too concerned.
"There isn't any question that granting pattern patents on software has spurred a lot more challenges to how patent law should work," Baker said. "The courts will have to decide. Certainly, Apple has a plethora of lawyers to help them through the many legal issues that pop up around them."
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