Will Beatles Take a Bite out of Apple?

The suit was brought by Apple Corps, which was founded in the 1960s as the music publishing arm of the Beatles. It alleges that Apple is violating the 1991 agreement preventing it from entering into a business "whose principle content is music." Apple Computer has stated in court it believes it is simply a distributor of digital content.

In 1991 Apple paid more than $25 million in a settlement to Apple Corps, who had wanted Jobs to change the company's name -- to "Banana," for instance.

Settlement Talks

Media outlets were reporting Monday that Apple CEO Steve Jobs was in settlement talks with attorneys representing Apple Corps, which remains under the direct ownership of the surviving members of the Beatles and their families.

Legal insiders are suggesting a settlement could be substantially larger than the 1991 resolution. "People are expecting this to be the biggest settlement anywhere in legal history, outside of a class action suit," a legal source told Variety. "The numbers could be mind-boggling."

There are also reports that the settlement could involve Apple ceding an ownership stake and board membership to Apple Corps.

Apple's Control Issues

While surrendering equity and a board seat might not impact Apple's iTunes and iPod sales, it could have long-term effects.

Ray Sweigart, an intellectual property attorney at Pillsbury Winthrop in Washington, D.C., told MacNewsWorld that while a settlement would avoid future conflicts, granting a seat on the board would involve ceding some control over the company's strategic direction.

"It also comes with a number of inherent conflicts in loyalty and duty," Sweigart said. "Frankly, I think the individual proposed for this seat might find it a difficult one."

Defining 'Music Business'

Jenna Karadbil, an intellectual property attorney with Lewis and Roca, finds this case fascinating as it may be a step in redefining just what the "music business" is.

"Does it mean the providing of a service where users can download music?" Karadbil asked. "Or is it closer to the original meaning most likely contemplated by the parties years ago when they entered into the settlement agreement -- running a music label or producing ... music."

In Karadbil's view, Apple Computer must hold with the latter view, as it has clearly disregarded the suit and continued to provide the iTunes download service.

Legalese Breakdown

Sweigart suggests that this is less an issue of trademark infringement and more one of breach of an agreement.

"It is not unusual to have similar or even identical word marks in different fields of use or markets, on the basis that there is no overlap and people will not be confused as to any affiliation or common source," Sweigart said.

"Thus computers and music were apparently agreed upon between the contestants to be such separate areas. They agreed to the simultaneous use of a similar mark with each staying in their own corner," Sweigart added.

In this case, however those roles began to overlap, leading to the new legal action and the possible settlement.