Apple sued for monopolizing worldwide MP3 market

Michelle Massey, East Texas Bureau Oct. 15, 2008, 5:34pm

TEXARKANA, Ark. – A Taiwanese corporation alleges that Apple Inc. is attempting to monopolize the worldwide MP3 player market by squashing and preventing competition from smaller manufacturers of the digital music devices.

Luxpro Corp. filed suit against Apple Inc., formerly known as Apple Computer Inc., on Oct 14 in the Texarkana Division of the Western District of Arkansas.

Shortly after Apple introduced iTunes in 2001, the company introduced its MP3 player, iPod. Since then it has sold more than 22 million iPods.

According to the complaint, the music provided by the iTunes store is only operable on Apple's iPods because of proprietary software, which has led to Apple's gain of 80 percent of downloaded music in the United States. Apple has also secured 90 percent of the hard drive based MP3 player market and 70 percent of the general MP3 player market.

According to the lawsuit, Apple does not make a profit from the iTunes store but focuses on the profit from its sales of MP3 players.

The plaintiff states that "Apple sought to conquer smaller competitors such as Luxpro to prevent an increased market share among the smaller-ranged manufacturers."

Luxpro argues that its products are "progressive and unique" and have features that Apple's products fail to contain. For example, one of its products has the capability to listen to FM radio, record music, and move, receive and set up music files and other products as well as a seven language learning feature and tri-color display monitors. Luxpro also emphasizes that its MP3 players were the first on the market with a Voice Positioning System.

Luxpro contends that Apple's competitors have attempted to fight back with lawsuits alleging, among other issues, "that Apple engages in illegal anti-trust tying schemes, unfair competition, and monopolizing behavior by placing unneeded and unjustifiable technological restrictions on its most popular products in an effort to restrict consumer choice and restrain competition in the digital music market."

Demonstrating Apple's unfair tactics, Luxpro alleges that Apple sued Creative Technology for patent infringement on its iPod's interface, even though Creative Technology had obtained the patents first. The case was settled with Apple paying more than $100 million to Creative Technology and gaining the use of Creative Technology's interface patents.

The recently filed lawsuit states Apple began targeting Luxpro in 2005 when Apple applied to a German court for injunctive relief preventing Luxpro from using the word "Shuffle" in one of its products.

Luxpro argues that Apple's litigation tactics have caused it economic damages.

After winning the German injunction, Apple then filed suit in Taiwan alleging that the appearance of Luxpro's products closely resembled the iPod shuffle. Although Luxpro eventually won the lawsuit on appeal, it states the litigation caused it great economic damage, and ruined the company's reputation.

Luxpro also maintains that Apple obtained two of Luxpro's proprietary price lists in an effort to "steal rightfully earned market share."

Luxpro argues that Apple sent threatening letters to Luxpro demanding it to stop marketing, manufacturing and selling its MP3 products.

When that did not work, Luxpro states Apple sent warning letters to other companies and suppliers to cease doing business with Luxpro. Due to the pressure applied by Apple, businesses such as Circuit City pulled Luxpro's MP3 players from its shelves, Luxpro claims.

The lawsuit alleges Apple's actions are explained by "its thirst for complete global dominance in the worldwide MP3 player market."

Causes of action filed against the defendant include interference with contractual/prospective advantage, tortuous interference with contracts, attempted common law monopolization, violation of California Unfair Competition Law and commercial disparagement.

Attorneys Richard Adams, Phillip Cockrell, Corey McGaha and Jeremy Hutchinson of the Texarkana and Little Rock law firm Patton Roberts, PLLC are representing Luxpro Corporation.

A jury trial is demanded.

Judge Harry F. Barnes will preside over the litigation.

Case No 08cv004092

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