Apple faces potentially damaging battle
Apple Inc faces a judicial battle for raising its e-book price warning this could set a dangerous precedent.
NEW YORK - Apple Inc, on trial for allegedly colluding to raise the price of e-books, said on Thursday an adverse ruling would have a "chilling effect" on how businesses investigate new markets.
If Apple was found guilty, it would "send shudders through the business community" by condemning the ordinary negotiations that companies undertake to enter new markets, the company's lawyer, Orin Snyder, said on the last day of the trial.
"We submit a ruling against Apple on this record sets a dangerous precedent," Snyder said.
The US Justice Department accuses Apple of conspiring with US publishers beginning in late 2009 to increase the price of e-books in an effort to undercut the pricing established by then-dominant Amazon.com Inc The publishers have settled with the government.
Throughout closing arguments Thursday, Apple found itself fighting back against tough questioning by US District Judge Denise Cote.
At one point on Thursday, Cote asked if it was correct that Apple "understood publishers were willing to work together to put pressure on Amazon."
Snyder responded there was no evidence Apple understood the publishers were allegedly conspiring together before it proposed creating an online bookstore for its coming iPad.
For three weeks, the government has sought to show the popular iPad maker conspired with five of the biggest publishers to raise prices for new and bestselling books from the $9.99 set by Amazon.com.
Amazon.com, which at the time controlled up to 90 percent of the e-book market, had been buying books at wholesale and then selling them at times below its costs as it promoted its Kindle reading device.
Apple, by contrast, entered into so-called agency agreements in which publishers rather than Apple set book prices of up to $12.99 and $14.99, in a move the government contends enabled publishers to push back against Amazon.com's pricing.
Apple in exchange got a 30 percent commission from the publishers, who included Pearson Plc's Penguin Group, News Corp's HarperCollins Publishers Inc, CBS Corp's Simon & Schuster Inc, Lagardere SCA's Hachette Book Group Inc and Verlagsgruppe Georg von Holtzbrinck GmbH's Macmillan.
After signing the deals, the government said publishers pushed Amazon.com into the agency model, allowing publishers to increase prices, which shot up 9 percent industry-wide, Mark Ryan, a Justice Department lawyer, said.
"Only a united industry front could move Amazon off its $9.99 price," he said.
Ryan, who had earlier shown statistics that publishers withheld titles just 37 times in 2009, said he rejected Apple's argument. It was unclear how the future would have played out, he said.
"We don't know what course competition would have taken the industry on," Ryan said.
The Justice Department is not seeking damages against Apple. In a slide presented Thursday, the Justice Department said it wanted Apple to be prohibited from the agency model for two years and a five-year prohibition against the use of price-parity contract clauses at the center of the case, among other remedies.
Should the government prevail, a separate trial would be held on damage claims asserted by 33 state attorneys general whose case on liability was also being heard during the last few weeks.
Meanwhile, a Tokyo court ruled on Friday that Samsung Electronics Co Ltd had infringed on rival Apple Inc.'s patent for a bounce-back feature on earlier models of its popular smartphones.
Samsung and Apple, the world's top two smartphone makers, are fighting patent disputes in 10 countries as they compete to dominate the lucrative mobile market and win customers with their latest gadgets.
Apple claimed that Samsung had copied the "bounce-back", in which icons on its smartphones and tablets quiver back when users scroll to the end of an electronic document. Samsung has already changed its interface on recent models to show a blue line at the end of documents.
The court ruling comes after the US Patent and Trademark office judged in April that Apple's patent for the bounce-back feature was invalid, allowing older Samsung models that had a similar feature to remain on sale.