Apple files opening brief in e-book anti-trust trial appeal

Ars Technica reports that Apple has filed a 75-page opening brief in its appeal of Judge Cote’s decision finding it guilty of engaging in a conspiracy with the publishers to help raise prices. The Ars article has a reasonable summary of Apple’s arguments.

Fundamentally, many of them are the same arguments that lost it the case in trial court: it just negotiated the most favorable contract for itself, and couldn’t be blamed for what the publishers, busy little bees that they are, imposed on other retailers. It acted to increase competition by making it possible for new players to enter or other players to stay in the market, rather than be forced out by Amazon’s low prices.

Apple also complains that Judge Cote applied the wrong anti-trust standards to the case, and that anti-trust law isn’t always meant to ensure the lowest prices. It also holds that Judge Cote excluded expert testimony that could have been favorable to its case. (Some of these arguments are also reminiscent of the ones put forward by publisher advocate Bob Kohn in his various filings, including the comic book.) Apple also says Cote disregarded a later anti-trust precedent favoring deciding ambiguous evidence in Apple’s favor in favor of an earlier one. Apple also holds that agency pricing had pro-competitive market-wide effects, using essentially the same charts that failed to convince Judge Cote.

Finally, Apple argues that the injunction against it was unnecessarily harsh, affecting the app store which wasn’t involved in the issue at trial. It also complains that the publishers didn’t get anti-trust monitors and it did, which smacks of punishment for going to trial and appealing.

Some of Apple’s reasoning seems a little tortuous:

For example, Mr. Jobs’s statement to a reporter that the price of an e-book sold by Apple “‘will be the same’” as the same e-book sold by Amazon for $9.99 (Dkt326.85) was most reasonably viewed as a reference to the MFN, but the district court assumed the worst—that it referenced a conspiracy (Dkt326.86)—even though Mr. Jobs died in 2011 and thus could not explain his statements.

The MFN was the element through which the price-fixing was imposed. It’s not possible to refer to the MFN without referring to the conspiracy.

In any event, this is just the opening salvo of a much longer battle. Apple bends over backward to cast itself in the best possible light, which is what such a brief is for. We have yet to see the DoJ’s response. In any event, it won’t be over ‘til the fat appeals court panel sings, and even then we’ll likely have the Supreme Court to look forward to.

This is the same appeals court that effectively found nothing wrong with the anti-trust monitor’s job description in the recent appeal (they issued a “restriction” that basically echoed terms already written into the monitor’s job description to begin with). It remains to be seen how they look at the case overall.

1 Comment on Apple files opening brief in e-book anti-trust trial appeal

  1. Me thinks you’re showing a bit too much deference to this particular judge and perhaps the DOJ.

    At The Robing Room, a website where lawyers rate judges, before 2011 Judge Cotes had normal ratings. From 2011 on, the bulk of her ratings have been 1.0 for “awful.” Here is one comment from 2011:

    “As several commenters have noted, this judge pre-determines which parties should win at the outset, and is blatantly enamored of big-name firms and gov’t entities. Engages in legal contortions to reach outcomes on behalf of her pet party, even to the extent of ignoring applicable black-letter law, instead relying on unbriefed decisions from obscure jurisdictions with no connection to the matter. God help us all if she is elevated to the Second Circuit. ”

    Recall that Judge Cotes went public with views that the DOJ ought to win before the trial even began. I’ve never heard of a judge doing that in any other dispute.

    What’s most relevant isn’t the judge, who may have some personal issues, but the DOJ. They adopted this prosecution after meeting with a Seattle law firm whose offices are but a 10 minute walk from Amazon’s corporate headquarters. Coincidence? I think not.

    As Deep Throat said during Watergate, “Follow the money.” In this case, the money trail may lead directly (that 10-minute walk) from the DOJ to Amazon, which has Apple as its number one competitor in the ebook space. Beat down Apple and Amazon’s primary competitor becomes the troubled and anemic B&N’s Nook. The 800-pound gorilla won’t have any trouble with that little mouse.

    I might add that one aspect of the punishment does strongly suggest aiding Amazon is this prosecution’s primary goal. That’s the requirement that Apple negotiate new contracts with these publishers serially, meaning one after the other. The rationale being offered, to prevent collusion, is ridiculous. Negotiated at the same time, collusion would be difficult. Negotiated serially, there’s be ample time for one publisher’s terms to be leaked (in the tiny world of Manhattan publishing) to the others. A more likely rationale is that puts Apple and those publishers up in the air for over two years, hurting their businesses and helping Amazon. Like I said, follow the money.

    Going after Apple does seem to have proved a major mistake for the DOJ though. Even giant book publishers can’t afford to take on the federal government. That’s why most of them folded. But Apple, with about $160 billion in reserves, can fight the DOJ to the crack of doom and beyond.

    What a politicized DOJ may have thought was a quick way to use Apple money to buy votes Chicago-style may suck up resources that would be better spent, from its perspective, concocting up prosecutions (IRS style) for a host of individuals and non-profits whose activities threaten the Democrats in this fall’s elections.

    Apple’s own behavior suggests it intends to win whatever happens in court. The judge and particular that friend of hers, the overpaid monitor/lawyer who doesn’t know anti-trust law will be forever discredited. Apple will also send a strong message to all concerned that they don’t want to mess with it.

    As a writer, I wish Apple would take a giant step further, and make the iBookstore the premier destination for authors and readers. Set aside profits and revamp those modest budgets for a few years of smart investing. Make Amazon rue the day it decided to crush Apple.

    Ideas include:

    1. Amazon can approve an ebook in about 12 hours. Currently Apple takes a week or more. Apple should match Amazon’s time, perhaps hiring authors in each literary category to do the screening. They might even encourage the founding of an independent company to do just that.

    2. Raise author royalties to 75% and take out ads stressing how much better its payments are than Amazon’s rates, particularly after Amazon’s outrageous download fee is included.

    3. Create beautiful ads stressing how much better ebooks are from Apple, particularly contrasting the much large image sizes in the specs (over 3 meg for Apple v. 127 K for Amazon).

    4. Include a $50 coupon for ebooks with each iPhone, iPad, iPod touch and Mac sale. That’d not only say “Take this” to Amazon, it’d get people accustomed to getting ebooks from the iBookstore rather than Amazon. The end result would be more sales and more profits.

    5. Work with the makers of apps that are popular with authors and publishers–Word, Scrivener, InDesign etc.–to create a bullet-proof and constantly updated “Export of iBookstore” function for those apps.

    I suspect that Apple is getting attacked harder here rather than in the music or video markets because it hasn’t shown as much interest in ebooks. (Have you seen an Apple ad for iBooks? I haven’t.) Amazon may have thought that if it hit Apple hard enough here (through the DOJ), it would let its interest in ebooks languish. Apple needs to make it clear that’s not so.

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