Steve Jobs to be key witness at Apple iPod trial

Apple faces a billion-dollar lawsuit over its iPod on Tuesday, with late chief executive Steve Jobs expected to be a key witness in the trial.

Attorneys for consumers and electronics retailers will claim in a California federal court that Apple used software in its iTunes store that forced would-be song buyers to use iPods instead of cheaper music players made by rivals.

The software is no longer used, but the plaintiffs argue that it inflated the prices of millions of iPods sold between 2006 and 2009 - to the tune of $350m (£222m). Under federal antitrust law, the tech giant could be ordered to pay three times that amount if the jury agrees with the estimate and finds the damages resulted from anti-competitive behaviour.

The case was originally filed in January 2005, and one of the key witnesses will be Mr Jobs, who died in 2011 but will be heard in a videotaped deposition. Attorneys took his deposition on April 12, 2011, six months before his death.

"The fact that this case is still going 10 years later is a sign that technology often outpaces law," said Mark Lemley, a Stanford law professor.

The case harks back to the early days of digital music and portable devices, when Apple quickly became the world's biggest legal seller of downloaded songs after launching its iTunes store in 2003. By agreement with major record companies, which were wary of unauthorised copying and file-sharing services like Napster and Kazaa, Apple encoded the songs sold through iTunes with "digital rights management" software that prevented unauthorised copying. The same software, known as FairPlay, was also built into iPods.

But Apple's FairPlay was incompatible with anti-copying code used by other online music sellers, such as the RealPlayer Music Store operated by RealNetworks, an internet streaming company based in Seattle. As a result, songs from rival online stores could not be played on iPods, and songs purchased on iTunes could not be played on competing portable devices, including Microsoft's Zune and Diamond Multimedia's Rio music player.

RealNetworks introduced coding that allowed songs purchased from its store to be played on iPods and other devices. But Apple blocked the RealNetworks code, known as Harmony, when it released an update to the iTunes program in 2004. Real tried again with a new version of Harmony, but it was blocked by another iTunes update in September 2006.

The plaintiffs contend that music fans were effectively locked into using iPod players because they could not easily switch their music collections to other portable devices. This prevented competition that would have driven down iPod prices, plaintiffs say. Apple sold iPods at prices ranging from $79 to $349 in 2006. It would go on to sell nearly 150m of the devices over the next two and a half years, during the period covered by the lawsuit.

Apple stopped using the restrictive FairPlay code in early 2009, after record companies shifted strategy to embrace the growing popularity of digital music. More recently, the music industry has moved toward a streaming-focused business model rather than selling copies of songs for individual download.

But attorneys for the plaintiffs maintain that iPod buyers are still entitled to compensation for past harm. Although iPod prices have fallen - models that come with more memory now retail for $49 to $299 - one of the plaintiffs' attorneys, Bonny Sweeney, said: "Prices always go down in the tech market. But the prices were still higher than they should have been."

If their attorneys prevail, the class of plaintiffs who would be eligible for damages include consumers and some retailers who bought iPods between September 12, 2006 and March 31, 2009.

Apple declined to comment outside court, but its attorneys have argued that Apple competed fairly by designing its iTunes updates to provide legitimate security protection and a host of other features desired by consumers.

Apple lawyers William Isaacson and Karen Dunn also contend in court papers that the plaintiffs' economic expert used flawed assumptions to conclude that the software inflated iPod prices.

The Californian company has said it paid no attention to online rivals when it set the price of iPods. Ms Sweeney, however, said Apple was "furious" with RealNetworks when it released the Harmony software. She said Mr Jobs' testimony will show Apple's reaction.