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Legal Featured Article

August 23, 2011

Apple in the Legal Cross Hairs over E-book Pricing

By Peter Bernstein, Senior Editor


Oh to be a member of Apple’s (News - Alert) in-house legal team or one of the outside firms that represents them. Just when it seemed like they had more than enough to keep them busy with all of the skirmishes involved in the patent law wars, as highlighted on The Bookseller.com, several US law firms have filed lawsuits against Apple and major US publishers alleging a "horizontal conspiracy" to fix and increase the price of e-books in the US.


As reported, one firm has also now moved for the lawsuits to be heard under one judge either in California, where two of the suits have been registered, or Manhattan, where three have been filed.

According to the On the Case blog, there are now five separate actions pending in US courts in New York and California. Here is a quick rundown:

  1. Seattle law firm Hagens Berman filed suit against Apple and publishers Hachette, Macmillan, HarperCollins, Penguin, and Simon & Schuster August 9 in Oakland, CA (News - Alert). The 42-page class action complaint accused Apple of conspiring with five of the six major book publishers to fix prices for electronic books. The complaint says that Apple and the publishers allegedly struck the deal in January 2010, because they had a mutual interest in forcing Amazon to raise e-books prices. Apple was about to launch the iPad, which had e-reader capability, and the publishers disliked Amazon’s inexpensive pricing of e-books.
  2. The following days saw four follow-on class action suits filed in New York and California:
    • August 11 saw a complaint filed by Ram, Olson, Cereghino & Kopzynski and Spector Roseman Kodroff & Willis in the same Oakland court using almost the same language as the Hagens Berman action.
    • Lovell Steward Halebian Jacobson and Finkelstein Thompson on August 10 and 11 filed similar but not identical complaints in Manhattan federal court adding Random House to the list of defendants under the same set of allegations. (Click this link for the Finkelstein filing and this link for the Lovell one).
    • On the Case also points to a third Manhattan federal e-books class action filed by Grant & Eisenhofer and Criden & Love, which features additional defendants—Amazon and Barnes & Noble.
  3. A fifth suit has been filed in California filed by law firms Ram, Olson, Cereghino & Kopzynski and Spector Roseman Kodroff & Willis naming the same defendants and also using the same set of allegations.

Being the lead attorneys in class action cases is a big deal. Finkelstein Thompson in the press release about all of this stated that, “Finkelstein Thompson seeks to represent a nationwide class of persons that purchased the defendants' eBooks at a price above $9.99 after April 1, 2010. The complaint also asserts claims on behalf of California and Maryland residents under each state's antitrust laws.” The firm has also asked Judicial Panel on Multidistrict Litigation to consolidate all similar class actions filed in other courts to be put before Judge Daniels in Manhattan.

According to On the Case, this is not sitting well with Hagens Berman. It quotes Steve Berman as saying, "I'm going to say that these guys are all copycats and don't deserve to be the lead," Berman told the legal blog. That comment led Publishers Marketplace to note, "All told, the timing and similarity of these filings more strongly suggests a conspiracy among lawyers than there ever was among publishers."

All of the jostling between the firms to be the lead litigators is great grist for the legal press, but the legal issues involved are extremely serious. With app stores opening up in various online ecosystems (Apple, Amazon and Android (News - Alert) being the most dominant), publishers are concerned about how they will remain viable if the commodity on which they make a profit is turned into someone else’s loss leader. Everyone from the publishers to the original content producers has a dog in this fight, and there are literally billions of dollars potentially at stake.

Price fixing and collusion are serious charges, how all of this shakes out will be fascinating to watch. This is a sub-set of issues surrounding digital rights management.  Nevertheless, the reality is, this is not just about e-books. It strikes to the heart of what happens with the disintermediation of all content markets. As we have seen with the closing of Borders, what happens in such cases regarding which parts of a value-chain gets gored and which gets a gold mine is serious business, all jokes about lawyer conspiracies aside. 

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Peter Bernstein is a technology industry veteran, having worked in multiple capacities with several of the industry's biggest brands, including Avaya, Alcatel-Lucent, Telcordia (News - Alert), HP, Siemens, Nortel, France Telecom, and others, and having served on the Advisory Boards of 15 technology startups. To read more of Peter's work, please visit his columnist page.

Edited by Rich Steeves








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