It was George Harrison--the quiet, but not-oblivious-to-trademark-law Beatle--who in 1980 first noticed the potential for conflict.
Leafing through a British magazine, Harrison saw an ad for an Apple Computer Inc. retailer. So the composer of the “Sue Me, Sue You, Blues” quickly rang up the trademark agents at the Beatles’ company, Apple Corps Ltd., and asked them to investigate.
The two firms have been at odds over the name they share almost since--most recently in a London courtroom.
Apple Computer, the company that gave birth to the personal computer industry from a Cupertino, Calif., garage in 1977, and Apple Corps, set up by the Beatles in 1968 to manage their creative affairs, have passed the nine-month mark in a trademark infringement and breach of contract trial being held in Great Britain’s gothic Royal Courts of Justice.
The trial, which adjourned last week for a two-month break, is not expected to end until at least December.
Apple Corps--Paul McCartney came up with the pun--filed suit against its computer namesake in February, 1989, for allegedly violating the terms of a 1981 pact that divvied up rights to the Apple name and the similar logos each uses worldwide.
A mind-boggling array of legal issues has been raised since the non-jury trial began last October. But the central question is clear: Did Apple Computer break the decade-old agreement by selling computers and other equipment used to produce music?
Under terms of the deal--struck at a time when the personal computer industry was still in its infancy and the Beatles had long since disbanded--Apple Computer would use its name and logo only in the computer business and the Beatle company would stick to entertainment.
No one, apparently, foresaw the day when computers would enter show business.
Today, Apple Computer’s machines and equipment--particularly the Macintosh--are used extensively in producing, composing and synthesizing music.
“You see Macs popping up at Pink Floyd concerts and that kind of thing,” says Robert DeMarzo, deputy executive editor of Computer Reseller News.
“Macintosh products are utilized day in and day out,” adds Tim Finnegan, general manager of a New York outlet of the Sam Ash music store chain that is an authorized Apple dealer specializing in music-related computer systems. “It is by far the most popular computer in the recording business.”
Apple Corps--whose four shareholders are Harrison, McCartney, Ringo Starr and Yoko Ono, widow of murdered ex-Beatle John Lennon--is seeking to block the computer company from using the Apple name on products with music applications.
The Beatle company is also asking $250 million in damages, although that figure is only an estimate of alleged damages and will be revised at a subsequent court hearing if Apple Corps wins this case.
Apple Computer, for its part, contends that it owns the right to use its trademark on all its products worldwide and has not violated the 1981 agreement.
Christopher Escher, spokesman for the firm, readily acknowledges that some Apple computers are compatible with music equipment. But he terms the products “general purpose productivity tools” that are capable of “lots of different things. They’re computers with sound capabilities.”
Apple Computer officials also question whether the Beatle company should be allowed to defend its trademark.
“Do they really do any business other than sue people?” Escher asks. “If they’re not doing any business, why do they need trademark protection?”
The difference in size between the two companies is considerable. Apple Computer earned $475 million last year; Apple Corps less than $10 million, mainly in royalties on Beatles recordings. But the Beatle company is a visible and viable business entity, its lawyer says.
“We are the company known as Apple in the music business,” attorney Nicholas Valner says. “We’re very concerned to draw the line so they don’t come into the music business. That is where our identity is. We still feature very prominently.”
The Beatles continue to sell millions of records annually, and Apple Corps is readying a video about the band, “The Long and Winding Road,” which will contain new material, he says. Should the label sign new artists or enter new fields, Valner adds, having the Apple logo “will be tremendously value-enhancing.”
Before the trial began, Apple Computer had initiated legal action to strike out the Apple Corps trademark in countries throughout the world. But the Beatles’ firm obtained an injunction from the British High Court to freeze those cases pending the outcome of the current case.
Exactly why founders Steve Jobs and Stephen Wozniak chose the name Apple for their start-up computer company is not entirely clear. The company denies speculation that the name resulted from Jobs being a Beatles fan.
“There’s no connection,” spokesman Escher says. “They wanted to be in front of Atari in the phone book.”
Still, when Apple Computer began registering its trademark and logo around the world in the early 1980s, Apple Corps objected. After long discussions, the two Apples agreed to carve out separate niches, signing their pact in November, 1981.
“It was agreed,” Beatle attorney Valner says, “that they would divide the use of the trademark so that Apple Corps could have registrations in the music/entertainment world and Apple Computer could have registrations in the computer world.
“And--here comes the crunch--they also specifically agreed that they would not use or register their marks for any equipment which had been, and I quote, ‘specifically adapted for use in the recording or reproduction of music,’ ” Valner explains. “In other words, if they made a computer that could do that, they couldn’t call it an Apple. They’d have to call it an Orange or something like that.”
The agreement let Apple Computer register its trademark throughout the world. But in the mid-1980s, the company quietly set up an internal research group that developed computers with sound capabilities.
In 1987, Apple Computer wrote to Apple Corps, saying it wanted to negotiate a new, less restrictive, agreement. But the talks broke down. Then, in January, 1988, Apple Computer announced that it was launching the Musical Instrument Digital Interface (MIDI), a device that connects computers to musical instruments.
The MIDI transforms computers into sophisticated musical instruments that can create, record, play back, store and edit music.
“We wrote to them asking them to stop,” Valner says. “They said they wouldn’t stop.”
Hence the British court case.
The court proceedings come as a disappointment to visitors hoping to see an ex-Beatle. A computer expert testifying for the Beatle company entertained the courtroom one day, playing “Lucy in the Sky With Diamonds” and other tunes through Apple Computer equipment. Mostly, though, it’s the sound of legalese and procedural minutiae that fill the daily court sessions.
Apple Computer has acknowledged that the outcome could have a significant impact on its business. If it prevails, the company probably would feel free to expand into new music and media territories. (It also would probably resume its worldwide efforts to delete the Apple Corps trademark, spreading the Apple War around the globe.) If it loses, Apple Computer could be forced to pay a huge settlement and remove its name and logo from a number of lucrative products.
Robert DeMarzo, who follows the firm for Computer Reseller News, says Chief Executive John Sculley wants to take the firm deeper into multimedia applications. Apple Computer already sells software that enables Macintosh users to splice together videos, photographs and other imagery to produce their own visual presentations.
DeMarzo also sees a connection with Apple Computer’s expanding ties to Sony Corp., owner of Columbia Pictures and Sony Records. Apple Computer is developing a Macintosh that will control household entertainment centers, enabling consumers to use their televisions, VCRs and stereos in new ways. Sony could provide compatible electronics and its catalogue of videos and music.
Conceivably, Sony Records artist Michael Jackson could play a role in new products put out by a joint Apple-Sony venture, DeMarzo says. And Jackson, of course, owns the rights to nearly all of the Beatles’ songs.
“If you start to think about it and go down the chain,” DeMarzo says, “you could take this as far as you wanted.”