Slim Shady vs. Universal -- and what it tells us about Apple


Many people complain that we're becoming an overly litigious society. And while they probably have a point, civil lawsuits involving big companies do have a huge benefit for consumers: companies can't spin and outright lie in court the way they can in the normal, everyday world. Stuff comes out in courtroom dramas that you wouldn't hear anywhere else.

Take the battle between rapper Eminem and his label Universal Music Group, for example. Eminem says that he should be getting more from electronic downloads of his music than he's seeing under his current deal. And since the iTunes Store thoroughly dominates the online music market, the testimony is full of tidbits about how the relationship between Apple and the labels work. For instance, Universal "asks" companies to pay a service charge for the master music files they send over, but, as former UMG attorney Lawrence Kenswil testified, "we didn’t always manage to collect it."

The thrust of Eminem's argument is that record labels are taking "distribution costs" out of the artist's cut of music for digital downloads that are based on the model of distributing physical media and that don't actually exist in electronic distribution. But more philosophical questions about the digital music business are being raised in courtroom testimony that could have a huge impact on how the law treats the digital download market. For instance, Eminem's lawyers are emphasizing that customers aren't buying music that they download, but licensing it. And while UMG is insisting that the music is still a real product that it owns, Michael Ostroff, the company's general counsel and executive VP of business and legal affairs, admitted that "I don't know what ownership of a digital file means."

This is all coming out because, unlike the huge majority of legal disputes of this nature, this case actually went to court, largely at Eminem's insistence. In general, companies will go through a certain amount of gamesmanship but then ultimately end up settling out of court, precisely to keep messy information under wraps. Thus, even though Apple and Mac cloner Psystar failed to resolve their dispute through mediation, they've both petitioned to keep some material that will be introduced in court confidential.

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