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Apple Faces Suit Over iPod-iTunes Link

December 30, 2006

BY BETSY SCHIFFMAN, AP Business Writer

NEW YORK – As if its options woes weren’t trouble enough, Apple Computer Inc. said Friday it is facing several federal lawsuits, including one alleging the company created an illegal monopoly by tying iTunes music and video sales to its market-leading iPod portable players.

The case, filed July 21, is over Apple’s use of a copy-protection system that generally prevents iTunes music and video from playing on rival players. Likewise, songs purchased elsewhere aren’t easily playable on iPods.

The plaintiff is seeking unspecified damages and other relief. The court denied Apple’s motion to dismiss the complaint on Dec. 20.

Another lawsuit, filed Nov. 7, alleges that the logic board of Apple’s iBook G4 fails at an abnormally high rate. The plaintiff is seeking unspecified damages. In a filing with the        Securities and Exchange Commission, Apple said its response to the complaint is not yet due.

The Cupertino, Calif.-based company also disclosed that PhatRat Technology LLC filed a lawsuit Oct. 24 alleging patent infringement. The Nike-iPod product in question, developed jointly with Nike Inc., allow runners to keep track of how far and how fast they’ve gone. The company’s response to the complaint is not yet due.

Separately, Apple is facing a securities lawsuit accusing the company and some of its current and former officers of improperly backdating stock-option grants, failing to properly account for them and making false financial statements. Defendants responses to the complaint are not yet due.

The lawsuits, many of which seek class-action status, were disclosed in Apple’s delayed regulatory filing with the SEC.

The company cleared Chief Executive Steve Jobs and the rest of its current management of misconduct involving the stock-option practice, despite Jobs’ awareness of favorable grant dates. The company restated past earnings Friday as a result of its three-month probe.

Apple shares rose about 4.9 percent to close at $84.84 Friday on the Nasdaq Stock Market following the announcement.




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