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App Store Monopoly Ruling 9th Circuit

App Store Monopoly Ruling 9th Circuit

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Published by: jeff_roberts881 on Sep 04, 2013
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09/05/2013

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FOR PUBLICATION
UNITED STATES COURT OF APPEALSFOR THE NINTH CIRCUIT
S
TACIE
S
OMERS
, On Behalf of Herself and All Others SimilarlySituated,
 Plaintiff-Appellan
,v.A
PPLE
,
 
I
 NC
.,
 Defendant-Appellee
. No. 11-16896D.C. No.5:07-cv-06507-JWOPINIONAppeal from the United States District Courtfor the Northern District of CaliforniaJames Ware, District Judge, PresidingArgued and SubmittedFebruary 11, 2013—San Francisco, CaliforniaFiled September 3, 2013Before: Dorothy W. Nelson, Stephen Reinhardt,and Milan D. Smith, Jr., Circuit Judges.Opinion by Judge Milan D. Smith, Jr.
 
S
OMERS V
.
 
A
PPLE
,
 
I
 NC
.2
SUMMARY
*
Antitrust
The panel affirmed the district court’s dismissal of a putative class action against Apple, Inc., alleging antitrustviolations in connection with Apple’s iPod and iTunes MusicStore.The panel held that the plaintiff waived review of thedistrict court’s order denying certification of a class of indirect purchasers of the iPod because she abandoned her underlying individual claim under § 2 of the Sherman Act based on inflated iPod prices.The panel also held that the plaintiff failed to allegesufficient facts to state antitrust claims for damages andinjunctive relief. The plaintiff alleged that Apple encodediTunes Music Store music files with its proprietary DigitalRights Management (DRM), called FairPlay, which renderedthe music files and the iPod compatible only with each other.She alleged that through certain software updates, Appleexcluded competitors and obtained a monopoly in the portable digital media player and music download markets,which inflated Apple’s music prices and deflated the value of the iPod.The panel held that a monopolization claim for damages based on the theory of diminution in iPod value was barred by
 Illinois Brick Co. v. Illinois
, 431 U.S. 720 (1977), because
 
*
This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader.
 
S
OMERS V
.
 
A
PPLE
,
 
I
 NC
.3the plaintiff was an indirect purchaser of the iPod. Inaddition, she lacked standing to bring this claim because shealleged that she purchased her iPod after Apple’s purportedanti-competitive conduct began. The panel concluded that because Apple used FairPlay from the beginning, when it firstlaunched the iTunes Music Store, its use of subsequentsoftware updates only served to maintain the status quo at thetime of purchase, and therefore could not plausibly be the basis for diminishing the value of the iPod.The panel held that the plaintiff failed to state amonopolization claim for damages based on overchargedmusic downloads because she failed to plead sufficient factsto state a plausible antitrust injury. The panel concluded thatthe fact that Apple continuously charged the same price for itsmusic irrespective of the absence or presence of a competitor rendered implausible the plaintiff’s assertion that Apple’ssoftware updates affected music prices.Finally, the panel held that the plaintiff failed to state aclaim for injunctive relief in the form of DRM-free musicfiles because her alleged inability to play her music freely, onnon-iPods, was not an “antitrust injury” that affectedcompetition.
COUNSEL
Craig Briskin (argued) and Steven A. Skalet, Mehri & Skalet,PLLC, Washington, D.C.; Helen I. Zeldes, AlreenHaeggquist, and Aaron M. Olsen, Zeldes & Haeggquist, LLP,San Diego, California, for Plaintiff-Appellant.

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