An Apple a day

Compared to the financial consequences of Paul McCartney's marriage crisis, the prospect of the Beatles' record company Apple Corps facing legal costs of an estimated £3m might be considered a drop in the ocean.

Nevertheless, the loss of the latest round in the long-running dispute between the record label and the software giant Apple Computer Inc, has wide-reaching implications for all the former Beatles.

Apple Corps was set up by the Beatles in 1968 and owns the rights to a large number of Beatles recordings.

The company registered trademarks in the word Apple' and a logo, which gave them, as trademark owners, the exclusive right to use the mark in connection with certain specified goods connected with sound recordings and sound reproduction.

In contrast, when Apple Computer was founded in 1976, it registered the Apple' word and its famous logo to gain an exclusive right to use the mark in the computer business.

As the company grew, it recognised the potential for conflict with Apple Corps and entered into negotiations with the Beatles to attempt to avoid future disputes.

In 1981, the two businesses entered into a co-existence agreement clarifying the scope of their respective rights and setting out the terms on which each could use their Apple' trademarks.

During the 1980s, Apple Computer started developing sound technology, and found the co-existence agreement was threatening to restrict its expansion.

As a result, in 1987 they approached Apple Corps seeking to negotiate a more flexible agreement. The first round of legal action began after Apple Computer started using the Musical Digital Interface (Midi) device on their computers, allowing users to create, record and edit music.

Negotiations broke down and when Apple Computer refused to withdraw the product in 1989, a two-year legal battle ensued which resulted in a new agreement being brokered in 1991.

It was the introduction in 2001 of the iPod, followed by the launch of the iTunes download service in 2003, that gave rise to the latest proceedings.

Apple Corps argued that Apple Computer had entered the entertainment market and breached their 1991 co-existence agreement.

Apple Computer took a different view of their agreement, claiming that iTunes did not infringe the record label's rights in the creation of music as Apple Computer merely provided a shop for the purchase of music.

On May 8, 2006, the High Court agreed with Apple Computer, holding that the iTunes store did not breach the trademark agreement with Apple Corps.

Mr Justice Mann ruled the iTunes service was a form of electronic shop,' and the fact that iTunes was not involved in the creation of sound recordings meant no breach had taken place.

The practical result of this is that Apple Computer may continue to use the word Apple' and their logo on iPod and iTunes products, at least until the case has been heard in the Court of Appeal.

All of which illustrates the importance of trademarks to any business's brand protection strategy.

Any mark that is used to distinguish the goods and services of one trader from those of another can be registered as a trademark.

Trademarks can be words, letters, numerals, logos, pictures, shapes, colours, or a combination of these.

There are 45 classes' in which a trademark can be registered, of which 34 apply to goods and the remaining 11 to services.

For example, Apple Corps registered its word and logo in class nine, which covers sound recording apparatus.

Registration of a trademark gives the owner the exclusive right to use that mark in connection with the particular goods/services in the classes in which it was registered.

This means the owner can obtain court orders requiring infringers to take products off the market and/or pay damages.

When applying to register a trademark, the applicant identifies the class(es) in which registration is sought and submits a description of the goods/services to be covered in that class (the specification').

Care must be taken to draft the specification widely enough to cover the goods/services to which the trademark is intended to apply, without including goods/services on which the trademark will not be used.

To be capable of registration, a trademark must be distinctive and must not be descriptive of the goods or services it protects.

The reason for this is that it would be unfair to competing traders if they could not describe the products which they sell without infringing a trademark registration.

The mark must also not be similar, or identical to, any earlier marks for the same, or similar goods or services.

Trademarks can be registered practically anywhere in the world, either by applying to individual countries, or through organisations such as the European Community Registry (OHIM), or the World Intellectual Property Organisation (WIPO).

There are a number of options when filing applications in more than one country, and cost savings and tactical advantage can be gained by selecting an appropriate strategy.

Once registered, a trademark will last for ten years and may be renewed for subsequent periods of ten years indefinitely.

The Apple case shows the difficulties that can arise when businesses expand into different markets and come into conflict with one another.

However, on a more fundamental level, it shows how important it is for businesses to protect their brands against attack from rival businesses.

Registration of trademarks is central to any brand protection strategy and should be considered by any business seeking to cement its position in the marketplace.

n Contact: Gayle Curry on 01865 262652 or email gayle.curry@morgan-cole.com