In re Apple Ipod Itunes Antitrust Litig., C 05–00037 JW.

• Decision Date: 19 May 2011
• Docket Number: No. C 05–00037 JW.,C 05–00037 JW.
• Citation: 796 F.Supp.2d 1137
• Court: U.S. District Court — Northern District of California
• Parties: The APPLE IPOD ITUNES ANTITRUST LITIGATION.

796 F.Supp.2d 1137

The APPLE IPOD ITUNES ANTITRUST LITIGATION.

No. C 05–00037 JW.

United States District Court, N.D. California,San Jose Division.

May 19, 2011.

Alexandra Senya Bernay, John J. Stoia, Jr., Bonny E. Sweeney, Carmen Anthony Medici, Thomas Robert Merrick, Robbins Geller Rudman and Dowd LLP, San Diego, CA, Andrew S. Friedman, Elaine A. Ryan, Todd David Carpenter, Francis Joseph Balint, Jr., Elaine A. Ryan, Todd David Carpenter, Bonnett Fairbourn Friedman & Balint, P.C, Phoenix, AZ, Michael D. Braun, Braun Law Group, P.C., Los Angeles, CA, Thomas J. Kennedy, Brian P. Murray, Jacqueline Sailer, Murray, Frank & Sailer LLP, New York, NY, Roy Arie Katriel, The Katriel Law Firm, P.L.L.C., Washington, DC, for Plaintiff.

Caroline Nason Mitchell, Craig Ellsworth Stewart, David Craig Kiernan, Michael Tedder Scott, Robert Allan Mittelstaedt, Jones Day, George A. Riley, O'Melveny & Myers LLP, San Francisco, CA, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT; DENYING AS PREMATURE PLAINTIFFS' MOTION FOR CLASS CERTIFICATION

JAMES WARE, Chief Judge.

I. INTRODUCTION

Plaintiffs ¹ bring this class action against Defendant Apple Computer, Inc. (“Apple”), alleging violations of the Sherman Act, 15 U.S.C. § 2, and related state law claims. Plaintiffs allege that Apple has committed unlawful acts in issuing software updates for its iPod, in violation of federal and state antitrust laws.

Presently before the Court are Defendant's Motion for Summary Judgment ² and Plaintiffs' Motion for Class Certification.³ The Court conducted a hearing on April 18, 2011. Based on the papers submitted to date and oral argument, the Court GRANTS in part and DENIES in part Defendant's Motion for Summary Judgment and DENIES as premature Plaintiffs' Motion for Class Certification.

II. BACKGROUND

A. Undisputed Facts ⁴

In 2003, Apple launched its iTunes music store (“iTS”).⁵ When Apple negotiated with record labels about the terms under which Apple could sell digital music files online through the iTS, most of the labels required that the digital music files be protected to guard against privacy. ( Id. at 5; Id. at 3.) Apple implemented the required security solution through a proprietary system called “FairPlay.” ( Id. at 5–6; Id. at 3.) The FairPlay system was used by Apple to encrypt the songs offered on the iTS. ( Id. at 6; Id. at 4.)

In July 2004, RealNetworks announced its Harmony technology. (SJ Motion at 8; SJ Opp'n at 6.) Using Harmony, RealNetworks was able to make music purchased from its online music store playable on Apple's iPods. ( Id.; Id.) In October 2004, Apple released an update of its iTunes software called iTunes 4.7. ( Id.; Id. at 9.) iTunes 4.7 featured a redesigned version of FairPlay. ( Id.; Id.) The version of FairPlay used in iTunes 4.7 employed a new encryption method, which ended the interoperability of the July 2004 version of Harmony with the iPod. ( Id. at 9; Id.)

In September 2006, Apple released an update of its iTunes software called iTunes 7.0. (SJ Motion at 9; SJ Opp'n at 10.) iTunes 7.0 included a redesign of FairPlay. ( Id. at 10; Id.) This redesign prevented third-party applications like RealPlayer (the “jukebox” used by RealNetworks) from placing music onto the iPod, which was accomplished by making it impossible for any source other than iTunes itself to write on the iPod's database. ( Id.; Id.)

B. Procedural History

A detailed account of the earlier procedural history in this case may be found in the Court's December 20, 2006 Order Denying Defendant's Motion to Dismiss ⁶ and in the Court's December 22, 2008 Order Granting Plaintiffs' Motion for Class Certification.⁷ The Court reviews the procedural history relevant to the present Motions.

This case is a consolidated putative class action. The original cases were Charoensak v. Apple Computer, Inc., No. C 05–00037 JW, and Tucker v. Apple Computer, Inc., No. C 06–04457 JW.⁸ On March 21, 2007, the Court ordered these cases consolidated, and renamed the consolidated case The Apple iPod iTunes Antitrust Litigation.⁹ (Docket Item No. 106.) The Court designated The Katriel Law Firm, P.L.L.C. and Coughlin Stoia Geller Rudman & Robbins as Co–Lead Counsel, and designated Somtai Troy Charoensak, Mariana Rosen and Melanie Tucker as Lead Plaintiffs. ( Id. at 1.) On April 19, 2007, Plaintiffs filed a Consolidated Complaint for Violations of Sherman Antitrust Act, Clayton Act, Cartwright Act, California Unfair Competition Law, Consumer Legal Remedies Act, and California Common Law of Monopolization. (Docket Item No. 107.)

On December 22, 2008, the Court granted Plaintiffs' Motion for Class Certification as to all but one of Plaintiffs' counts. (December 22 Order at 13–14.) As to the remaining count, which stated a claim for Unlawful Tying in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, the Court denied certification without prejudice pending further proceedings in the case. ( Id. at 13.) On December 21, 2009, the Court sua sponte decertified the classes it had previously certified.¹⁰ In its December 21 Order, the Court explained that the technological interoperability between iPods and media sold through Apple's iTS did not constitute unlawful tying under the Sherman Act. ( Id. at 2.) The Court stated that Plaintiffs' monopoly claims “interweave[d] allegations that there were technological ties between Apple products when they were first introduced to the market,” which by itself does not constitute anticompetitive conduct, and “allegations that Apple made technological modifications to its products for the express purpose of maintaining monopoly power,” which could support a monopoly claim. ( Id.) The Court invited Plaintiffs to submit an Amended Consolidated Complaint “that does not depend upon allegations of tying as the anticompetitive conduct upon which they base their monopoly claims.” ( Id. at 3.)

On January 26, 2010, Plaintiffs filed an Amended Consolidated Complaint ¹¹ alleging six causes of action: (1) Monopolization under Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2; (2) Attempted Monopolization under Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2; (3) Violation of the Cartwright Act, Cal. Bus. & Prof.Code §§ 16270, et seq. ; (4) Violation of California's Unfair Competition Law, Cal. Bus. & Prof.Code §§ 17200, et seq. ; (5) Violation of the Consumers Legal Remedies Act (“CLRA”), Cal. Civ.Code §§ 1750, et seq. ; (6) and Common Law Monopolization Business Practices.¹² ( See ACC.)

Presently before the Court are Defendant's Motion for Summary Judgment and Plaintiffs' Motion for Class Certification.

III. STANDARDS

A. Summary Judgment

Summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). The purpose of summary judgment “is to isolate and dispose of factually unsupported claims or defenses.” Celotex v. Catrett, 477 U.S. 317, 323–24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party “always bears the initial responsibility of informing the district court of the basis for its motion....” Id. at 323, 106 S.Ct. 2548. “The judgment sought should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). The non-moving party “may not reply merely on allegations or denials in its own pleading; rather, its response must—by affidavits or as otherwise provided in this rule—set out specific facts showing a genuine issue for trial.” Fed.R.Civ.P. 56(e).

When evaluating a motion for summary judgment, the court views the evidence through the prism of the evidentiary standard of proof that would pertain at trial. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The court draws all reasonable inferences in favor of the nonmoving party, including questions of credibility and of the weight that particular evidence is accorded. See, e.g., Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 520, 111 S.Ct. 2419, 115 L.Ed.2d 447 (1991). The court determines whether the non-moving party's “specific facts,” coupled with disputed background or contextual facts, are such that a reasonable jury might return a verdict for the non-moving party. T.W. Elec. Serv. v. Pac. Elec. Contractors, 809 F.2d 626, 631 (9th Cir.1987). In such a case, summary judgment is inappropriate. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. However, where a rational trier of fact could not find for the non-moving party based on the record as a whole, there is no “genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

B. Class Certification

The decision to certify a class is committed to the discretion of the district court within the guidelines of Federal Rule of Civil Procedure 23. See Fed.R.Civ.P. 23; Doninger v. Pacific Northwest Bell, Inc., 564 F.2d 1304, 1309 (9th Cir.1977). The party seeking class certification bears the burden of establishing that each of the four requirements of Rule 23(a) and at least one requirement of Rule 23(b) have been met. Dukes v. Wal–Mart, Inc., 509 F.3d 1168, 1176 (9th Cir.2007) (citing Zinser v. Accufix Research Institute, Inc., 253 F.3d 1180, 1186 (9th Cir.2001), amended, 273 F.3d 1266 (9th Cir.2001)). A district court may certify a class only if, after “rigorous analysis,” it determines that the party seeking certification has met its burden. General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147, 158–61, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982).

In reviewing a motion for class certification, the court generally is bound to take the...