Apple Sued For Monopolizing MP3 Music Player Market

Apple on Tuesday was sued in Arkansas by Luxpro Corp., a Taiwanese electronics company, for contract interference, attempted monopolization of the MP3 player market, unfair competition, and commercial disparagement.

The lawsuit represents a continuation of a long-running legal fight between Apple and Luxpro. It alleges that Apple has used illegal tactics, such pressuring Luxpro's retail partners to stop selling Luxpro music players, in an attempt to monopolize the MP3 music player market.

Luxpro was founded in December of 2002. In January of 2004, it launched its EZ Share MP3 player and introduced subsequent models after that.

In March, 2005, the company showed its Super Shuffle MP3 player at the CeBit trade show in Hanover, Germany. The device's similarity to Apple's iPod Shuffle, in terms of looks and name, prompted Apple to seek an injunction against Luxpro.

A German court granted the injunction and Luxpro responded by renaming its Super Shuffle to "Super Tangent."

The following month, according to the complaint, Apple "engaged a third-party to purchase a Super Tangent from LuxPro" and "surreptitiously obtained two of Luxpro's proprietary price lists."

Apple then sent threatening letters to Luxpro demanding that it withdraw its MP3 players from the market, the complaint says.

In July, 2005, Apple asked the Shihlin District Court in Taipei, Taiwan, for an injunction that prohibited Luxpro from making, distributing, or selling any MP3 player. The injunction was granted a month later, but after a long legal battle, Taiwan's High Court reversed the injunction on appeal. Apple then appealed to Taiwan's Supreme Court and lost.

When Luxpro announced its victory in January, 2007, it said it intended to sue Apple for $100 million in damages. The complaint that the company filed on Tuesday does not name a specific damage amount; it seeks damages to be determined by a jury trial, plus attorneys' fees. The summary information describing the lawsuit on Justia.com says Luxpro is seeking $75,000.

The complaint characterizes Apple's legal tactics as "abusive" and "calculated to stomp out competition."

And it describes a far-reaching effort by Apple to intimidate and pressure Luxpro's suppliers and partners as a means to keep Luxpro's MP3 players off the market.

"While Apple's over-reaching injunctions were on appeal, Apple sent warning letters to other companies doing business with Luxpro demanding that they cease doing business with Luxpro," the complaint alleges. "For example, Apple placed significant pressure on InterTAN, a subsidiary of U.S.-based consumer electronics giant Circuit City, to drop Luxpro's MP3 players from its retail shelves."

InterTAN complied in September, 2005, the complaint says, and destroyed 4,500 Luxpro MP3 players. It stopped placing orders with Luxpro and news of InterTAN's actions prompted Best Buy and Radio Shack to stop doing business with Luxpro, the complaint claims.

The complaint further alleges that Apple made similar demands on Singapore's Orchard Company, Japan's Kaga Electronics, and Germany's Web Worker. And it claims that Apple urged its suppliers AsusTek Computer and Synnex Technology International to pressure Taiwanese Luxpro distributors including Carrefour, ET Mall, EUPA, and 3C.

Apple did not respond to a request for comment.