Full steam ahead for Apple class action over ipod levy

2008-01-01

F
ULLSTEAMAHEADFORAPPLECLASSACTIONOVERIPODLEVY

L
AURENTCARRIÈREANDKARINEJARRY*
LEGERROBICRICHARD,
LLP
L
AWYERS,ANDPATENTANDTRADE-MARKAGENTS
InSt-GermainvAppleCanadatheSuperiorCourtofQuebechasallowedaclass
actionsuitagainstAppleCanadaIncinorderforcustomerstorecoversums
collectedbythecompanytocompensateforroyaltiespaidtotheCanadianPrivate
CopyingCollective(CPCC)pursuanttothesaleofitsiPodsandiPodsshuffle.

InitsdecisionofDecember122003theCopyrightBoarddeterminedthata
permanentlyintegratedmemoryoranirremovableincorporatedmemoryinanaudio-
numericaldevice,suchasaniPodoriPodshuffle,wasan‘audiorecordingmedium’
inaccordancewithSection79oftheCopyrightAct,andthussubjecttotheprivate
copyinglevysetoutinSection82(1)(a).Followingtheboard’sdecisionApple
includedthislevyinthepriceitchargedforitsiPods.

However,onDecember142004theFederalCourtofAppealruledagainstthe
board’sdecisiontoimposesuchalevy.OnJuly282005theSupremeCourtof
Canadarefusedleavetoappealthisdecision,makingitillegaltochargeprivate
copyingleviesoniPods.TheCPCCdulyreimbursedApplefortheroyaltiespaidand
AppleinturnsetupareimbursementprogrammeofiPodroyaltiesforitsCanadian
customers.

OnAugust52005JimmySt-Germainfiledamotionforauthorizationtoinstigatea
classactionsuitagainstAppleandaskedtobenamedrepresentativeofthegroup
describedasfollows:
“AllpersonshavingpurchasedaniPodoraniPodshuffleinQuebec
betweenDecember122003andDecember142004,withthe
exceptionofthosehavingbeenreimbursedbyApplebefore
February282006.”
Initsdecision,thecourtaddressedthreequestions:

©CIPS,2008.*Lawyerandtrade-markagent,LaurentCarrière,isaseniorpartnerwithLEGERROBICRICHARD,
L.L.P.,amultidisciplinaryfirmoflawyers,andpatentandtrademarkagents.KarineJarryisanarticling
studentwiththefirm.Publishedinthe2008-04-24issueofWorldMediaLawReport.Publication
328.043.

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·DidmembersofthegrouppayC$15orC$25asroyaltieswhenpurchasing
theiPodoriPodshuffle?
·Shouldthedefendantreimbursethemembersofthegroupforthesumspaid
asroyalties?
·ShouldthecourttakeintoaccountApple’sreimbursementprogrammeandif
so,how?
ThecourtestablishedthattherewasnodisputeoverthefirstquestionsinceApple
admittedthatitraisediPodpricestocompensatefortheroyaltiesithadtopay.The
actstipulatesthatthemanufacturerordistributorshallpaytheroyalties,butdoes
notprohibitthisbeingrecoupedfromconsumers.

Asregardsthesecondquestion,thecourtestimatedthatsincetheroyaltieswere
deemedillegal,thosewhopaidthemshouldbereimbursed.Appledidnotdispute
thisfact.Infact,Applewasproudofitsreimbursementprogramme.

TheissuelaywiththeremainderofthesumgivenbacktoApplebytheCPCC:this
wasC$2,791,122minustheamountgiventothe6,889customerswhowere
reimbursedC$15orC$25,dependingonthetypeofiPodtheyhadpurchased.
Applepromisedtodonatethistocharity,whileSt-Germainarguedthataportionof
thatsumshouldbegiventothemembersthatwerepartoftheclassaction.
AlthoughApplehadputinplaceareimbursementprogramme,thishadnotbeen
widelypublicized,consequentlymostcustomerswerenotreimbursed.

ThecourtstatedthatalthoughtheissueathandoriginatedfromtheCopyrightAct,
theresultingissue–theroyaltieswrongfullypaidbyQuebeccustomerstoApple–
concernedthejudicialrelationshipbetweenacustomerandamanufacturer,which
isaprovincialmatterandfallswithinthejurisdictionoftheprovincewherethe
transactiontookplace.Thus,fortheprovinceofQuebectheCivilCodeofQuebec
regulatesquestionsofpropertyandcivillawandthepropercourseofaction–inthis
caseaclassaction,stemsfromtheQuebecCivilCodeofProcedure.

Applearguedthatsinceithadputinplaceareimbursementprogramme,theclass
actionwasauselessandabusiveproceedingandshouldberejected.St-Germain
counteredthatsincetheprogrammewasputintoplaceaftertheproceedingswere
instigated,Applewouldthenescapetheconsequenceofitsactionsandevadeits
responsibility.Thecourtstatedthataccordingtotheevidence,18,000iPodunits
weresoldtocustomersinQuebecbyAppleduringthepertinentperiodandonly
1,013reimbursementclaimshadbeenfiled.Appleestimatesthatitreimbursed5.6%
ofthecustomerswhoboughtiPodsinQuebec.Thecourtconcludedthattheclass
actionwasnotuselessorabusive.

Thecourtruledthattheremainingsumsshouldbegiventothemembersofthe
classaction.However,thisshouldbeconditionalonfurtherrepresentationfromthe
partiesconcerningthemethodsofcalculatingthesumtobepaid.Itshouldalsobe

3
determinedifthecostofApple’sreimbursementprogrammeshouldbededucted
fromthosesums.

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