Taking a Bite Out of a Trademark Apple

The law provides for the protection of trademarks primarily to prevent confusion about the origin of goods and services. Sometimes, however, well-known companies can co-exist with similar names without any confusion. Agreements outlining the appropriate use of respective trademarks can help sustain the harmony.

This was the case between Apple Corps Ltd., the record company formed by The Beatles, and Apple Computers, Inc., the firm that started the home computer revolution. Take a look: 

The corporate names of both companies are similar, although not identical.

• Both are commonly known by the identical single-word name of Apple.
• Both use an apple as a logo, illustrated in the right-hand box.

Undoubtedly, there are situations where confusion could occur, if the two companies were engaged in the same or similar businesses.

These days, the computer maker is the first company that most people think of when they hear the name “Apple.” But the Beatles’ record label existed for nearly a decade before Steven Jobs and Steve Wozniak first set out in business from a Northern California garage. (Jobs has acknowledged that the name Apple was partly chosen as a tribute to The Beatles.)

In the 1980s and early 1990s, Apple Corps raised concerns about the computer maker’s use of the Apple name. The companies avoided litigating the issue by reaching an agreement in 1991 that limited the type of businesses in which each company would use the name. The record label claims the agreement prohibits the computer maker from using the name and logo in conjunction with a music-related service.

Until recently, this seemed to be an effective solution.

Both sides realized the public would not confuse the record label, now owned by Paul McCartney; Ringo Starr; John Lennon’s widow, Yoko Ono; and the estate of George Harrison, with Apple home computers. Likewise, they acknowledged that Apple Computers was not likely to be seen by the public as the source of recordings by artists including The Beatles and Badfinger. It was agreed that consumers were not going to confuse apples with oranges, or Apple with Apple.

This co-existence came under attack in 2003 after Apple Computers introduced its new iTunes Music Store, which allows customers to find, purchase and legally download the music they want for just 99 cents per song. The computer company announced that customers have downloaded more than 10 million songs so far.

Apple Corps has filed suit seeking an injunction to enforce the terms of the 1991 contract, regarding both the use of the name and the companies’ respective apple logos.

The suit, filed in the High Court in London, is not terribly surprising. The chance for confusion has certainly increased with the introduction of the Internet music service. After looking at the terms of the agreement, the court will decide the matter. (The case is not based on trademark claims, but rather on on a breach-of-contract claim.)

Although the outcome of the case is uncertain, the fact the suit was filed is instructive to all trademark holders, regardless of the industry. Some lessons:

First, agreements such as that signed by Apple Computers and Apple Corps can be useful tools to avoid litigation while still protecting a valued trademark from infringement by outside companies.

Second, the fact that there is now a dispute between the companies as to the limits the contract places on the computer maker’s ability to use the name shows the importance of considering all possible points of overlap between two companies’ businesses.

The fine print: It’s possible that this potential point of contention was foreseen by those involved in negotiations back in 1991, but that neither side fully considered this eventuality. Agreements of this type, while useful, must be written with a full respect for what is always unknowable, the future.