Apple Inc. (NASDAQ:AAPL) was fined for copyright violation in China yesterday. The company is liable to pay damages to eight Chinese writers and two Chinese publishing companies for publishing their books in electronic form without permission from the copyright owners.
The owners of the copyrights said that copies of the authors work were found to be included in apps made available on Apple's app store in China. The works were, according to the plaintiffs, downloaded in large quantities and therefore formed a huge economic loss on the part of the authors and the publishing company.
The plaintiffs had originally filed for damages amounting to 10 million yuan. The awarded damages amounted to just over 1 million yuan, or 165, 000 dollars. Apple Inc. (NASDAQ:AAPL) has according to a statement shifted the blame from themselves to the developers of the infringing applications.
Apple Inc. (NASDAQ:AAPL) said in a statement that it requires all of its developers to sign an agreement promising that the developer has all the required rights to the work contained in their application. Because of the way Apple's closed ecosystem works, they are ultimately to blame for the apps sold on their devices.
Analogous to this ruling, in the hypothetical, would be an author suing Microsoft Corporation (NASDAQ:MSFT) for a work which appeared in a program downloaded off of the internet. This is clearly absurd in the case of Microsoft, but Apple appears to garner little sympathy for its plight.
That's because Apple Inc. (NASDAQ:AAPL) charges its developer 30% of all revenue their application generates. For this fee Apple is expected to guard closely the quality of applications available to users and take responsibility when that quality control system falls down. This is one such case.
Apple has already been sued this year by the US government on charges of price fixing in its iBooks store. The company's settlement on that suit resulted in the distribution of electronic book vouchers by the company.
Apple, in a statement released after yesterday's ruling, said that they were constantly improving their ability to detect and reject apps that infringed upon copyrighted works. Fines the size of the one delivered in China are miniscule to Apple Inc. (NASDAQ:AAPL), but could be more than negligible if a large amount arose.
If research was done on the entire app store, and all copyrighted material sourced, it is almost certain that many more acts of copyright infringement would be discovered. A class action case based on such material could put a real dent in Apple Inc. (NASDAQ:AAPL)'s finances.
For now though, it appears the company will only have to deal with these case on an individual basis. As long as they can ensure a low occurrence of copyright infringement, and an even lower occurrence of law suits for copyright infringement, the firm will be able to pay these costs with less than half a days revenue.