Apple Sues Over Knock-Off IPod and IPad Accessories

Apple Inc. sued companies it said are selling unauthorized electronic accessories such as chargers, speakers and cables for the iPod music player, iPhone and iPad tablet computer.

“Many are of inferior quality and reliability, raising significant concerns over compatibility with and damage to Apple’s products,” Apple said in the complaint, citing a user comment that a charger from one of the companies drained his iPod rather than replenishing the battery.

The suit is an example of the tight grip Apple keeps on its products, including approval of accessories and applications. Apple has a program called “Made for iPod” under which manufacturers get a license to sell accessories for devices. Apple collects a royalty of 20 percent to 25 percent from each sale of a licensed accessory, according to Shaw Wu, an analyst with Kaufman Bros. LP in San Francisco.

“If you sell speakers for $100, Apple gets $20 to $25,” said Wu, who has a “buy” rating on Apple shares and doesn’t own them.

In the complaint, Cupertino, California-based Apple said the unauthorized products are infringing as many as 10 patents and violating its trademarks.

“They are trying to control all aspects of their devices,” said Mark Kesslen, chairman of the intellectual property group at Lowenstein Sandler PC, a law firm in New York. “They are using the various licensing agreements, partner agreements and brand management to make sure that it stays within their high standard.”

Implied Endorsement

Kesslen, who has represented clients seeking licensing agreements with Apple, said it’s trying to prevent unauthorized products from being marketed as endorsed by the company because these sales could harm its brand.

The complaint, filed July 22 in federal court in San Francisco, identifies six sellers based in California and one in Washington and said Apple could name as many as 20 additional companies. Calls or e-mails to five of the named companies weren’t immediately returned, and contact information for two companies couldn’t be obtained.

Apple’s policies drew attention from the U.S. Library of Congress this week, when it said in a periodic review of copyright laws that users could “jailbreak” their iPhones to download applications not authorized by the company.

‘Fine Line’

“There is a very fine line” between maintaining control over its gadgets and anticompetitive behavior, Kesslen said. “You have to be very careful,” he said.

In November, Apple sued a California company that it said was selling knockoff power adapters for the MacBook laptop computer. The accused company agreed to a court order that it stop selling the products.

Apple sold 3.27 million iPads, 8.4 million iPhones and 9.41 million iPods in the quarter ended June 26, the company said in its third-quarter earnings report on July 20.

The case is Apple Inc. v. eForCity Corp., 10-3216, U.S. District Court for the Northern District of California (San Francisco).

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net; Adam Satariano in San Francisco at asatariano1@bloomberg.net

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