French Lawmakers Dilute Anti-iPod Bill

French lawmakers voted Thursday to dilute a draft copyright law that could force Apple (Nasdaq: AAPL) to make its iPod music player and iTunes online music store compatible with competitive products.

Music purchased on iTunes can only be played on iPods. Likewise, iPods cannot currently play songs purchased from competing digital download stores, such as Sony's (NYSE: SNE) Connect. Allegations of anti-competitiveness have mounted against Apple, whose business model depends on keeping its file format, called "FairPlay," proprietary.

France's lower house, the National Assembly, voted in March to force companies like Apple and Sony to disclose their proprietary Digital Rights Management technologies to competitors that want to offer compatible products.

Letter of the Law

In the diluted version adopted Thursday, French legislators do not back down from the view that companies should share their exclusive technologies to spawn interoperability that would benefit consumers. The redraft does strike some language that would have allowed consumer groups to file complaints against Apple, though.

Specifically, the bill proposes a new regulatory agency with the authority to order companies to license their proprietary file formats to competitors -- if the restrictions they impose are "additional to, or independent of, those explicitly decided by the copyright holders."

"This bill is more likely to pass," Francois G. Laugier, corporate transactions and international business attorney in the Redwood City, Calif., office of Ropers Majeski Kohn & Bentley, told MacNewsWorld. "Now, there will be a regulatory authority that will act as sort of an arbitrator to decide whether or not it's appropriate to give competitors access to the [proprietary technologies]."

Apple Not Satisfied

The new draft also allows Apple, Sony and others to skirt the issue by signing deals directly with record labels and artists that would give them permission to sell their songs with their proprietary copyright-protected formats intact.

Artists are considered likely to cooperate with the iPod maker because of the sheer marketing power it wields. Apple sells 80 percent of the legal U.S. downloads.

Still, Apple seems less than satisfied with the compromise.

"We are awaiting the final result of France's legislative process, and hope they let the extremely competitive marketplace driven by customer choice decide which music players and online music stores are offered to consumers," Apple's statement says.

Strength in Numbers

Denmark, Norway and other European countries have risen up against Apple over the same issue, claiming the iPod maker is violating their laws by keeping its platform closed. Their goal could be to break up what they view as an MP3 monopoly, Laugier said. Regardless, Apple may not be able to afford to exit those markets too quickly.

"Apple pulling out of France is becoming less of a possibility," Laugier speculated. "If more of the European Union countries take a similar stance, it could make it difficult. The European Union is a 360 million person market. Ultimately, I think the new bill has become bearable for Apple, but the devil is in the details."