French Lawmakers Reach Compromise on iTunes Legislation

PARIS – Leading lawmakers have agreed to water down a draft law that could have threatened the future of the iPod in France.

The National Assembly had voted in March to force Apple Computer Inc. (AAPL) and other companies to make their music players and online stores compatible with rivals, but key members now say they have agreed to weaker measures endorsed by senators.

Currently, tunes purchased at Apple's iTunes Music Store won't play on music players sold by Apple rivals. Likewise, an Apple iPod can't play songs bought on Napster Inc. (NAPS) or other rival music stores. Critics have called the restrictions anti-competitive and anti-consumer.

The draft adopted by the Assembly, France's lower house, contained a blanket demand that companies share their exclusive copy-protection technologies with rivals, effectively free of charge.

But the compromise, due to be approved Thursday by a committee of legislators from both houses, maintains a Senate loophole that could allow Apple and others to sidestep that requirement by striking new deals with record labels and artists.

A new regulatory authority would be given the power to resolve disputes by ordering companies to license their exclusive file formats to rivals — but only if the restrictions they impose are "additional to, or independent of, those explicitly decided by the copyright holders."

This means that Apple and Sony Corp. (SNE) could avoid having to share their FairPlay and ATRAC3 file formats, lawyers say, if they obtained permission from the artists whose music they sell.

Christian Vanneste, the governing party deputy who presented the bill to the Assembly, said that a rival company's right to market compatible products and services would "hang on the will of the copyright holder" under the terms of the compromise.

"It's perfectly legitimate that the artist should decide the potential limitations on the use of his work," he said.

Vanneste and another center-right deputy, Dominique Richard, said the compromise commands "pretty much unanimous" support among the lower house lawmakers who represent the governing Union for a Popular Movement on the joint committee.

The changes represent a small but significant change to France's earlier collision course with Apple, which had condemned the lower house proposal as "state-sponsored piracy."

Analysts predicted that Apple would close its French iTunes store rather than comply.

The Cupertino, Calif.-based computer company declined to comment Wednesday.

The apparent softening comes as several other European nations are mulling action to force Apple to open the iTunes store to rivals' players.

In a joint letter this month, consumer agencies in Norway, Sweden and Denmark accused Apple of violating contract and copyright laws with its product usage restrictions.

French consumer groups, which have pressed hard for a strict compatibility requirement, criticized the weaker measures adopted by the Senate last month.

"They're washing their hands of the consumer," said Frederique Pfrunder, a spokeswoman for the CLCV, one of the country's main consumer organizations.

Confronted with the market power of iTunes — Apple claims an 80 percent share of U.S. music downloads but publishes no figures for individual European markets — copyright holders will have to agree to maintain the iPod link, Pfrunder said. "If they refuse, they'll lose their deals."

The French draft copyright law also introduces new penalties for a range of online piracy offenses — up to a maximum three-year jail term and a 300,000 euro ($380,000) fine for knowingly offering or advertising an illegal music download service.

Unlike the National Assembly's text, the compromise bill does not allow consumers to file complaints against companies with the new authority, Vanneste said. Lawmakers have also agreed to scrap an earlier proposal allowing copy-protection technologies to be legally hacked when they prevent rival music players and sites from working together.

Before becoming law, the compromise text adopted by the joint committee requires a final vote of approval in both houses, where the governing UMP commands an absolute majority.