ETHICAL ISSUES AT AP PLE INC.

Although Apple has consistently won first place as the World's Most Admired Company, it has experienced several ethical issues within recent years. These issues could have a profound effect on 4

the company's future success. Apple's sterling reputation could easily be damaged by serious misconduct or a failure to address risks appropriately.

PRODUCT QUALITY

One issue requiring consistent oversight is product quality. Apple's brand hinges upon product quality, so mistakes can create serious ethical dilemmas. In the fast-paced electronics industry, where several new products are introduced every year, mistakes can become hard to detect before product introduction. After Apple introduced the iPhone 4, consumers began to complain of reception problems. The problems were caused by antenna interference that occurred when users held the phone a certain way. Public relations experts have criticized Apple for appearing to minimize the problem rather than reacting quickly to remedy it. After Consumer Reports would not endorse the product, Apple provided free bumpers and cases for a certain period of time that resolved the reception problems. This product issue did not stop millions of consumers from purchasing the iPhone 4, but it does reiterate the great care Apple must take regarding product quality. Consumers view product quality as inseparable from Apple. Hence, a mishap in this area could damage the brand's strength.

PRIVACY

Privacy is another major concern for Apple Inc. In 2011 Apple and Google disclosed that certain features on the cell phones they sell collect data on the phones' locations. Consumers and government officials saw this as an infringement on user privacy. The companies announced that users have the option to disable these features on their phones. This was not entirely true for Apple as some of its phones continued to collect location information even after users had disabled the feature. Apple attributed this to a glitch that it remedied with new software. Both Google and Apple defend their data-collection mechanisms, but many government officials disagree. The government is considering passing legislation on mobile privacy, actions which could have profound effects on Apple and other electronics companies.

SUSTAINABILITY

Apple has taken steps to become a greener company, such as reducing its environmental impact at its facilities. However, the company admits that the majority of its emissions come from its products. In 2009 Apple stated that its operations contributed to 9.6 million metric tons of metric gases being released. While 3 percent came from its facilities, 97 percent came from the life cycle of its products. Since Apple's success hinges on constantly developing and launching new products, the environmental impact of its products is a serious issue.

One practice for which some consumers have criticized Apple is planned obsolescencepushing people to replace or upgrade their technology whenever Apple comes out with an updated version. Since Apple is constantly releases upgraded products, this could result in older technology being tossed aside. Apple has undertaken different approaches to this problem. The company builds its products with materials that are suitable for recycling, it builds its products to last, and it recycles 5

responsibly. To encourage its customers to recycle, Apple has created a recycling program at its stores for old iPods, mobile phones, and Macs. Consumers that trade in their old iPods can receive a ten percent discount on a newer version. Consumers recycling old Macs that still have value can receive gift cards. Apple partners with regional recyclers that comply with related laws. Despite this recycling program, many consumers feel that tossing out their old products is more convenient, particularly if they have no value. E-waste will remain a significant issue as long as consumers continue to throw away their old electronics.

Apple has also publicly stated its achievements in reducing toxic chemicals within its products. According to Steve Jobs, Apple has eliminated cathode-ray tubeswhich contain leadfrom its products. Its iPods are constructed with light-emitting diodes (LEDs) rather than fluorescent lamps, which do not contain mercury. The company has also eliminated the use of two toxic chemicals, polyvinyl chloride and brominated flame retardants, from its products.

INTELLECTUAL PROPERT Y

Intellectual property theft is a key concern at Apple, an issue that the company aggressively pursues. Apple is serious about keeping its proprietary information a secret to prevent other companies from stealing its ideas. This has led to many lawsuits between Apple and other technology firms. In 1982 Apple filed a lawsuit against Franklin Computer Corporation that highly impacted intellectual property laws. Apple alleged that Franklin was illegally formatting copies of Apple II's operating system and ROM so that they would run on Franklin computers. Franklin's lawyers argued that portions of computer programs were not subject to copyright law. At first the courts sided with Franklin, but the verdict was later overturned. The courts eventually determined that codes and programs are protected under copyright law. This law has provided technology companies with more extensive intellectual property protections.

Another notable case was Apple's lawsuit against Microsoft after Apple had licensed technology to Microsoft. When Microsoft released Windows 2.0, Apple claimed that the licensing agreement was only for Windows 1.0 and that Microsoft's Windows had the "look and feel" of Apple's Macintosh graphic interface system (GUI). The courts ruled in favor of Microsoft, deciding that the license did not cover the "look and feel" of Apple's Macintosh GUI. Although there were similarities between the two, the courts ruled that Windows did not violate copyright law or the licensing agreement simply by resembling Macintosh systems.

Two other lawsuits involved more serious ethical issues on Apple's part. One involved Apple's use of the domain name iTunes.co.uk. The domain name had already been registered by Ben Cohen in 2000, who used the name to re-direct users to other sites. Cohen eventually used the domain name to redirect users to the Napster site, a direct competitor of Apple. Apple attempted to purchase the domain name from Cohen, but when negotiations failed the company appealed to UK registry Nominet. Usually, whoever registers the domain name first gets the rights to that name. However, the mediator in the case determined that Cohen abused his registration rights and took unfair advantage of Apple. Apple won the right to use the domain name, which led to complaints that the big company (Apple) was being favored at the expense of smaller companies. 6

Apple faced another trademark lawsuit from Cisco Systems in 2007. Cisco claimed that Apple had infringed on its iPhone trademark. Cisco had owned the trademark since 2000. Apple and Cisco had been in negotiations to discuss whether to allow Apple to use the trademark. However, Apple walked away from the discussions. According to Cisco, the company then opened up a front organization, Ocean Telecom Services, and filed for the iPhone trademark in the U.S. Some stakeholders saw Apple's actions as a deceptive way to get around negotiation procedures. The lawsuit ended with both parties agreeing to use the iPhone name. However, Apple's actions in this situation remain controversial.

PATENTS

With the many products Apple releases each year, it makes sense for it to protect its technology from theft. Apple's aggressiveness regarding patent protection has led it to file lawsuits against some powerful companies. For example, the company filed a lawsuit against Samsung, claiming that Samsung had copied the designs of its iPhone and iPad for its own products. It also filed a lawsuit against HTC Corporation, a Taiwanese smartphone manufacturer that makes phones for Google's Android products. Apple accuses HTC of replicating a range of cellphone features protected under Apple's patents. Although the lawsuit is directed toward HTC, it also indirectly targets Google since it is a major client. If HTC is found guilty of patent violation, then Google's phones could also be implicated. The ethical issue is whether Apple's claims are legitimate. Is it pursuing companies that it honestly believes infringed on its patents, or is it simply trying to cast its competitors in a bad light so it can become the major player in the market? Although it might seem that Apple is being too aggressive, companies that do not set boundaries and protect their property can easily have it copied by the competition, who can then use it to gain a competitive foothold. It is up to the courts to determine whether Apple's allegations have any validity.

Finally, a more recent lawsuit accuses Apple of patent violations. Kodak has filed a lawsuit against Apple and Research in Motion, alleging that the companies infringed on its patent on digitalimaging technology. In response, Apple countersued Kodak by claiming it violated Apple's patents. Unfortunately for Apple, a U.S. International Trade Commission judge ruled in Kodak's favor in Apple's lawsuit. The issue still stands regarding whether Apple infringed on Kodak's patents. Kodak is seeking $1 billion in licensing revenue.

My Question is:

How do you think Apple has handled the various ethical issues that it has faced in the past?

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