Lawyers representing consumers in the state court case against Apple Computer Inc. said Thursday that the settlement could affect as many as 2 million people nationwide who purchased first-, second- and third-generation iPods through May 2004.
Cupertino-based Apple confirmed the settlement but deferred immediate comment.
In the fall of 2003, eight consumers filed a suit, alleging that the iPod failed to live up to claims that the rechargeable battery would last the product's lifetime and play music continuously for up to 10 hours.
Thousands of consumers complained that the battery — which cost $99 to replace — lasted 18 months or less and they could only play music for four hours or less before recharging it. Environmentalists were also upset, saying the short-lived battery encouraged consumers to dispose of their old devices, which were ending up in landfills and possibly leaking toxins.
The iPod debuted in 2001, with early versions costing up to $400. Considered a must-have accessory on college campuses and a top pick for holiday shoppers ever since, the device has been a windfall for Apple.
Revenue in the most recent quarter was a record $3.24 billion, up nearly 70 percent from $1.91 billion in the year-ago quarter. Nearly one-third of quarterly sales resulted from the iPod.
According to the terms of the settlement, people who fill out a claim form are entitled to receive $50 redeemable toward the purchase of any Apple products or services except iTunes downloads or iTunes gift certificates. They can redeem the voucher within 18 months of final settlement approval at any bricks-and-mortar Apple Store or online.
Consumers who file a claim must have a receipt. Apple didn't want to extend vouchers or extra warranty protection to people who bought their Apples on eBay auctions or other sites with used or liquidated merchandise, plaintiffs' attorneys said.
A judge in California's Superior Court for San Mateo County initially approved the settlement last month and consumers began receiving notifications by e-mail and letters this week. A judge will hold another hearing Aug. 25 to give final approval.
"We think all the terms of the settlement are going to stick," said Eric H. Gibbs, a partner at San Francisco-based law firm Girard Gibbs & De Bartolomeo LLP, which represented several plaintiffs.
"We think it's a very good settlement, basically providing relief to the majority of the class that had failures," Gibbs said. "The negotiations with Apple were hard fought and at arms length and took quite a long time, but at the end of the day, the process worked like it was supposed to."
It's unclear how many consumers will file claims. Plaintiffs' attorneys did no advertising other than word of mouth when they filed the suit, but details spread to Internet sites and blogs.
Within a year, lawyers had received e-mails and calls from more than 12,000 people who said their iPod batteries failed to meet expectations.
Consumers will be notified of the tentative settlement in three ways: by e-mail, by letters, and through advertisements in USA Today and Parade Magazine in the next month, said Elizabeth C. Pritzker, an attorney at Burlingame-based law firm Cotchett, Pitre, Simon & McCarthy LLP, which represented two plaintiffs. Apple has agreed to pay up to $2.8 million to the two law firms that represented consumers.
Pritzker noted that Apple has changed its advertising and downscaled claims about its batteries. The company has published technical specifications of its batteries, including their limitations.
"It was hard to argue that consumers who bought products after May 2004 didn't know about the battery issue," she said Thursday. "By that point, there was also a lot of publicity around the battery issue. We really wanted to protect the people who were caught unawares."
Environmentalists applauded the deal but emphasized it doesn't require Apple to change the design of the iPod, which includes lead and other hazardous materials.
Apple is the target of a yearlong campaign by environmental groups, which are asking executives to reduce or eliminate recycling fees for consumers and build in-store recycling centers. They say Apple has done little to discourage the perception of the iPod as disposable.
"Apple has to admit they messed up and made a battery that doesn't last very long and doesn't have the ability to be easily replaced," said Gopal Dayaneni, director of sustainable technology program at Silicon Valley Toxics Coalition. "Failure to do so is evidence of their environmental irresponsibility — it's a company that doesn't take into account environmental design as much as cosmetics."