MacRumors

Following up on last month's threat to file suit over the Apple-backed agency model of e-book pricing, the U.S. Department of Justice today sued Apple and a number of book publishers over the practice, Bloomberg briefly reports. Settlement talks had been ongoing, but Apple and the publishers were reportedly unwilling to meet the Department of Justice's demands.

The U.S. filed a price- fixing antitrust lawsuit against Apple Corp. and Hachette in New York district court over eBook pricing. The government also sued HarperCollins, Macmillan and Penguin, according to court papers.

Settlement talks had centered around dismantling the agency model, which sees publishers set retail pricing and vendors receive a percentage of the sales price. Apple had pushed for the agency model in an attempt to dilute Amazon's power in the book market, where it had offered vast discounts, even sometimes selling books at a loss, in order to attract customers who would make other purchases through the site.

But the Department of Justice believes that the agency model as implemented by the publishers at Apple's behest amounts to collusion, with contracts between Apple and the publishers including language that prevented the publishers from offering lower pricing to competitors than they did to Apple. Contrary to the government's claims of an anti-competitive impact from the agency model, Apple and several of the publishers have argued that the move has fostered competitiveness by limiting Amazon's stranglehold on the book market. Consequently, the two sides have been unable to reach a settlement.

Update: Bloomberg reports that the Department of Justice has reached a settlement with Simon & Schuster, Hachette, and HarperCollins over the issue. Once finalized, the settlement would leave Apple, Macmillan and Penguin as defendants in the case.

Macmillan CEO John Sargent has published an open letter to the publisher's authors, illustrators and agents outlining why it will fight the lawsuit.

It is always better if possible to settle these matters before a case is brought. The costs of continuing—in time, distraction, and expense— are truly daunting.

But the terms the DOJ demanded were too onerous. After careful consideration, we came to the conclusion that the terms could have allowed Amazon to recover the monopoly position it had been building before our switch to the agency model. We also felt the settlement the DOJ wanted to impose would have a very negative and long term impact on those who sell books for a living, from the largest chain stores to the smallest independents.

Sargent notes that Macmillan makes less money under the agency model than it did under the previous wholesale model, but that it made the change to support competitiveness in the market, not stifle it.

Addressing the Department of Justice's claim that publishers and Apple colluded to fix pricing, Sargent also describes the circumstances under which he made the final decision to move to the agency model, calling it the "loneliest decision" he has ever made.

The government’s charge is that Macmillan’s CEO colluded with other CEO’s in changing to the agency model. I am Macmillan’s CEO and I made the decision to move Macmillan to the agency model. After days of thought and worry, I made the decision on January 22nd, 2010 a little after 4:00 AM, on an exercise bike in my basement. It remains the loneliest decision I have ever made, and I see no reason to go back on it now.

Update 2: The Department of Justice has released a transcript of a press conference statement from Attorney General Eric Holder regarding the lawsuit.

Update 3: Connecticut Attorney General George Jepsen today announced that a group of sixteen states have followed the Department of Justice's lead and filed their own lawsuit against Apple and publishers. The complaint claims that consumers were overcharged by at least $100 million due to the alleged price fixing.

Update 4: The Verge has a thorough analysis of the highlights from the Department of Justice's filing.

We typically avoid posting a story each time the Apple Store goes offline for updates. While the Apple online store famously goes offline to introduce new products, it also goes down for routine maintenance.

Tonight's downtime is likely related to maintenance or other non-product tweaks, but notably the "We'll be back soon" graphic that should be quite familiar to long time Apple followers has been changed.

The original graphic (above) was on a sticky note and has been in place for many years. Every time Apple's online store goes down, visitors would be greeted with this yellow sticky. Tonight, we see a new graphic overlaying a linen background that has been popularized in iOS.

Apple has several product lines that are due for updates soon, including the Mac Pro and MacBook Pro. These overnight downtimes, however, are more typically related to routine maintenance rather than new products. The change in "We'll be back" graphic may foreshadow other graphical tweaks to the online store.

Update: The online store returned without any notable changes.

Apple published a support document this evening regarding the Flashback malware that affects OS X computers. We previously detailed the software which began life last year as a trojan and has morphed into a drive-by download taking advantage of a vulnerability in Java that Apple did not patch until last week.

The malware is said to have infected over 600,000 Macs worldwide. While 3rd party tools have been developed to test for the infection, Apple reveals they are working on their own tool to detect and remove the software:

Apple is developing software that will detect and remove the Flashback malware.

In addition, Apple has been working with ISPs worldwide to disable the servers that send commands to the malware.

9to5Mac claims to have some early details about Apple's next version of iTunes. iTunes 11 has been internally seeded and is said to include under-the-hood changes and early support for iOS 6, which has not yet been announced.

The main focus seems to be on iCloud:

iTunes 11 includes an increased presence of iCloud integration. Perhaps the biggest testament to this is a dedicated iCloud settings panel within iTunes. This panel is a centralized, always accessible spot for users to control iCloud related features while in iTunes. These features include iTunes Match, iTunes in the Cloud, iCloud iOS device backups and more.

An increased focus around iCloud makes sense as Apple's Tim Cook has said that he doesn't view iCloud as short term product, but instead a long term strategy for the next 10 years. When asked about it at the Goldman Sachs Technology Conference, he responded:

I view iCloud not as something with a year or two product life -- it's a strategy for the next decade or more. It's truly profound.

Apple is equipping its London Genius Bars with replacement international keyboards for MacBooks and considering stocking new MacBooks with American, Asian and other international keyboards ahead of the 2012 Summer Olympics in the city, according to a report from TUAW.

A high-level Apple retail employee here in London told me today that the company is planning to stock its London area retail stores with international replacement MacBook Pro, MacBook Air, and MacBook keyboards. This way, the retail outlets will have the spare parts on hand should international journalists need a quick turnaround on a damaged laptop.

As my source told me, "London is going to be overrun by an onslaught of journalists when the games begin. We want to be prepared should they need help with their equipment during the time they are here."

TUAW notes that along with the thousands of athletes and other support staff attending the Olympics, more than 10,000 print journalists are expected to be covering the games, along with numerous other bloggers, editors, photographers, videographers along with thousands of tourists -- many of them Mac and iOS users.

The stocking of international keyboards will be important for foreign Mac users coming to the city for the Olympics. Generally, Apple Stores only stock keyboards localized for the country in which the store is located, and international keyboards must be ordered separately. This would be impractical for Mac users covering the games, as time will be of the essence on any repairs.

It is likely that the London-area retail stores will see some of their heaviest traffic ever during the Summer Olympics, and will have extremely high staffing levels to prepare for it. London itself has five Apple Stores, including the Regent Street and Covent Garden flagships.

The 2012 Olympic Summer Games will run from July 27th through August 12th.

Amid continuing rumors that Apple is looking to increase the size of the iPhone display from the existing 3.5-inch screen to something in the range of 4 inches, one persistent concern has been how Apple would deal with the change in screen dimensions.

All models of the iPhone and iPod touch released to date have carried a 3.5-inch screen with a 3:2 aspect ratio, allowing developers to target their apps at a single screen size. With the addition of Retina displays in 2010, the screens now come at much higher resolution, but the extra resolution is dedicated to increasing the visual quality of content rather than increasing screen real estate. The introduction of the iPad in 2010 added a new display size to the mix, but the considerable difference in screen size compared to the iPhone made it reasonable for developers to create custom interfaces, either in the form of universal apps or separate iPad and iPhone apps, for use on the different devices.

But moving to a slightly-larger iPhone display would seem to cause issues for Apple and its developers, with the company seemingly having two options: either increasing pixel size to keep the same resolution but on a slightly larger display; or maintaining pixel size and increasing resolution correspondingly. The former solution would allow existing iPhone apps to fit the new device's screen with no modifications but with only limited utility, while the latter solution would seem to require developers target yet another screen size with their apps.

But as outlined at The Verge, one method for achieving the latter solution in moving to a 4-inch display would be to change the aspect ratio, maintaining the existing 640 pixel width but stretching the height of the display until it reaches a 4-inch diagonal. Simple geometry yields a screen height of roughly 1152 pixels for a 4-inch display, compared to 960 pixels on the current 3.5-inch display.

The forum poster, a user by the name of modilwar, was inspired by a comment from a caller named "Colin" on The Vergecast show who suggested that change in aspect ratio as a possibility for a larger display. Using that idea, modilwar developed a series of illustrations showing how this could be achieved.

At the most basic level, an increase in the height of the display would allow Apple to show five rows of icons on each page of the iPhone's home screen, up from the current four rows. Apple would also likely find it fairly easy to augment its own apps to take full advantage of the increased vertical screen real estate.

As for third-party apps, modilwar notes that many apps already utilize standard interface elements such as navigation buttons and bars at the top and bottom of the screen supporting a larger main content window in the middle. In the case of these apps, the main windows could simply expand vertically to show more content than on the current iPhone. Examples include browsers that could show more of a webpage, Twitter apps that could show more of a timeline, and mapping apps that could show more map tiles.

Other apps with custom user interface elements would require a bit more work, but in the meantime could simply be displayed at their current sizes with a 96-pixel wide black bar at top and bottom on the larger 4-inch display.

This new 4-inch screen with a 9:5 aspect ratio would also perform much better at displaying widescreen 16:9 video content, leaving bars on either side of the screen that are only 7 pixels wide, compared to 50 pixels for unzoomed content on the current iPhone.

Modilwar passes off his post as an intellectual exercise simple showing one way in which Apple could make a change to the iPhone's display with a minimum of disruption to the iOS ecosystem, but in a bit of a curious turn the post was picked up by Daring Fireball's John Gruber, who hints that the original idea may not be all that far-fetched.

Methinks “Colin” wasn’t merely guessing or idly speculating.

Since Gruber has been known to speak coyly about his occasional inside knowledge, it is unclear whether he has independent knowledge supporting the idea of a taller display for the iPhone or if he simply has a gut feeling that "Colin" may legitimately be tipping some information at least partially tied to Apple's thinking.

Update: "Colin" has been revealed to be Timothy Collins, who has no direct association with Apple.

As noted by AppleInsider, third-party resellers are beginning to experience shortages of Apple's 15-inch MacBook Pro, hinting that a refresh may be coming in the near future.

Among those resellers reflecting backorder status on some of the current 15-inch MacBook Pros is J&R, which is now sold out of both the 2.2GHz model, which is listed as "out of stock," and the 2.4GHz variety, which is currently advertised as "on order."

In addition, Best Buy has also stopped accepting online orders for the 2.4GHz model for home delivery. The 15-inch notebook is still available on a store-by-store basis, however a quick check of individual store inventory in cities such as Chicago and Austin similarly indicate that between 40 and 60 percent of those shops are similarly reflecting stock outs.

Apple's own online store is not yet showing any delays in fulfilling orders, but the company prioritizes its own distribution channels over third-party resellers, meaning that shortages generally show up first at those resellers.

Apple has been said to be ramping up production of new 15-inch MacBook Pro models carrying a thinner form factor, with Intel's rumored April 29 debut of quad-core mobile Ivy Bridge processors undoubtedly driving that timeline.

With dual-core Ivy Bridge processors not launching until early June, it seems that Apple may not be launching upgraded 13-inch MacBook Pro models until that time. As for the 17-inch MacBook Pro, AppleInsider had previously claimed that Apple was likely to use a staggered rollout of the new MacBook Pro form factor, with the 17-inch model not receiving an update until perhaps several months after the smaller models.

AllThingsD today announced that Apple CEO Tim Cook will be the opening keynote speaker at the D10 Conference scheduled for late May. Cook will appear in an evening interview session on Tuesday, May 29 in Rancho Palos Verdes, California.

Walt Mossberg and I could not be more thrilled to announce that Tim Cook, CEO of Apple, will be the opening-night speaker at our 10th D: All Things Digital conference.

It will be Cook’s first appearance at D, as well as his first time being onstage at an event not run by Apple or for investors since he was named CEO last August.

Steve Jobs made a number of appearances at the D conferences, including a notable joint appearance with Bill Gates at D5 in 2007 and his final appearance there at D8 in 2010.

The Flashback malware affecting OS X systems has gained quite a bit of publicity since it was disclosed last week that over 600,000 Macs have been infected by the malware. Flashback began life last year as a trojan and has morphed into a drive-by download taking advantage of a vulnerability in Java that Apple did not patch until last week, despite Oracle having released patches for other systems back in February.

Over the past few days, a few additional tidbits of information on Flashback have surfaced, including the arrival of some new tools to help users manage the threat.

- As noted by Ars Technica, a new Mac app by the name of Flashback Checker has been released to help users determine whether their machines have been infected. Users have been instructed to use Terminal to enter commands searching for files created by the malware upon infection, and Flashback Checker offers a simple packaging of these commands behind a user interface. While the app is incredibly simple and does not offer assistance with removing Flashback if it is found on a given system, it does provide a more familiar interface for those who might be intimidated by delving into Terminal on their own.

- OpenDNS has announced that it has included filtering of Flashback in its services. OpenDNS offers a number of features to improve resolution of domain names, and the new filtering of Flashback helps prevent infection while also preventing already-infected machines from communicating with the command-and-control servers being used to deliver instructions to the infected machines.

- Forbes has an interview with Boris Sharov of Russian security firm Dr. Web, which was first to bring the magnitude of the Flashback threat to light. In the interview, Sharov describes how difficult it was to even track down the proper team at Apple with which to share their data, also noting how uncommunicative Apple has been throughout the process. In fact, the only sign of interest they've seen from Apple is the company's efforts to shut down the "sinkhole" Dr. Web was using to reroute traffic from infected machines to gauge how widespread the infections are.

“They told the registrar this [domain] is involved in a malicious scheme. Which would be true if we weren’t the ones controlling it and not doing any harm to users,” says Sharov. “This seems to mean that Apple is not considering our work as a help. It’s just annoying them.”

Sharov believes that Apple’s attempt to shut down its monitoring server was an honest mistake. But it’s a symptom of the company’s typically tight-lipped attitude. In fact, Sharov says that since Dr. Web first contacted Apple to share its findings about the unprecedented Mac-based botnet, it hasn’t received a response. “We’ve given them all the data we have,” he says. “We’ve heard nothing from them until this.”

Security experts at Kaspersky Lab, which verified Dr. Web's assessment of Flashback's prevalence, indicate that Apple is indeed taking the proper steps to address the threat, including tracking and shutting down the servers being used by the malware. But the company has little experience with threats of this magnitude and is undoubtedly scrambling to keep on top of the situation.

Apple's stock has continued its remarkable run in 2012, moving up another 1% today to briefly hit a market capitalization of $600 billion. The milestone comes just under six weeks after hitting $500 billion, and Apple's stock is now up nearly 60% since the beginning of the year.

If some analysts are to be believed, the $600 billion mark is just a brief stop on the company's way to a trillion dollar market capitalization. Analysts are beginning to float that unprecedented number as a target for Apple's stock price over the next year or so.

Apple is now within just a few billion dollars of taking Microsoft's title of most valuable publicly-traded company ever, targeting its rivals' $604 billion market capitalization achieved in December 1999. But adjusting for inflation, Microsoft's market capitalization at that time would correspond to over $800 billion in today's dollars.

The Wall Street Journal reports that the four major U.S. wireless carriers have reached an agreement with the Federal Communications Commission to work toward a centralized database to track and disable stolen mobile phones.

The database, which the wireless companies will build and maintain, will be designed to track phones that are reported as lost or stolen and deny them voice and data service. The idea is to reduce crime by making it difficult or impossible to actually use a stolen device, reducing resale value.

Currently, Verizon Communications Inc. and Sprint Nextel Corp. block phones that are reported stolen from being reactivated. AT&T Inc. and Deutsche Telekom AG's T-Mobile USA don't. All four have agreed to be part of the new database.

The report cites a study from the New York Police Department showing that electronics are now the most commonly stolen type of property, with mobile phones accounting for over 80% of thefts in that category.

According to the plan, the major carriers will develop individual databases within six months, integrating them over the following 12 months. Smaller carriers will also join the database after that point. The database will also be interoperable with similar efforts in other countries to allow for international tracking of stolen phones, although many countries have yet to develop such databases.

As noted by ifoAppleStore, Apple has typically taken a hands-off approach when it comes to stolen phones, with Genius Bar staff routinely offering free warranty replacements in exchange for stolen phones. Apple's policies reportedly stem from a lack of centralized tracking of stolen devices and a desire to not become involved in potential confrontations over the stolen merchandise, but an official database supported by the carriers could help Apple become more proactive about handling stolen iPhones.

This weekend, AT&T began unlocking iPhones for off-contract customers. This allows the iPhone be used with a SIM-card from overseas carriers, or T-Mobile in the U.S. In addition to unlocking phones for off-contract customers, AT&T is also quietly unlocking iPhones for U.S. service members still under contract with the carrier.

Carriers are required by federal law to suspend service without penalty for deployed military personnel upon presentation of their military orders, but AT&T is not required to unlock the phones of deployed service members. Instead, the company is choosing to do that on its own.

AT&T declined to comment, but we have independently confirmed that AT&T is unlocking phones for service members upon request. Deployed soldiers, airmen, sailors, and Marines should contact AT&T customer service to get more information about having their iPhones unlocked.

Thanks Taylor! (Photo courtesy Otterbox)

Facebook has announced it is buying the extremely popular photography app-maker Instagram for a reported $1 billion.

Facebook founder and CEO Mark Zuckerberg announced the acquisition in a blog post today:

For years, we've focused on building the best experience for sharing photos with your friends and family. Now, we'll be able to work even more closely with the Instagram team to also offer the best experiences for sharing beautiful mobile photos with people based on your interests.

We believe these are different experiences that complement each other. But in order to do this well, we need to be mindful about keeping and building on Instagram's strengths and features rather than just trying to integrate everything into Facebook.

That's why we're committed to building and growing Instagram independently. Millions of people around the world love the Instagram app and the brand associated with it, and our goal is to help spread this app and brand to even more people.

Apple named Instagram its iPhone App of the Year for 2011. Instagram is also the 19th most downloaded free iPhone app of all-time. Instagram launched an Android app just last week.

Instagram is a free download on the App Store. [Direct Link]

Topeka Capital Markets analyst Brian White has released a new research report today outlining some of the takeaways from a recent trip to Asia to talk with companies in Apple's supply chain. According to White, chatter from those suppliers is pointing toward a larger 4-inch screen on the iPhone 5, which will also include a redesign bringing a "new, sleek look".

In our view, this will be the most significant iPhone upgrade with a four-inch screen and a new, sleek look that we believe will require a Unibody case. This new, sleek look will be the most important reason that consumers decide to upgrade to the iPhone 5, while we believe the addition of 4G will also attract buyers of the new device.

White notes that some suppliers are expected to begin ramping production of components in June, ahead of a launch in the August-September timeframe leading into a blockbuster final quarter of 2012.

As in any discussion of a larger screen on an iPhone, the issue of screen resolution is certain to be a key sticking point. With the iPhone currently offering a 3.5-inch Retina display, an increase to 4 inches would require one of two changes: an increase in resolution that would yield difficulties for developers by adding yet another device size to the mix, or a decrease in pixel density that would maintain the current resolution but see density drop to roughly 285 pixels per inch from the current 326 pixels per inch.

Among White's other takeaways from his trip:

- Display issues have caused a bit of a bottleneck on supplies of the new iPad, but the shortages seem to be easing. Any small constraints on March quarter sales numbers would be compensated for by a boost to June quarter sales.

- Suppliers suggest that a smaller "iPad mini" is still in the works, but launch timing remains unknown.

- While the new iPad is not yet officially available in China, some resellers are already carrying the device. Speculation is pointing to a potential May release for the new iPad in China, although evidence for that timeframe beyond a recent regulatory approval appears scant.

9to5Mac claims that Apple is internally testing new iPhone hardware that is based on a variant of the A5X system-on-a-chip used in the new iPad, with the company disguising the hardware in existing iPhone 4/4S bodies in order to keep its potential plans for a new form factor a secret.

Much like they did last year, Apple has internally seeded a prototype next-generation iPhone with the iPhone 4 design. The actual next-generation iPhone is specifically said to not include the iPhone 4/4S design, but Apple is testing these new devices in older casings to throw off leaks. The purpose of the prototype iPhone that we heard about is to test a variation of the “A5X” chip in an iPhone.

With the A5X having been designed with quad-core graphics in order to drive the Retina display of the new iPad, the variant being used in the iPhone prototype will emphasize other performance gains coming from the S5L8945X application processor included in the package. Like the new iPad, the prototype iPhone 5 reportedly includes 1 GB of RAM, up from the 512 MB found in the iPhone 4S. According to the report, the test iPhone 5 hardware carries a code name of N96.

The report also cites evidence of an "iPod5,1" reference in iOS 5.1 code suggesting that Apple is working on a hardware update for the iPod touch. The device was left nearly untouched in last October's update, with the addition of white models being the primary physical change to the lineup as the iPod touch retained the A4 chip even as the iPhone 4S received an upgrade to the A5.

Proving that Foxconn employees, even those associated with worker hiring, aren't necessarily privy to information on launch schedules for Apple products, Kotaku reports on an article from Maeil Business Newspaper offering new claims on an iPhone 5 launch date. The report notes that the newspaper contacted the chief of human resources at Foxconn's facility in Taiyuan, China to ask about hiring and iPhone plans, with the employee disclosing that the company has just received an order from Apple for the iPhone 5 ahead of an expected launch date of "around October".

According to a recently published article, the paper asked the head of human resources at Foxconn's Taiyuan factory about the iPhone 5 release date. The human resources head apparently told the paper, "We just got the order. It [the release] will be around October."

The report comes just after a Foxconn recruiter at the same plant claimed last week that a hiring surge of roughly 18,000 workers is supporting production of the iPhone 5 for a June launch.

As we noted in our earlier report, a September-October timeframe has seemed much more likely than a return to a mid-year launch, as Apple would likely prefer to maintain at least a one-year interval between product updates. Returning to a June-July launch for the next-generation iPhone would bring that interval down to only 8-9 months, a rather fast turnaround for the company that is still rolling out the iPhone 4S to new markets and carriers.

On Friday, AT&T released a statement that they would now be offering SIM unlocks for iPhones that are no longer under contract. The process of SIM unlocking a phone allows it to use SIM cards from other carriers. This feature is frequently used during international travel to allow the use of mobile service from local carriers. The Next Web detailed the basic steps required by AT&T.

The process is painless and only takes a few minutes in the chat. The only piece of information required by AT&T is the International Mobile Equipment Identity (IMEI) number, which can be found under Settings>General>About on your device.

Once you’ve completed the procedure, Apple pushes the unlock code during the next 72 hours to your email address, so the code comes from the mothership, not from AT&T. Once Apple completes the unlock request, a customer has to back-up and restore and tether the device to iTunes to complete the unlock process.

MacRumors readers shared their experiences on Sunday trying to unlock their out-of-contract iPhones in our discussion thread on the topic. Responses from AT&T service representatives were mixed with some seemingly unaware of the process.

Others had better luck, such as Exegesis48, who was able to get his iPhone 3GS unlocked immediately.

I called AT&T Tech Support and was able to get my iPhone 3GS unlocked no problem. In fact, the representative waited on the line to ensure I received my unlock confirmation email, at which point he told me to backup and restore my phone to receive my unlock. I did this and was able to receive my unlock IMMEDIATELY.

Experiences may have improved over the day. Some early callers were told the process would complete on April 16th, while others were told to simply wait 48-72 hours for the confirmation email.