A lawsuit claims that Apple Computer Inc. has created an illegal monopoly by linking iTunes music and video sales to its iPod players.

The company says the suit, filed in July, centres on Apple's use of a copy-protection system that prevents iTunes music and video from playing on rival devices. As well, songs bought elsewhere aren't easy to play on iPods.

Apple CEO Steve Jobs launches an iPod cellphone at a technology convention in this undated photo.
(Canadian Press)

The plaintiff, which the company did not divulge, is seeking unspecified damages. On Dec. 20, the court denied Apple's motion to dismiss the complaint.

It marks the latest in a series of problems facing Apple.

The online iTunes Music Store had a breakdown on Dec. 26 after the site experienced soaring downloads after Christmas. Consumers were faced with error messages and long delays.

Apple officials still can't explain why some people experienced 20-minute delays to download a song. The situation was corrected by Dec. 29.

Apple commands about 75 per cent of the market for downloaded music, but analysts predict rival services will start to eat up Apple's portion of the market in 2007.

Separately, Apple is facing a securities lawsuit accusing the company and some of its current and former employees of improperly backdating stock-option grants, failing to properly account for them and making false financial statements. 

The manipulation itself isn't illegal, but securities laws require companies to disclose the practice in its accounting and settle any charges that may result.

The company initiated an inquiry, and its audit and finance committee cleared CEO Steve Jobs of misconduct and said he did not benefit from the grants.

Apple says its internal review has been handed over to the U.S. Securities and Exchange Commission and the U.S. Attorney's Office for the Northern District of California, and that it has responded to their "informal requests" for documents and additional information.

With files from the Associated Press