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Friendly Fire Sparks Apple

A European legal battle over the iPhone could mean a bigger market.

Apple (AAPL) - Get Apple Inc. Report bulls see nothing but silver in the dark legal cloud over iPhone sales in Europe.

Shares of the Cupertino, Calif., tech shop rose 3% Tuesday after a German court ordered

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T-Mobile unit to stop selling so-called locked iPhones under the requirement that users sign two-year contracts.

The ruling favored wireless rival


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, which brought a complaint to lift the restrictions on the iPhone and allow people to use the phone on other networks.

The news seems to threaten Apple's unique royalty and revenue sharing arrangement with its telco partners. In exchange for exclusive iPhone selling rights, phone companies agreed to share a percentage of the monthly subscription revenue with Apple. It is estimated that Apple enjoys a 10% cut of the proceeds.

But rather than view it as a challenge to Apple's revenue stream, some Apple investors say the move opens the door to even broader iPhone sales.

"You have Vodafone basically suing to get the iPhone. How often do you see that?" asks one money manager who is long Apple.

The news comes just a day after a San Jose Federal District Court judge dismissed a lawsuit against Apple that accused top management of lying about stock option backdating.

So far, Apple CEO Steve Jobs has been left off the hook for the company's manipulation of stock grant dates. The ruling determined that the accusations of lying involved comments made more than three years prior to the filing of the lawsuit in June 2006. It does leave open the chance that a new case could be filed if more recent comments are found.

Apple shares had risen $3.03 to $166.98 in midday trading Tuesday.