Palm released software that would connect to Apple’s iTunes software. Apple issued a software update that broke the connection.

So Palm went to the group that controls USB technology, USB-IF, arguing that Apple’s block of the Palm Pre’s access to iTunes violated their rules. And Palm went on to say they were planning to issue a software update that would identify Palm Pre’s to iTunes using Apple’s unique, registered USB ID. The reaction of the USB regulatory group: No way, Palm.

But the USB-IF finding goes further. Much further. “However,” the body writes to Palm, “your letter also states that: ‘Palm will shortly issue an update of its WebOS operating system that uses Apple’s Vendor ID number for the sole purpose of restoring the Palm media sync functionality.” In other words, Palm is telling the USB-IF, We’re putting you on notice that we are taking the technological steps to continue our questionable practice of technology trespassing anyway. Just lettin’ you know!

The USB-IF responds: “Under the Policy, Palm may only use the single Vendor ID issued to Palm for Palm’s usage. Usage of any other company’s Vendor ID is specifically precluded. Palm’s expressed intent to use Apple’s VID appears to violate the attached policy. Please clarify Palm’s intent and respond to this potential violation within seven days.”

This is the right result. Nothing stops Palm from developing a music management/player application like iTunes, one that Palm can ship or offer via download to Pre users. Apple has spent a large fortune developing iTunes and Apple has the right to control its use by competitors.

Fake Steve Jobs jumps on this with relish.

Disclosure: I am long in AAPL.